Cabin Fever--or the heretical lifestyle

Consistent Readers know that I sometimes get some wacky ideas, and no, I not smoking anything since my heart problems. I read this article from Reinhardt, and my mind just seemed to develop an independence from the normal bounds of good Conduct. I came up with this ‘Save the Trees’ idea, and decided to write on it. It takes into account that Insurance companies find Profit in sticking Conditions on any form of health insurance to minimize payout on Benefits guaranteed on the surface of the policy. It follows that both Government and Patient would like to cancel such practice, and health care Providers would enjoy a minimization of paperwork which they currently have to complete. So We come to my idea.

The first Step will be to declare all Insurance–of every type–must be filed with a National Insurance Agency. The second Step is to outlaw all Insurance which is not filed with this Agency, with a legal mandate that all premiums of such Insurance must be returned to the Purchaser if these Insurance contracts are not filed within 30 days of taking effect. The third Step is to put a $.80 Charge per page of such filings if presented on Paper, but a much lesser charge if filed electronically. Step four will be the Condition that all filings of Insurance must be read by the National Insurance Agency, and clerical workers of the Agency have the right to cancel any condition within these policies not in conformity with National Insurance Agency policy, by the simple practice of erasure in electronic filings, and an annulment claim made against paper filings. This practice, of course, would require the establishment of defined Insurance policies for all types of Insurance, and such policies would probably have to go through an Up or Down review of Congress. It is my estimate that such a practice by the new Agency would entail an federal employment increase of practically a quarter-million Workers, but they could easily be found in unemployed clerical labor pools.

Now We all know that good things never really end, so We could pay for the cost of the National Insurance Agency by charging a 2-Cent per Page charge for electronic filings, as well as the $.80 per page filing cost for paper filing. Relief for medical personnel could come from an imposition tax on all claims made against such Insurance under the same payment conditions–mandatorily paid by the Insurer; this meaning that a lot less material will have to be filled out by health care providers. Such simple practices could change the entire matrix of the health care debate, and go far to eradicate a multitude of problems in the health care industry. I have hopes that such practice alone will reduce health care Costs by at least 20%, and get Us far closer to the desired community-based premiums for health insurance, car insurance, business insurance, and Insurance Bonding. It is the creation of another federal agency, but one which could make sense, as well as presenting a more uniform structure to Insurance across the Country. lgl

Where We are at Today

This Concept has been around since the late 1970s, but seems New and Vibrant because it is now happening to those new Jobs created since the Seventies. It has been a lament from that time, and comes from the simple fact that Wholesalers had turned Overseas for cheaper Product, abandoning domestic labor, and leaving domestic Consumers to develop their own sources of revenue. This has become defined through the very uneconomical idea of abandonment of a Tariff system. Jobs suddenly faced the horror of Wages dropping to the lowest common denominator, and the destruction started to creep through the economy. Fewer and fewer Workers found themselves with Jobs which actually paid for their existence, while World Product Prices began a dreary uniformity; culminating in even the Rich having to pay a huge Price for their Toys. Those with entrenched upward Wage spiral began to draw unbelievable high Salary, while such Positions started a shrinkage of numbers of such positions. Where did it all Start?

The discrimination against Tariffs started in the Great Depression era, when Tariffs drew a great share of the blame for the economic downturn. Producers could not find sufficient domestic market for their Product, and decided that they would sell excess Product in foreign lands. They, and later Economists, refused to recognize the existence of foreign competition and lack of a distribution network; and became angered by the pointless activities of some misguided Legislators. Tariffs were suddenly the great Demon. It did not matter that Business had no foreign Sales network, that the Railways could not handle a much greater increase of Product traffic, or that there were not sufficient Ship bottoms to transport any serious enlargement of bulk traffic. We had a Transport network capable of transference of about 8% of the World’s Product at the time, and a Distribution network which could only handle less than that. A serious evaluation of the Time would suggest an extensive Export network would have not been able to increase labor rolls by even 2% during the Period, and do to the competitive domestic production, would probably not have increased the labor rolls by even 0.7%. Tariffs did get vilified, though, at exactly the Time when a sensible Tariff system was the only salvation for the modern development which has occurred since the end of WWII.

The World has suffered from two main problems in the last half-Century: the first being the production of cheap, poor quality Product in a Time when environmental difficulties demanded much higher quality production; and, the massive Dumping of Product, where Governments engage in activities to sell Product below Cost Worldwide to maintain labor rolls. Competition within Production has only grown with the inferiority of Product expanding, creating vast Environmental and Capital Costs; neither of which elements can be paid for from the actual Production. The Dumping of Product has proven relatively useless in maintaining Employment levels, as more Economies engage in the practice; with Governments unable to maintain the funding necessary for the artificial Production levels. Sensible people have long recognized major alteration of Production decision-making must be made, while the majority of decision makers cling to economic ideals and practices which cannot be met, or paid for within the current context. So We sit with archaic economic policies and plans. lgl

Business Model

Mark Thoma gives us access to this link to the Fed Reserve–Dallas. It brings a really good Overview of the Unemployment levels of the recessionary periods since the Great Depression. The Unemployment rate is rising higher than ever before since WWII. One should recognize some exterior factors to this data: the last shreds of the WWII generation are leaving the labor force, the Baby Boomers have reached the Retirement range with many retiring early, and many of the younger generations are avoiding employment; all of which probably produce about 2% of the Unemployment rate. All of the above elements are structural, and while they could have been initially recession-created, are self-sustaining after separation from the labor force. It all means that a real premium in Wages must develop before most of these labor elements will return to employment. This is highly unlikely within the current economy, and most of these labor elements are permanently gone, and should not be accounted within the normal employment schedules.

I agree and disagree with the Federal Open Market Committee. I would have joined Thomas Hoenig in dissent if granted the Vote, as I think that cheap finance is one of the suppressants of the economy. Business does have no incentive to raise Prices, but both Employees and Consumers possess little desire to expand their consumption patterns–especially with the maintained high rate of Consumer Credit. The Inflation, on the other hand, has not been cancelled–simply delayed. It is inbreed in current practice, and will reappear in magnified form just as soon as the cheap money disappears for Business. The later will not even expand into new production until a higher Return seems approachable, requiring higher Wages, greater profits from Consumer Savings, and higher product Prices; all requiring a return to more expensive funds. The Fed intends to support a business frame whose Time has already past, when it needs to generate a vibrant economy.

One can find one of the relative destructive elements of current banking practice here. There should be a real limitation of labor reward in relation to Stockholder reward mandated into law, except it is hard to interject a sound number. It would do much to equalize the Living Costs structure across different sections of the Country at base, and bring an equalization of Consumption within society. Housing shortages would be reduced, and a more uniform Cost could be brought to Housing construction. The current practice of business management consists of the more one gives to the employees, the more management can collect for itself. I would suggest a 50-50 Split between Employees and Stockholders, with a limitation of 25% of Profits going to business expansion. It will quickly become apparent that there will be immense protest from all Sides, but everything can be resolved by a more efficient Pricing structure for the business Product. This would be a basic movement away from Growth identification, but it seems Time such an aged format (coming from the 1950s) should be abandoned. lgl

It is Time to get Nasty

We wasted more time talking about the Banking crisis than any subject deserves, but here is a commentary which changes the context of the argument. I am afraid, though, that it will affect little as family spread their deposits through different family members; it will, of course, help the spread of Income, especially with the removal of Inheritance taxation. Everyone knows that the next Step will be centralization of those deposits, so that control of the funds do not extend past one family member, where We are exactly back to the Start position; all such families actually gaining greater security by extension of the insured levels.

