Thursday, December 31, 2009

That Old Age Affliction

I read this message, and I get all wild-eyed and revolutionary–eh?–that was the 1960s. I mean that study of the material presented leads me to suspect We older Americans will be laboring into our vastly later years, because our Replacements may have died of starvation in the transition to middle age. I particularly do not like the trend which I witness, where requirement of a college degree conflicts with a rising Cost of acquiring advanced education in the street-fighting at the barricade level. This is Why I wonder How we can reach the statistical level of the final graph. I might be having one of those Bolshevik Moments, or I am actually perceiving a lack of formal and on-the-job training for a great mass of our labor force. I am not complaining, but when I am on public welfare and lying in my decrepit hospital bed in some rat-infested Rest Home; I do not want some cretin orderly trying to wheel my bed out of the room while the place starts to burn down, because of failure to properly maintain the Sprinkler system.

John Taylor may be feeling similar to myself, simply in another area. He seems a little tired of economists trying to justify the Stimulus by reliance on economic models, which have always shown disparate results from the reality found. He attempts to show there is real degrees of contention with any proclaimed Consensus, while I simply state that most of the economic models deal with a much smaller economy with far less capital expected to expand, and a far greater capacity to borrow. I do not wish to continue in this vane, else I might censured by the community for being a rabble-rouser.

Here is an article which is supposed to make Us feel better–I think. The Geithner Stress Tests were supposed to identify What the Banks held, and What they didn’t. Then, using their own numbers–never a good idea, Everyone is finding that the whole situation is not so bad. The article claimed this Transparency has provided a calming effect upon All. I am not so sure that Mortgage-holders are calmer, but the people who built this Crisis are back to demanding their exorbitant bonuses. The whole thing will work out, as they always do, though I really doubt that the economy is currently on safer ground; especially with the banks back to extending the same Credit in the traditional method of issuing SWAPs. I cannot see How capital reserves can increase by writing Paper, but I have been so wrong about so many things; I might as well be looking for that Rest Home. lgl

Wednesday, December 30, 2009

The trouble with Government

Self-Interest and Greed has always driven every agricultural subsidy program ever devised. Every one has been initiated to protect the food supply of the general populace, relatively all have been captured by large business enterprise, and made into a graft system. I grew up on a farm, and believe inherently in a subsidy program for agriculture; but I believe in one based upon established Costs, with overall limits. I like to call my projected agricultural subsidy program the Renter’s Profile. I would limit agricultural subsidies to Two-Fifths of the Cost of Fertilizer and Seed, and this payment limited to a total payment for 5000 acres of farmland per applicant entity. I would directly commit the Government to negotiation for the purchase of standard Fertilizers and Seed, in order to control the program. The Plan is simple, and easily implemented: the Costs of the Fertilizer and Seed must be proven, relatively easy with the Government being the primary Distributor. It is a program, though, which is bound to be opposed by All, as it gives no one an ability to play the system.

Medical Care is much like the above mentioned agricultural subsidies program; if it can be gamed, it will be. I truly approve of the Japanese system of insisting General Practitioners maintain their own Hospital/Clinics, where their Patients stay. Specialists on contract visit Patients in these facilities, and ambulance services deliver Patients to Specialist clinics for both Testing and Surgery. The Patients return to the GP clinic/hospitals as soon as they are stabilized from whatever procedures they have endured at Specialist facilities. Ambulance attendants will be cross-trained as Nursing personnel, to promote a full Workday on their part, and to reduce the Costs of the Transport system. The medical underwriting program I would advise is payment of Two-Fifths of the total Costs on the first 5 hospital beds maintained at each location, and no more. Aid to Patients would be prevision of two Examinations per year, and nothing more; Proscription would be handled in an unique way: Doctors would be charged $5 per registered Proscription, Pharmacies charged with not filling any Proscription until it is registered; Doctors can buy Drugs in volume, but cannot charge their Patient for any Drug themselves—it must be included in the overall charge for clinic or Doctor visit to every Patient overall. It is a practice of using one suppressant of medical Cost to control overall Costs.

Will Any of these help? Who knows! It is clear than alternate methods must be used, to stop the current gaming of the system, which has produced such great Costs in both programs. The whole aspect of Government intervention in the Private sector to aid the overall populace has always had its disadvantages; a far greater service might be insistence that people pay for their own Costs like in the purchase of Food and Housing–themselves partially corrupted by Welfare initiatives; Housing Cost would probably be around 12% lower overall, if the Government programs were subtracted. There are more ways to tax than simple implementation of a Government charge. lgl

Tuesday, December 29, 2009

Poorly Canned Product

This Post from Tyler Cowen leads me to question the effectiveness of Government intervention in the economy. Tyler’s line of Thought is a quite excellent analysis of Fed policy and what it attempt to accomplish within its periphery. It is at this point where an alternate question assailed me: Why must economic policy always alter in mid-stride? TARP and all its complications were initially implemented to save the Banks from Insolvency. Right! Good! The thing is–the Banks have not been in trouble since about October. There was a lot of Talk at that time about long-term mortgage failures which relatively Few believed, the Crisis having passed. Tyler speaks of the desire to recapitalize the Banks, but also states that he does not want to push that Point too seriously. Why not? The first Question which must be asked is why recapitalize the Banks anyway? Banks, by the terms of their construction, do not need recapitalization at all if the majority of their financial paper is sound. They can always borrow from outside sources if they need more funds; in the final analysis, the Fed is always ready to provide the Cash. What We are talking about here is the recapitalization of Bank Profits; We are in one of the greatest Government-created Cash Cows ever designed, and there is huge pressure from the Banks on the Fed to maintain their ‘No Interest’ policy. Will it help lower Unemployment?–No! Will it actually get Banks to increase their lending with lower Contract restrictions?–No!. Do We really want this form of Government intervention?

Read through this Post from Brad Delong, which attempts to define the difference between the actual Taylor Rule, and the central banks’ interpretation Rule. The humor of it all is the fact that I believe that both Rules feed into a Bell-shaped Outcome Response, where success comes only in those Outcomes falling between 2-5% Interest rates. I have often contemplated whether there could be negative outcomes, and decided that the tails of the Bell curve of Outcomes always had to be negative. This does not bode well for Fed intervention. The tails, by the way, are created by a right-hand production of too much Lending, and the left-hand tail comes from too high a value to repayment–insisting on huge repayment demands. I await my fellow bloggers claims that I am full of it.

I will finish with this article, which discusses the fight over fees between Stations and Cable networks. I do not see what the great fight is about, as I do not see Cable networks provisioning any new programming on their networks. I have a Brother-in-law who currently watches nothing but movies from Netflicks, as nothing new can be found on Cable. Placed in the spectrum of the above argument, Stations want a high Interest rate on their Product, while Cable networks want to continue their ‘No Interest’ policy while actually restricting Product. Current Consumers are being trained to watch canned Product over and over, and Big Brother will eventually enter the arena, as Fox networks have already started to program predicted response. I wonder if Fox can understand that propaganda will only work with standardized response, and such response will not be adopted without lengthy repetition; more varied programming sharply curtails the ability to instill propaganda. lgl

Monday, December 28, 2009

Who's talking about Sheeps' clothing?

I don’t agree with John Kozy specifically, but he presents this Post which should be read. The proximate cause of American decline can be stated as the Corporate concentration on the bonus programs for top Executives. Long-term R&D went the way of the Dodo bird, lifetime pension plans went to the paper shredder, health care for workers found itself a starving child which could not help anyone, and corporate executives refuse to reveal internal Corporate operation to either Government or Stockholder. Lawyers representing the Corporate structure have been instructed to block any attempt of Information Conquest from everyone, including auditors. The scamming of Corporate resources became complete, when executives designated themselves as the sole real voters in the Corporate election structure of officers. It became a real Ride to the bottom at that point, where the sole Corporate goal was the aggregation of immediate Profits to be split into huge bonuses.

A better view of the American decline can be obtained from this Post. The structural failure of the transfer of specialized skills in Outsourcing has been a long-term qualification on the practice. The fundamental hazard of Outsourcing, though, must be Transportation. Too much Product has to be transferred too often, as too high a Price, and with a massive environmental Cost. America will eventually have to bring manufacturing back home, but will probably be after vital Skills will have been lost by the American labor force. The Piece does not mention the Pricing of the Dollar in the discussion, but the pressure of Wholesale outlets for cutting Costs mean nothing in the face of a less valuable Dollar. The real causation must be a mixture of the two above paragraphs, where the Corporations have turned to production of the quick Buck–at the Cost of everything else. They have betrayed the Employees, they have betrayed the Stockholders, they will betray their Customers, and eventually, all of America.

