Where does it come from? Over 350 Hedge Funds have over a billion dollars apiece, and there are some 15,250 Hedge Funds in total. This is pure guesswork on my part, but it would seem that a Hedge Fund would require at least a half-million dollars to even involve oneself in the Trade, and at least $3 million to be a stand-alone business entity. It sounds like a tremendous amount of money, and it is; but the most important aspect of Hedge Funds may be their position as Price-setters, due to their automated Buy-orders. The mechanisms allow Stock prices to go up, but provide restrictions in allowing Stocks to drop; adverse Stock information must push through the morass of automatic Buy limits, before it can establish a new floor price for the Stock. One can say that the Buy limits employed by Hedge Funds for any one Stock is so low, that there is little impact on Stock price. The reality states that 15,000 Funds operating in conjunction establishes a basement price for a Stock, especially as Sell orders most often lack magnitude themselves. Artificial shelving prices are created for Stocks, based on very little volume, while Stock and Commodity price increases are quickly integrated into the mechanism, and not easily discarded.
Europe has a long history of dealing with financial disturbance and artificial booms, extending back prior to the French Revolution. They realize that most economic balloons are generated by financial manipulations of unscrupulous Traders, who promise quick Profits from new ventures. These new deals, or planned investment concepts, rarely involve an actual deep entanglement of the economy, mainly involving resident investment funds during the periods in question. The basic structure of the economy, which churn up the investment capital, finds little alteration. Inflation has little tie with economic growth, and suppression of Prices hardly ever provides challenge to long-term economic growth. I agree with the European philosophy, and do not witness any measurable increase in economic growth through adoption of a Plunger mentality; i.e., any plan to promote rapid growth rates.
Boeing is utilizing it paid-for legislators to scuttle the Tanker deal between Northrop Grumman and the Military. Boeing’s basic fault lay in failure to provision the Air Force Decision-Makers with the Perks which cashiered the previous Boeing deal for the Tankers, and this group rejected the Boeing deal because of losses to their planned Retirement portfolios; a process that the Airbus parent company could run an End-around by promise of European employment to decision-makers after their military retirement. Does the previous Statement sound cynical? Perhaps the cynicism resides in the reality of it, bureaucrats resistant to surrender a high-value escape after completion of public service–one of the real employment incentives of such Service. The threat of a little Prison time, or the occasional Suicide, does not dismay Those trapped in a Pentagon office; a position already somewhat similar to a prison term. lgl
Thursday, March 06, 2008
Wednesday, March 05, 2008
Keep On Trucking
I try to inform my Readers on the dangers and limitations of monetary and fiscal policies, and find that Stephan Roach does it better. The real inspirational aspects of his argument comes in the form of the truisms which he articulates: Monetary policies create Credit bubbles when they attempt to generate economic growth, and retard economic growth when they seek to constrain Inflation; fiscal policies should generate future growth, not Consumer over-consumption; and bubble recessions impact specific sectors–depressing relative Supply measures to the greater economy–rather differently than cyclical recessions which are festooned by a general lack of Consumer Demand with a backlog of Production supply.
I would not get too technical here, simply state that bubble recessions lack the deflationary pressures of cyclical recessions, in neither Case does liquidity play an overlarge role in corrective recovery, and all fiscal initiatives which do not promote future economic growth will lead to an overdraft of resources–maintaining artificially high Prices to the detriment of the economy. Bubble recessions can actually be highly inflationary, where Productions Costs can be bloated due to lack of resource provision (Credit provision Costs–if resident at all–making up only an incredibly small portion of the Production Costs). Cyclical recessions, on the other hand, react rather poorly to monetary policy, falsely sustaining undue high Prices, stopping the clearing of the over-supply existent in the economy. Monetary policy activity will only create false premises which will eventually turn into Consumer over-reaction, and eventual economic loss of potential; fiscal policy works only by infrastructure construction to promote economic growth.
I must, in the tradition of the overfed and overconfident Pundit, come up with my very own proscription for economic success, given the proclaimed woeful (check the Q4 2007 GDP growth still at 1.9%) state of the economy. It must be something brilliant and edifying, which no one else has thought up (I hope--the issue of plagurism a real plague). I hereby come out with a Call for Interstates segregated and devoted to Truck traffic alone. I would suggest that the new highways be called Truckstates, none connecting directly to any City, and that there should be 3 East-West Routes, and 4 North-South Routes. The new Truckstates would save Our current Interstate system from intense erosion because of constant Truck traffic, moderate the heavy traffic on the current Interstate system, and provide immense stimulus to economy recovery with real future economic growth potential. Truck traffic will be directed to the Truckstates by a mandated advantage in fuel cost from Truckstate stations. Slower Truck Speeds do not aid fuel conservation because of the heavy tonnage involved, so Truckstate maximum speed should be 80 mph. It is an idea whose Time might not have come, but has to come sometime. lgl
I would not get too technical here, simply state that bubble recessions lack the deflationary pressures of cyclical recessions, in neither Case does liquidity play an overlarge role in corrective recovery, and all fiscal initiatives which do not promote future economic growth will lead to an overdraft of resources–maintaining artificially high Prices to the detriment of the economy. Bubble recessions can actually be highly inflationary, where Productions Costs can be bloated due to lack of resource provision (Credit provision Costs–if resident at all–making up only an incredibly small portion of the Production Costs). Cyclical recessions, on the other hand, react rather poorly to monetary policy, falsely sustaining undue high Prices, stopping the clearing of the over-supply existent in the economy. Monetary policy activity will only create false premises which will eventually turn into Consumer over-reaction, and eventual economic loss of potential; fiscal policy works only by infrastructure construction to promote economic growth.
