Anyone want a new Tax policy?

Everyone who knows me understands about my getting up on the wrong side of the bed sometimes (Some say more than half the time). I read this Piece by Cathrine Rampell, which is really very good–especially the link to Bartik’s Piece, and growl to myself. It is all because Americans approach the Tax issue in the wrong manner and direction. We start out assessing massive tax rates, then start giving Exemptions to that Tax to Unknowns; never considering Who we are giving the Exemptions too, or really understanding how much these Exemptions are going to lessen Tax revenues. It is not the way to do things, and WE ought to have more sense.

I personally favor a Universal Tax, applying to All, not matter what is the source of the Income. It is all thrown into the Pot, whether it is labor Income, Capital Gains, Rents, Royalties, Welfare subsidies, or Inheritances. I would set the tax rate payable at $300 per $10,000 earned per year. There would be no Exemptions of any type, except for Proof that Expenses were in excess of the amount left after the Assessment of the tax; with the Expenses allowed pre-set by law under the tax authorization. Living Expenses would be at set amount per individual in the Household, with proof of that Expense at a Tax adjustment hearing. Every other Expense would be limited in amount, and must be proven upon Tax hearing. The entire Concept behind my proposal would insist that the Tax is owed, and failure to forward the set amounts of Tax expresses a personal or business inefficiency from the Taxpayer.

Everyone will start to whine now that the Tax is too harsh. I would disagree! We have a definite limit on the amount of Tax which can be assessed, with no likelihood that the Tax will be increased. We have adequate Revenues, and the least impact on Business performance; because such a Tax easily transforms in character to an ordinary business expense. The Public Forum will have an understandable level of Tax Income for Government, and thereby, a base of resistence to excess Government Spending. Constraints are placed on both Politician and Special Interest without Taxpayers actually paying much more, or being charged with unknown taxation at odd moments without notification. The whole process becomes understandable to All, and Rent-seeking becomes extremely difficult. The only final Question to be answered is How such a regular and uniform tax policy will affect the economy; the answer is probably far better with less adverse impact than designed political economic policy. lgl

Don't worry about making them mad!

I worry about the substance of this argument. I agree that these differing opinions lead to disparate avocations which lose Contact with each other. On the other side, Brian Riedl and John Cochrane own somewhat of a Point. The existence of a central bank willing to create from nothing makes it impossible to propel any crowding out effect in the Money supply. There can be a very real statement, though, that Employment is respondent to two factors: the Profitability per Item of Production, and the Productivity level of labor. There is a very real argument that Business will not Hire unless Productivity has a certain magnitude, and that Stimulus expenditure manages to exceed a certain level of Profitability per Item. There must also be a very real level of Production per labor force size to accept the total Wage Costs of maintaining a heavy employment structure.

There is not only a limit to Stimulus, past which no benefit will be found; there is also a limit to Tax Cuts past which no increase of employment will be envisioned. Before anyone discusses any projected Stimulus or Tax Cut, one should quantify the current Private sector level of Consumption, and estimate How much of that Consumption is already fulfilled by the current level of employment. It is foolish to add Cash to either Stimulus or Tax Cuts if Consumption needs are already being met for the level of Consumption. I would like to tell the Author of the argument that a real valid thesis can be made where it is impossible for Government to create any greater level of Employment, though he thinks it lacks weight.

I do not advocate any Stimulus measures which do not have an underpinning of increased Consumption by some segment of the economy. I will not advocate any Tax Cut which is not coupled with some form of Consumption incentive; I personally like a codicil to current Tax Cuts stating that such Tax Cuts cannot be obtained, unless and until the Taxpaying Business prove a reduction in Retail pricing for its Product during the Tax year. Conservatives will automatically say that I am advocating a Tax increase, which is not necessarily true; but what is true consists of a real desire to increase Tax revenues, especially from Business and industry which shows little response to declining Consumption of their Product lines. I mentioned earlier in previous Posts that I hoped this was the Year of Great Sales. I still do, thinking that these Sales will be the only method to increase Consumption–the prerequisite to higher employment. lgl

Why We are here

Have you ever wondered How huge Corporate entities gained control of our lives? Read this Opinion from Robert Reich, someone who I often challenge but whose Intellect I always respect. The Question I must ask, which I have often repeated before, is How can Corporations expect to remain in business if they raise their Prices above a 9% per year price increase limit? I have designed some models which suggest that Consumer enrollment will decline inline with Price increases over a 8-year cycle; this meaning that a 20% price increase will bring a 20% loss of clientele within 8 years. Health Insurers must expect a huge Subscription pressure to be existent within the Consuming Public, and that the replacement Consumers will always be present. It also means that they expect a huge transference between Providers by Consumers, who will lose their Consumption antagonism to Price increases. There is much contention to my thesis, with Many claiming there must be an automatic reduction of the Inflation rate from the increases, but I state that the relationship will hold without the decrease; simply because these huge increases set the Inflation rate in and of themselves.

Spend a little time with this Table. I actually expect there is a little more money to be made by real Accounting procedures utilized as this format indicates, but that it will never be implemented at the real Tax level of IRS seizures. I would be better pleased with a flat seizure scheme like the Alternate Income Tax for Corporations. Here I would suggest a flat 15% tax rate on all Corporations making Incomes higher than a set limit, without resort to any Tax exemptions of any type. All that would be required would be that the Sales were made over the stated limit. Every economist knows that Corporations will only push Taxes unto the Consumers, but with this type of taxation; it only increases the taxable base income. I would set the level of such income at $1 billion per year, and thereby ensure some level of Corporate payment of tax. I would also insist that the liability be based upon American Sales income–that specifically which Americans buy. This both makes the American market less vital to Corporations and speeds World markets, but also speeds normalization of American market prices with World prices.

