Sunday, May 30, 2010

I hear what you are saying, but do you hear what I mean?

Read this Commentary, and ask if Robert Frank is not questioning Us bloggers who might be a little less than Frank? Notice that the information presented was at the Heart of the old Nazi propaganda machine: Repeat a Lie often enough, and you get the correct reaction, even if everyone knows that it is a Lie. Case in Point: the famous Republican Death Panels. Everyone knows that Death Panels are a patent lie, but there have actually been physical assaults incited by the use of the language between Democratic and Republican followers. Such activity has produced increasing acrimony in the discussion of health care; the desired goal of the issuance of the label. Even recognition of the tactic did not dissuade the emotive reaction. How does this relate to yelling ‘Fire’ in a crowded theater?

Readers should preview this Piece to reach an Understanding of how black markets are created. The particular Thought I would wish to impart consists of the fact that environmental factors can be manipulated to create a black market which is to the advantage of the managers. I know of prison guards who buy several cartons of cigarettes a week, though they do not Smoke. There are several prisons where prison guards regularly get $1 per cigarette for allowing Prisoners to smoke in their supervisory areas–though the practice is banned by prison policy. The real definition I wish to express stands as fact that prison policy operates for the personal benefit of the managers, rather than any public, stated policy. It relates to the previous paragraph about the repeated Lie; can you tell How?

Bruce Bartlett and I are working on the same page, even though I am sure We are at odds as far as economic policy goes. We are agreed that Taxes are being raised for hidden motives, rather than the stated policies. He thinks these Taxes are too high; I think such Taxes are insufficient. He would eliminate American taxes because of the existence of foreign tax assessments; I will state that American tax assessments should be independent of foreign taxes. It is my contention that multinationals should be taxed for their use of American infrastructure and Consumers, thinking it be a taxation for the availability of markets upon these companies. I justify this taxation based upon American production being forced to withstand these Costs before competition with multinational pricing. Both Bruce and I believe We are being fair about the issue, and We are both in some ways not! Such is the complexity of the World. lgl

Saturday, May 29, 2010

Better Plan than paying Business to hire Lobbyists

I might as well give my Readers these numbers, and perhaps put a little analysis to them. Only 1 in 5 had found a Job, and only a little better than 1 in 7 a good Job. Over One-Half had taken a Pay Cut, and 1 in 7 had lost over One-Third of their previous Salary. The length of their Unemployment will have meant that their financial reserves were no longer existent. Reviewing the rest of the information, one can determine that it has been an almost universal Recession, with no segment of the population enjoying a better position. I expect that defeatism may be the worst enemy in this Recession, while business will not reinvest until the Consumption pattern improves. Any Government program cannot be more of the same, but come up with something which will actually shake up the Status Quo.

This article discusses How this legislation does not meet that criteria. The whole thing lacks punch of any kind, with hardly Anyone suspicious of where the money is actually going. One has to understand: Where is the Stimulus when most of the Bill simply continues payments which no one noticed in the past, and whose continuance will mean relatively nothing to Anyone, even the Recipients? The entire picture lacks for both cohesion and identity. There is obviously absolutely no impact behind the measures, and no businessman states that his bottom line is going to improve. Business statements that same store Sales year-over-year improved does not a boom make! Don’t laugh too much–the American Consumer may be the only people keeping faith with the American economy.

I might wrong Maxine Udall by presenting this Post as counterpoint to my own argument; she being one of the truly good minds. The proposals are all sound, and mean absolutely nothing to Anyone’s bottom line. As opposed to the legislation presented in the Economist’s article, I would propose legislation which granted 12 Weeks of Severance Pay to Everyone who had worked over one year for the Employer; all paid by Tax rebate of the exact amount of forwarded Wages from previous Tax assessments in prior years–paid in Cash. The rebate must show the Accounting of previous Paychecks before Layoff, current Paychecks after Layoff, which must match; plus an reactive Statement from the Employed that they have received the Pay. The plan would be to make the legislation retroactive back to 2008, and canceled only at the point where the Employed finds subsidiary employment. There will obviously be much fraud in the program, but even more Stimulus; and I have always enjoyed putting business personnel in prison. lgl

Friday, May 28, 2010

The Color of my Thoughts

I feel almost hypocritical in my defense of Public Employees. Zuckerman, though, was way out of line. I would layoff (Fire) about 27% of all Public Employees if I could, but Zuckerman’s intent to demolish an effective health and retirement program goes that Bridge Too Far. Rants like those of Zuckerman could do more to incite union activity than it will ever cause any diminishment of protection for Workers under the current program. What amazes me is the success of inoculation of anti-union sentiment in all those College courses; College being the greatest Resistor baring union activism in this Country. Unions must be too plebeian for the exalted heights of unemployed college graduates.

I would advise the reading of this Statement, though it is filled with ambiguity. It would seek to condone all transgressions, and lambast all attempts to straighten out the mess. Mead fails to mention that the greatest majority of financial crises cited all depended upon a lack of regulation and deception of Investors. I don’t know on what he bases his claim that liberal capitalism works, though it does work. The trouble comes from the fact We are not discussing the successes of liberal capitalism, but its failures! There is a claim that the old left is dead; even as I wonder it ever existed; remember that the majority of health and Pension plans operate on a very un-socialist division of benefits by levels of previous Income. No one, East-West-or Central, has ever truly advanced the concept of an equal, uniform benefit system for All; a notable element in almost all Socialist discussions, and one which gets very un-liberal fast. The demographic crunch comes more from Those who can afford the Taxes necessary refusing to pay such Taxes; it has little to do with the problems of Ageing or Entitlement. I finish with a speculation that fear of the democratization of economic policy translates into a non-belief in true capitalism, as it sounds like a Call for the suppression of natural forces upon the market structure; one can spend and invest, but no one gets the Vote.