I dislike this type of argument, as it assumes that a limitation of Government Expenditures can never be attained. James Galbraith makes a smart economic debate, even though he automatically discounts a withdrawal of funds, from both the Private sector by taxation, or reduction of Government expense. I find no real proof from my own observation that current Stimulus policies imposes greater economic performance, than would a ‘let the chips fall where they may’ abdication of Government economy policy tools. I prefer a 12% drop in the CPI to any economy stimulus, and know that stimulus certainly cancels any movement towards that drop. We need to get away from issuance of Tax Credits and cheap Cash before We can get to a massive White Sale. I would like to witness some form of actual Business losses before more erosion of taxable Income base. I suggest there should be actual Production below Cost prior to any reduction in taxation. Government expenditures could be reduced by a automatic reduction in payment for all Government contracts—including social Welfare payments–exactly equal to the percentage reduction in the Producer Price Index; notice I left both the CPI and PPI unchained as far as future growth at every level.

The standard argument for paying business to hire new employees is fairly discussed here; and I find it equally ridiculous. Why pay Concerns a bonus for making other people less miserable, when a simple tax imposition does far more to promote new Hires. Simply pass a tax which says all Income savings coming from a Wage Expense reduction will be taxed at a rate of 40%. It simply states that if business wants to make money by screwing their fellow citizens, then the Government wants a huge slice. It is simply determined by subtracting current Wage Costs from the previous year labor Costs, and taxing any amount left over. I do not mind alleged claims of confiscatory policies, and such taxation would be quite legal with its uniformity. Simplicity of Demand is the key, while one remembers to unsheathe that sword. lgl

The New--Old Order

Paul Krugman brings Us excellent comment here, but still fails to express the fundamental failure of the entire Government structure in dealing with the current Crisis. He does not detail the fundamental weakness with current Government policies, which is that We have devolved from the curative policies of previous regimes which had worked in the Past. It remains quite true that economic conditions have changed in the interim, with both Product and Employment levels changing in both number and context, but previous Government policies did succeed when faced with economic failure, and could still work if given a chance. It might not matter whether One thinks the second Reagan Tax revision or the 1993 Clinton Tax revision worked best; both seemed to work better than Our present mess. It actually also does not matter where the economic stimulus utilized was placed. What is important was the fact that both those programs worked to the degree that they did work, and that current policies are failing. There is an old adage in Business that if Innovation fails, you return to what worked in the Past. I think it is time We returned to the Days of Yore, and descend to a previous position on Tax and economic policy, before Employment returns to those previous positions.

Bruce Bartlett stands as someone who would obviously oppose the above ideology; at one point stating it likely that Roosevelt should have abandoned fiscal conservatism, and spent 5 times the amount of stimulus in the 1930s. Bruce makes the mistake of using the position of the GDP from the previous Boom before the 1929 Crash, instead of the level prior to the Boom–say 1927. He also does not understand the difference between Stock Market performance and real capital investment–positions which can deviate quite substantially through short periods. I agree with him that there is slight chance of fiscal tightening over the near future, but do not see this performance as beneficial to Anyone. The ideation of a running Mortgage on the federal government is a Concept which will come back to bite Us.

I will finish this Post with this article, which explains a great deal of the mess We are in. We literally cannot have a sound Tax base without a manufacturing sector; I will not explain the technical aspects of Inflation here, but state that Tax increases without manufacturing output increases are inflationary, and declines of output will make even current Tax rates inflationary. It is not necessary to detail who gains from manufacturing declines, and remains counter-productive in organizing Opposition. The need stands as the necessity to identify the real Costs from failure to regenerate manufacturing in this Country. It costs Us a savage price to purchase abroad, and understanding that Price will improve our organization. We can produce better Product at lower Cost with better Wages, if only We separate from the debris of the Past. I may later make a Statement on methods to accomplish this State, though it will obviously entail some research on my Part. lgl

Labor Practice--Great and Small

I read this Opinion, and to express How my mind works, immediately thought that I have not recently read anything on the effects of Employment of these consolidations. There has been much concentration on Price and Quality in these mergers, but real discussion of the impact on Employment has been absent. I would actually like some good material on hard employment, semi-hard employment, soft employment, and automatic labor Cuts. It might be that I have a poor Search pattern, or there might be a real pronounced lack of such data; a real curtailment in a Time of high importance for such materials. Understand that policymakers cannot make good determinations when there is a dearth of robust discussion from this arena.

I read this article, and I worry about the long-term consequences to Employment. It combines huge pressure on labor from two factors: Employers expressing an abdication from Employee support, and Employees generating new social patterns which minimize the centrality of labor within their social lives. How does an Employer regain Employee dedication to the labor, when they have to endure both Job insecurity, and loss of new Social contacts? This is especially a Question which must be asked when conducting many physical stressful Jobs. Iceland serves as a prime model, with high unemployment numbers, and a higher than usual number of such high-stress Jobs within their economy. I am simply saying that as goes Iceland, so goes the World; and I have great doubts for the World of Labor.

There may be one Job that economists still worry about, though I wonder if Anyone should. I would start off this discussion by saying I like Ben Bernanke, and don’t see how he could have done much different than which he has at the Fed. This said, I don’t think there is any other position in the US Government more desirous of having a Term Limit placed upon it. Many could question my motives, but it is basically the Need to validate previous policy, and to promote competition of Solutions sets to the financial policies of the Time. I would really be more worried for Ben, if I thought that he would soon join the Unemployment line. I could actually come up with a series of federal jobs which should have a one term limit, but Fed Chairman probably holds the top Spot, followed by Treasury Secretary. They should easily be joined by Defense, State, and Interior. I could even get radical, and state that the entire Cabinet be replaced every four years. Which makes me wish We could do the same for all Corporate CEOs. I am in a vicious mood this morning. lgl

The Power of Strangers

It would be a beautiful thing if there was an easy solution for ‘underwater’ mortgages, but there really is not. The real problem lies in the reluctance of all Parties to make amends to the initial mistakes made. Both Consumers and Creditors ignore the most fundamental first mistake of their mortgage; which was the maximization of their Credit potential when first acquiring the mortgage. Understand that the excessive extension was mutual; bankers should no more allowed such growth in mortgage size than Customers should have asked for such large amounts of untied Cash. Mortgages should have proper reserves, exactly as Banks must fulfill demands of the Fed for capital reserves. The concept that a down payment served as such a reserve was stupid in concept, and only another fuel component to the fire of mortgage meltdowns. A much brighter choice would have been insistence that banks could only extend 88% of the estimated value of the property as mortgage loan. This initial moderation could have probably have saved a majority of these mortgages, and the useless nature of down payments could have been dropped from the lexicon; thus eliminating artificial creation of bank reserves, and not stripping immediate Cash reserves from the mortgage holder.

I will let the Reader pick through this thing without that much Comment. I will first state that the source of any fraud is confusion and mixup of the lexicon; the fraudulent first convince the Sucker that there is a vast range of ideation out there which the Sucker does not comprehend, and the fraudulent will act as cursor through the complexity as friend. Prop trading first, last, and always is the selling of ‘Blue Sky’. There is no sharp delineation of Risk, there is not designed recourse to non-fulfillment, and no justification of the middleman Costs of the Issuer. The later has already established the Risk, designed the spread instrumentation, and frees itself from any reactive risk through documentation which the Purchaser cannot alter. Such Issuances does not offer opportunity to negotiate the instruments, or offer an identifiable Product exchange; this all means that such instruments do not constitute legal Contracts in the traditional sense. The best which might be said of prop trading is that it is legitimized fraud.

Here is a good Post on the ability to utilize altered circumstance to attain a relative degree of power. Thank God that the 10-hour Day did not take hold; I already find the passage of the hours to be a constant burden. Poor Students have for years been pressed to learn all the digital systems of measurement, and the methodology of transference from one system to another. Now We must learn the differences between old and new forms of Risk, simply to avoid losing what forms of capital We managed to attain under older systems. It is Time to stop and smell the flowers, before they devise a new Rent rate for the damned things. lgl

Bubble, Bubble, Toil and Trouble!