Here is a great part of the reason why the American business structure has failed–consider Buffett. Stockholders at Berkshire think of him as a friend, and do not do the Math; something of which Buffett himself could never be accused. He is the studied prototype of a hard-working grandfather, spending hour upon hour studying Investment decisions. Nothing of his life is released to the Public, outside of that which he has authorized. He talks to everyone as an old family friend; sometimes, even as he is planning to exterminate them. Is he a bad person? Not so that anyone can mention. His decisions at Berkshire is always what is best for himself, not Berkshire. His family will always come out well, no matter what happens; and he has planned for everything imaginable Buffett is the classic Corporate symbol–talking a Populist program, while promoting a straight line Corporate aristocracy. lgl

Saturday, December 26, 2009

Legislative failures

This is an article which would suggest that We add illegal immigrants to Those able to buy health insurance under the Exchange system. This brings on the old question of whether Americans should be asked to pay for health care for everyone. The article says that it would be better. I would opt for a better Plan, thinking that better pressures could be applied. I call for turnstiles to be introduced in all Bars, Restaurants, and Groceries where a Credit-Card style Insurance card had to be swiped, or a $1-3 entrance fee would have to paid to the machine in order to enter. Only Cards of up-to-date insurance would be accepted as payment, and the entirety of the tax would be devoted to payment of the health care Costs of the area in which collected; overages would be sent to a national health account. It is the famous old case of ‘We ain’t asking!’

One finds that derivatives cannot be regulated seemingly, all basically because it allows Gambling to be introduced into Investment decisions. These instruments warp the Market, allowing Investors to hedge against their risks, except the risk coverers themselves are uncovered and open to failure. The markets suffer from a punishing inflation because of the more adventuresome risk-taking, while the repayment system has basically stayed normalized; even in the arena of derivatives, where transactions are simply not cleared. The Profits from derivatives go to pay the Operators of the derivatives, while clearing operations depend totally on future derivative investment without any Margins set-asides. It technically should clear automatically, but the number of uncleared transactions only continue to grow; there is no equality between Buyers and Sellers, all because of market trends. An intelligent person will soon recognize that derivatives cannot clear because they will lay without investment, as the Margin Costs force up the derivative pricing, and astute Investors start to ignore their purchase; it is the same argument utilized by young adults for the non-purchase of health insurance. Only the high-risk investments will be hedged, and they are the most likely to require heavy repayment.

If the previous paragraph has presented some confusion, I will deepen the clouds with this piece. It states that there is basic deception in the creation of all derivatives, as implants of bad risks are always interjected in the construction of such instruments to gain Returns from bad paper, and average out the Risk higher than normally expected from safe paper; they want the high risk to entice good paper for the construction. At no time is there an understandable methodology for handling risk-failure, which will be intrinsic with the averaging process. It was only a wonder that the derivatives lasted as long as they did without substantive failure. Congress now wants business as usual, without regulation of derivatives in any realistic manner. lgl

Friday, December 25, 2009

Have a real Christmas this Year.

I love economists, who can come up with mythical demons which boggle the mind. Black Holes and inflationary death spirals are marginally possible, but deflationary death spirals express an excess of imagination. It presupposes that households would starve, rather than spend. I just know that they would burn their precious currency in the fireplace when it got cold; no one serve that evil demon–Buying. When will economists acknowledge what mathematicians have for years: As models approach infinity, they become valueless. It reminds of a graduate Instructor I had, who did not understand that math warps exactly like Time, as models approach the Speed of Light. I still await the argument of what happens when your average Bank employee is informed his salary will be cut, because he extended no loans, and there is no Profits to pay him from. Oh God, on this day of Gift-Giving, save Us from the demons of our own ineptitude.

I have promised myself that I would stay away from Marauders in the countryside et al.; it indeed being Christmas after all. Food Distribution will always maintain a limit beyond which death will not spiral. I am currently seated in a relatively cool apartment with the thermostat relatively high, because of the chill winds hitting the windows; it is endurable, but I wonder if I want my electric meter to stop spinning. I will probably settle in to watch a good movie on my Cable network, as I cannot approach my DVD outlet, or get to the huge Christmas dinner which I am supposed to attend. By the way, I will really miss seeing the kids open their Gifts, with which we bribe them to act nice at least one day a year. Somewhere in there I fail to witness any deflationary death spiral, but maybe my expensive eye-glasses do not allow me to see.

I can conceive of a time where no expansion of production can occur; has anyone contemplated the load stress on the foundation at the end of the living room where the Gifts are stored beneath the Tree? I always sit at the other end of the room to give the floor a chance. I think there is a counter-argument to be made against your basic economic spirals in the first place. It seems to me that your average good spiral require a massive stress in the distribution networks, having nothing to do with your normal flow of money, and that it takes some Dope to print too much money or extend too much Credit to get even a minor blip on the radar. I personally would like to see an elimination of Currency, and a return to Gold and Silver pieces, just to prove that Money Supply is not that important in the production process. Truth must demand I would actually like to witness Everyone having to pull up their sagging Pants, like I have to do. Santa, you had better start dragging your bag in, as I am starting to depress the kids. lgl

Thursday, December 24, 2009

Our Senate-approved Christmas Presant

The only reason this bill passed was Senate desire to get their Name in front of Voters for Christmas. No attempt to gain universal coverage with 23 million people still uninsured, subsidies to people making up to four times the Poverty Line (could potentially cover several classes of federal Civil Servants), no real balance between Benefits and Tax allocations, and knowledge that the Conference Committee will discard the Taxes, cut the expected expansion in half, and reinstate the payments to health care providers. The upshot will be subsidies to middle class to pay for their health premiums, a reduction of the un-Insured roles by around 10 million (almost All coming from the Working Poor), and continued pressure on Emergency rooms for long-term medical care. Health care Providers will get absolved, Employers will get a Pass from payments into any system, and only recently-uninsured will get reinstated into health coverage.

Paulo Krugman is far more optimistic than I. The first failure from his analysis I witness is no Statement as to the reliability of charting in calculating health care Costs; i.e., how many of his charts actually worked out in practice over the last three decades? The bill leaves the black hole of un-Insured, and sets no precise definition of How one can get caught in the vortex of the black hole; instant capacity to expand the black hole in the face of higher health care Costs. Upper Incomes protected themselves from higher taxation, and if you notice such things, will have demanded this protection extend through future legislation. The entire debate included wild Talk about increasing federal debt levels, but no serious consideration of a balanced budget. It remains the standard old Congressional argument: We will not solve Problem A, We will not solve Problem B, but We will spend more Money to ensure that there will be no solutions to Problems A&B advanced to embarrass Anyone.

Those Shut-Ins who know that Congress has given Directions to Santa will probably enjoy this Post, which expresses such Congressional ability to lead the nation on important Issues; remember that Obama was Senate-tutored before running for President. Remember the last Presidential Election, where We had a choice between a Stud black man, a middle-aged white woman, or a near-senile old White man–all coming from the Senate; the only alternative in reality was a Minister from Arkansas. Every Vision for the future was approved by the Senate, except for the Arkansas governor who makes a good Fox Channel News Commentator. Can Anyone remember a time when Special Interests and Politicians left Us an actual Choice in the great empowerment of Voting? Someday, Bloody Someday! lgl

Wednesday, December 23, 2009

New Age Crap

All Authors tend to be correct in this one, including the illusion to creation of moral hazard. What the Austrians had always lacked was a reference to Political Science, another of those not quite rocket science endeavors. Those Guys would have come up with a Concept of patronage fields, and the degree of resistence held by politicians and lobbyists to elimination of developed fields. The fact of the matter states that everyone likes to spend money, and even more, dislikes the discontinuance of that expenditure if it can be maintained. Removal of restrictions upon debt acquisition has always been the Crime, and it cannot be expected that politicians will ever control themselves. We need to introduce some outside controls, which the politicians cannot violate; and currently, We must force them to introduce such controls themselves.