I have always believed that Opinion must be the result of informed study, even if it seems that I only listen to myself. Read this format to understand where your most reviewed Commentary comes from in daily development. This study may put to an end the concept that there is a liberal media bias active out there. The graph on the last page shows the weight split between Conservative and Liberal. I stand in the middle of the Road, not professing liberal or conservative bias; simply picking any source that seems attractive at the moment. lgl

Thursday, May 27, 2010

A better Stimulus program

I especially enjoyed this Piece from Mark Thoma, simply because he sets up the argument perfectly for discussion. My main contention against his Thought patterns may be his assertion that there is a normal Consumption pattern. Mark does not understand he is standing on Quick Sand here. Facts: every Recession brings to the fore knowledge that Products can withstand greater usage, while delayed consumption already had reduced the prestige of constant consumption a household had previously enjoyed; the largest Consumption market–Baby Boomers–are reaching retirement age, and reverting to the Consumption patterns of Retirees; Advertising become less effective as the Consumer ages, and We are in an Aging society. Mark makes the completely unproven assumption that prior Consumption patterns were normal; combined with the postulate that a Return to such a pattern would advantage or please the current Consumer population. I doubt seriously both assertions.

There is a very good argument which states that We should accept the current Consumption pattern at relatively stable, and instead turn our attention towards the completion of projects providing Social utility. I will state quite clearly that this is not advocacy of greater Public expenditures. I personally would advocate a Government expenditure program which absorbed less than 14% of GDP. Economics should teach that Consumption does not need Government sponsorship in order to be genuine. We need to prepare for the future, and We are not doing so!

I would advance the idea that Tax Cuts never be given, except for Those expressly tied to Savings. Congress should rewrite the entire Tax Code. My Concept is that each Income level should have a mandatory Savings Account, where a Tax larger than the indicated Savings be assessed for every failure of Savings fulfillment–this Savings allowed by Payroll deduction exactly like Taxes. To be effective, the Tax rates would remain Constant as to Income level, but Savings must increase by amount of expected Savings accumulation for the number of years in the program; the Tax suspended if it can be proven that Steps are being taken to make up for the lost previous Savings at an appropriate rate. This, to me, would equate to 135% of the previous Savings rate to qualify for Tax suspension. Economists will insist that this would prevent Stimulus circumvention, but I would insist that the program is the only means to sustain stable Consumption over the long-term. lgl

Wednesday, May 26, 2010

Poor Innovations

I do not like the ideation defined in this article. Why? The authors are not the problem; the ideas they expressed remain the core problem; let me explain. Bankers, by their very nature, want funds; Money which they can lend at higher rates than they pay Investors. This is How they make their own Income. Past performance has shown that Bankers are not all that ethical in that practice, and Investors often lose their funds in this process. Bankers are currently on a course where they are paying Depositors relatively nothing for their deposits of Cash, and making their Profits by maintaining the same rate structure on their extension of Credit. Bankers correctly fear for the amount of funds which they find coming into themselves through those same deposits.

Everyone who has studied the financial crises of the Past know that the Bankers utilize innovation of new financial instruments to raise the desired funding; such practice often bringing on the crises described. The elemental criteria behind these movements is Selling, basically requiring Bankers to convince Investors that they are purchasing relatively safe investments; often when the Bankers themselves know the high Risk involved in such instruments. Let Us face it: these instruments are designed to finance high Risk ventures, and Investors have to be introduced to delusional belief about them in order for the Bankers to get the level of funds necessary. Investors want Blue Chip, while Bankers are cognizant they are getting Blue Sky! Bankers, and by the term I mean Investment Bankers, currently want the Image that the Federal Reserve somehow guarantees such investments. This holds the rationale behind the current Move to extend the Fed greater power; legislation in which the small Print takes away what the large Print has given.

Bankers want the Fed to become the new Barker of the new Sales Pitch, and one wonders whether this is good practice. I think that Taxpayers have overpaid over the years for the claims made by Investment Bankers. I believe that any legislation passed altering the position of the Fed should include actual legislation expressing an inhibition forbidding the Fed to extend any funds above a set amount to any singular bank, and the total number of banks per specific year; and I would make this amount no greater than $50 billion per year for the entirety! It would outline to Investors that the Fed is no more confident in Investment Banking than they themselves. Congress will obviously not do this, so I would advise all Taxpayers to oppose any extension of the Fed legislation at this or any Point; knowing that the Fed has functioned fairly well since its inception, and further activity could not possibly be good for Americans. lgl

Tuesday, May 25, 2010

The Woe of the World

Arnold Kling and Tyler Cowen attempt to present a point which is most difficult to define through its very nature. I am equally at fault in use of my analysis, as any mathematician and/or economist will outline for the Confused. I will start at the simplest, then get flat obnoxious–Some will claim Wrong! Economics is based upon Averages–the most commonly utilized math concept. Production quotas are based upon construction of absolute items. Their only target reference is the economic Averages of Income for establishing Market and Sales fields. The trouble comes in the nature of Averages, where half the population of the Average makes less, while half of the Average makes more Income. There is a Product Satisfaction in Consumption which is a relative absolute–Case of variation–the 3-car family. It all means that half of the Production quota is easily fulfilled and consumed, while the other half needs finance of some sort; enter the realm of Credit.

We could site Production quotas based upon absolute ability to Pay; and live in the land of our great-grandparents, with their limited degree of Living Standard and choice of Product. This Scenario does not please either the Consumer, or the Producer. This creates the initial impulse for Consumer finance. It is a joyous choice, even if We all feel it is not at times! Credit is basically a bet made on the future ability to sustain a level of Income. Here is where the Problem is created. That future ability is itself an Average–meaning that half of Incomes will do better than expected, but half will do somewhat worse. The later half requires some form of refinance, as the strained circumstance becomes known. This means lengthening the repayment period at a lower level of individual payment.

The trouble comes in the fact that Credit itself relies on Averages which are based upon Income. This means that half of the population can meet all their Credit obligations easily, with some particular extra which I will call Investment or Savings–choose for yourself. The other half, though, will require the added refinance; itself based upon an Average of Income, meaning that again half will need some form of refinance. Boom periods are terrible in their creation of self-esteem, and Bankers have to constrain Consumers in great part; while themselves being afflicted by the enthusiasm of the Boom. Busts are those periods where the self-esteem is pricked, and the entirety of the economic system watches the escaping funds with morbid desire; bankers unable to acquire deposits, Producers unable to pay their Production Costs, and Consumers wondering How to pay their accumulated bills–made potentially extreme by the process of Layoffs and reduction of Work hours. Booms almost insist on over-expectations, second generation if not first generation. Busts are almost always first generation recognition of the lack in absolute amount of Money to pay for previous expectations. lgl

Monday, May 24, 2010

Whose your Daddy!!!