I don’t really agree with this Post which can identify the true scope of bubbles, but it provides so much food for Thought. Bubbles, taken in their most basic context, are extreme variations in the rate of inflation in the various sectors of the economy; think of them as the shells within that Revolver cylinder I mentioned earlier this Week. Bubbles are the sectors which show the high rates of acceleration, which can be produced by real or artificial factors. Bubbles will burst relatively rapidly if sector prices have been artificially generated, but may not burst at all if the factors generating acceleration of prices are real. The inverse method for examining this process finds the high Costs of Production to be unsustainable in the other sectors of the economy, so that the bubble will drain–not pop! The most adverse circumstance presented by a bubble must be that it ignites inflation elsewhere–that Round being fired in the old Revolver. It is most dangerous when the factors behind the bubble are real–like higher Resource Costs, Resource shortages, or Production delays.

The Reader can find information here about the worst bubble which exists, in both the domestic and world economies. Does One notice the Trick of avoiding rounded numbers to avoid Commentary by the politicians; it is much harder to state that the debt ceiling will be $14.294 trillion, than to say We now have a $15 trillion debt ceiling. Does Anyone expect there is even a debt ceiling at all? We will undoubted find a new ceiling being introduced by Congress before the next Presidential election. Do not doubt Congressional ability to Spend, especially when the Country screams for Stimulus. Here is a bubble which would require a bulldozer with a sharp front blade to prick it.

The Europeans expect they can avoid the hazards of being a super-sized Savior of the World. Americans try to spend their way out of the troubles of the World, while the Eurozone tries simply to ignore awkward economic data which comes in from elsewhere. Both of them have about an equal degree of success. No one ever explains How the fate of Us all rests upon the idiocy that the policy-makers can inspire. I do not know what to propose, as I cannot get finance for my Fallout Shelter–maybe it was the outlined 3-year supply of Scotch. lgl

What Thread to pull

I will first present this Piece from Menzie Chinn, basically because he always comes up with such interesting Graphs; if one enjoys a good field focus. He comes up with a graph at the end which suggests that there has to be some level of Inflation (around 5%) which must be sustained to get back full employment. I know that this level of inflation will trigger other inflation flares in the Country much sooner than in a 3-year Period, which will cancel continuous employment effects. The retention of a 2% inflation rate at this point already produces a Job loss which is unacceptable. The truth is We have to endure a Product deflation, in order to gain a reversal of declining Job losses at this time, without some technological breakthrough coming into Production. All economists are terrified of this deflation, because of its impact upon the structure of Credit extension in this Country. I am not as worried, knowing that the deflation has already been priced into Credit rates, and We have now had 2 years of Mortgage reductions; now if We could only get banks to engage in mortgage renegotiations.

I take the exact opposite view to that expressed in this Ditty advanced by one of our latest Nobel laureates. The principle means by which We can regain Jobs will be by pressuring efforts on the business world to produce greater Product. The only real way to do this at this time must be by propelling a reduced Profit per Item Sale, something which will not come by making business personnel more comfortable within their environment. I personally would like to see legislation which insists Labor get some Share of the Profits, which would be a propellant to more new Hires, as business hates disturbance through larger Return to labor. It makes it far easier to suggest Drops in Product pricing, and a spread of Profits distribution through new Hires to cancel unwelcome Income distribution.

A pattern micro-management that may be effective is a regulatory law which insists that at least 30% of Wage Increase must come is direct Return of funds to the laborer–coupled with a Statement all Tax reductions on stapled Expenses will be additionally taxed, if such distribution is not maintained. Knowledge of the business resentment at this legislation leads me to call it the ‘Mad Money’ clause; I am quite sick of watching all Wage increase being shipped off to other business management, as proclaimed payment for higher Cost services; all of which would not be higher Costs, without this shipment of funds from other businesses. It is alright, children; business personnel always consider me Nuts anyway! lgl

Improper Gun Handling

James Hamilton attempts to explain the theoretical aspects of both Greg Mankiw and himself; yet still lacks a bit in credibility on the spread of deflation being as large a threat as inflation. I would like to tell the interested Reader that this is not to suggest he proposes the impossible, and the equal great plausibility that he could be totally accurate. We are all still Guessing after centuries of intense study of the economy, and this does not bode well for the eventual survival of the human species–if the ecologists are Right; still, that is another discussion. I will try to explain my own position on Inflation and Deflation, which will obviously lead to confusion for the Readers.

Inflation/Deflation remains a function crippled by two exterior impacts which I like to call the Brush Fire effect, and the Revolver Trigger effect. The Brush Fire effect consists of previous accumulation of nonproductive wealth accumulation; this coming from potential prior monetary policy leading to excess stocks of Cash, and parasitic profits coming from artificial middleman costs which serve no real economic transference or productive function. The Revolver Trigger effect consists of the statement that there are multiple propellants of Inflation within every economy, and a resistance to these propellants before they are allowed free rein; a certain level of pressure must be applied to the Trigger before the sear slips and the Round fires. The only difference from the Revolver is that the cylinder spins of its own accord, and no one is sure which Round will fire at any time. It all means that no one quite understands which Round will fire as there are multiple sets of pressures applied to the Trigger at any given time, and the bullet fires from unknown origin to hit unknown target. The Brush which catches fire from the Round has unknown location, unknown levels of brush accumulation, and unknown dryness due to the brush’s distance from actual productive effort.

We know that Inflation can flare up anywhere exactly like a Brush fire, will find a abundance of fuel or a lack of same, and can explode into flame like a bomb or burn slowly like the coals of a campfire for decades; all dependent upon the level of fuel and dryness of the materials. The two basic methods to control a brush fire is to pour Water onto it, or build a moat of cleared area around it so that it lacks fuel. Pouring Money on deflation can forestall such deflation, but Money is actually in short supply–it is an Accounting thing–though the Fed makes it look easy; a secondary factor which should be discussed, but not here. Pouring Money on inflation accelerates the fire, only essentially diminishing the dryness condition necessary for the nonessential capital for productive purpose to brightly burn. Here is the trouble: Pouring Money on inflation will only cause a much greater fire, while building a moat against provision of further fuel will vastly increase deflationary effect; a minor discussion should be made about the width of the spout from which the Money is poured which always hits the entire economy. Now comes the Guessing Game of deciding if any Round of Inflation will fire, and if so, in what direction; and what is the condition of the brush capital it will impact, also as to amount and dryness of materials. What more need be said? lgl

The Truth, the whole Truth, . . . ah, you get it!

I feel like Mark Thoma, and would not inflict This on my Readers except that the material is relatively important; think that the Test on the material will come in the future, and will likely cost the Reader real Money. The real lesson is Borrowing does increase the Price of Products, and Pricing rises with the degree of margin looseness which is allowed. The Point not discussed adequately is the fact that the effect of leverage is accumulative in nature, as it averages the level of optimism without constraint; meaning that pessimism is discounted but not effectively. The trouble results in the fact that the money market does not utilize the actual Average, but the more erratic Mean without recourse to pessimism; all this insisting the Cost of any form of Collateral will be less that the nominal Price. The following article within the Post states that loans are tied to one another, as leverage has foundation upon leveraged collateral. They suggest that regulating leverage can be accomplished by limiting liquidity. I cannot see the connection to this idea in actual fact; dismissing the concept that stability can be afforded by limiting the magnitude of the total loans which can be extended on the collateral; the instability being introduced by the degree of leverage, not by the quantity of loans made by the same leverage. Of course, there are Many who say I don’t understand these things!