I will finish my outrage today with this Piece. I do not doubt that people try to spend less when they cannot find the level of employment which they desire. Conditions in the economy, though, work diligently to suppress than expenditure suppression. This means that they extort the funds anyway, if there are any funds left. Notice that there is no indication of Price structure alteration, even though there has been a huge increase in unemployment and underemployment. Tax law and benefits save Business from any necessary response to the potential loss of real revenue which has occurred, leaving Labor and Consumers to do all the suffering. Some Readers may think I am Joking, but this Shift from Business onto the Consumer forestall any real economic impact under the recession; causing a real suppression of a recovery in the short term. lgl

What paramenters do We use?

Paul Krugman may not be able to see the Forest for the Trees. He does not know What to call this Era since WWII. It is simple: We are in the Age of the Central Banks. They were all around before this Period, but no one paid them much attention; up to and until We began to wonder How one financed World Wars. Ad hoc activities were generated during the Wars themselves, but the techniques were defined and refined after the Shooting stopped. This might be the problem of central banks: their need to defend their own existence by creation of a modus operandi. They continually invade new areas of economic activity, and corrupt the found behavior with the techniques designed in War; things ranging as diverse as Corporate raider technique to debt creation for Welfare Costs. Their mantra has become ‘Debt is Good’, and We have way too much Debt for our own Good; creating a brand new industry which the economy cannot pay for in the traditional context. One cannot precisely define Why the institutionalization of Production Costs as an industry is bad, but I suspect it very much constitutes a suicidal self-defeat mechanism.

I am not the only individual worried about the above-mentioned trend. Here is the basic Problem. Debt is ever-increasing in magnitude, along with an absorption of national and World GDP percentage ratios. Central banks advocate reduced Interest rates at periods when more and more funds are devoted to Debt creation and Interest resolution. An increasing percentage of GDP is being regulated, and in a manner which suppresses adequate Return on the capital involved. It upsets the basic Production cycle matrix, and presents a risk-aversion matrix of lowered Return safe investment–nullifying the risk performance cycle. Risk management shows suppression at the enterprise level, while Taxpayers are left with long-term expensive Mortgaging with delusional Start-Up payments. We are changing the basic nature of the economy without effective capitalization of that Change, and it will eventually cost Us far more than We imagine.

Read this article on the determination of recessionary cycles. Study the graphs provided herein, and ask if Recessions are not of far greater duration than expressed by the formal definitions of the cycles. Effective growth ratios and labor integration extend far beyond the stated recessionary parameters, and often do not even get back to previous periods before the next recessionary period. This could be because of economic alteration to new business practice; yet, involved review does not suggest that the transitional losses result from technical revision of the Production cycle. It is my Thought that Recessions should be expanded to two following Profitable Quarters, which is the exact period necessary for business to return to full employment roles–after they have regenerated their capital reserves. This subtraction from the boom cycles, and addition to the recessionary cycles, would reflect far better the exact position of economic performance. lgl

Methodology

Here in a nutshell is the underlying rationale for altering the basic economic structure of studying Inflation and Deflation. A recession comes along, and there is a build-up of finished Product, and Everyone thinks to get rid of as much Product as possible rapidly–i.e., a giant Sale. Everyone, likewise, knows without fundamental Change in Production Costs (read Wages), then the suggested deflation is only temporary–lasting only until Product supply is reduced. Inflation has inbred, built-it causes; mainly consisting of incentive packages to labor and Business to induce intensive labor over time. Excessive Government Spending creates artificial Shortages in nonproductive areas, do nothing to promote household incomes, and employ only a minor fraction of the labor supply under current Business formats. There will come a Time when economists must admit the old Keynesian model does not work to counter Recessionary periods, under the current level of Production and Technology. We are tired of the Dentist pulling the Tooth, when only a Root Canal is needed.

There are other wrong-headed ideas–like this! Domesticated Livestock is a primary characteristic of humanity, and a vital source of Food. There are indeed great Savings to be gained from the inhibition of greenhouse gasses from improved Livestock maintenance, but not at the Cost of higher charges to the Consumer. Such taxation calls for lower Incomes to reduce their Protein intake, which can be avoided by other Income classes. I await the taxation of flatulence from human beings, as well as taxation for an early bond to ensure every human being has the accumulated assets for proper burial. Increased Livestock production causes many problems, mainly from disease spread; but this requires health measures to counter the concentration, not taxation to make such concentration more slipshod.

This Post uses accurate data to present an utterly false presumption, which is that the economy must run a deficit to avoid recession. It is basically a Copout, stating there is no conceivable design for the economy where it will operate effectively at surplus. Because no one has ever tried it is not a justification for, or a proof that it cannot be done. Economists are great at proscribing policies based upon inaccurate and insufficient information, and by placing what information there is into models already proven deficient. There has not even been sufficient proof that Inflation is a mandatory condition to ensure economic performance. We need to enter a study period of undertaking holistic economic conjectures to simplify the economic performance criteria. Piecemeal adjudication of economic data will always bring disorganized economic effort; when We need serious directions for altering economic direction patterns. lgl

The Joys of Finance

One can spend forever talking about How you can finesse fiscal and monetary policy, which is Why I like this Post from Stephan Gordon. He insinuates, though never stating it, that it is functional folly to worry about attempting to make people money, as the funds disappear like water in the desert. The goal should be in building a sound safety net for the people who fail. I agree with that proposition, knowing that business itself is much like Gambling; every enterprise having a temporary Run of great luck, then falling before the ravages of Age. It is only a matter of Time before a successive business is found with a more viable format. What We need to worry about is the concept of standing the Losers up, and starting them over once more; the later being defined by people, rather than business outlines. I have seen successful Social Security programs, and I have seen failures of such systems; but I have never witnessed any long-term success of a business incentive program. I would concentrate upon the former, under these conditions.