Here is a man who will not see the black hole, even as he is sucked in. There are only two potential economic black holes in economics–Debt Aggregation and Over-Capitalization. Both concern the pressure of Interest destroying the Profits-making potential of enterprise. The real danger is that the two forces can mask each other until it is too late. It is so bad that there are economists who would acclaim that neither trend can be effected. No one ever thought that a small nation could terrify the entire civilized world; by the way, this was accomplished by an adverse over-capitalization of education by the civilized world. It is also sad commentary that the capitalization of weaponry has raced ahead of preventive measures–through the easier locus served; never doubt that the techniques of mass murder will never be used.

I will finish this Post with this Piece from Marcus, even though it is too wonkish for it’s own good. His entire point is that We are trying to increase aggregate demand, not Inflation. The exponents for allowing Inflation to afflict Us to greater degree are wrong, but so is pressure for aggregate demand, if any could be found. We have long claimed that Americans must learn to consume less, and that the rest of the World will approach American consumption rates. We are now in such circumstance, and everyone is screaming because of the loss of Employment and Profits. Sale of Product to established economies is always more profitable than to undeveloped nations, as the Producer have to deal with the lack of infrastructure and legal safety issues. No one is ever going to find Solutions to this set of problems, and Employment will continue to suffer from the degradation of Profits. We need to switch to an economy which values Employment over Profits, where full employment consists of actually less Work hours, more Employees, and development of cheap Entertainment venues to accommodate the greater leisure. The Reader should understand there will be Change, and it would be better if it were planned; than if devotion continues to be laid with old economic values. lgl

Tuesday, December 22, 2009

Tax Terrorism

Ireland has always been a relatively good bellwether concerning all things relating to debt. They seem to possess the capacity to make their own citizenry suffer the horrors of want. The Irish continue the tradition with sharp measures to curtail the government deficit. Americans will never follow their example, yet We might have to adopt our own set of fiscal rules. I, in my wondrous foresight, have come up with a ponderous Insight and a few suggestions:

1) Remember the good ole days when they used to Nickel and Dime one to death? I call this Rule the Dollar you to Death! All Employers must pay as Surtax one Dollar for every Wage payment made, in order to be allowed deduction of the Wage as Cost for purposes of taxation. Employers can pre-deduct from said payments, as We don’t care Who has to pay it.
2) Entrance to any public place will cost one dollar for every adult–children under 16 need not pay it. Like the previous Surtax on Paychecks, We don’t care Who pays it–only that it is paid. Public places are defined as Churches, colleges, Sport stadiums, Theaters, Retail stores, Bars, Restaurants, and Government buildings. We do not care How the tax is collected, simply that it is a daily fee which must be paid by the facility manager.
3) Every Taxpayer must pay a $5 Filing fee for every Government document filed, irregardless of the source, or even the mandatory nature required in the filings. This includes Tax documents, license applications, Permit permissions, or clarifications for Government desire–including the Census.
4) Every visitation to a professional–be he Doctor, Dentist, Lawyer, or even Architect must be accompanied with a $5 tax–paid for the consultation; it is immaterial who pays the tax–the professional is held responsible for the collection and delivery of the tax.
5) Every Vendor of any type will be held responsible for payment of a 25 cent tax on every Refreshment sold–it immaterial if it consists of liquor, coffee, soda pop, tea, fruit juice, even bottled water.

The Reader may have noticed that I have made no provision for the curtailment of Government expenditures. This is the essential part of the madness I propose. The law will be introduced without Sunset provision, will insist it applies to every political jurisdiction and level of Government, and must be introduced only when there is a Government-run deficit. The law will utilize the market force of Citizen anger to restrain government excesses; to the point that the total magnitude of the taxation can be tripled if all political levels run deficits. One cannot instill any sense of fiscal conservatism, but We can introduce Tax Terror. lgl

Monday, December 21, 2009

Heresy for Today

A number of Papers in this Country have mentioned the increase of Temporary Help. This would seem to be good, but read this article. Temporary labor seems to be cheaper, as it requires few benefits and is left to suffer the rigors of economic life on their own. Temps have to adjust their own lifestyle to meet the difficulties, and are often dumped without recourse after job completion. This is true both internally and externally. Foreign export of labor often turns permanent, while Temporary labor often looks for more Work in the area where they has been previously assigned, knowing that Jobs were hard to find at home. Mexican labor often thinks to simply cross the river to find a good-paying Job for a season or two, but rarely return home. Labor has been notorious for leading the migration of peoples, and cultural clash becomes turmoil. A lot of this is actually a good thing, as it leads to toleration between people. Most of it, though, destroys the roots of labor gains hard fought for through the years. The loss of power from Unions comes not from the contempt shown to them by Business, but the rapid redeployment of resources elsewhere when Wages and Benefits exceed what Business desires to pay. It is exactly this effect which must be canceled, if We do not wish to return to a status of unprotected labor; the underlying causation for the destruction of the middle class.

The plight of the Foreigner might be expressed better in watching the money. This article on the latest financial crisis is instructive: domestic funds get greater support and protection than do foreign funds, even though the individual Depositor have little chance of controlling the management of their monies by bankers. The higher Returns from foreign investment provide well for Bank and banker, without Depositor gain from the exportation. Both Bank and banker keep these gains under financial crisis, while Depositors are left to take the losses of whatever magnitude. Few are the Calls for expatriate protection of investors, when there was never a judgement made by investor for exporting their funds. The World-wide Market still needs major work, and the failure to produce such efforts are as fundamental a cause of the current crisis as any other thing.

Arnold Kling always comes up with an appropriate Piece to explain the situation, when I need one. One of the greatest temptations is to use Inflation to reduce the burden of national debt. Business leadership would far rather utilize this instrument, because it also eases their own debt obligations under a consistently underperforming Tax rate. No one ever discusses the fact that Inflation destroys the value of past Wages far faster than it reduces national debt, and that Labor is pushed closer to the Poverty Line. The middle class is placed on the Endangered Species list from such practice, and old Wealth finds it impossible to maintain their previous lifestyle. Seniors may be the hardest hit by such inflationary practice, as hard aggregation of retirement funds is never sufficient for the maintenance of life desired. It could possibly be far cheaper to raise real taxes by 2%. lgl

Sunday, December 20, 2009

A Path less Taken

I find the self-serving nature of this article to be consistent with the entire context of inertia. Half of the serious political elements of this Country want no action on environmental corrections, and half insist that any procedures must be radical; effectively maintaining the opposition of those opposed to pollution controls. These attitudes are matched by a stupidity of the World, who insists that the United States take on a responsibility which they cannot control. Obama needs to use honesty of expression, where such expression will only bring condemnation from whatever Side feels betrayed. I would suggest that Obama propose an environmental fund, but one which must allocate taxation on the basis of population; where no nation can demand from the United States, or any other developed nation, any taxation higher than which they would proscribe for their own citizens. A World Convention could then be convened to determine what level of taxation the World would present to their own citizens.

Some might perceive this situation as a real loss to the economy. I believe it will have a benefit to the economy. The less Consumer Credit expended this Christmas season, the better it will be for All concerned. Retail Stores are going to take a hit this year, and worse rather than better, may make all the difference as far as Reform. I have thought seriously about the Situation of the economy in total, and am about to offer a Suggestion which probably All will initially oppose; but a more contemplative evaluation might offer support. This is a President-sponsored moratorium on financial interest payments of all kinds for the first Quarter of 2010. This later Event would have to be passed by Congress, and would be valueless without Fed guarantee that their prime rate would be re-introduced at 4%. It will have to be a brokered deal, but one which could have great rejuvenation elements.