We find this article about the effectiveness of propaganda. It is a relatively good Interview within, but the real effect of propaganda may escape. Propaganda is basically a methodology which introduces a logical alternative shaped to promote some objective belief. It may be True or False, or contain elements of each; all of which does not highlight the purpose behind the propaganda. The later is intended to offer an alternative explanation (I like to say alternate Universe) based upon the hidden motivation of hidden Participants; the later of which are all the population who are condemned–whether they be some minority, or simply a current leadership. The real grasp of the essential of propagandist argument comes in determination of the motivation sequence of the propagandists themselves; asking what led them to devise the alternative explanation. It is here that one can grasp some estimation of the truth of the propagandist statement.

It is like the discussion within the article of health costs. The later prices will always be determined by the interplay of Supply and Demand, while the discussion is introduced to shape both elements of the Supply and Demand curves. Care remains forefront to avoid discussion of expansion of health providers and finding Cost curtailments for the provision; all because Most of the discussion is generated by the health care providers. Such propaganda is directed at generation of health care Demand by Consumers, pushing the Curve outward; all the time insisting that the Supply curve should advance only upward. No one suggest that the Demand curve can be pushed downward, or that the Supply curve can be pressed lower and to the Left. The actual fact stands about 30% of health care Costs could be eliminated without any impact upon health care outcomes, through more accurate use of health care elements to eliminate unwarranted medical procedures. A second major area of resource should come in the arena of over-the-counter medication; resultant shock treatment from drug reactions being much cheaper than the current Proscription debacle–one of those areas where we should imitate Mexico; only about 1 in 160k purchases ever have any resultant adverse reaction. lgl

And when I die, and when I'm gone!

Greg Mankiw seems to have gotten it exactly Right, and that worries me. That is not to say Greg ever gets very much Wrong. It only states that I have an idiotic sketch which portrays a 77% Inflation rate for the Money Supply that the Fed has produced, and the Fed has to get not very much Wrong in order for that Inflation not to show up. I have to now ask if Everyone is that Gifted, and I hear an echoing laughter from the Past. I almost wish that they had authorized a potential Tax on Bank reserves, while they had passed provision for the Fed paying Interest on those reserves. I specifically do not like the fact that the Banks can earn Money whether We are in a Recession or a Boom; through the simple practice of buying Treasuries. Ease of paying for Government excesses hint of older practices of printing Currency to pay for Government; with the horrible suspicion We are talking about the same thing!

Julian Zelizer mistrusts the impressions of the American Public, which I myself feel are truly far off the Mark. This is basically because Americans listen to the Propaganda of the military/industrial complex as expounded by Presidents, rather than the justified worries of military strategists. We have too much Money spent on Intelligence capacity and super-weapons, with insufficient funds granted to the maintenance of a viable military force. This concentration means We have difficulty stabilizing parity with other military forces in the World. Our present military force could not set up for an extended military campaign against a determined enemy of significant size, without massive alteration of organization. I would suggest that the US Military today expresses the persistence capacity on a par with the British Army in 1914. Once the professional reserves were destroyed in 1914-15, the British has to really scramble to feed the Manpower needs of the War. Today, the loss of two of Our functioning divisions–even if only Casualties–and/or 1000 Combat air hours upon our aircraft, would mean a scramble to maintain an effective military posture. Neither Republicans or Democrats are truly Hawks, though they are Vote-gathering automatons.

I will maintain the pretense of sharp economic analysis, by presenting this Post from Menzie Chinn. I will first say that I do not believe these models very much, though they are carefully done. The basic reason being these models are all dependent upon functions with coefficients determined by functions with inline shrinkable values. This means that the final Readouts are not the expression of general Trends, but the interplay of general Trends; all final outcomes inconsistent for growth or expansion (no consistent direction). Expectations are always overconfident under these terms, especially when interaction of Trends lead to component shortages and Time delays. Q42010 may get Us a 1% Growth rate, but We are running against Constraints of Resource competition and loss of experienced Operatives with the retirement of the Baby Boomers from decisive management positions. This is not to say that many of Us should not have been replaced earlier, yet; many good Operators will be hitting the Skids in the next decade. lgl

Real Educational Values

Arnold Kling is saying exactly what I have been saying for some time; okay, okay, maybe he is saying it in a more normal, rational (understandable?) manner. There has been a definite shift from enterprise strategy to investment strategy as the effective mechanism for wealth creation. It is not so much the theft of investment funds, as it is the capture of talent, and interjection of profound Middleman Costs. The innovation slump is real, and the creation of Consumer desire has been corrupted to fulfill inferior, rather undesirable Product; leading to a corruption of Consumer will to purchase, as previous purchases prove to lack value. Arnold fails to mention the Consumer Credit crunch, which affects more than the Oil crisis this time; especially Consumer resentment that Card Interest rates rose in the face of cheap money for financial institutions which lowered the value of their Savings. It has never been the lack of liquidity within the economy, but corruption of the flow of funds which defeated all attempts to restart the economy; We cannot survive in paying actual exterior Players a very high Rent in middleman Costs, when they present only intrusive blockage of Profits from enterprise.

It is time to review this Post from Tim Duy. I hesitated because of the information presented is such a mix of Good and Bad. The return of long-term Savings is a good thing, but will be defeated if the Fed maintains it’s ‘No Interest’ position, and provisions no Return for that Savings. The reduction of Credit Spending is also a good thing, especially to the ‘Out-of-Pocket’ Spending; again, something threatened by the ‘No Interest’ policy; the Trend would eventually only present a lag to a Return to normal growth, except for the engineered high prices generated by banks in pursuit of ‘No Risk’ investments to maximize their profit ability to cheaply borrow funds; not unintelligent, remember that without cheap Cash, they would lack a Return from either Investment mortgages or Consumer Credit at previous levels; Stockholders not known for easy recognition of recessionary loss of Profits. There is the fact that outside this analysis, there is not rationale for the Fed policy of ‘No Interest’, as commercial demands for loan capital will not be higher without an increase in Consumer consumption. It is sad when the only investment demand for Cash comes in desire to purchase Treasuries profitably without Risk.

The Reader may have noticed that I did not review the discussion of Trade within the Duy Post. I must regrettably state that the only way the domestic economy will recover will come from an increase in the cost of Trade. It is only when the cost of buying Overseas becomes equivalent to producing our own Product, that We will see a real Return to economic growth. This is not an All or Nothing thing, any increase in the cost of Imports better the advantage of domestic production. Part of the real problem has been a half-Century of convincing our Children that Production line Jobs remain the venue to Poverty. The real poverty within this Country are unsustainable mid-level, Middleman slots which do not present the Profits potential to maintain a living Wage. This erosion of Respect for Production labor should be discontinued, while actual Wage level comparisons should be clearly outlined. It should also should be taught that Job Security among Middleman Jobs is no better than Production labor anymore, while the Skill levels developed in Production labor often bring much higher ReHire capacity. lgl

Simpler Solutions

We have a new proposed tax, and here you can find a short commentary from many sources. I would like to approach the entire issue in a manner which is unconventional. We need to start with the new financial instruments somewhat laboriously called credit default Swaps. They were designed on a very basic level with the Intent to displace liability from the issuance of debt. They did this by selling the liability mixed within a lot of other debt liabilities, with an offered promise to the Purchasers of these Swaps that the liabilities were so mixed that a Profit was bound to be derived. Understand that this was all to escape from the potential loss of extending Credit. A secondary problem appeared when regulatory law was changed so that these Swaps could be considered as capital reserves when purchased from other banks. Soon there was overextension of debt, where the placement of liability was absent. Banks were soon assuming a central bank role of creating Money; the problem was this Money was not backed by either Government contract or asset assumption. All that was required was debtors not paying the contracted payments in large measure, and We had a wealth of Monopoly money.

We are currently attempting to find a solution saving Us from this overpopulation of Dollar bills. We are, almost more importantly, trying to forestall a repetition of the financial crisis We have just endured; something almost impossible to do because of the opposition of bankers dedicated to such a lucrative practice. The President has proposed a Tax, which will always be reduced to much below any level of impact reliable as an effective deterrent from effective practice. Obama has opted for a tax level which is ineffective from the Start, and destined to Sunset exactly when a need for restriction becomes pressing. A better methodology must be found.