Arnold Kling criticizes model studies, basically because they are all observation studies; pray do not think I disagree. Models are constructed to prove what the modeler would like to have proven, never the inverse; this makes the choice of data extremely variable and highly erratic. You can be assured that any model which requires constant adjustments tell you relatively nothing; as they have to be adjusted to reflect real world economic functioning. Strip such adjustments from any modeling system, and you have a backward-looking formula which only explains past performance; the later often quite distant from the Present. Like old Generals, We are often fighting the last War. The Military is still building a war machine to fight a series of ‘set-piece battles’ only found in WWII, while guerillas are destroying them. Economists are still trying to fulfill tenets of Ronald Reagan.

Read this Preface by Robert Litan. He would try to justify the direction of financial instruments, in counter to Paul Volcker’s assessment. The Paper, which I did not read, might do so; but he has undertaken a real task. I would assert he is trying for too great a Reach, as some of this stuff is most definitely bad; it consisting of only insertion of middleman Costs within the Production function, without even raising the Capital necessary for Production. It’s record on the Consumption side raised the Cost of that Consumption seriously, and disallows Consumption with the same constraints after further debt is assumed; simply placing the Consumer in worse position than formerly before the debt. Understand that development of these financial structures were for the benefit of the financiers, with little care for the Consumers of such structures. One cannot describe them as alternate forms of Ponzi schemes, but one also cannot grant them the sanctity of contracts either. lgl

What did I say, anyway?

Here is an article which is somewhat disingenuous, though I am sure that Daniel Gross meant nothing of the sort. The Republicans did fundamentally oppose the Stimulus package upon passage, and did immediately seek a part of the Stimulus later. What the article does not state was that the Democrats dropped the Ball, having no one and nothing developed to absorb the Stimulus after passage, while Republicans already had a number of industries capable of absorbing the Stimulus under the rules established. The Republicans are taking little more of the Stimulus than originally assigned, and Democrats have still not organized business entities to take the remainder of the Stimulus, which is quite a large amount. A very great part of the rationale behind this fact comes from the real element of little opportunity to organize any workable business model to accomplish a profitable enterprise; this coming from a lack of acute examination of the technology currently available to be exploited. The Reader must understand that very little of the remaining Stimulus will be spent, unless real practical design is implemented.

Here is a far more truthful and honest Report. No matter what the rhetoric, Few in D.C. or throughout the Country advance real labor on changing anything. The Republicans smell more like Fox Channel News than any definite Plan of Action. The Democrats have no real design to contain Government Spending. The Former demand the easy-going Spending of Old, and the Democrats allow such passage, while formulating no Plan. Republican forestall Democratic spending on programs ancient in design, and previously declared unworkable. Both Sides sound hypocritical, and there is really no one at the helm. This is not solely an accusation of Obama, there being no leadership on the Hill either. This Drift, more than anything else, will bring down the American Government.

I will finally refer the Readers to this Piece, though I disagree with the promise of Trade; and admit the reality I only skimmed the material. The author denigrates the ceilings on Tariffs with which I agree, knowing there is real need for such tariffs, but also cognizant that such barriers cannot be so high as to be forestalling of Trade; the Result of tariffs should be to promote domestic production–not inhibit it. The trade remedy policies on anti-dumping etc. all establish a level playing field for Trade, and I do not understand the opposition of Chad Brown to these designs. We live in an intense world where production is mandated even in Writing, but many things should not be written. Developed economies are being flooded with Trade Goods, many of poor quality and of dumping criteria, and most of the new restrictions limit this activity. One always has to define What is being done, not take a superficial accounting of procedures of activity. lgl

Realism is only a Word

I will recommend reading of this Post, which I only skimmed due to the press of Time. The only admonishment I would advance is to consider when We talk about Monetary and Fiscal policy, We are only talking about marginal rates. Any resulting program will vary the direction and load of GDP by about 2%. We then face the real possibility that economist views on marginal rate alterations fail the test of Time. The fringe elements will not doctrinal pressures of the economy, and that the economy will recover when it will, and where it will. It might all be a ‘Teapot in a Tempest’, working in ill-advised manner; actually presenting a counterfactual when the economy needs uniformity to readjust. I do not present the argument that this actually occurs, yet I propound that the possibility could exist.

Follow the previous Post with this One, where We cannot really determine How Much We pay in Interest on the national debt. I do not believe the authors are right on this one, as the Cost to the federal government remains basically stable; only Investors in the debt have challenges in their investment portfolio. The practices of the central banks as described by the authors are actually utilized to great length, but it only provides better performance for the Fed or other central bank, not a cheaper functioning of the Government as a whole. The Cost to both Taxpayer and Investor remains the relative same, as it finally works out; this because the Taxpayer must pay the full amount someday, and the Investor gets the proper price on bond resales. Understand that only Bankers retrieve a Profit from all this distortion.