This article may seem dire, but one can wonder if it is quite so bad. There is an astonishing number of Experts out there, who see deflation as the fall of Western Civilization. I have often postulated that deflation could possess neutral, if not beneficial, potential scenarios. Deflation tends to reintroduce older cottage industries, reestablish older types of employment, and raise the quality of Product to justify retention of Product prices. The decline in Housing prices were long awaited, and in my mind, should have stabilized somewhere in 2002; later Home pricing being in itself over inflationary. The only problem here was the tie between Credit and Housing Retail. An intelligent Government would have long established a minimum and maximum Interest rate for Mortgages. It is and was a sensible plan to separate Mortgages from the Credit industry, while presenting little initial impact to Credit overall; banks and financial institutions devoting their attention to the viability of the mortgage payment system.

Read this Piece, and ask whether the Rich should be taxed higher than they currently are taxed. I had a Thought which takes much more examination than my passing idea. It is a sincere Spread the Wealth concept. Keep the Tax rates as they are, but add an amendment to the current law. This would insist that Everyone making more than $100,000 per year must rebate a fellow Taxpayer his Tax Cost for every $25k he makes above $100,000. It is clear that the IRS would have to present a Tax List of Taxpayers who have a real Tax Cost after deductions and reductions; with the law insistent that there must be a Tax Cost above $1000. It is quite clear that Taxpayers would quickly turn to family and friends first; especially if the Tax law would not invoke the Gift tax process. There might even be a Trickle Down effect generated.

It is quickly apparent that the process requires a specific number of benefitted Taxpayers for each major Taxpayer. Ordinary Taxpayers could be rapidly absorbed, though a quick scan by myself suggest that no more than 40% of Taxpayers could extract benefit with and from their Tax Costs. It is also equally apparent that major Taxpayers need minor Taxpayers who pay more than $1000, but as little less than that as possible. Minor Taxpayers could also find relief from subsidiary Costs of Tax compliance with expert help. Every major Taxpayer will want to keep as much of that $25,000 as he can, while every minor Taxpayer would enjoy the relief from Tax Cost. It would be a situation of great entertainment, as the major Taxpayers will certainly be faced with the subsidization of minor Taxpayers, as the IRS would assign Those to get rebates if the major Taxpayers do not supply their own choice. lgl

Saturday, May 22, 2010


Someone who I will not name suggested that I should go back to work, and post something. I groaned, even bloggers need downtime and vacations. The entire production did manage to instill a guilt reaction within myself, so I decided I had better forward this Post. It reminds that environmental economists can be as stupid as regular people, and any method of evaluating damage costs will induce hysteria. One has to identify willful avoidance of Safety to assess true liability, else the outcomes are only normal industrial accidents. The cost of such accidents cannot be entirely attributable to the participating business, but to the industry as a Whole; which is only responding to a Customer matrix–themselves liable to some degree. The Courts need a criteria to adjudge How Much blame should adhere to the participating company in such hazards, and How Much should be a communal cost.

The problem with the above Statement consists of two parts: the establishment of a socially acceptable business practice; and the demeanor necessary to ascertain safe operation within that social acceptance. The former necessitates some Up or Down Vote by a political establishment of some kind, determining if a form of business activity is acceptable to the body politic; where they outline the boundaries within which business must operate. The later requires a Board or Commission to write guidelines under which business must operate under dangerous circumstance. Both elements generate great lobbyist pressure, while the later will always incite great argument, leading to Court litigation anyway.

A more solvent solution could be a precision excise tax on the industry as a Whole, while leaving the offending business organization to pick up the cost of the industrial recovery. Explained in common terms concerning the Gulf Oil Spill, BP is stuck with the Cost of capping the Spill, while there would be a $.05 surtax on every gallon of Gas and Diesel sold in the United States for a specified period of time as originally outlined within the legislation. It is a lot more sensible than massive Court litigation under Contest. lgl

Wednesday, May 19, 2010

Positions Taken

Arnold Kling does not say anything original here, but it is material which should be studied. I am glad that Arnold can admit to being wrong about the degree of Trade in early times, something I had great difficulty defending in a history class. We know Today that the Mandan Indians raised Corn for almost all of north America for over a Century and possibly longer; finding artifacts from as far as Russia and Mexico City in archeological digs. I disagree with some of Ridley reasoning, knowing that the mixture of found animal bones at Sites indicate that ancient hunters were concerned with volume, not hunting prowess. Accolades do not make up for hunger. Study of Monkeys also do indicate there is a form of Commons sharing between Groups, with alternate forest hunted in alternate periods by several animal groups; this likely to avoid Conflict between Groups. The common Indian Sign language throughout north America expresses assured Trade, simply through the lack of value of Sign language without widespread Trade.

Dean Baker presents Us with a good Keynesian argument, and it would be excellent rationale in a much simpler world. My fear, though, remains that Stimulus resides on a Bell Curve, like so many things can be replicated. Stimulus makes huge Gains in an arena where there has been no previous Stimulus. What happens if the Government already makes up 20% of the Demand; said quantity already within captured markets? Government suppliers have organized their Production and Supply systems under prior economic conditions, and reduced their labor force to maximum Productivity. Now, if Stimulus is actually on a Bell Curve, there comes a Time where Gain is less than level of Stimulus, and the residual becomes only an economic Cost. This can only be worsened if all Stimulus is done by Debt aggregation, draining funds from Private capitalization. This is my dilemma!

This Post by way of Mark Thoma comes from Akerlof and Kranton. I ask the Reader to define How this Post relates to the previous paragraphs. Identification of class status could be a prime motivator in both paragraphs. It might be easier to understand in the first paragraph over the second. How would you imagine Readers of the Baker Post would respond if they were Politicians, Government Suppliers or their Employees, or Bond Sellers? Now imagine you were a small businessman with no chance of Government supply contracts and a Taxpayer; could you conjure a different Response? Let’s think of the posture of a Laid-Off Employee: would he be in favor of Stimulus, except possibly if he worked for a Government Supplier? There are several alternate institutions affecting decision-making of this order, and all potential Mustangs. My only Statement consists of the fact this is the matrix within which economic decisions are taken. lgl

Tuesday, May 18, 2010

Old Men caught with their Pockets empty!