My suggestion is that We revamp the entire process of capital reserves. These should be forwarded to the Fed as loans are actually issued; something about 8% of the total value of the loan. Interest will not be paid on these capital reserves, which will be used to purchase US Treasuries, and funds not returned to the issuance bank until the loan made has been repaid. The capital reserves will be forfeit if the loan fails of performance. The banks stand center-targeted in liability, credit default Swaps can still be entertained, and the Fed has a continuous, large capital reserve in it’s own right; by which it can handle any constituent elements for which they might have to pay. The entire issue of ‘too big to fail’ becomes irrelevant as We have acquired a capital reserve capable of matching the performance of the big banks. The lack of payment of Interest on the capital reserves by the Fed limits the Profits of the banks, and We do not have to intrude into the inner management of such banks. The sheer placement of funds, and controls of those funds, can often serve better than any form of micro-management. lgl

The Approach is Everything

I like Menzie Chinn’s and try mightily to understand his Tables and Graphs, though they are way above my Pay grade. What I dislike most about all these fancy models remains the fact that none figure what has to be the addition of capital to the economy to maintain the growth pattern of 2007. This has always been the problem with such models; they neither indicate the capital stimulus of the base years, or give any amount of estimated Stimulus necessary to maintain productive capacity. Here is the thing: Stimulus measures are always outsize to the normal generated natural Stimulus, and invariably applied in areas which apply the most discordance to the natural flow of the economy. It does not matter what model one may utilize, no avowed Stimulus ever reaches the necessary Recipients to actually assume Stimulus, without being drained of Profits by the intervening elements. Stimulus is not easily derived or applied when the leadership cadres of the economy are allowed to replenish their coffers, before a Trickle-Down effort actually reaches those Parties which actually need the assistance; and then only at a Cut-Rate much below the initial assignment. It is from this level that the models should operate, but is information which is never viewed.

Brad DeLong undoubtedly disagrees with me on the above issue, but invests little time estimating How Much it cost to hire each additional Worker, after intervening Parties had been paid to hire those extra laborers in the first place; positions which entail specialized experience, not simply grunt labor which would have eroded core unemployment. I would expect as little as $2 billion of the $21 billion spent on Roads and Bridges actually reached the level of labor payrolls. Here is the basic problem with such Stimulus, as I further expect less than $10 billion went to actual materials payment. It is an expensive methodology to implement with little Return on the investment, and there should be far greater restriction on the dispersal of the funds.

I did not pursue this Post, except for the introduction to the links, though they may provide my Readers with a wealth of source material. I would like to touch upon an aspect that the author cited to state: A degree of inequality is necessary to establish a Collateral to attain the necessary investment funds, but after that point, sustained inequality will always be hazardous to growth. Proof of this assertion would require the alteration of economic modeling to follow the above commentary. We all have our set beliefs, and the above measurement is basically one of belief, though I believe statistical data can be formed to minimally prove my assessment. The Reader is admonished that academics at fundamental root is the development of a belief system; but one which should always be approached with moderation. lgl

Small Business and Recessions

Jeff Cornwall brought Us a very good article, but it is consistent with every Recession, all because Small Business deals with the same defects continually in their operation. Be sure to read the Wall Street Journal article it links with, as it is equally accurate. Students should have an outline of Why bankers fear extension of Credit to Small Business within recessions. The most primary problem, of course, is the sharp curtailment of Customers for Small Business under recessionary conditions. Bankers have to estimate that Small Business will do no more than pay the interest on the debt, if that, for the first 3 years of the loan. The second element consists of the fact that most Small Business remain Speciality markets, whose Owners have relatively little experience in alternate Production. Their Product lines are limited in both scope and number, and have little chance of real expansion through lack of experienced labor and relatively set rates of Production. There are real detractions from any process of conglomeration with others, due to personal animosities and legal restrictions which must be met by law upon enlargement of the firm. The most probable telling point, though, remains the realistic factor than to increase Production within these small firms, there will have to be an increased capitalization of the enterprise, so that the lenders will have to assume greater Risk.

Calculated Risk gives a good Post, if Students want to study hard. I would advise some Thought be expended on this thing. The basic idea which should be taken from the material states that Employment is currently very stable, and already adjusted for the current level of Production. Fear of Job loss is growing in the labor market, as evidenced by the decline of voluntary Quits in comparison to Fires. The drop of new Hires to the level of Fires means that Business has already dropped to basic employment levels, and such Business decision does not bode well for future employment. It is actually Time for a new Product creation of the magnitude of Windows Software, to turn around the disparity between labor needs and labor supply. An actual new Turn in Production must be made, and I doubt that such a fundamental shift can be found in short order.

I will finish with presentation of this article. What can I say about this thing, when I know so little about the Japanese economy. I should at least state that Japan has an Export-driven economy, where is had to hold down Wages and reduce Transportation Costs; it did not, and therefore, less-organized but more competitive economies successfully vied for Product provision. Japanese monetary policy became side-lined, as is the current American monetary policy, because of Private Sector decisions to avoid bank loans in favor of new financial instruments and Savings; monetary policy became only a nuisance which could be avoided. The Japanese Government finds ever decreasing Voice before both it’s Corporations, and it’s Citizens. The real venue left is for sharp taxation to drain both these elements of their Cash reserves. It is as unlikely as in the United States, with no major political figure to propel Change. The real problem is the same as the American: You cannot get people to act in a responsible manner, until they actually feel like they are in a Recession; something the Welfare conditions of both Countries preclude. lgl

Cutting the Cash Flow

I read this article, and ask What the author is trying to say; I imagine it is somehow to portray a ‘feel-good’ attitude towards the Fed. I hear that the Fed made a Profit of $45 billion this year, the highest in history, and not since 2007 has there been a previous high of $34.6 billion. Wait! Didn’t I read previously read that the Fed owned $1.8 trillion in Securities this year, up from $497 billion the previous year? I start counting on my fingers, and estimate this is a purchase of more than a trillion dollars. I really have to begin calculating here: $45 billion times 10 years equals $450 billion; $34.6 billion times 10 equals $346 billion, and these equate to the Fed’s best two years. Do I smell extreme leverage here, and was there not something about extreme leverage being the most compelling reason for the financial crisis. Americans may think that the Fed is some omnipotent Power, but it is only one central bank in a wide list of central banks in the World; though it may be the largest. They are indeed moving up the risk-return curve. I curse under my breath, and uneagerly await the ‘central bank’ Crisis.

Bruce Bartlett writes a nice little Piece denying the proclaimed effect of reduction in the Capital Gains tax rate in the 1990s. I regret that he did not take it a Step further, and compute the loss from reduction of tax rate on the 80% increase in Capital Gains not attributable to the Capital Gains tax. As in the prior paragraph, economic policy will eventually drive Us to the Poorhouse. We had real Gains from curtailment of federal expenditures back then, and dissipated those Gains with a Tax Cut, which was worsened under Bush II. One has to ask How we can claim a booming economy, when the largest player in the economy consistently sinks deeper into debt. I know the old adage that One has to choose his battles, but neither Democrat or Republican seems desirous of any attempt to hold down federal expenditures. It is like unto telling a 300-lb. Man that it is alright to eat a 5000 calorie/day diet. Both Republicans and Democrats are trying to be Summa wrestlers.