Who do you think is right–Greg Mankiw or James Kwak? The Answer lies behind Door N. 3–both of them! Everyone is responsible, but We will never get Anyone to admit that they hold some element of responsibility. The Reader must trust his instincts, and they should be telling you that both express high levels of self-denial within their contexts. All of the Problems developed under Bush, and all the Solutions must develop under Obama. This grants the Republican great license, as their damage has already been done; while it leaves the Democrats under great threat, as anything done carries their label. What the Reader needs to remember is that the Democrats voted with the Republicans in the Run-Up, and Republicans will be voting with the Democrats in anything which will be tried to solve the questions of the day. It is helpful to realize that all Politicians are the creatures of Special Interests, such Groups being the real guilty Parties. lgl

Riding the Beast

I bring my Readers this Argument, though I have little faith in it. My major opposition to the theory lies in the fact that Inflation is a One-Shot stimulus, exhibiting benefit only in the year in which it occurs, and requiring additional inflation in following years to present any stimulus. Actual fact states following years without inflation endure the full price-distortions as mentioned in the article, without significant easing of these crippled prices in the following years. There is also the assumed loss of paid capital, which purchases far less under the inflation, and creates a real counterfactual stimulus the higher the inflation rate; this means that the economy is losing equity as rapidly as it gains stimulus. These facts lead one to doubt that there is serious relief from Recession presented by inflation.

Realistic calculation suggests that We actually need an environment exhibiting a Zero or Negative inflation rate in order to achieve real Stimulus. We need an increase in both Production and Consumption, without any major increase in Production Costs. One can get tricky about this later fact, choosing a realistic or a false image of Production Costs. Either can be turned into real stimulus, though Business hates the false image; further explanation will explain Why this is the case. Most Students understand the basic ways to curtail Production Costs: increase Productivity (think layoffs–bad for stimulus), use of inferior materials (bad for Consumption), or Vertical Integration (bad for Product pricing–highly inflationary). Creating a false suppression of Production Costs has many suggestions, but the only effective means is by Taxation. There is a famous Business Saying never heard but understood, stating that Business likes everything about Government–their largest and best-paying Consumer–except for Taxes.

There are two basic methods for adjusting taxation to create the false image of stable Production Costs. The first takes into account that it is the Consumer, not Business, who actually needs support during Recessionary periods. Automatic tax policy would cut Personal Income taxes by a specified amount–I suggest 5% reduction–whenever there is any Quarter within the Tax year with Zero or Negative GDP; while Business taxes get a Surtax of 10%. The second automatic method of taxation, automatic will be the only thing which will achieve these Results, is to reduce Personal Income taxes by twice the inflation rate, while increasing Business taxes by twice the inflation rate. There are serious reservations to both methods of taxation, but I feel both are better than the ad-hoc economic policy developed on the Go in the Rodeo ride WE call Government. Now We await the firestorm! lgl

Our Position in the Universe

Bruce Webb does a good job of describing Conservative fears, though he fails to take it to its logical conclusion. Government debt is probably the greatest Socialist element within the spectrum, debt being a universal factor which All feel compelled to honor. Debt must be considered as being paid, or in the process of payment, else everything within the economy is shaken. Under this level of Understanding, Government should be disallowed the power to borrow. Neither Conservative or Liberal would take their ideals this far, as then Government services must be paid as they are developed; no one being willing to pay their taxation at this level of strata. The reality exists that any Investment in Government is a Support of Socialism, and actually, the most vindictive of Supports. One can only hope that All reading this commentary will understand the real underlying trap of Government program.

I bring in this Opinion article at this time, and ask my Readers to ascertain How it apples to the previous paragraph. Alliances draw Interests Groups together, or creates a distance between them. Debt, on the other hand, create Ties between these Groups, often insisting on more intense involvement between them to obtain repayment procedures on the debt. It demands a consistency of program, even when there is real discontinuity. Every administration of the federal government has had the problem of continuance of programs undesired, or even disliked; all because there was no method of debt repayment of what was already established. Conservatives never had the slightest chance of reversing Social Security–a factor appreciated even by Conservatives, but would Medicare and Medicaid have been passed; if Everyone then had understood the problems which We face today? Everyone resents and refuses to pay new taxes, to defray past debt on programs which have been discontinued; they must at least be granted the promise of some form of receipt of the benefits originally described. We cannot get ride of Medicare without getting rid of the Social Security Fund; which would mean getting rid of Social Security-at least in its present paid-up form. How consistent are you in your beliefs?–Sufficient to survive on your own Income without Government guarantee?

I will finish the Reading list this morning with this Piece from Gretchen Morgenson. More and More of the economy is being classified as ‘Too Big To Fail’, so that the entirety of the system is being compromised. This threat all revolves around the issuance of debt, the undisputable factor behind it all. What is the Solution to all of the mess? The Answer is simple–simply tell people to repay their debt, and make it virtually impossible to contract more debt. Do the Politicians, Business personnel, or Consumers possess the fortitude to adopt the stringent lifestyle to live without debt? Can Those who do even adopt such a lifestyle, considering the pressures which can be exerted by Those who would live beyond their Means? One has to live with one’s neighbors, and one cannot continually berate them, especially if you need their advocacy to complete your own labors. Understand that economic policy can support, or bring down, the entirety of the economic structure. What Road do you believe We are on? lgl

How to extract Money gracefully

I began reading this article by Greg Mankiw, and started to come up with ideas. It led me to contemplate the entire relationship of Taxes and Recessions. Taxes possess little power to incite Recessions, but they also have little power to inhibit Recessions; even though Conservatives would claim Taxes are a great economic retardant. National debt, though, can have an immense impact on the Inflation rate, and some impact upon Recessions; though I suspect a vastly lesser curative than economists, Conservatives, and Liberals would acclaim. Politicians, on the other hand, are incited by Business to spend other peoples’ money quite liberally, as long as the money which is spent is not their own. It is from this point that We began discussions on national debt.