Does this assessment make sense? I agree with the belief that most nations of the EU would benefit with cutting their ties with one another, and that the Baltic nations should forget tying their Currencies to the euro. One of the horrors of Globalization comes from the need for independent agents to achieve success. Independence allows negotiation for advantage, utterly necessary to have genuine Trade advantage. World leadership has spent the last quarter century crippling that independence. There can be no Tariffs, no selling below Cost, no negotiated Favored Nation agreements, and everyone must give everyone else equal time and advantage. Middleman Profits have been persecuted on the only level where they make Sense. Everyone must have low Taxes, and Public Expenditures must be financed with Debt. Does anyone wonder Why Debt has been rising so rapidly, or Why nations are all in trouble with their Credit liabilities?

Read this totally unrelated Post, and ask if it is not a similar line of inadequate defense. Small Pox vaccinations were ended by 1970, but Now We found that such vaccinations could help against HIV. It also is indicative that Small Pox has made a minor resurgence in later years. It is like the medical practice of proscribing antibiotics for the Common Cold, and Now we have resistant strains of bugs in our blood. Doctors are awaiting the loss of any and all weapons against disease, before they will regulate the use of such drugs. Nations await the complete collapse of national fiscal finance, before they think to moderate their positions on both benefits and Taxes. Everyone gets to suffer the consequences of such short-sighted management.

I will let the Reader ramble through this Post, which I only scanned. Do I believe the information to be accurate? I would trust that it is so. The real Turning Point on the slow Recovery must be the heavy debt levels generated at all levels of the economy. Only Corporations possess large Cash reserves, and they are not noted for Investment in the absence of Consumer Demand. Remember that the later in not just desire, but the ability to pay for those Products. One should note that Consumer Demand will not increase in the face of rising Unemployment. I may later advance the theory that the heavy debt of Governments nullify the effects of any Stimulus package, especially if it is all borrowed funds. There is difficulty in defense of this theory, and there are Those so egregious as would insist that I come up with some evidence–instead of simple suspicion. Some would even advance the argument that I am trying to utilize old and outdated capital to engender belief. lgl

Monday, May 17, 2010

I am trying to figure this out!

Danni Rodrik sometimes tries to read more into a economic situation than can be found. He suggests that the Greek crisis was generated through an innate discontinuity between economic policy and Democracy. There is no inconsistency mandatory between economic policy and Democracy, only mal-approach to legislation of the economic policy. There will always be economic disaster when the wrong applications are applied, whether under Democracy or Authoritarianism. Both Democrats and Soviets have intrinsic difficulty with misapplied economic policy. Globalization has much different connotations, though, all concerned with Too Big to Succeed. Economic policies must be sculpted to meet the needs of populations, and One can doubt if there is an economic policy with enough latitude to be applied everywhere.

Here is a Piece which expresses the very real economic situation existent under economic stress. The World business model which pares labor down to the bare essentials finds a labor shortage during recessions. The rationale will likely be that the worries of employment lead labor to take whatever Jobs can be obtained, and Skilled Labor is absorbed quickly by the general labor market because of greater Skill levels; all to simply gain employment, rather than wait for doubtful Specialty Jobs. Lesser Skilled Labor finds greater Unemployment, while Skilled Labor find themselves working at substandard labor given their Skill; all the while Businesses are searching for the skilled performance they need. It could be that Business has made a mistake in not recruiting long-term labor complements.

The Reader might ask How the Two mentioned above can be related. I will simply state that there is singular disparity between the needs of macroeconomics and microeconomics–a factor of far greater significance that the existence of Democracy or Authoritarian operation. Economic policy must be the reconciliation between Business, Labor, and Consumers. The needs of None can be ignored safely, and breeding false economic information can be dangerous–leading to the various Crises, all due to individuals trying to hide their faults. There is only a quantitative difference between a Madoff, and a AIG. There is only an Opportunity Gain between Germany and Greece. It is not a question about the existence of Democracy. It is not a question about the error of economic policy. It is all a question about intemperance of political leadership promising more economic benefit than can be allocated, then blaming Voter reaction. The Globalization issue goes beyond this scope, and One can wonder if anything truly exists in this netherworld, as all interaction must occur in much vaunted Trade treaties which no one understands; whose by-product is always disturbed by misinterpretation by all Parties–like the debt standards applied between Greece and the rest of the EU, minus Portugal, Spain, Italy, and actually France as well. lgl

Saturday, May 15, 2010

The Roar that Shatters

I ask the Reader what they think of this link, especially if they think it will be true. My thoughts on the matter may be the breakdown of the world market price for Oil. There is already unsettling aspects to the Oil markets. The Oil Spill in the Gulf is only the tip of a huge Iceberg. The future will witness far greater intervention by Governments in the Oil development process, where Government will find voice in deciding under what conditions Oil fields can be developed; leading inevitably to resource protection and routing. There is already differential prices for Oil based upon Transport Costs which can only increase, while Government interventions will probably increase such differentials to a potential $20-30 per barrel by Government imposts for the transfer of Oil. This will fracture World Oil prices, and eventually lead to a more Protectionist World; not a bad thing overall, but one which will have to be carefully chosen.

This article might identify the first crack in the unified World of which I describe. World leadership remains constrained on climate issues by political considerations in their home countries. The Indian and Chinese economies probably contain greater dampening effects than they will publicly acknowledge, and are unwilling to commit to climate controls they must automatically violate. Brazil and South Africa could only go along with the Asians, considering the poor economic conditions in their own nations; it can be estimated that stringent pollution controls would close down half their potential industry. Obama faced an unfriendly domestic environment to any such commitment, and intractable opposition on the world stage. It is no wonder that the Meeting came to nothing.

I will finish with this debate today. Follow the links to get a long and evolved argument. It is a road much trodden, and actually informs little. Nothing works in the Entitlement World except cutting Costs; no one can touch the franchise itself. One can put Caps on the total yearly benefits included, but not on the people covered by the program. The Rich insists on getting the same as the Poor, the Young insist on the same as the Elderly, Child Advocates insist that the Children get the best of Care, and the Unemployed insist on as much Coverage as the Workers get. Such considerations split the World into those who entitle, and those who don’t. This will change into those who entitle a great deal, and those who entitle little. It does not matter, as the entire process will shatter World markets by sharply skewed Pricing for Product. lgl

Friday, May 14, 2010

The Way We Were, Are, and Oh Well!