This is exactly the wrong way to attempt to curtail the debt, but one that may be propelled by Public sentiment. I can only say it is not likely to find passage. I would prefer a regulatory tax upon the very conduct of federal expenditures. Rental rates to just Park Work vehicles now range from $40-$600 per month, where charges are in-place. I would suggest that every entrance to every federal building have a Ticket vender in front of the metal detectors. The rationale is sensible; every entrant is desiring either federal aid, Wage, or Salary, unless they are seeking some expensive outsourced federal advantage. It makes sense to charge every Entrant a dollar per entry, a resident Parking fee much cheaper than for vehicles. There is also the possibility of charging a ‘kickback’ tax, where every federal agency and department must pay a Quarter for every paper form which they insist must be filled out; it at least pays for the paper and printing. The Savings from switching from Paper to electric impulses could equal millions of dollars per day. Lawyer fees are so high, that charging every lawyer $8 per day for pleading before a federal Court does not seem outrageous, while a dollar per attendance does not seem unreasonable for courtroom spectators. I would even charge federal employees some $.30/gallon for gas consumption within federal vehicles, simply to ensure that all trips are necessary. Most of these regulatory fees could be implemented without much Congressional action. lgl

Economic Directions

Everyone knows that CEOs of large Corporations maintain large slush funds. It may be functionally impossible to run a large entity without an open source of available Cash for immediate Capital demands. Everyone also screams every time one of these Cash dispersals are found, at least since the old Watergate Days. The trouble with proper accounting of these funds lay in that the information allows Anyone to track the progress and direction of the Corporation; a factor which incites every CEO to hide the accounting of such funds. It can even be consistently stated that CEOs who do not hide this accounting are acting irresponsibly as chief agent for the Corporations they represent. We still howl for the hides of the chief officers when such funds surface publicly. One has to ask whether this is the most sensible methodology which should be utilized.

There has been a major withdrawal of small investors from Stocks in 2008-09. They exhibit no current attempt to return to the Markets, and the transfers of Capital will not likely come back. Less than competent investment strategy will await successive years of Stocks outperforming Bond yields, while more intelligent planning may await some indication that the actual economy regains capacity to expand. The traders within the Markets have been making a good Return, but it is clear this Profitability is dependent on their knowledge of the activities of their compatriots. There is a subsistence gain which can be derived from the downsizing potentials of the Market elements, but this does not bode well for long-term Profitability. It is this long-term Gain which is necessary to bring the small investors back, and it isn’t coming soon; Government monetary and economic policy showing minor impact.

Bruce Krasting has written a Post which could provide Doubt that the small investors will ever be back. Long-term population trends indicate far less economic expansion, unless Consumers acquire far more funds to consume; nowhere is this apparent where equated to Product pricing. Here We have the problem with minor Wage increases combined with slight reductions in Hours worked; all to cancel projected Wage increases. One of the greatest reasons that all Economists and a fair share of Business leadership concentrates on Trade comes from knowledge that domestic markets are relatively filled, with little chance of meaningful expansion. Curatives for this obvious fact should be advanced, before We begin to resemble the France between the World Wars. India’s population will never buy, as they will be choked by starvation aversion and land impossibilities, which means that viable productive land capacity cannot be found for either Production and Housing, or reliable Mining capacities. It is not going to get better for a long while, and Investors as a class may disappear with the actual Production. lgl

Moma used to love me, but she died!

Those persistent young economists who search for good material should source this Post by Rajiv Sethi. Paul Samuelson goes way back in the economics profession, and led the profession forward for many of those decades. Do I read Paul Samuelson?–No! Way too complex modeling for an old farmer like me, yet Paul touched base with everything. He was always concerned with the definition of the model in How the economy operated; intrinsically believing there was a viable mathematical model which could be devised. I, on the other hand, have never given a damn about a pretty and precise model, only wanting to know where We were going next in the economic context. Paul always believed that Controls could be placed upon the economy by modeling recent economic events, while I threw Gamblers’ dice, and set Odds on where the economy was going next. Paul Samuelson remained renowned throughout the World, while at Most, I am considered an Aftershock placebo. Just remember that I am a almost Nice Guy, and at least as jovial as an Investment Banker.

James Manzi attempted an essay perhaps comparative to my own style, and got caught in the act. He compared Apples to Oranges, and estimated the cost of Peaches. Do not pound on the man, as he is already having a bad time. This of course is not a defense of Manzi, but it is a critique of Those who would defile him. It is kind of like unto Rap Music; even if I can understand it, I don’t see why people think it is so great! American economic data is exactly like Rap, hard to understand and oversold in the impression market. Critiques of the European economies never advance a fair evaluation of the American economy, while Recessionary impacts are probably about 12% less in Europe than America. It reminds me of Generals and Staff Officers: First to take Cover, and last to Rise. Of course, this is not very well researched either!

My state of mind today may be most influenced by this article. A great Share of the great Numbers of past American success are standing idle today, with no indication of a predatory leap back to extreme performance. I think the American economy most resembles Dubai, trying to sell the tallest building in the World. I have not been to Europe lately, but cannot imagine they have closed up like a clam upon sight of danger, like the American economy. I still await the downfall of China, which cannot forever survive the tubular failures of rapid expansion. I will withhold my final opinion on all economies, until such Times as I get some Readings on the levels of recoverable Capitalization across the industries, once they do start back to work. I believe We are back to the Specter of building skeletons and decaying aged machinery. lgl

Movements of Money

David Beckworth put the entire matter of low Interest rates in proper form for a good grasp of the situation. It is exactly the rest of the problem which causes the trouble. Low Interest rates monetary policy will only continue the level of risk bearing, while Compensation packages left the same will continue to defeat Returns to Shareholders; adequate Investment Returns to Stockholders mean less capital to gain Compensation from investment issuances. There has been a continuous movement in the last 30 years to circumvent the property rights of Stockholders. All Corporate entities retain vastly increased Capital reserves without distribution as Dividends, managing to engender ever-higher Compensation to Management. Information to Stockholders has been ever more stringently meager, while Courts have granted allowance to Management teams to ignore even majority Stockholder demands. Corporate managers have even gone so far as to hide their Records overseas, simply to deny even Government entities supervision of their activities. We have a runaway Corporate mentality, acting only upon their own impulses, within the cultural vacuum of their own society. Their control of the majority of capital assets of Production makes the situation increasingly serious, when the normal Response controls have been upset.

Study these Charts for a while. One of the great reasons there is expected higher Interest rates lies in the Corporate structure; who visualize threat to the above state, with the resulting fall in Compensation packages. One of the things not specifically mentioned among these Charts consists of the desired expectation that falling Wages should suppress Inflation, not any control of Prices. Expected Inflation was high in early 2009 simply because most of the business managers expected a fall in Prices, which did not happen; all basically stemming from the ‘No Interest’ monetary policy of the Fed. The later organization saved high Prices by the destruction of primary Investment schedules through a systematic lack of Return. This both channeled investment funds to high-risk bearing financial instruments with huge levels of Compensation for Issuers, and saved Corporate Profits. The fact that it also destroyed much of the Consumption capacity in the developed World made little difference, except that Consumers are not returning to the Retail outlets at the speed desired. This is where We stand today.

China has broken with the triage of central banks to the financial crisis, though it might not seem like a very valiant surge. This style of reaction can be considered typical of Chinese policy, which always seeks to initially mystify; little discussion given until the change of policy is in place. I would look for new restrictions on foreign capital, enjoined restrictions from purchasing abroad, a forced rise in tariff revenues, and cutbacks in exit visas for Chinese to move freely to foreign destinations. I would bet that Chinese will be forbidden to privately store Capital in foreign financial entities, insisting that all funds be returned to domestic soil–at least Chinese banks. This retreat to autarky will be based on Chinese assumption that their extended economy can generate their domestic needs, without the pressures of foreign consumption practices being allowed introduction. This will be another crimp in the World recovery from the last Crisis. lgl

Meaningful Change

I was planning an ordinary Post this morning, then I read this article. My first criticism of this excellent, well-thought article is no critique of it, but a condemnation of the Podesta/Ettlinger argument. Every discussion of the deficit would throw the entire effort of deficit reduction upon the next Administration, based on proclaimed economic dangers of the Present. It is a total Cop-Out. The deficit is Now, and reaction to it must be Now, or ineffective. I would further this argument with the Statement that Government Spending has little to do with the creation of Jobs, when deficit spending pulls as much Cash from the Markets as do high Taxes; along with an additional high amount dedicated to Debt service. It is not a question of the willingness of the Government to Spend, when the Private sector will not; the later seeing no opportunities for effective Investment under current economic trends, and Government expenditures as conducted has little to do with expansion of current business structures. We are basically wasting Money, which could be better used by paying off debt, and establishing long-term structure to increase Government efficiency.