I review the presented information so far, and conceive of the notion that What must be done is to incite Business to expend their own funds on public finance. Business possesses the largest capacity to aggregate funds in society rapidly, and tend to increase that function even faster during Recessions. The Answer to Stimulus questions must, in the final analysis, be to incite Business to underwrite the Cost of Stimulus. They are the only entities which can capture the capacity to pay for Stimulus in the first place, and/or the potential to raise that potential during Recessionary times. Once this conceptionalism is derived, it becomes only a question of Accounting procedure to induce Business to start financing such Stimulus efforts. It is known that under full employment Labor can assume a greater share of the underwriting of public finance, but this capacity reduces drastically under Recessionary conditions; a factor which must be brought into the equation before Accounting procedures can be introduced.

My idea is the issuance of a new type of Treasury, one which will incite Business interest. I will call this form of Treasury a guaranteed Interest Treasury. It will respond to normal Interest rates until it falls to a Minimum of 3.5%, and will be a 3-year or less Issuance; the catch being that it can only be cashed by payment of future taxes to the Government. Business can purchase any level of such Treasuries, up to an estimated 3-year payment of their estimated future taxes. Inducement to purchase these Treasuries will be gained by Congressional approval for the Treasury to raise the minimum Interest rate up to 5.5% on specific issued Treasuries under this format. The program holds a number of benefits for Stimulus. It has the potential to reduce taxation under recessionary conditions. It presents a method of Investment under recessionary conditions to businesses restricted by limited Consumption at all times, but especially under Recession environment. It presents a potential added value to capital construction, and a source for potential government support for such capital construction; at rates which are an effective Zero Cost to Government. I like my idea, and await the debate which will tear apart my idea. lgl

The Bright Hope

I admire Menzie Chinn, but this set of charts are particularly worthless, and I should say Why. I would rerun the charts in two ways, if I had the capacity. The first would translate all data into 1980 prices, the second would transfer current Interest rate into a common 5.5% for all national debt. The first scenario is totally unlikely, the second quite likely. Smart young graduate students might attempt creating such scenes, and do not worry if it begins to smell quite early in the analysis. A third scenario could be to run the created analysis out say some half-Century. I have a minor rule of thumb which I use for almost any economic unit: Everything must eventually pay for itself, else the unit will disintegrate somewhere along the scale of Interest rates. My favorite disaster point for Government debt is around 7.5%. What is the probability that We will reach that Interest rate? Consider the probability of global tax revenues not advancing over the next two years, with Government Spending maintained at current levels; a sleight of hand I will not explain estimates a Interest rate of 9.1% (I do not explain my math exercises simply because I am tired of my work being called childish–whether it may be or not!).

This link is another one of those Posts which I feel disheartened to find. I cannot remember when initial unemployment claims were less than 400,000, or the 4-Week average less than 450,000. Identification of such things during a Recession, though totally necessary, should be added without fanfare. I personally would desire a switch to a Statement of permanent Hires employed longer than 6 months, with the Unemployment claims added only as an addendum. It would simply present a cheerier atmosphere. Of course, such would only be an act of delusion, as We need a new Hire number much higher than 450,000 to get back to relative full employment.

Serious Students of economics can attempt to read this Paper. I have not, and don’t intend to do so; it is all a question of time, and present sufficient discouragement as to the competence of financial leadership. What is necessary is only to recognize that our leaders are operating in a fantasy world equal to that of the Nazi leadership in 1943-45. They are saying that things are not so bad, and will continue to do so, until the economic situation explodes. What my Readers must understand is that the situation will get worse before it gets better, that a realistic tax policy will have to be introduced in order to straighten out the mess, and that our leadership cannot destabilize our basic life pattern; the Common Man has worked too hard to have his life stolen from him, though the Corporate structure continually tries to do so. We will get back to a functioning economy at some point, no matter How Much our leadership acts stupid. lgl

A brand new day

This Piece holds some distinct information, even if the format is hard to understand, and the column graphs are utilized to put too much emphasis on change. It’s discussion of vertical specialization is concise, but fails to fully cover the impact; as decreased labor employment is not evaluated in the host Countries. What I find most distressing is the lack of study on the Price inflation in the Durable Goods sector during the intervening periods of the two latest Recessions. Jian Wang must be considered a good economist, but the outline of the information is poorly formulated, without discussion of the potential causations of impact decline. The decline of Durable Goods was accounted by an excessive increase in Cost for these items, mainly due to the added Costs of Transport, but also the assumed Wage increase in Production coming from specialization. There is inherently sound economic practice, and then there is unsound business practice which introduces artificial Costs into Production. The introduction of several levels of intermediary Profitability–plus a higher Wage Cost for labor at all levels–defeated the growth of both Imports and Exports.

This compilation pleases me, basically due its defense of the sustainability of a welfare system, when such a system is geared to the protection of the individual–not the protection of the business interests in the social support system. Such welfare works well both in times of Growth and Recession, with little suppression of natural wealth aggregation for the individuals protected. I lack a real basis for understanding the Nordic economies, yet I believe that it is the protection of individual income during times of economic distress which protect the gradual growth of wealth and living standards. The American system of welfare measures fail, all due to the refusal to guarantee the individual levels of Income; insisting instead on what is basically Price supports of essential life maintenance Goods. Designed for the protection of business interests selling such Goods, such welfare protects neither the individuals drawing such aid, or the society as a whole from exorbitant Price structures. A lot of Readers may think I harp on this issue, but the difference in practice between the American and the Nordic systems can means a difference of around 40% in the quality of living standards.