The Tax effect of such a measure would be canceled in the long-run by the introduction of the 4% Overnight rate; one Quarter can make up for the loss of the previous Quarter. Everyone could take a breather from the constant press of escalating Debt service Costs, and so reorganize their finances into a more sound strategy. Mortgage holders would get a release of funds, Businesses would achieve relief from mandatory Inventory movement in a reduced Consumption market, and Consumers could devote much more of their Income to Debt repayment. Banks would get no relief, except for repayment of extreme debt levels. The Interest holiday would be of immense gain to the Indebted, cause almost no loss to Banks or Depositors in the face of the ‘No Interest’ current policy of the Fed, and promise real advantage to the future; not least of which is a much greater ability to return to previous Sales levels for Retail. Think about it! lgl

Saturday, December 19, 2009

The old 'In the Interest of the Nation'

Herr Krugman and Robert may not remember the old Highwayman named Stagflation, but their youth can be forgiven. There is every indication that old basket of Goods is costing more than ever, even if Santa short-listed and skipped about 10 million households this year. There seem to be about two million households which health care providers cured because no one could pay the bill (on the third day of Christmas, the Doctor himself is scheduled for a lower GI–-courtesy of the Patients). Enlightened Business personnel have set their leave-taking on that 3-Week Cruise in the Caribbean for the day after Christmas–Santa offering no sleigh Tour service this year. Everyone states that Commodities should race for the sky, but even China are not actually presenting the expected volume of Orders. The Commodities still have not fallen to pre-Short Dollar prices. The weakened Currency has not brought on more Exports, even though there is economist’s lament that Exports are like Stimulus, and you cannot determine the exact impact. Another 50 Cent increase in Gasoline pricing within the context of lowering Oil price makes me pine for the good old days of Middleman Costs, instead of extraneous factors.

I include this Post simply because I believe Readers should view it, though I have not referenced it for Content. The real rationale for the FDR failure in the later 1930s with his legislation stem not from a loss of popular support, but an aged Congress; such Age determined by length of service within the distinguished body. Special Interests held more power at the time in question, when Congressional salaries were lower in relation to the cost of intrinsic joys in D.C. and New York, and the Special Interests picking up the tab for special dinners very important. An old campaigner among the lobbyists always said it was always a question of getting enough prime Steak in their stomachs. Now it costs another $5-10 Thousand in the native political campaign contribution basket. I am trying to remember which Nebraska paper once wrote that they would not accept paid political ads from political Nominees, as it was a violation of Free Speech (was it Wood River, Kearney, or Revanna?). The methods of corruption remain basically the same, couched in terms of Gain or Loss for the specific Congressman or Senator. It still works well, of course!

I will finish with this article, asking the Reader what is the value of such a tax elimination? Anyone subject to such a estate tax had to accumulate quite a pile of assets–I think approaching $3 million. The resolved price tag on estates from the inheritance tax equates well with the adoption of a mortgage liability. Republican ideology would state that the removal of a Generational mortgage should be protected as a Property Right, even though Republicans may abridge any Property Right except an increase in Tax rate. I don’t know whether Daddy having founded the company should grant an additional 50-60% of the detailed Profits, but I do know that such grants a Competitor the ability to potentially undersell his competition. Here is the exact point where I find a degree of fallacy within Republican ideology, thinking that the level of aggregate holdings of which We talk has earned excessive Profits for a number of years already; the potential of Daddy having paid off the liabilities earlier in his career. I wonder if this state of well-being is worth protecting, especially as it is one of the few Revenue collections left to the Treasury. lgl

Friday, December 18, 2009

Context--its own impact!

I read this Post from Alex Tabarrok, and am reminded of the old story of two Drunks on a train, who have run out of booze. Both were planning to go to New York City, but the lack of liquor was a real problem. One asked the Other if they were coming into Grand Central Station. The Other said, "No, it is only Albany,’ for which the reply was, "Close enough!" Bad story—but I am trying to imply that Need alters the context of all arrangements. No Employer I know of ever discovers his exact needs for any extended period of time. He is Hiring on an ad hoc basis, and rarely can remember the personnel arrangements he has previously made. He cannot withstand the allegation that he is discriminating against people by multi-tier Wage grants based on anything but skill levels. This Employer type offers Wages at levels previously successful at acquiring Skill levels required, and will raise those Wages if Employees cannot be acquired otherwise, This manner of Hiring is perhaps the only one acceptable over Time, when continually faced with multiple Job listings per Quarter. There are some economists, and many Businessmen, who imagine that lowering Wage levels is easy. It is clear that such negotiations must be conducted on a per-person basis, with all Job applicants knowledgeable of correspondent Wage levels elsewhere in the company and market. Good Luck!!

This Post may explain Why there is contention about Wage levels in the first place. Wage happens to be an elemental Cost in the first place, non-replaceable and substitution-proof, so that it must be accounted. There is no direct relationship between Wage levels and Profitability, so there is no guarantee that a reduction in Wages will bring an increase in Profitability. There is even economic motivation to suggest that lower Wages could bring less Profitability because of a real decrease in Consumption by labor. An economic model could even be constructed to suggest that an increase in Wages could lead to higher Consumption and greater Profitability, if the later was based on a per-item unit basis. Business personnel, though, like to think that cutting the Income of others will grant them some advantage with their own Incomes; they envisioning a greater capacity to maintain their own personal Income levels. The later ability has rarely been proven in the face of overall Income decay, but pardon them for the foolishness of their own attitudes.

My advice is to forget the words of economists, who suggest solutions for problems non-apparent. We do know that Consumption is Down, and any reduction of Wages will commit to further reduction in Consumption. We know that a reduction in Wages will lead to a reduction in Productivity as well, as labor feels overworked and underpaid. Economists identify with Business far too often, maybe because they are mainly paid by Business organizations–even in the academic setting. I like to think that both economists and business personnel get wrapped up in their retirement programs, and tend to believe that what leads to their own personal benefit leads to economic success. There might be even less relationship in this arena, than in the area of Wages and their impact upon Profitability. The only sure Bet to be made is that the most well-off people will complain the Most, when losses are endured. lgl

Thursday, December 17, 2009

Are We so confused?

The entire Concept of Minimum Wage should be reevaluated by Keynesians, as the most notable part is ignored. This consists of the fact that Wage levels are differentiated by Skill levels; alteration of the Minimum Wage brings on the Shelving effect, where labor insists on separate Wage levels based upon Skill level. Skilled technicians demand a Pay raise to correspond to a increase in Minimum Wage, and the entirety of the labor force is universal in refusal of a reduction of Pay at any level. Labor relations are not as simple as Economists would outline, and Worker incentives demand a sophisticated Wage response. Economists would claim that these effects are lost over the entirety of the economy, but I have found Wage Demands lower, but fundamentally ingrained within the labor ethic.

Many will not detect a relationship between this paragraph and Post, and the previous segment. The fact of the matter is the Banks changed the nature of the mortgage contracts, by the post-acquisition of cheaper funds. The banks’ refusal to alter the contractual commitments under the impress of cheaper funds has relieved any necessary Consumer commitment to fulfillment of the obligations. Banks should realize that their refusal in effect reduced artificially the Wage Income of the mortgage holders, by their insistence on full recovery, though their Costs had lowered. I am probably the only Voice who would frame the issue in these terms, but Economists will attest that there has been a reduced Return for Wage earners paying older mortgage contracts. The Cost of borrowing Cash must stay relatively stable for Wage repayment to stay the same, without loss of Wage from Employment.

The Fed shows its confusion about the above issue through its timing of elimination of the adopted platform of financial aids. The zero interest rate should be the first to go, where a correct Cost of borrowing Cash is introduced, and stabilized by extraordinary assets purchases. Nothing will be accomplished in the financial sector until a viable Cost is given to obtainable funds. It is all a question of putting the Cart before the Horse, and the Horse is winded. Forward guidance on rates is completely off, with a necessary Statement of the willingness to adopt extreme rates to forestall Inflation missing from the discussion. Sustained economic growth cannot be realized within sustained Inflation, and the Fed needs to provide proper emphasis. lgl

Wednesday, December 16, 2009

The Big Move, and what it should be

The World seems to be turning slowly this morning, and the economic arguments are flying over my head; I tend to be a bit lazier around Christmas (yes, that is possible). I will first go on record therefore, and state that I don’t believe this article from Alan Blinder. I find that the greatest reason for the lack of Stimulus expenditure comes from lack of actionable potentials of growth.; that means very low chance of secondary generation of economic activity. I feel sure that Professor Blinder has a very lucid answer to that one, but I have yet to hear it. One of the elements acting against Stimulus comes from the still very high rates of Interest applied to pre-and early-Recession paper. Banks insisted on being Saved, but show little desire to help any of the rest of the economy to like success. Old businessmen from my era used to say that Profitability only truly came after you burned the mortgage on the place, but Banking today has tendency to make that style of business impossible; I just wonder if they managed to alter the principles of real Profitability as well.