I am feeling very uninterested today; there being a wealth of material out there, but no motivation in here. I suppose I will present the Reader with this link, which is a measure of the inputs into the economy; which suggests that the Ton-mileage is not up to economic momentum. I agree with the assessment, though I must admit that a switch to train traffic may have occurred, or the truckers may have had the weather gauge with them (reference to Master and Commander, which I watched again last night). It might also be possible that the loads might have been lighter–indicating a higher transference of Finished Goods rather than stocked Materials; an actual improvement in the economic cycle. The more likely aspect, though, is that the economic momentum shares as much hype as did the original Stimulus program–huge dollars with little Produce.

I can present this link to pretend I want to inform Anyone of Anything this morning! Maybe I should do something like a Reality Check, like News rooms do. The big firms have slowed laying off Jobs basically because they are done; larger firms still needing necessary labor, while knowing exactly how much labor they will need under most circumstances. Small firms really don’t know how many people they can afford to keep when striated economic change occurs. They get started late in the layoff period. It is also true that the small firms are not really starved for Credit; they are starved for Customers. The great Recovery may be nothing more than a traditional Spring season with increased labor rolls. Check out the graphs in the Post; there has been no great Shot in the Arm of energy, and the higher Wages simply state that firms are intent on keeping their current force.

The last commentary is also misleading. The higher Wages Are reflective of the huge increase in health care costs–resulting in huge increases in health care insurance premiums. I have no way to quantify this increase–but it probably equals at least 60% of the Wage increase. The perceptive should notice that these are business to business financial transfers; meaning that there is almost no change at the Consumption level for Households or Retail Outlets. We have to get the Stimulus out of the corporate boardrooms for it to be truly Stimulus. We still have not gotten it out of the banks as yet! lgl

Thursday, May 13, 2010

The Gods of Taxation

The real problem with the federal government comes from two sources; one consists of how much it spends, the other stands as the distortion of the economy coming from its tax structure. Read this short article on tax expenditures. Read it carefully, then ask several questions of yourself: how much does it cost in lost tax revenues; how well does Accountability operate within the tax expenditure system; how much is Government debt the result of tax expenditures, and not actual fiscal expenditures; how are tax expenditures tested for program effectiveness; and is the stability of business within the areas served challenged by possible loss of such benefits? How much confusion is introduced into the market system by such a subsidized program? Can any market price in these subsidized areas mark the actual Cost of Production and Distribution? Finding Answers to these questions might shed some light on tax expenditures, but no one–especially the beneficiaries from such tax expenditures–are actively looking for any answer; they knowing a loss of personal Income will follow.

Read this Post from Tyler Cowen fully–meaning to follow the links. Almost everyone would support tax reform, if it did not cost them personal income. The beneficiaries of current tax policies feel that their tax burdens are already too high, and elimination of their tax benefits would worsen their own violation. They can sorrow for the more afflicted, though stop way short of it costing themselves any Cash. Friedman is correct in assuming there is a relative benefit quite distinct from the absolute is all this hype, where the mandatory position remains protection of their own benefit position without erosion.

It is especially important to read this link. A real difficulty finds introduction in the assumption that relative and absolute will not operate in conjunction. The normal person is a compilation of absolutes and relatives; their weight and power determined by their personal impact upon the individual, and their desire for change. Effects upon their personal position will almost always reflect a relative decision, while ideology is almost always absolute; with everything in between falling somewhere that is personally pleasing. There is almost never any analytical decision process, and waffling is common within the center. It becomes truly difficult to alter tax policy due to the relative power of the benefitted, and even harder to gain admission that the relative position erodes the absolute position taken by most people on economic equality. Such individuals are too guilty to admit their retreat from the absolute, and too cowardly to admit that this evasion is due to their own personal Greed. lgl

Wednesday, May 12, 2010

The Road less traveled!

I would advise my Readers to study this Piece, which might introduce some rationality to environmental policy. I do not like Renewable Portfolio Standards on the surface, because it allows Pollution without interaction with market forces; this means that automatic dirty industrial processes must pay for the program, with marginal production getting a relative skate to pollute. My ideas would basically turn the EPA into an arm of the IRS, charging reasonable charge on all Polluters; possibly a regressive form of Tax, where initial charge to Pollute is very high, and reduces at progressive reduction with emission levels. State authority must be constrained in some manner to achieve uniform national standards, but this could be accomplished by granting them the status of Corporations under environmental law, and charging a carbon tax rate similar to the one proposed above. I am sure State legislators will desire to bring environmental standards in line with national standards, if they perforce must advance revenues to a national agency. The issue of Drilling should also be rationalized, whereby Drillers are taxed per hours of Drilling, but also with an applied emissions tax; the same could be applied to Energy Transportation and Refining capacity.

Felix Salmon attempts to explain the European position on debt. One of the great problems of Government debt today consists of is the common animus towards raising taxes of any kind. Anyone could tell the Reader that the debt picture of Government everywhere would be vastly altered, if real taxation were increased 5% overall in real terms. Creditors find it disturbing that Debtors will make no attempt in real terms to reduce their own debt. The tax increase of which I speak would probably reduce around Three-Quarters of all Government debt within 11 years, if such real taxation were applied. Real Wages would probably make up 90% of such tax increase within 3 years of tax introduction, and Business profits would absorb the greatest impact; yet We are only talking about perhaps 3% of total Profits. The cheapest Solution could be simply raising taxes, though this would adversely affect Investment opportunities; thus making Money much cheaper to acquire.

It is now time to explain the two solutions proposed here, and their possible impact. Real Tax revenues would probably rise over 30%, but with an inflationary pressure increase of less than 2% of current pressure readings. Creditor Profits would narrow, with Depositors demanding a normal increase for invested funds, in order to supply the increased taxation; while the reduction of debt levels would reduce Investment opportunity, so that there would be probably a 3% reduction in Lending rates. Government expenditures would have to be held constant, or the increased taxation will be useless to improve the debt posture of nations. Holding the Line, though, could improve the Living Standards of all citizens, as Investment Cash moved to actual capital construction where Labor rolls would increase, and outsize Suppliers would have to limit their excesses in order to maintain their Clientele. I await the charge of the Lobbyists attempting to deny this thesis. lgl

Tuesday, May 11, 2010

Bait and Switch

I will not try to explain the economic maneuver behind the EU financial package, but the Reader can attempt understanding with the links here. It is rather standard fare, based on the old Concept of ‘We will spend it, and it might help!’ No one talks about it much, like all these things, because no one can define How it could possibly help. It is like unto betting on rolling Boxcars when playing Craps; given odds, you can sometimes win a bit. Here, if Creditors believe the hogwash, it might allow these Countries to last through another year. Will the Euro withstand the myth that everything is uniform in the land of the EU?–Even God rested on the Seventh Day!.