Here is a Post right up my alley. The author does not understand the process of Global editing, where individuals such as myself are ostracized, simply because of the quality of their output. A truly democratic society would allow as more crap to be published, as is quality material. This does entail a Processing Cost, sifting through the trash to find some relevant material to read; does it remind of the Internet. I have long advocated a per-page reading charge for Internet access, rather than the current system of monthly maintenance charge without payment of any kind to the Presenters of material. Of course, this is purely economic self-interest, so that I can go bankrupt with genteel grace. Praise Those advocating Change, even if the context is slightly stupid. lgl

The direction of the World

I am in a sour mood this morning, so I will provide this link for all Those who think they understand the economy. Menzie Chinn is quite correct, the numbers on the Stimulus do not add up–whether the Government or anywhere else. I will try to explain it in humanist terms so Us normal people can understand: The Stimulus is a Band-Aid trying to cover the cut throat of the economy! Two factors have currently saved the Patient: 1) the economy had so much blood to give; and 2) the blood tends to coagulation by itself. This happens to be the reasons Why the economy is not completely dead! Economists have tried to rise to the Challenge, and failed somewhat miserably. Politicians tried to rise to the Challenge, and only jumped into corruptive practice. Business leadership refused to rise to the Challenge, and resorted to thievery. Everyone else pays the bill for it all with Taxes and lost Labor.

I am currently working on the premise that the Stimulus may actually be worsening economic conditions. It is known that all Stimulus is directed towards maintenance of Business Profits, and little seems to working itself through to household Incomes. It is also known that the Stimulus works best at sustaining Business Profits-Taking practices developed over the last quarter-century, allowing Business organization to maintain operations as they were–except for the layoff of labor. Examination of actual Business conditions presents the suspicion that the Stimulus only grants the ability for Business to maintain current Returns while delaying Investment schedules; a definite counter-cyclical effect, and one only I seem willing to discuss. There comes a Time, my dear Readers, where one has to descend into paranoid images, simply to bring Order into your world; this could well be one of those Periods.

It seems apparent that there exists no mode to direct Stimulus to households, a prime necessity for any increase in Consumption. There may be a definite Plan, never discussed, to downsize the economies of the developed nations; and if so, the Corporate demand for cheaper labor remains the culprit behind the design. I cannot totally oppose any such Plan, as there are real Savings to be made from better Quality of Product and Services, but there seems no complementary attempt to improve such Production which can be perceived, though this does not deny its existence. I dislike the methodology of the only apparent movement in that direction, a process of simply making such Product too expensive for labor to purchase. The economic context of it all holds greater clarity: consistency of current Production will lead to another year of reduced GDP, whose only denial will be increased Consumer Pricing. It does not bode well for Labor. lgl

What is Coming

I debated with myself if I should present this one from Paul Romer to my Readers. It is a pursuit of a Dream, but one which has some initial benefits. One cannot make law in isolation, and the methods exist to corrupt the concept of ‘Open Cities’; a factual attempted many times in the Past, occasionally with success, but mostly with failure due to varying degrees of corruption. The trouble basically relies upon a real rigidity of structure to curtail such corruption, while the creation of such zones are specifically to forestall a rigid enforcement of Constraint upon the inhabitants. The idea must have a freedom from the Past, without the invasion of the elements of corruption pervasive within the greater hinterland. Is it a truly viable Concept when the entity is surrounded by that corruption? History will state that there is freedom from contamination only where there is advantage to the hinterland itself, irrespective of the benefits to the World, or to the inhabitants of the ‘Open Zone’; without this defined value, the corruption of the hinterland will dominate.

Here is a case where Students must read this Post, though it is in many ways wrong in context and content. Observers here place the Cart before the Horse, believing that the behavior engaged in by empires is what destroyed those empires; when, in actuality, Money was always substituted for adequate solution of problems within those empires, bringing down the entire structure eventually. It must take a sincere Shock for the Readers to understand the facts I would outline; so this means the Reader should not believe the following as acceptable, even by me. Our current military structure is ridiculous–We spend more per combatant soldier than any military formation in history. Every support element of that soldier is outsized and unrepentant, be it the Cost of the uniforms, the Cost of the Weaponry, the Cost of the Ammunition, the Cost of Housing, the Cost of Recreation, or the Cost of the Food and Travel for such military personnel. The actual Wage Cost of such military personnel should be among the lowest in the World due to the excess of Population and excess of trained labor in almost all domestic professions. Reality states that the actual Cost of an American soldier should be lower than anywhere except China, when evaluated in terms of military effectiveness at low Cost. Now ask yourselves What scenario We do enjoy, and How we have arrived at this Point.

Americans must learn that We do not possess the unassumed resources of previous Generations. There is little venue for expansion open to the nation. We need to get more done with less, and do so at a far more rapid rate than We are currently doing so. We need Quality of Product, and permanence of Product. We need to examine the Production process, and start to learn to substitute labor for capital intensity, and to hold to a lower Cost of that labor. Community services must expand, while individual wealth must decrease as a measure of economic success. I continually hear that Europeans and Chinese must learn to live like Americans, while I know that history dictates that Americans must learn how to live like the Chinese. It is not evidence of disrespect for human life; simply an awareness that history stands ready to destroy pretentious people everywhere, and We have reached the apex of our national star. We will have to learn to live within our Means within this century, or perish! lgl

The New Science

Sometimes I think economists may be a little too optimistic. I know for a fact that politicians are way beyond optimistic. Take the current financial crisis–please! How many Countries are spending Money which they never attained by taxation?–All of them! How much Cash does the Private Sector possess which is lying around loose?–None! Where are various Governments getting the funds with which they are building up the huge debt?–the central banks, of course! Where are the central banks getting their Cash–fancy Printing is the only Means! Let’s get real here–Where have I seen this scenario before? No Income except for bad Paper–Where have I heard this One before? I hope that the politicians and central bankers have devised a better Escape plan than Bernie, as I don’t think the prison system has enough Cash to house that many extra people. What do you call a Ponzi scheme run by central banks?–Government!