I disagree with the Josh Bivens’ argument that budget deficits are beneficial to Jobs promotion and provision of welfare services. No Government program can be maintained permanently when based upon deficit spending. It will eventually have to be cut, both in expenditures and extension of benefits. No Government program should be passed at all, unless there is adequate provision of tax revenues to pay for that program. This may seem draconian to Some, but lack of such provision will lead automatically to the establishment of deficit spending as an institution. We have to start deficit reduction by organizing Government expenditure rules which cannot be violated. I like the Process where every Government program must be funded from some group of Taxes, and that automatic Surtax is added to this group of Taxes under deficit expenditure in the program; the percentage of the Tax determined by the need of revenue alone. The text of the law mandating this Process should be so tight, that the law would be implemented even in the midst of the Great Depression II.

I suggested a mandatory 32-hour Civil Service Workweek yesterday on this blog. I like this action immensely, thinking it provides far increased Job creation over any other measures proposed. It first requires a limitation of Civil Service benefits allowed, and should be mandatory at all levels of Government–Local, State, and federal. The law, to have force, should prohibit any form of Overtime Pay, though extension of Good Time additional Vacation Pay would add to the effect of the law by extending Vacations drastically. The law should reduce Civil Service benefits to equate with Private sector extension of benefits–with a permanent Commission created to determine statistical equality. I would also create an Efficiency Commission, which would specifically list ‘Bang for the Buck’ equalities for Government expenditures; which must be published annually, and will be a great help to both Economists and Politicians in decisions relating to legislative Voting. It is exactly this type of overall supervision which will eventually bring Changes to a political system too dependent on graft and corruption. lgl

Divide and Conquer--or Something

The primary point of the argument suggests that group discussions are functionally valueless when compounded by unmanageable size. Nothing could be farther from the Truth. Anything adopted as an environmental policy will take more than acceptance of the policy. Implementation of any Accord will require the dedicated response of every member of the conference, else any Accord is powerless. One cannot hardly expect any nation to expend the financial and political capital for an environmental policy whose participation was absent in the drafting of the policy. Assent to any policy must first be gained, and in such a manner that it compels some observance by the Participants. All six of the opponents of the Accord were not so much Socialist opposition, as they were rogue regimes to whom other Participants at the conference had restricted the provision of economic aid; None expecting any alteration of economic policy to these six nations. It simply portrays the unspoken opposition in the rest of the World to the activities of these nations. Environmental concern can only be expected from Those concerned with the internal political and social ecology of their own countries.

Has the Reader ever felt total agreement with an Opinion, but where you are totally opposed to the Outcome Choice? I like just everything about this Piece, except the proposed thesis of ignoring Reform. The authors should not worry, though, as I am opposed to Government policy as well. I believe that a concentration on specific economic conditions is the best plan for bringing Consensus here. The first economic fact is that domestic Consumption is down by about 20%. The second fact is that Bankers are not going to expand their loan capacity until there is marked improvement in these Consumption levels, and it does not matter how cheap Credit is extended to them. Mortgage extension will go only to Those exhibiting Granite-hard Incomes; all others need not apply. Business even has to prove to their financiers that their next Quarter Income will be maintained, simply to retain their current revolving Credit limits. Some say that Bankers are obtuse and inefficient; I say that they are taking from both ends, and are rewarding themselves above all others. I regret to state that it is everyone else that portray a country bumpkin attitude on the Midway.

It is about this time that everyone asks me what I would do to stimulate the economy. I will reject my automatic response: I will let you know what I favor, just as soon as something works! I might has overused that Response in the last few years. I would order Congress to concentrate on universal Tax Reform, revision of the Civil Service regulations, coordination of policies between Local, State, and federal governments, and the nullification of all Bonus programs where Sales have not been maintained within the previous Tax Year; all of the above dependent upon my election as God. I might be left to simply be an illegal, unconstitutional President, where I would immediately declare a 32-hour Workweek for all federal employees below whatever suggested ranking I am allowed, with declaration that additional labor must be hired from the Private sector to fully man federal agencies; but at Pay no higher than 4 times whatever Unemployment Benefits they are entitled initial to employment, and without the Job protections guaranteed to normal civilian employees of the federal government. I would follow this with the proposal of a national conference of Small Business and Banking, the entire Intent behind the conference being amalgamation of similar business structures to derive economies of scale, and follow-up finance for the reorganizations. Other than that, simply Pray! lgl

A sad, below-Zero Day

Daron Acemoglu and Arnold Kling might need to understand more about the Mexican/American border. I often had finished an extended Lunch across the border in Palomas, NM, about the time the School buses pulled up; the three from the local American Grade Schools, and the Five from the local American High Schools. The rush of kids at the border crossing really amazed, until you understood the climate of the area. This was the same border crossing which Mexican police had rushed, when a Mexican Drug gang had decided to go to war with the Mexican police over a bribery issue. The standard price to be released without arrest by the individual American Border Patrolperson was $3000, drug mule or not. The average American Patrolman retired after 8-10 years; some 8% taking an extended Vacation in a federal prison before Retirement. Some would claim the system works, some don’t. Few Patrolmen eat below the Border, though Mexico has by far the better Restaurants, and Patrollers are specifically not expected to burn more than one tank of fuel in their SUVs per night; not saying anything, but Illegals know that there is no one out there past 2 am. It also is getting a little harder to enforce the law on both Sides of the Border, as outright Murder gangs are seeping into and throughout the border.

Everyone tries to make a Living off Consumers; Everyone at least, except for maybe the Consumers themselves. Economists have long known there are Ways to compete by raising Prices–it only requires middleman venders of valued Product. The average Consumer only carries 3 Cards in his or her Wallet, and at least One is specific to a Name brand set of Stores. Some 30% of Card Users utilize their Cards in budgetary manner; either buying from one Card until a financial limit is reached before switching to another card, or restricting the type of expenditures to different Cards. This is where Card companies begin to resemble Mexican Drug gangs, with the old Standby: Make a healthy Profit from the Bribes, or Lose everything! It is only the tenor of the language which alters, not the content.

Ben may be Right, though I doubt it. The housing bubbles have more to do with the shortage of adequate housing, and the Construction charge levels of such housing. The federal government made it a primary issue to get everyone into their own home, creating that artificial housing shortage so desired by business interests; Construction and Furnishings made a fortune simply because the federal government said everyone should have their own house, and provided the risk mortgages to pay for them. The whole debacle is not the problem today; the problem now consists of housing which is still too expensive, mortgage-holders who are paying too much for the residual value of their homes, and a continuation of mortgages which should have long been written off. The low Interest rates fed by the Fed keeps the Trash moving sluggishly, which is the real cause for the continued deterioration of the economy. Were low Interest rates the panacea for the economy orginally–debatable! Do they function now as anything but a drag on economic stability–No! lgl

The American Way

It may be somewhat insulting to claim Economists are cheapskates. Knowledgeable people will tell you that a respect for the U.S. Dollar should be held by Someone; and who better than Economists. Everyone realizes I am not exactly an Economist–too much expensive study–but produce a fair imitation of the profession. I told the Salesman of my last Pick-up that any color but White would be acceptable. I did not offer to front the massive Tip for the last Dinner my Nephew invited me to; besides, he could deduct it from his taxes, which I never could. I don’t return Calls Collect; Most say I simply don’t return Calls at all. I will admit to an appetite for Gambling, though I also exhibit desire for those Gambling activities with highest Skill over Odds preview; some rude characters even suggest I overuse the condiments utilized to draw Gamblers into the casinos. I have never hired Movers, thinking paying the differential Living Wage to full-time Movers was too expensive; chiropractor fees not counted–defined medical expense. Charities will get more of my money, just as soon as they come out with an efficient Kickback system after Tax declarations. I don’t often hire labor to do menial tasks, having full capacity to make younger people feel guilty about abuse of the Elderly. It all does not lead me to accept the ideation that Economists are naturally Cheap!