The next question to ask is whether California can join the EU? It might be time to switch the State debt to euros! California, Greece, and Portugal seem about on a par in refusal of new taxes, with wistful feelings about cutting expenditures. Spain might be able to get a Credit Card, but with a set upper limit; the above nations need a TARP of their own. Some dismal people like myself cannot see past their Nose, and believe this will only let Creditors get their money out without loss. I do not feel Good about writing all this, but I doubt if Anyone does!

The United States helped the EU in one way at least; they proved beyond doubt that invasions were too expensive to undertake anymore, especially when you have to transport Troops and Supplies halfway around the world. It is fact, though, that everyone is searching for some form of stimulus, and Spain could invade Portugal fairly cheaply; forget the suggestion of Germany invading Greece, the Greeks still remember the last time, and might get even angrier than the Taliban. There is the Thought that We could threaten Switzerland with invasion by France and Italy if Swiss banks did not issue a similar loan guarantee for the euro as has the IMF. There is the traditional standby of everyone borrowing from Great Britain, with their later borrowing from the United States; but then the U.S. Treasury would get mad! California and Greece could swap derivatives I guess, if the Chinese will front the Cash. lgl

Monday, May 10, 2010

The mechanical Scam

This may be bourgeoning paranoia, but Thursday was probably only a Test of the system made by a hacker, and probably a criminal hacker at that! It was a basic study of the machine shift between market exchanges, and if connected to some real money, will lead to a scam being introduced in about a month; after the furor dies down, and the traders return to normal practice. This Test had light volume in the Test, but the purchasers of huge volume should be arrested in the next major Run. This will be difficult, as the action will be across multiple exchanges. The SEC should immediately introduce a cross-exchange computer program to trace major Traders in sudden surges–simply name the top three Traders at any given point along with the total volume of their Trading. The real thing to be remembered is that the Screw-Up was man-made, and designed to test the machine system for performance characteristics.

This article may explain the difficulty in doing the Above. Any action by the SEC should impose heavy fines on Anyone who does not register their clients during any specific period of time; something equivalent to the total Trade value of the client, if they cannot be identified. This makes firms responsible for the probable Cost, if they do not identify their clients, and certify they are reputable firms which can be located in the real world. I would set a Rule stating that a firm or client must have been existent through 3 Tax Return years to purchase unfiltered access to the exchanges.

The real point behind my meandering outlines that immediate remedial action must be emplaned rapidly, else there will be major losses in the near future. The SEC should have the new regulation by the end of the Week, or be willing to endure a major loss to Investors very soon. We have a certain amount of time, as it will take the perpetrators a relative degree of time to set up their scam; it obviously requires a major positioning across markets. This will be to introduce instant Selling within a rapid period of Time, with major Purchasing within the same Period. The real thing is for Traders to stop machine trading as soon as possible, and not to Buy immediately until the Market has reestablished itself. lgl

Saturday, May 08, 2010

Our beautiful Computer Age

I promised myself that I would not write about this, but it is too much to stop myself. Market Trading relies on computer programming today. The idiot machines, though, cannot detect Trends, only marginal movements. This means that they can only be taught to go up with the market, or down with the market. They find it very hard to define previous Sales data. Everyone involved with the machines throw up their hands when anyone suggests that a program Fix be introduced to rein in that horse, when it starts to buck. My Solution would be an Override instruction stopping all Trading until there has been human intervention to restart the sequence. Every exchange will likely order their own limit of Gain or Drop, but I would apply a 1.9% of Stock price from the Top of the previous day, with human intervention only being able to reset at the Top of the current day. After the two limits have been reached, then all Trading becomes human activity. All of this would mean that humans would have to be present, in order to enjoy any Movement in the markets; Traders and Investors might have to go back to working a 40 hour Week again!

There is a man who believes fairness extends beyond personal association; so he has yet to admit that machines were designed to eliminate such impractical outcomes which might be associated with fairness. By the way, Ernst Fehr does excellent work. Read the article and ask How the introduction of computers cancels the very effect which he describes. The electronic calculators reduce humanity to digital units of common uniformity, then propels equal weight impacts on the digital units to obtain the desired advantage as defined by their Programmers. The entire purpose of computer programming is to instill herd behavior in any chosen population. We are back to the Marxist doctrine of Action, Reaction, and Synthesis. We wind up back at the inhuman propulsion of Mankind to serve some set of Masters. The hunger for megalomania only resurfaces under different guise.

I will leave the Reader with this Post, which takes some degree of Skill simply to understand it. Barry Ritholtz probably has a better understanding of computers, than of market fundamentals; but such is the nature of the present world. I do know that there is a claim that some 16 billion E-mini S&P Futures were sold in under two minutes yesterday. The computers are now setting the Trends, and understand those Trends even less than We do. One can ask if the World can continue to function with this mess! I do advise to repurchase those Futures which will be on the market at great premium less than originally sold. Who knows–You might get lucky; the computers are roiling for another great shift. lgl

Friday, May 07, 2010

Real World Estimates

There are some people you should really take a class under, and Sanjoy Mahajan would seem to be one of those Instructors. General estimates are actually important in every occupation, and an absolute Must in Corporate management. No Executive can be able to attain expertise in more than one or two areas, and the probable arena in which every Executive works means delving into 7-8 areas every day. He must rely on the expectation of specialized personnel, but he must also have some methodology to test for accuracy of the material presented to him (Specialists have the tendency to follow monolinear lines of ideology). There is the old adage of getting out of the lab, and entering the real world. Estimation is a technique which requires practice to center on accuracy, and people in the real world have to make Judgements based upon these estimates. It is much akin to a baseball game, altered to where Home Runs are not Points, they are simply Foul Balls. The game must be won, but can only be done by placing the Hits in the areas of the Park where Opponent players express weakness. It does make for a tougher game, and one where Opponents can themselves estimate your policy options.