I know that the Readers will try to make sense of the wealth of information presented by this Post. I will extend the Warning that this will be hard to do, except to state that Banks are expressing deep regret that they cannot get in the Ponzi scheme business, as hedge funds ex all are suggesting that the market for Ponzi schemes is not out there; Investors want it in Writing that they are guaranteed some form of Return of Principal and Interest. Banks feel victimized that they cannot unload bad Risk, with no Market available to absorb all the bad Paper. Everyone knows that the other Shoe is going to drop, and Banks are highly worried that they will still be holding the mortgage on that Shoe as it hits bottom.

I am almost feeling fraudulent providing a link this wonkish to my Readers, but it is too good to be avoided, and deals somewhat with the discussion I am trying to present rather unsuccessfully. Economists were the first to discover that moral deviance can be hidden and absolved through the development of mathematical models. The later separates the individual from responsibility for the adverse circumstances, even when they were the immediate Participant. It makes the Conditions found a Certainty, and beyond the scope of any individual to control. Ethics become only a Dream, and one fostered by Those ignorant of the mathematical magic. Bankers have watched economists walk away from bad outcomes time after time, and caught on to the beauty of Math. Investors are almost the last to understand the beauty of the math concept, and in some situations, must remain in the dark as to the mathematical potentialities; all in order for the beauty of the math concepts to operate efficiently. Ponzi did not know what he had, when he had it. lgl

The Leadership is pushing it, but they don't even recognize it.

Tyler Cowen expresses more faith in the democratic process than I can really accept. The political adherence is not to the ‘middle of the Road’ Voters, but to the ‘middle of the Road’ Voters of the upper 10% in Income. Obama and his fellow Democrats in Congress would get far greater support if they turned to the vast majority of Americans–the kind who pay the survivalist taxes of Social Security, Property, and Licensing; which make up a very significant level of taxation in total Country tax revenues. Notice I did not mention Sales taxes, which are the real Paymasters of the American economy. Also notice that Everyone pays Sales taxes as well. There are many Ways to propel a cheaper health care program, and a program which does not short Services to the Poor, but such programs adversely affect the affluent in greater manner than taxation. There is a vast groundswell among the Ten-Percenters to forestall any such limitation of their Profits-Taking by overcharging for medical services. The democracy so vaunted may seriously not be there!

Read this thing which may be a charade in itself. I am tired of the old Adage that Government must be the Spender of Last Resort. I ask if even this were so, that Government should restrict the collection of taxes to pay for that Spending. No one has seen Business Interests make any Investments which lack Profits-potential since the S&L Bailout of the mid-1980s. Business should pay the taxes, unless and until they have shown Proof of real Investment in hard capitalization endeavors, which should be limited to domestic production. Read the material provided, and ask yourselves if you like your current Government; and if you do or do not like it, Why you have those feelings. It could just be the Year for complete replacement of the entire Congressional structure, except this would bring Republicans to the fore; they of no Solutions and huge benefits to the Wealthy. lgl

Where do We go from here?

This article actually says very little, but at least gives the Readers some focus for Research. I personally would like to find some Plant-Closing follow-ups, finding the Re-Hire rates among Workers combined with their migration patterns since the Closing or Downsizing. One of the important Questions to be answered consists of whether Re-Hires can manage to stay within their Specialties, or must accept employment outside their fields; simply to understand the value of intense specialization. It would be equally nice to develop a model equating the Production potential of transferred labor; a young graduate Student could make his name with an effective evaluation of production potentials. I think We are in the Best of Times for economic comparisons, if only economics Instructors would get their Graduate Students fired up for the task. Take careful notice of the fact that this burned up old bum has not outlined any labor for himself; Instructors need to learn to delegate labor.

Study these graphs from Menzie Chinn. If these are the types of pretty pictures that you like to draw, then the economics profession needs you! The graphs may seem a little downbeat, but if you have lost your Job, there is no reason to smile anyway. It is obvious We are not getting to where We wish to be by our Stimulus program. The basic reason behind this failure lies, to my Thought, in concentration on preservation of current high-priced Specialized Labor, rather than massive redeployment of lower-Cost general labor in localized projects; the type of labor which is only short-term and temporary, but which gets a increased level of general Consumption which is needed. We need a Window of less than a Year duration of prior Consumption performance to kick-start the economy. Will We get it–Doubtful!

I will finish today’s Post with this link. Read the last paragraph quite carefully! There will be a lack of sustainability without an increase in Consumption, and the boost in Inventory will only provide a short blast of little more than one Quarter. We need that boost in Consumption Now, and there is nothing in place to produce it. We will be at an end of Business-incited Stimulus by the end of Spring, and there will not likely be further business-generated Stimulus for a likely following two-year Period. Government is not going to get anything done quick enough to utilize the natural Stimulus of industry in the time frame expressed, and business will let this Period go unnoticed. I would suggest a economy-wide Sale, cutting the per Product Profit from Sales by 50%–to get the Consumers into the Stores–but it will not happen. lgl

Tiptoe through the Meat Grinder

Matthew Slaughter makes me feel old, not because I disagree with anything he has written; simply because the World has changed so much in my time. It is indeed true that American Jobs are far more dependent upon complimentary foreign labor, but my digression probably relies on the fact these American Jobs reside in the area of Transmission, where it is simply a process of movement of Goods produced elsewhere. I know that I will hear from Many who would deny this sentiment, though Goods Transport and Information Sharing remain the only major growth areas in Employment over the last two decades. I worry most in Employment about the transmission of Employment up the Education scale, where the less-educated find themselves on continuous unemployment; abandoned by Corporate business simply based upon Wage–not Skill levels or Effort. I think there should actually be aTax which would equalize the Wage differentials on this lower class employment, and though the planned Taxation may not effect this aspect; it may not automatically be wrong!