Paul Krugman tries to define the context of Paul Samuelson, though I wonder if the later Paul would have been so categorical about his contribution. Samuelson always thought of the economy as a Chinese puzzle, where One could not consider the first Move without contemplation of successive Moves, else the crust of the problem could not be penetrated. The good elder knew that you had to understand the impact and the direction of impact to define the participation of any economic force. Paul Samuelson always had a schematic within his mind which many of Us could not see, and so the man was himself like unto a Chinese puzzle. Mr. Krugman does a creditable effort to explain the man’s success, but still lacks the total essence of Paul Samuelson.

I would first like to state that I feel that Greg Mankiw is flat wrong; an extreme claim considering how much Greg makes selling economics textbooks, versus my wondering if I should file for bankruptcy or not! Still, We must look to the Technicals. Business will not expend capital, until and if Consumption does increase. Business capital sits in bank accounts where they draw little Interest, awaiting the great opportunity for which no one is planning. Tax revenues, especially high tax revenues, find highly efficient Consumers; Politicians like deficit spending as they get to expend without any Cost to themselves–they neither have to anger by taxation, or find resolve to repay the expenditures; thinking they will have retired by the time of repayment. I favor elimination of the Bush Tax Cuts, imposition of a rigid program of debt repayment, and insistence of Business search for new Profitability by taxing their current level of affluence. It is indeed a radical program, but like I personally care–I am worse than a Politician! lgl

Tuesday, December 15, 2009

Ridiculous Discussions

I present this article for evaluation, a study in How We should have done things in hindsight. The first thing the Reader should realize about all this is the degree of safety enjoyed by all of these authors; having once been a Fed Governor ensures a rich salary at some academic institution, unless one falls asleep in a lecture they themselves are giving. Credentials are like Savings in this rare environment, and these individuals are at the top of the heap. The current fight at the Fed is conducted as a group of fat Cats suggesting How the charnel house should be run, knowing that they are insulated from any hazard. Everyone knows that no matter What the final outcome, their pleasantries will always be present. There might be justification for this, stating that personal affectation should not be a part of the process of decision-making. The truth, though, might state that personal stake in the outcome might hold some validity.

The bubble process can be explained simply. Prices rise, and Prices fall, and the frequency with which they channel the entire wave is important. Prices which are too suppressed for too long wind up with an inability to garner capital assets to maintain current levels of production. Prices which are too high generate excessive capitalization, and enjoin a State where financial instruments become the base of collateral for future financial instruments. This later state is the basic cause of the danger of bubbles. Any failure in the repayment process, even difficulty in meeting such repayments, endangers the entire structure. This is the reason Why the Fed should concentrate on the bubble system, and devise methods to control their expansion.

The worst aspect of the entire situation is a basic lack of control by the Fed. This mainly occurs through attempts to dilute capital reserves of Banks through holding financial instruments themselves as capital reserves; a process which defeats the entire purpose of the reserves in the first place: a medium of Cash which is unaffected by financial commitments, which can be utilized to pay a Bank’s way out of financial trouble created by failure of repayment measures. The Reader may ask Why banks would engage in such subversion; the basic rationale being the rapid growth in book values Banks can achieve through the process–truly important when Bonuses to bank executives are based on book values. There is not much else to say, except possibly that ordinary bank officers should be granted the same sinecure as Fed governors. lgl

Monday, December 14, 2009

A Voice has died

Sometimes you come across a Post which touches all the bases, and this is one, though I hate the discussion. The first economic textbook I ever owned was written by Paul Samuelson. What can one say about the man and/or the Teacher. Professor Samuelson looked at the economy, and wrote a math book. He looked at a math system, and wrote an economic textbook. He gave sound advice to every President since FDR, and all of them would have been better off if they had followed his instructions to the letter. He was the first of the American Nobel laureates, and arguably the best of the lot. By the way, I didn’t even like the layout of his textbook–it is an author thing. The layout of his economics, though, was probably the best in kind. It is really the end of an era, and I think We will all miss the promise of it.

I have been looking for a manner to complete a Post this morning, after the news about Paul Samuelson. I decided this Post from Arnold Kling would fill the bill. Samuelson always used a decentralized style, both in Teaching and Practice. He always sought Order out of what was basically spontaneous creation, believing the real world was the only practical aspiration. Canned Product was universally based upon forces which were basically non-economic in nature, and substituted personal concerns for real economic evolution. I could say that Samuelson would agree with this Post, even though he was very Liberal in economic action; he spent his youth in the economic profession under FDR. Arnold deserves to hold in this place, because his Thought pattern parallels Paul Samuelson to great degree.

I finish with this Post, because it is so much like Paul Samuelson. Jeff Cornwell would not seem to work with Arnold Kling, but both directional styles worked actively in Paul Samuelson. The later was always concerned with theory and the practical, at the same time. Samuelson always wanted to know What worked, and then devised a theory to go along with it. It was Paul’s universal grasp of economics which fascinated. Another Great Man has gone to his final rest, and We have been losing some great Voices. lgl

Sunday, December 13, 2009

But, but, but. . .

I have always felt the need to interject myself into the serious discussions of other men on important subjects, and Brad Delong presents these ten paragraphs; granting me the ability to act like an ass, especially as Brad gave himself two of the paragraphs. The distinguished authors are basically discussing the Credit freeze and the Unemployment issue; most definitely giving Us a creditable account about the bind in finance and the lackluster potentialities for Employment. Like any good Groupie, I feel the need to express myself; so here is my contribution:

Paragraph 11:
The real roots of the current Recession trace to the extension of Stimulus when None was needed; i.e., the Bush Tax Cuts. The American economy was struggling in 2001, but consisted of a natural struggle where the Capital was brand new, and already purchased; this meaning that the elements providing the previous Boom–a vast expansion of Capital Goods and Consumption–were in for a period of reduced Sales. We could have sat out that reduction, and kept the effective Tax structure then in place. Instead, We opted for Stimulus; the resultant pressure on Resource pricing and Cost of Consumption brought Us further constriction and higher Unemployment. The second set of Bush Tax Cuts did it again; fostering a second round of Inflationary pressures exactly as the economy was working out of the Government-inspired difficulties. The current Recession is now caused by the Government pressure in earlier years to commit everyone to exorbitant Home ownership, as if there was something wrong with the large Renter class; one of the effective Means of Capital aggregation existent. The Government pressure was so great and wrongly placed that there was more Housing construction priced greater than $500k, than there was Housing priced less than $200k; while most Economists could have assured that most Household could afford the Debt Service of only about a $230k mortgage. We are now talking of a great inflationary Stimulus at exactly the time when that Debt Service capacity has declined dramatically. Any Stimulus effort will likely destabilize more Households, than it will provide relief. The correct Solution seems to be higher Business taxes, as Business will not utilize greater aggregation of capital for expansion in an era of declining Consumption.

I like that paragraph, as it even makes me sound like a real economist, though most of that profession would call for a Witch-Burning. I would admonish All, as did my mother, and tell them to play nice, and not set their playmates on fire! Remember that the Truth will set you free, or something like unto that. lgl

Saturday, December 12, 2009

Viable Options

Here is probably the clearest statement advocating a Windfall tax upon Corporate bonuses, and they make it sound good, but I do not believe there will be much improvement in the system without some real check on the quality of Work activity. I have proposed a delayed bonus system, where the labor has been verified against Risk hazards by quality fulfillment; coupled with a bonus reduction if the bonus has not served its purpose of retaining the skilled employment. The Job creation aspect is somewhat doubtful in the face of reduced Consumption by households, though this sounds excellent, it probably will not work out on Paper and Fact. Another two years of household savings would reintroduce the old Consumption pattern with about half of the Interest payments; if the trends of cheap Interest rates and lower Debt levels were maintained. I favor increased taxation, though only upon currently unexercised business structures rather than personal Income; a fact which places me at odds with most of the blogging world.

Tim Hartford outlines his own view of How to achieve economic success, as well as the view of Sir Partha Dasgupta. I have always taken the view that it is the uniformity of Government rule which brings prosperity. I have never witnessed any society of Government corruption, where payola was the common practice, which ever succeeded anywhere; except making the Rich richer, and the Poor poorer. It is this definition of Property rights by position that destroys prosperity. Tim imagines that Rich countries cannot grow Poorer, yet he denies history: the fall of Rome, the decline of France, even the decline in his own country prior to the Thatcher reforms. I remember the famous Reagan, who faced adverse economic circumstances, and ended by raising more equitable taxation. We need better tax policies in the States, and probably they need better tax policies in Britain; though it remains doubtful that a speciality tax like the Windfall tax is the Answer.