Here is a Post where I do not assume any of the Scenarios are exactly truthful, but where the estimation is highly significant. The Reader should study it in its various aspects to determine exactly the place where the plausible likelihood will fall. The boundaries of expressed behavior is outlined, though the final reaction will be less, demonstrably found somewhere inside these extreme positions. The Reader will feel like none of the extremes are viable in an complicated world of vying Powers, but it must be assumed that all Policies will fall somewhere within these extremes. We must determine how great will be the cultural reaction, and how much such a reaction will be countered by competitive forces. I can explain to the Reader that business management faces similar conditions every day, simply of lesser magnitude of impact; except for the continuous threat of bankruptcy.

Here I present a real Case in Point on the discussion. We are exactly at that point of estimation which We have been discussing. Business leadership and Stockbrokers are developing expectations on the level of profitability and loss to BP under conditions of paying for the Clean-up of the Oil spill in the Gulf. Everyone will be satisfied if their Expectations come close; everyone will lose if it costs a great deal more than expected. Everyone is trying to limit their exposure to such Costs, but face a Government which insists on an intense liability; as contretemps that it is a Social Welfare Cost of an industry necessary for optimal social benefit; no one likes the ideation that such Incidents are the natural product of such technology, and that there is a Social responsibility. We must regress to the subject at hand, and ask where the Reader would put their money, how much would they be willing to risk, and how large a premium would the Reader demand for such supply of Cash. I welcome the Reader to the real World! lgl

Thursday, May 06, 2010


Sometimes I wonder about the expectations of economists, like this Post. There is the assertion that wolves are not pack animals–a highly debatable item. There is also the inability to assume the distinctions between wolves and sheep. Wolves are predators–lean of form, and heavy on propulsive muscle; very swift to change direction and speed. Sheep are bred for meat and wool. They are light on muscle strength–bad for quality consumption of the meat–and slow to change direction. The wolves’ strategy is to hamstring the animal, or simply to tear out the sheep’s throat. Wolves can run for approx. two hours without tiring, while sheep can run only about twenty minutes before slowing and panting. Wolves have an innate knowledge that running the sheep tire them rapidly, making a kill easy. They also know that sheep frighten easily, and one wolf can keep all sheep running rapidly as they tire; wolves cognizant that they can rest as other wolves run the sheep herd in a circular pattern. Shepherds recognize that the poundage of sheep is important to their bottom line, and sheep run off pounds faster than either wolves or Shepherd. Nick’s argument lacks some validity. Looking at the entire thing from the viewpoint of the animal grower, it suggests that the correct option is to shoot the first two wolves, the loss to the wolf pack suggesting to the pack that it is too dangerous to attack the sheep.

Here is another Post which suggests that Times are relatively Good, simply because nominal numbers have reached a certain level. A stability of certain sectors does not a Recovery make, or does certain high Sales constitute a Return to Production. Yelling Fire in a crowded theater is not appropriate, but neither is promising Free Food which does not exist. The numbers are there, though they are having little impact on growth in the economy. A major factor behind this comes from the Government pulling so much Cash from the Private sector by their borrowing practices. The Rain will have to change in both force and amount before I go to whistling in the rain.

Read this thing straight from the White House. It is here that you will find most of what is wrong with the financial markets. The Loopholes are there, and exercised. A study of the issues involved will tell the Reader that it all concerns allowance of financial institutions to misinform their investors. All this should be covered by fraud laws, if the Courts would only enforce the laws on the books. An independent agency might not be the Solution, though the ability of State investigators to take such information to State Courts would be an immense help. One of the most important provisions under the law is to treat everyone the same, and the creation of exemptions will haunt Us in the long-run. lgl

Wednesday, May 05, 2010

Unenviable Solutions

Everyone has their own view of the Oil Spill, though this is a good portrayal of the options available. My main Question remains what happens if the leakage cannot be stopped. I am reminded of the Coal Mine Fire in Penn. It has been burning now for almost 50 years. I would like to know what the outliner may be, if the leakage has a relatively permanent aspect. My fear is that the wellhead is not only a Smackover (think Gusher), but the initial damage was incited by a tectonic plate shift which produced a Blowout, and following increased pressure in the Oil reserve itself. This could mean that We have an artisan Oil spill which can pollute the entirety of the World’s oceans. The real threat will be that if there is heightened Oil pressure in the reserve, then drilling in a blocking hole will only cause another Blowout.

Here is another case of a Solution being turned into a worsening of the problem, with Banks buying Treasuries instead of lending Money to businesses. There is Risk in business lending, but none observable in Government securities. The efforts of the Government to restart the economy are simply being gamed by the Banks. The Question is again what do We do next? I know this one will be well-received, but the Answer is higher Taxation. Is it not fun to be a Preacher foaming at the mouth in a Red Light district? I await the thrown Stones.

Read this thing, and ask if I am being overexcited. Here is the fact which I expect has not been adequately evaluated. World debt has been exploding, with every Government in search of added revenue. There are Those who state that World Governments are Too Big to Fail, but I imagine We could reach a Point where Currency could be traded as Toilet Paper (imagine it would be stiff and forbidding in such usage). It remains fact that Currency and its solvency rests on a popular belief in that Currency. What happens when the Public generally loses faith in the viability of the paper? It stands as a consideration I do not want to contemplate, and one which is also a possibility–the Solution set is filled with undesirable outcomes. lgl

Tuesday, May 04, 2010

Always take me with a grain of Salt!

I want any Readers I may have to read this Piece from Dean Baker, which is one of his very best; he being a great author when not shrill. He is advocating a moderate degree of inflation; this means loose monetary policy. It is a sound argument, and well-thought, but as always I contemplate assuming the Devil’s Advocate position. I do so in hopes of establishing the continuity of argument between the two Poles. It will be up to the Reader to determine the validity of the arguments through definition of the differences.

The first Statement Baker makes is that people rely on dead economists, yet his argument depends on the analysis of a dead economist–something about Pots and Kettles here; Keynes having died some decades ago. Notice neither of Us really define any economic perception from this digression. Keynes was Right to the degree he was Right, and in error to which he was; the same can be said of his detractors–Then and Now. A number of economists are now calling for a higher inflation target as described by Dean next, and it is here that my task becomes quite difficult. No one has truly advocated a much tighter monetary policy, and for me to do so remains an attempt to give a Speech in a side ring of a performing Circus; though it is my ill-conceived goal.