One can ask What is Wrong about this Proposal? I favor Ezra Klein over Paul Ryan in the details, and of course, maybe the Reader should read this Piece. Yglesias complains about health care rationing for Seniors, yet even the most ignorant knows there must be some form of rationing in the last year of life. I would rather have a Cap on health insurance expense per year, over almost any other form of constraint; my effective Choice would be $30,000 per year, insisting that health care Providers present cheaper medical care or hospice care. I will now listen to the screams coming from all Sides; still, it is the only medical plan which makes sense.

There will be Those who question exactly How the above limitation can be reached. That is easy: simply leave it to the Patients! Tell All that the Government will underwrite no more than $30k per Patient per year, then let the Patients chose their own round of medical care. Expensive operations will be dismissed out of hand, simply because Patients would not be willing to front the rest of the bill. Patients say Yes to everything which Doctors propose because they are totally Insured, except for a Deductible. They would say something else if the situation was reversed, and Government took the front-end Deductible, and left the rest to the Patient. It sounds hopelessly cruel does it not? It is, but nothing else will stop the progression of health care Costs upward. lgl

News Publishing

Even Hal Varian can get something wrong once in a while, and he is wrong on this one. Newspapers are following the route of Magazines; they had simply gotten too expensive. Since the time of the Penny Dreadfuls, publishers have had to recognize that their Reading Public have to feel that they are getting a good deal in order to develop a loyalty for the published Product; something which should be a Warning to the Kindle and ipad. No one today estimates they are getting a good deal on anything published, and Bookstores are beginning to close. I know something of the total debacle, simply because I am a failed author basically because of poor pricing of my materials (it obviously could have nothing to do with the Content!).

I would, if I were a publisher, bring back the Serial format within a Sunday Magazine design; with News interspersed with serialized Stories–Advertising finding place at Side columns around the concentrated normal Page size of the Content. The Stories–novelettes would be the best choice–would require a Week’s purchase or more to be read; the later staggered to always present a loss to the Reader of the rest of the Story. Advertising should be sold only on a Week by Week basis, unless the Advertiser would want Month by Month. The Price on the tabloid should never cost more than the price of a competitive Paperback per Month during the same period of publishing, and there should be enough News items with the tabloid to replace a conventional Newspaper. The Market should be saturated–perhaps even bringing back Paper Boys within high traffic areas, and the Tabloid should develop the belief within the Reading Public that Special Editions will be published for special News events, and granted Free to Subscribers.

The entire Concept could work effectively, or fall on its face. Special Market research should be directed at the serialized Stories to examine the exact length of Time devoted to each Story; I believe these Stories should have effective Chapters which do not extend beyond the normal Reading time of a Coffee Break for most people, and News should have a short plot of five paragraphs or less; immediately followed by a Story lead-in. The Magazine format should not be long, consistent with my belief that people will not touch anything resembling a book within a normal Workday, but will grab a Magazine to read during Coffee Break or Lunch; carrying it along with them to read when they have further time. Magazine racks therefore should be a high Seller, and the serialized nature of the Stories will incite Purchase and Saving the materials for repetitive reading. It will float, or it will not, but the format will be something still carried under an arm; and turned to at any opportune moment, unlike the weight and Price of the new electronics. lgl

Dividend and Debt

One must start with a bias, and then you have to find some proof. Here is an article which agrees with my bias, but does not present exactly the proof which I would require to provide a researched argument. I should first express my bias, which is the Statement that companies are in violation of the personal propriety rights of Stockholders, when they refuse to advance Dividends on their Stock. Dividends not only provide a Return, but also present a health measure on the Stock which Investors can utilize to make decisions on Investment. The lack of Dividends continues as excuse to expand the issuance of Stock, diluting the value of previously held Stock; allowing for a undeserved expansion of Stock Option and Stock Grants to Management, who pay themselves even when there has been failure of efficient performance. Stockholders lose Investment information, loss of the value of their investment, and separation from any Profit coming from successful conduct of the enterprise. Any reliable economist or accountant should estimate the negative Profit (Cost) generated by refusal of Dividend dispersal, but no one does. All we get are informative articles like this one discussed, without any sensible review of the potential evaluation of the Cost to Stockholders.

I found this Post which presents a delightful grasp of some of the horror in store, as the storyline unfolds. It brings forward a contention which I have been considering for some time. The basic thesis states that there is a cyclical point where Stimulus Spending is actually regressive. There comes a point where Stimulus propels such a corruption of Pricing that Stimulus actually defeats productive activity. I could come up with many reasons for this, probably the greatest being that deficit investment opportunity achieves a greater security and higher Return to Investment, than does actual Production. Additional elements are higher resource prices which are abnormal, supported markets which are not representative of Supply quantities, and an over-dispersal of liquidity to inefficient operations. We find Ourselves dealing with an artificiality of Market conditions, all of which stress Growth factors in a period which will not be corrected without a Contraction of production functions.

I will finish today’s Post with this article, which gives some vital information on the Credit Card industry, and Consumers’ response to it. The greatest element to be drawn from the information consists of a real lack of protection from the very practices which are the most profitable to the Card companies. They can still set their own Interest rates, increase service fees at will, and hide relevant information from Cardholders. They can still entice Consumer debt with cheap initial rates, and increase those rates without proper notification to the Consumer. The only real gain to Consumers from the legislation prohibits Card companies from charging Consumers financial charges for paying their Credit balances. The article mentions some glaring omissions, then glosses over what those omissions actually do to the poor Consumer. lgl