I like this little Post, because it shows the fallacy of Trade expectations. Imports constitute a major part of our economy, a share that is relatively hard to reduce. Exports make a relatively slight part of our economy, one which finds itself in easy decline anytime alternate suppliers of Export product present a cheaper, more viable option. The desire for Dollar decline actually places greater stress on our economy, as any relieved by increased Imports. Some people cannot understand that Free Trade policies are favored by Exporters, but Importers can clarify problems associated with these problems. It does not help when policy creates more problems than it resolves. lgl

Friday, December 11, 2009

The medical payment system

One can rant about the health care Insurers, or one can try to examine attempt to devise some code to govern the health care system; Robert Reich attempts a little of both. One first has to understand this is not really about health care, but about payment for health care. Anywhere One goes in this country, almost Everyone gets a high quality of care; the real problem develops when One goes to pay the bill. I went to talk to my Doctor yesterday, I say talk because his nurse had already informed me of the relevant information, and he and I were both impatient to get on with our busy lives. This only tells Us that We had to touch base, simply so that he could be paid for valuable supervisory activity. We could have both skipped it, and been quite happy!

The fact stands that Americans are tested too much, medicated too much, and pay too much; all because of the system of payment. We are tested too much due to malpractice liability. We are medicated too much due to the fact that Americans cannot face a simple statement that they are Sick and should simply wait it out, and we pay too much because we insist on splitting the entire procedure into too many parts. It is a question of Divide and Multiply–not Divide and Conquer. It is obvious that many medical procedures can be compiled into a set unit Cost, that many of the most common Proscriptions could be switched to the Pharmacist providing relief to the Doctors, and that bi-yearly Check-ups could substitute for continual imposition on Doctors; saving their efforts for real medical problems. There is the way the medical system should run, and the way it stumbles along.

I would approach the problem of health care in a harsh manner. I would favor a health care measure where Government would pay for two medical visits per year in entirety, but leave all other medical costs to private Insurers; the Check-Ups standing in as defense from malpractice. This would cost about $60 billion per year, and would be fronted by a Triage system where Nurses must agree to arrangement of an Appointment, under the supervision of the governing physician. I would allow Pharmacists to proscribe a list of medications allowed by a formal national medical commission; also allowing for Pharmacists writing a Note to School and Workplace proscribing Time off. The law would set up the practice of a Standard rate for Lab services of all types defined by the medical commission, where there would be only one rate charged for all Patients. The law would also entail that Doctors be allowed only 6 examinations per day, on which they would be paid a set rate, but allowed any amount of subsidiary labor to handle distinct medical problems previously discerned or emergencies. I hope this would lead to a better allocation of time, and bring medical Costs within reasonable payment range. lgl

Thursday, December 10, 2009

A better life

Can your average business set aside 47% of revenue for Compensation? Goldman Sachs does. Most businesses actually pay more than that percentage, as well as high Costs for capital, utilities, materials, and Advertising. Banks, on the other hand with inclusion of the Investment banks, use other peoples’ Cash to function, paying less and charging more for the Cash which they utilize. The Fed had presented a wonderful flush of Cash, and Wall Street has come up with the beautiful concept that the Compensation fund should not underwrite the bad loan discount fund; this means that Employees uses no caution is the extension of other peoples’ funds to any idiot who applies. One has to ask if such a level of Compensation is so necessary, and also where else could these individuals go to get equivalent levels of Compensation.

Great Britain is facing the same Compensation trouble as Wall Street, where somehow their Employees are going to find greater Pay elsewhere, if they don’t give huge amounts to their Employees in London. The Government has proposed a heavy tax, I think hoping to raise significant revenue–a forlorn hope. I would pass a law delaying Compensation bonuses for a payment Period after 40% of the extended instruments have been paid off, just to make sure that the instruments were of quality. This should provide about a 4-year lag in Compensation payment, and actually pay for something of benefit. The law could even insist that such Compensation bonuses could be automatically cut by 20% under the case that the Employee has ceased working for the Employer; all of this to ensure some value deriving from the bonuses for the Employer.

I will break pattern with the last paragraph, thinking to include this interesting set of charts from Felix Salmon. The amount of information processed is truly amazing, especially as a major portion has been subtracted as Work-related. I have to ask a TV watcher how much could possibly be redacted as previously viewed material. I do know that about 40% of all telephone communication consists of trash talk about the health of family and friends, which presents no actionable activity; it is the old Press-the-Flesh brought Us from Politicians, but where no conversation can be conducted without some personal touch–else We are simply talking to a spouting machine. Music still has sanctuary for the Soul, but when was the last time you were allowed to simply listen, instead of multi-tasking or being bombarded by Advertising? We might actually have less Pay, and more Employment, if We allowed the individual to relax a little. lgl

Wednesday, December 09, 2009

The real Recession

I read this Piece by James Hamilton and ask if maybe he makes the proposition too complicated. The major factor behind much of the market moves within a basically stable Market comes from the mathematical purchasing systems engaged today. They are basically a Traders’ mechanism, designed to detect the slightest changes in Price; as consequence, they always cut in at the same time and in the same direction, and in themselves generate the expected Market move. This directional pull basically destroyed the real operation of the Market, and acts as a parasitic force preying on the Investment funds in the Market. Any Investor must depend on long-term trends, or enter into the field of mechanical Trading themselves, the alternative being loss of investment capital. The real Question becomes what this does to long-term Investment, especially with the artificial drain of funds to Profits-Taking?

The above paragraph leads naturally into this Post by David Beckworth. The Great Moderation was accompanied by the beginning of model Trading. The asymmetric policy of the Fed was very important to the smoothing of the growth of GDP, but not the whole Answer for the Great Moderation. There had to be an additional shift in the award of Profits from growth, and this was accomplished with the mathematical model Trading which quickly adapted to fringe Trading. The relative delays in Stock price growth by Profits-Taking ensured that growth would be accomplished by heavy borrowing and Stock dilution. The Fed policy was dictated by protection of the heavy borrowing, bringing a degree of safety to Lending; a practice which was finally overborne, as it’s construction became more risky.

There are Those who contest Beckworth’s and my contention. They believe there has been no sign of a change in market formation in the period of the Great Moderation. Their essential thesis states that the new financial instruments are not the cause of the current Recession. I believe that this is wrong, that both the new instruments and Fed policy reaction to these instruments led to the Recession. This occurred because the Fed underwrote the financial practices adopted, until they became so extreme that the Fed could no longer go along; whereas the CDSs immediately began to fail. The worst impact was probably the allowance of these Swaps to be used as Reserve limits. The whole thing is a mess, and there has still been little effort expended on forestalling many of these practices because of Bank opposition to losing these high-Profit loan entities. lgl

Tuesday, December 08, 2009

The current state of our Government

Joseph Haubrich knows about Inflation modeling, having devoted much of his life to it. The major problem with Inflation modeling comes from it being a Time Series of continuous ascension, and base stability factors change under such conditions. Case in Point: At the time I started my economic career, it was estimated that a Retiree should have equity equivalent to around $40,000; I think the estimate Today is around $1.7 million. We developed Medicare, Senior support services, and slanted Senior Discounts in the interim. The facts states that Inflation modeling in the style of base years must change the date of the base year continually, else lose any relationship to the process itself. An alternate system is to determine the necessary time to obtain a 100% Inflation at the current rate of Inflation, and subtract it from previously determined numbers utilizing the same method; this way a table of absolute value numbers can be achieved for a series of years, and analysis of the series can be made. I will leave it to my Readers to estimate Why I would use absolute values, and Why what We are looking for is always deviation from the whole number.

The entire issue of health care could be eased with utilization of the Inflation modeling exhibited above. The real problem with health care consists of use of short-term base years because otherwise there is too much deviancy from placement values. This means you have to compare health care Costs to recent health care Costs, else the actual Inflation becomes hidden by the vast increase in dollar amounts. The short-term base years foreshorten too much, though, and the result is as mis-representative as the dollar injections. It becomes a real problem, as the one method suggests an irreparable fissure in health care finance, while the Other suggests a short-term fix which is inapplicable under the long-term. My table gives year over year spreads, and highlights the long-term implications of such spreads.