Here is the outlandish Plot: Adopt a monetary policy designed to achieve a 3% deflation rate; with momentary asides to the impact of leaving monetary policy alone in its current performance. The 3% deflation rate would lead to about a 14-16% reduction in Consumer demand, would generate a Lay-off of labor of around 12%, and quadruple the failure rate of Consumer Credit–especially mortgages. Leaving monetary policy alone at its current position is much safer, but over the long-run may produce as much decay within the economy, though over a much longer Period of Time. A 3% inflation rate seems to be the desirable policy with a 3% deflation rate to be avoided; still, there are other factors. A 3% inflation rate destroys the position of Savings–which constitutes the stored value of past Wages and Profits; and does so in a manner where artificial Consumer Demand creates new debt for everyone–needing continuous inflation rates to suppress debt service pressures exactly like the 3% inflation proposal. The policy may only incite continuance of a failed policy not yet adopted.

A 3% inflation rate would eventually lead to higher Interest rates on debt, simply because Creditors will not lend without a return on their capital. Debtors will have to borrow much more at much worse rates, simply to get the financial assistance now needed. Wages will lose value, as Wage storage like Grain storage, will lead to decay of substance; any increase in nominal Wage to counter the inflation will propel greater pressure to inflate. Leaving monetary policy at it current position will not stop a gradual inflation and long-term degradation of the economy. A 3% deflationary rate has massive immediate adversity, but impels long-term changes which may be a benefit to the economy: an increase in the value of Wages without a nominal increase; reestablishment of Savings with a return of value to the process; driving inefficient economic performance of the business sector from Production; and lowering all Welfare Costs. The Readers should note that I do not actively advocate such a policy, simply stating such a Choice is also possible. What I do know is that the current course leads to long-term decay of economic structure, higher Inflation will lead to decay of that structure at much more rapid pace, and that a designed Deflationary policy has never been examined for its potential. lgl

Monday, May 03, 2010

The Tale of Misbegotten Woe

We are observing the Recovery which never was, though that Statement ignores the total, real Labor enrollment. We are not doing badly; it is just that We are not growing. It is a factor which will not matter within a decade, as Retirees shift out of the labor rolls. Nothing, though, seems to gel within the current matrix. Inputs introduced in one area appear to detract from other sectors. The Government pulls more Cash from the economy than it can possibly inject as Stimulus, and the Private Sector is not investing in Capital construction in the face of soft Consumer Demand. Everyone knows that the Inflation is in the economy, but everyone knows it will turn into a inflationary spiral past the first Price changes, and a soft Consumer Demand will turn nonexistent. The Horse cannot be rode, and everyone gathers anxiety waiting for the Chute to open.

Here is an article which would contest the previous assessment, but looks similar to PR claiming a good deal to be had. Gross numbers likely are utilized, with no scaling for Inflation, capital utilization rates, or average Work hours. The criteria from which the assessment was performed creates its own wide variance. Productivity Gains with a lower labor complement means actual labor loss, with a more rapid capital burn without reinvestment. I believe We are still burning off fat, and the animal is getting very lean. This estimate is extremely viable, and We could soon be scorching vital muscle. I do know that Government Spending is going to get no one anywhere, until Tax rates are raised; Stimulus is not Stimulus when it is borrowed Money anymore.

Paul Krugman would suggest that the Debt is coming from the Slump, though I think this is a mite simplistic. Government Expenditures have been increasing year over year forever; at least since the mid-Sixties. Every Conservative economist awaits a turnaround of the data, which never comes; they being as bad as the Liberals, thinking that Tax Cuts should come before Debt reduction. The Liberals, of course, want an expansion of the Spending. The only groups making actual Profits are the Corporations, and they are definitely not sharing the Wealth. It is going to get a lot worse before it gets better; then the Reader might be surprised, in that it will probably get better very rapidly after 2020. The reason being I predict a Population decline starting in 2018. Sound Mad? Probably, but a number of reasons are propelling this estimate: Baby Boomers start getting caught by the actuarial tables; Drugs are pricing themselves out of the life-saving mode; and Pollution will start to actually affect everyone.

Sunday, May 02, 2010

I can't believe I am saying this!

Arnold Kling presents a coherent definition of the American Welfare State (go to p. 9 of the document). Arnold develops a history of American Welfare in a short number of pages, and it is one that the Student should study. Arnold asserts that the American Welfare system came through piece-meal implementation, but does not insist on the most serious characteristic of the system; which consists of the impossibility of eliminating or altering any aspect of the system, once passed. Special Interest groups coalesce upon passage, and are soon backed by business interests which benefit from the program. Such lobbyists are singularly incapable of being defeated as the current patronage system is constructed. Social Security benefits are still distributed through levels of Income, though taxation for such benefit levels is forbidden; especially troublesome when Medicare composes an increasing share of the matrix. Tax Breaks, however awarded, can never be challenged no matter how seriously it disrupts the tax revenue program; We would still be subsidizing buggy whip manufacturers, if any were still in business. We retain the spectacle of middle Incomes being taxed at a higher rate than higher Incomes, simply because of insistence of differentiation of types of Income for tax purposes. Read Arnold carefully, then consider the issues I have raised.

It may be time to turn to this article, then ask whether the complications are naturally existent, or artificially generated. The difficulties of Iraq and Afghanistan come not from the military difficulties, but from the concept of Nation Building. The defeat of an enemy opponent is rather simplistic in design, simply destroy them with massive weight of Firepower; the replacement of the enemy in the area with a cohesive force of native origin remains functionally impossible. The Financial Crisis become unmanageable, only after one adopts the thesis of Too Big to Fail! One is immediately faced with an inability to call any Commercial Paper by the name Crap! The health care system can be Saved simply by declaring a total limit per Patient per year, whether paid by himself, Insurance company, or Government, constitutes the natural health insurance to guarantee adequate medical treatment for the entire year. The Gulf Oil Spill can be closed with naval torpedoes of like order as the Cave-Buster bombs of the Air Force; then all Costs of clean-up placed on the Drillers. In all cases under study, the concept of Bankruptcy must be upheld; as positive guarantor of prime performance.

What I am proposing is not an outlandish rugged Individualism. It is simply forcing all Parties to assess and understand their own limitations. Military and Government must go back to simply suppressing their enemies, health care goes back guiding their health care on business practicality (they are supposed to be a business), and the IRS returns to raising tax revenues–rather than moderating monetary policy. God save me, but I believe that Government must go back to perceiving business interests as the worst of their enemies. We need to ignore the special interest, and join in the communal interest; the alternative can only be horror, and consist of indecision when We need leadership. lgl