I read this article, and immediately began to speculate on this aged instrument. I decided that, completely without verification by the way, that the Cost of leisure entertainment must be higher in the United States than in Europe. I thought for a short moment to find justification for such belief, then decided to utilize the skills mentioned in the above paragraph; the purpose being to induce some young Student to investigate, and send me some of the Results. Such deviltry sometimes does not work, and research should be taken seriously; all meaning that I will leave the follow-up to Others. I once had an enthused individual send me a huge volume of material; I, in a return message, suggested that he write a book on the subject–I haven’t heard from him since. What is known after all this Trash Talk, consists of European resistance to violation of cultural ethos established from the medieval Indenture system. Americans have a penchant for getting things done, while Europeans enjoy the union concept of a Work slowdown; I favor the European view, except among my own personal employees.

Now Paul Krugman had to come up with this sad Commentary on Memory. I never remember anything I wrote, unless it can somehow enhance my prestige. It reflects on a derogatory aspect of American society; Paul’s message would not have been forgotten, by himself or others, if Americans lived up to their ideals and beliefs. I am not suggesting any despicable personality on Paul’s part, only an American over-effort in cutting down Trees, so that Sight is lost of Forest management. We Americans do too much, even Writing on blogs, and fail to adequately catalogue our efforts. I go back occasionally, and am sometimes amazed at my perception; more often, though, I quickly click the mouse hoping it will somehow provide escape from notice. lgl

Another Option

There is a persistent fantasy which claims that an economy can live off of Investments; that there is some means to gain ascendency over the economic hazards, and one can one day wind up living off the Profits of the labor of Others. It is a nice dream, even though it is propagated by minion paper salesmen, who show up for a 60-hour per Week job some five days a Week. I also like those 75-year-old Types who propound the dream of retiring when you are Forty. You know the Ones, who are sitting at their desks while making the prediction. Michael J. Roberts explains the situation better than I can, in an more coherent manner. The only real difference in our opinion may his faded adherence to the image of the dream. I, on the other hand, recognize that the greater the population field under study, the more uniform the statistical results will become; and eventual success in investment will eventually link to success in enterprise management, and statistically, no Investor will attain a long-term advantage over his Peers–One has to be In on the building of those Companies to make Money out of them.

Now comes the qualification placed upon the above Statement. You could start out by reading this article, if you have half a day with no meaningful expenditure of Time planned. It contains the basic argument that the managers should get the available Cash–not Investors. Only there is one difficulty with this position. The managers are utilizing other peoples’ funds, and cannot portray any observable Return to the usage of those funds. Management would claim this is to be the Risk of investment, but managers have taken to hiding total Cash reserve revelations, completed Pay packages for managers, and all Reward programs for Management. Where is that exact Point where business management is left, and fraud entered the Picture? It is clear that We are reduced to a behavioral environment where both Sides are partially Right, and obviously somewhat Wrong.

My solution would be passage of a simple law: No Profits distributions can be made until an average annual Return of 4% has been paid to Stockholders as Dividends, until 75% of those Profits have been expended. Federal Reserve banks will be detailed with supervision of the necessary documentation, and possess automatic Search Warrant capacity in pursuit of verification of all claims of Profits distribution; they entailed with this pursuit because of their capacity to pursue financial streams. The federal law should also state that any distribution not meeting such Standards are automatically subject to revocation and recall of all funds. This simply means that Managers are told that their bonuses are not their bonuses until the Government says that they have earned them. Am I loved, or am I loved! lgl

Hayek's Critical Information---Where did it go; the Good Lord only knows

No matter How it may have turned out, one can expect that Cable subscribers will have been screwed; those expected to Pay are never let in on the negotiation until the bills reflect upon our Credit Card statements. I myself am in favor of a per-View fee for programming, and believe that IPOs should be compelled to pay an equal fee for maintained Web sites; all to help defray the Costs of maintaining the Site with some Return to the authors. The sadness resides in the equal insistence that the Consumer Protection Agency should demand that all such rates should be publicized. One cannot rely on a market model that depends on essential information being hidden from the primary Participants within the market. The sad Truth today states that every area which should be regulated is not, and every area which should be freed from regulation are not; all for the benefit of Business, at the cost to the Consumer of massive mis-structure of the markets.

This article will explain that Consumers are not the only victims of hidden information, which should be within Public view. Courts has even ruled that Corporations do not have to reveal how much they have paid their own Executives to Stockholders. There is no American law demanding that Corporations pay out a certain percentage of Profits as Dividends, or even that Corporations must be truthful about the Cash reserves which they have on hand. Developing nations pay out a high level of Return on investments, simply because they need to attract Investors. American Corporations have an easy and ready wash of Cash, and Dividend payments have dropped accordingly; especially in the absence of regulation requiring publication of information. Understand full well that Dividend levels are determined precisely by Corporate Management, not available funds on hand; but Corporate bonuses continue to grow at fantastic rates.

We can find another example of Courts protecting Corporate management from information disclosure to Stockholders. Bribes to arms brokers equaled more that the Dividends paid to Stockholders, and bonuses to Executives were almost as great as the Bribes. Both the lower court, and the Appeals court, ruled that the international corporation did not have to respond to American law against bribery, yet a great share of the money spent in the bribery came from American Stockholders’ pockets. It is interesting that much of the Stockholder contentions concerned operations funneled through the defunct Riggs bank, long known for it’s Drug money laundering, and other criminal activities. Why is it that Criminals always seem to get a break in American courts, while the victims of Crime are ignored? lgl

What I do Best!

This is that time of year where everyone expects me to make some idiotic predictions, which are always thrilling in their exposition, and comic in its final resolution. The trouble is that I do not feel particularly predictive this time. Still, you ought to give the children something. I decided therefore to give you this article to give a particular base to my first prediction. It is a basic Statement that Americans cannot look to foreign Sales of domestic Product to aid in a restart of our economy; subsistence living does not encourage high-end Consumption. Reality states that a devaluing dollar cannot keep pace with declining Export sales, in the face of declining Incomes–the first major aspect of the coming year.

The second great prediction states that the great promise of the Tech sector is only that, and that there will be no great level of Sales past the Innovation market. Some ratty, old economic models of myself indicate that for Consumers to upgrade from currently operating equipment under a position of constant Income, there will be no purchase if the upgrade costs more than 8% more than the current operating equipment purchase price. The current upgrades are looking for around a 40% purchase cost increase, and there will be little Sales provided beyond your basic Tech-junkie class. Tech stocks are overvalued, and the degradation of Profits in reduced Stock values will further injure an ailing economy.

The third great prediction is that Inflation is a hidden, stalking lion; awaiting some minor Trigger to flare in force. The beast will come out with massive leap, and will be almost uncontrollable for about 22 months. The end-result will be the transfer of national deficit debt from foreign to domestic subscribers; foreign sales of Treasuries declining because of loss of true exchange Product, and domestic subscribers attracted to the only remaining constant Return investments. There will not be a double-dip recession–just dismal growth, made up of only inflationary increments in Product pricing. I could go on for hours in such esoteric discourse, but I fear the loss of my audience. I will finish with a Happy New Year–with all subject qualifications. lgl