Here you can find the present federal expenditure program. Study the charts. Defense and Security has shrunk as a part of the budget due solely to the growth of Costs elsewhere; we are actually not spending any less here. People feed victorious about the little amount We spend on the Debt service, but it is a hidden Time Bomb which will quickly go back to about double its current level; it is all a Question of central banks raising their Interest rates again. The federal budget can only endure about 3 more years of sustaining a 10% increase in health care Costs, before Medicare, Medicaid, and CHIP grow beyond its resources. We are starting into the retirement of the Baby Boomers, and Social Security Costs are going to go way up. People, both in and out of the Government, fail to understand that We are in the Quiet before the Storm; something which will capture Us before the end of the current Obama administration. It is a factor which the devaluing dollar will not aid. Get ready for it! lgl

Monday, December 07, 2009

Why things go wrong!

A lot of people want to know how the Banks are managing to pay off the Government so rapidly, when they were supposed to be in trouble such a short time ago. The first item to recognize consists of the fact that mortgage failure has been much less than predicted, though still very high. The second element must be the Fed policy of ‘No Interest’ rate, so that Banks are paying not the previous 4% on average for funds to lend, but only something around 1% or less. Intelligent people must realize this concerns not just new loans, but all loans out there; after Banks pay off previous Depositors timed Deposits. The Fed is actually taxing Bank Depositors a hefty tax of around 3% of their Bank holdings through this policy. The Banks are set up to make a Windfall of heavy Profits as they need not lower their own Interest rates; Credit Card companies are actually raising their Charges, knowing that neither Treasury or Fed will intervene. Are you not glad that your Government is working on your behalf?

This article basically considers Why Oil Price shocks have less validity today, over previous Times. Translation of the article states that the Business sector managed to hold down real Wages, while at the same time pressuring higher Prices for Goods and Services; this draining the Profitability of the labor itself. Fed policy previously stated has drained the Profitability from Savings for the great mass of people. This later drain has led to Business gaining high capitalization from Stock sales, buttressed by the high Profits from Sales; gaining some degree of rising Stock prices and Dividend yields. It all means that the laboring classes are getting paid less, and spending more for their Goods and Service, all while having outside sources of Income shrunk, unless presenting greater capitalization potential for Business.

One can ask Why micro-financing is now proving to be a failure. The Answer is relatively simple: It has been taken over by a Corporate structure. Clients are chosen on their ability to repay the loans, granted only to Those expected to further some Lender interest, and secondary loans are rarely made to assure there will be adequate potential for repayment. Borrowers cannot expand their enterprise due to the lack of secondary funding, and repayments come before Gains for the Borrower. The Lenders want repayment within to short a Time-frame, and the Borrower must complete the cycle before consideration for further funds; an effect which rarely grows in magnitude of extended funds. One has to recognize that Business practice will suppress for reasons of profitability, and conquest of the sector of micro-finance by Business meant its downfall. lgl

Sunday, December 06, 2009

How you do things!

Review this information, then ask a series of Questions:

Is there anything in the data which suggests a predictable replacement of the Jobs lost in March?
The flow of Unemployment increase has not stopped, though it has slowed; can We expect any Job recovery before Government stimulus loses its Time frame?
How many months will it take to replace the Job loss if Recovery only averages 25k Jobs per year?
What are the Odds that We will run into our next Recession before We achieve full Job recovery?
Can We obtain the necessary funds for continued Stimulus, if We refuse to increase Interest rates?
Could the extension of reduced Taxes actually restrict our ability to fund Stimulus?
There are Economists, even besides myself, who believe that long-term recovery will require a reduction in the Cost of resources, while maintaining a constancy of Cost in Consumption; can this be accomplished with a curtailment of Government expenditures?

None of these Questions are yet answered, but might have to be clarified before there is any economic recovery.

Read this article, and then ask how realistic it may be in the long-run. All Steps We take in Conservation will require huge amounts of capital, almost all of which has been aggregated for other economic purposes. The real Truth is that it is cheaper to build Clean from Scratch, rather than to try to amend any economic process. The next Truth stands that Carbon reduction equipment requires high-Cost maintenance to ensure even its own standards, so that steady capitalization of such equipment is a Must; check out Chevron selling its praised New Guinea oil fields, large Corporations like to sell ideal, but non-Cost-effective Plant. Clean water often turns into Brown water hardly without Thought, yet no one examines neighborhood refreshing stations to purify water; there is little hope for additional Clean water without Cost-effective cleansing systems. Corporations will never get heavily involved in Conservation without efficient systems which do not detract from Corporate Profits and Payscales.

One may ask How the above paragraphs incorporate into a common thesis. Almost all Conservation efforts are labor-intensive, and there are few Consumption needs left unfilled for Consumers. Corporations are ever designing more Production technology which makes Production faster and cheaper, with less labor involved. Any advancement of Employment must inevitably come in the form of expansion of Conservation measures. The later will come only with a Pigovian tax system which taxes even favorable Goods for desired finance of Conservation concerns. I believe in a Weekly Drivers’ License which must be placed in the Windshield like some National Park Passes, costing a sensible fee for Conservation of Carbon and Oil products; with a whopping fine for no or out-of-date licenses. Toll Booths would be set up everywhere to sell these licenses. A fee of $2 per license would fund a lot of employment, properly tax heavy Emitters of Carbon, be in-line with normal Gas tank Fills, last sufficiently in time for Travelers, employ massive numbers in license sales and law enforcement to catch Violators, and be an adequate fund for highway construction and Conservation. lgl

Saturday, December 05, 2009

The Real, the unreal, and the '. . .Ah'

Can lobbyists affect the quality of life? Test the medical waters! A lot of people understand that Congress is trying to cut the Cost of health care in this Country, although they do not understand that this Cost-Cutting refuses to touch the remuneration flowing to the health care industry. I have already proposed more Amendments to the Constitution than the number presently on the books, but We might need another one demanding that each Congressional personage must state for the Congressional Record the amount of political financial aid he has received and from whom who has an interest in the legislation, before he can cast his Vote on any bill or issue. It would mean nothing, though, as the legion of paper built up; the esteemed legislators lacking any sense of shame.

Many would call this data a victory of sorts, but what does it truly say? The Job market is still shrinking, the revision is finding more Jobs as it always does under study, and it says very little else. In-Demand occupations are stilling facing a short Turnover of 10 to 14 Weeks, but the length of time for other occupations continues to lengthen; this means that total Hours Worked is still declining within the cited occupations. Government employment has been increased, so that all ratings are suspect. It does not look good, and the longer it lasts, the greater the smell. It could help if legislation could be passed without the additions of special favor legislation, all of which presents the real Expense to every program; this because none ever generates the level of subsidiary employment which stimulus should require.

I will first state that I do not believe in this Hogwash, though the venue is open to pursue such a course. I would advance an equally improbable choice–the creation of a Jobs Boot Camp. The principles of this Job Boot Camp are simple: all Internees will show up 6-days a Week, undergo rigorous physical training and exercise, spend 3-hours per day in Classroom study of job performance factors–initially in a general sense, and later in their chosen occupations. Job Boot Camp will last for 6 Weeks, attendance a prerequisite to obtaining Unemployment Benefits, and where the individual cannot seek alternate labor; to give more-extended Unemployed a greater chance of obtaining a Job. Internees will not be paid for this until they have completed Boot Camp at the end of 6-Weeks; I would suggest a payment of around $2000. The entire purpose of the Camp is to outline what Business desires for labor at the moment, the occupations with the greatest chance of employment, and shifting the American market from Temporary employment to long-term Employment. lgl

Friday, December 04, 2009

Which Way?

People have asked me about my real position on the renomination of Ben Bernanke as Fed Chairman. I would first like to say that I have no doubt as to Ben’s integrity; he is doing a tough job, and he is trying the best he knows how. It is stupid to imagine that he has some devious plan to restrict any improvement in the economy. He should be given a second chance possibly, simply from the real attempt to present effective curatives to the recessionary pressures which only seem to multiply. My major hesitation on his renomination is based upon technical aspects; the major aspect being his lack of understanding of the altered changes in the last Recessions–notice the plural. It is hard for all of Us schooled in Keynesian theory to recognize those forces, and the traditional Keynesian theorist may be the wrong choice.

Keynesian theory has always been an engine for Inflation, but the Concept was viable when some deflation was evident in the economy, combined with a low Government debt level. We have had neither in this or the last Recession. Operating an economy on deficit spending, whether Public or Private, is not a good idea; especially when there is already sufficient debt. We are in a Period where everyone is leveraged–the Government, Business, the Consumer. We additionally hold to the sad fact of conducting our Production from foreign sources, which means that We do not have a natural Job market. Debt service alone could bring down the American economy, and there is no program to bring American production home. It is somewhat simplistic to advocate Keynesian Spending without controls to retain those funds in the American domestic economy.

The current Crisis is draining excesses from the American economy. Debt is slowly being repaid in the Private sector, and much less is being renewed. Government policy is rapidly expanding their own debt, with little observable effect on economic improvement. One has to ask if Keynesian spending is worth it, if all that can be effected is maintenance of current adverse levels. I take the revisionist position that the only real economic stimulus currently present must be the debt repayment which is being accomplished, and that Government policy could ruin that program. My decision would be that the proper stimulus measure would be the elimination of the Bush Tax Credits, along with bringing Government spending in balance. How this reflects upon the Bernanke renomination is the Statement that Ben probably could not handle such a revision program. The Fed of the 1930s should have acted like the Fed of Today, but the later should act like Fed of the 1930s. lgl

Thursday, December 03, 2009

Some Real Questions

It always seems to hurt when I agree with Robert Reich. We are in a World which does not respect American labor, and will not support Us in the style to which We have become accustomed. The Government has tried to borrow the Money for Us, but that source of these funds are now in jeopardy; the World may not respect the Government either, especially after the run-up in American debt. The later tends to be a real Downer when searching for respect. A great part of the lack of respect is the fact that American industry does not produce for the Consumer, whether he is American or foreign. I live in an agricultural area, and see the machinery produced for the American farmer; relatively useless to farmers, but really great for agribusiness. Machines cannot be bought which do not burn gallons per hour, or handle a potential hundreds of acres per year. American farmers think this is great often, but their entire field can be handled in hours; wonderfully labor efficiency, though the complex machinery requires bi-annual visits to the Shop at about $6000-$12000 per trip–saying nothing about the unrecorded Downtime. Foreigners, if they purchase, train an entire Maintenance team to keep the machines in the field continuously. We must get a little more User-Friendly, with less Operating Costs; Labor Hours are not really demon ogres.

I like this column because it asks a bunch of Questions which will never find a real Answer. Therefore, I will try to answer them for gentle Ben, and present a group of my own. Congress has been looking for a Scapegoat, rather than a Solution, and a failure to blame enforcement of complex, confusing regulations is easier for a member of Congress than passing sensible regulation of the financial industry. This basically answers the first question, as neither God or Devil would have satisfied Congress as leadership of the Fed. The greatest cause of the crisis was paying extreme bonuses for writing and selling Credit Default Swaps; study of Risk was lost with Sight dedicated to the bonanza of wealth potential. TARP was ridiculous in the first place, and its removal could hardly affect anything but Speech-writers. Breaking up large firms would be beneficial, and no one has yet convinced me that Bankruptcy was not the proper vehicle for this Break-Up. The reason that the Fed will not adopt a policy of 3% Inflation is the fact that We already have such a rate, and the Fed does not want an Inflation rate in the high digits.

Questions I could ask Bernanke are wide-ranging and numerous, but I will keep it simple and sweet. Why does the Fed keep a ‘No-Interest rate’ policy when it produces as great a curtailment of Consumption, as counter-reaction produces Consumption? Why make Business loans easy and cheap, when Business is actually pushing less Product; and will not Hire or Borrow under those conditions? Why is the Fed creating the ability for Banks to repay their debt obligations, while forestalling a like process elsewhere in the economy; there is no attempt to actually bring relief to Those in the economy who actually hold unviable financial positions? There has been no effort to suppress either Credit Card interest rates, or Business loan interest rates–Why? Can the economy restart without serious Capital investment is previously un-pursued economic channels, which the Fed is making no effort to fund; should it not be the policy of the Fed to give advantage to new industry, not wealth monsters which should be taken apart? Could you imagine the Fed absorbing and financing something like the Small Business Administration–actually working like a Banker for Those who cannot aspire to a Private Sector banker provision of requisite skills. lgl

Wednesday, December 02, 2009

Suggestion Box

Mark Thoma generally discusses the Jobs market incentives which the Government can adopt. The key element to remember must be that the Private sector will not undertake Job generation under the decline of Consumer Demand. Nothing will alter this fact except Government activity. Mark explains some of the methods that this Government activity can take, though he ignores the punitive action of specific taxation. There can be a major impact by making downsizing expensive. This would entail things like forced Severance Pay of excessive amount, payment of medical insurance for the eliminated Worker plus his family for a specified period, assumption of relieved Worker’s debt obligations for a specific period, or payment to the Government of a set amount of projected Welfare Costs for a released Worker. Does all this sound like Communism? It might seem so, but One can establish that in some way, all these generated Costs are the responsibility of a negligent industry. I am not advocating any of these efforts per sec, but simply attempting to outline the scope of economic policy which could be adopted.

Read this article, and ask if it is Government which should be the primary funding agent for economic recoveries. We would not be discussing the hazards of Government debt, if We made the decision to force the Private sector to fund their own recoveries. We could be in need of a Transportation tax, which charged each business a Ton-mile charge for transporting Goods and Materials. We could accept a Profits tax, which charged 10% of all gross Profits, which would be contributed to a Fund utilized as a Credit Union; but have the mandate to pay Worker salaries past Lay-off for a specified period based upon previous years of labor service–extending from a few Weeks for new Workers, to several months for older laborers. It is exactly these in-place instruments which could generate recovery from Recession, and forestall much Government expenditure for economic generation at least in the early stages of recovery. This is all using the Tax Code, but not giving Business a free pass, but are We back to calling it Communism?

I basically agree with Charles Plosser, never believing that the Fed could act in any role of stimulation with the economy. We need to tighten up the amount of Cash within the economy, or face real un-retractable Inflation; the real role of the Fed policy. The expansion of the Fed role in the economy, especially the purchase of distressed assets, can only lead to long-term complications; none of which We would like to face. I do not agree with Plosser’s expectation that the Unemployment level will begin to decline though, not without some of the activities mentioned above. Government must take an Activist role, but not one as Chief Consumer. lgl

Tuesday, December 01, 2009

Reality without Doublt

Jon Hilsenrath tells the story, though with great things left unsaid. The drop in Consumption cannot produce Job growth in the Private sector. One has to understand, though, that there is Consumption and then there is Consumption. We don’t need to use more Oil products. We don’t need to buy more foreign cars. We do need to buy more American production. We do need to have more Americans providing Services to Americans. We don’t need more Tax Credits to Business in order to sell foreign products to Americans. There is even One, namely myself, who believes in the old Tariff system to somewhat restrict the sale of foreign products, from which We receive neither Taxes or significant American wages.

Paul Krugman is worrying about a Double-Dip in the economy. He should of been worrying before the federal government spent a trillion dollars on only that which protected the wealth of the Banks and Brokers. I personally live in an area which has much less unemployment than the rest of the Country, but local Sales are way down because Everyone is worried. The real difficulty is convincing Consumers to take on future financial commitments. A real element of all this is the split in Inflation readings; the federal government is satisfied with the inflation rate because Prices have decreased in anything connected to the Credit Crisis. A check of Grocery or Discount house reflects a high Inflation; all of this within a spectrum of no Wage growth. The government can fool itself, but never the American housewife. It is exactly these people whom We have to convince that more money is coming.

Here is the opening shot of a great war, but be sure to wear Rain gear; the BS will fly in massive amounts. There will be Protection of lobbyist position and advantages, incited Terror among Seniors, and about as much overall help as Americans received in passage of the Proscription D program in Medicare. All the Health Care providers will raise their rates by another 25%, and Consumers will pay what they had before, while the health care industry gains a massive Welfare program. The real Question will be how long will it take to fix whatever mess is initially enacted. It will get fixed, as Americans get mad at what they have been stuck with, though it will be a long process where the health care industry will make a fortune in the decade of disaster ahead. lgl