I must, in the tradition of the overfed and overconfident Pundit, come up with my very own proscription for economic success, given the proclaimed woeful (check the Q4 2007 GDP growth still at 1.9%) state of the economy. It must be something brilliant and edifying, which no one else has thought up (I hope--the issue of plagurism a real plague). I hereby come out with a Call for Interstates segregated and devoted to Truck traffic alone. I would suggest that the new highways be called Truckstates, none connecting directly to any City, and that there should be 3 East-West Routes, and 4 North-South Routes. The new Truckstates would save Our current Interstate system from intense erosion because of constant Truck traffic, moderate the heavy traffic on the current Interstate system, and provide immense stimulus to economy recovery with real future economic growth potential. Truck traffic will be directed to the Truckstates by a mandated advantage in fuel cost from Truckstate stations. Slower Truck Speeds do not aid fuel conservation because of the heavy tonnage involved, so Truckstate maximum speed should be 80 mph. It is an idea whose Time might not have come, but has to come sometime. lgl
Definition of a Moral Code
There has been an argument over how to account Employment and Unemployment since Carroll Wright first put in the qualification of listing only Those who were actively seeking Work. What is the Definition of seeking Work? I personally know a colleague who was accused of the Crime of not looking for a Job, who after four months sent a 570 page Manuscript to a Publisher; the fact that he received a Rejection Slip only denotes the oppressive nature of the Publishing World (actually, I thought it stunk too!). I have known Labor accounted as not actively seeking Work, who were working 4 Part-Time Jobs totaling 54 hours per Week. I knew Contractors who managed $2-4000 per month based upon non-Paper Contract labor who were not seeking Work. Then there are the individuals like myself, who may or may not pursue active occupations, because the later pays very little. The fact exists the Unemployment rate probably lists only half the actual Unemployed, but the fact remains that Unemployment is not especially dangerous until such time as there is an acute shortage of Income. The true test will always remain the ability of Households to pay the relatively uniform charges existent in Society, and it is here that We are seriously getting into trouble.
Bankruptcy filings may be a good measure of Household Income stability, but also has its own problems. Congressional alteration of bankruptcy regulations may mean less than most people perceive; real Bankruptcy conditions mainly means only a matter of Time before the necessary conditions are met, qualified officials previously eliminating unworthy candidates for bankruptcy. This means that the quality of Judgeship is the primary element for completion of successful bankruptcy Proceedings, and most often, chosen individuals for the bench lack both training and experience for the role demanded. This is the arena in which Congressional action should have impacted, insisting on a mandatory level of training or experience in the area.
Jeff Cornwall points out that Consumer reaction often reacts counter-cyclical to Price, because Consumers adjudge quality of Product and Service according to Price. This might have sway in the discussion of Unemployment and Bankruptcy above. Employers are therefore potentially advantaged by offering higher Wages, and less Benefits, capturing a more sustainable labor force at actually less Cost than a rounded Employment guarantee. At risk debtors may think to maximize their approachable debt prior to bankruptcy filings, believing that the legal procedures will be expedited, they gaining advantage both prior and post bankruptcy filings. How much effect would such behavior possess? I knew an individual who purchased a Summer home/Retirement domicile some eight days prior to filing for bankruptcy, knowing he would be allowed at least one residence, and dumping a $4000/month mortgage on a barn that neither he or his wife liked. Nothing is perfect, and People will naturally corrupt any regulation to their natural advantage; what We need is intelligent definition of the limits of human conduct. lgl
Bankruptcy filings may be a good measure of Household Income stability, but also has its own problems. Congressional alteration of bankruptcy regulations may mean less than most people perceive; real Bankruptcy conditions mainly means only a matter of Time before the necessary conditions are met, qualified officials previously eliminating unworthy candidates for bankruptcy. This means that the quality of Judgeship is the primary element for completion of successful bankruptcy Proceedings, and most often, chosen individuals for the bench lack both training and experience for the role demanded. This is the arena in which Congressional action should have impacted, insisting on a mandatory level of training or experience in the area.
Jeff Cornwall points out that Consumer reaction often reacts counter-cyclical to Price, because Consumers adjudge quality of Product and Service according to Price. This might have sway in the discussion of Unemployment and Bankruptcy above. Employers are therefore potentially advantaged by offering higher Wages, and less Benefits, capturing a more sustainable labor force at actually less Cost than a rounded Employment guarantee. At risk debtors may think to maximize their approachable debt prior to bankruptcy filings, believing that the legal procedures will be expedited, they gaining advantage both prior and post bankruptcy filings. How much effect would such behavior possess? I knew an individual who purchased a Summer home/Retirement domicile some eight days prior to filing for bankruptcy, knowing he would be allowed at least one residence, and dumping a $4000/month mortgage on a barn that neither he or his wife liked. Nothing is perfect, and People will naturally corrupt any regulation to their natural advantage; what We need is intelligent definition of the limits of human conduct. lgl
Tuesday, March 04, 2008
The Dirge
The excess Cash held by Corporations, here and here (pdf), meant a negative net debt ratio (debt minus Cash) from 2004 through 2006. All authors concentrate upon the annulment of Risk with the Cash load, the expectation of special Dividends, and the new adverse Risk of corporate leadership spending the Cash unwisely. This is excellent analysis, but I would take it further. The added build-up of Cash (around an additional $400 billion) means far more to myself. It means that the Bush Tax Cuts did not work, as they did not substantially increase investment capitalization. It has long been my position that investment capitalization is driven only by Consumption Demand, and cannot be extorted by higher liquidity. Evidence might indicate that the Cash build-up was accumulated for Hostile Takeovers, or defense against Same. I would not assume there will be any special Dividends in the near future, as I find Corporate leadership adverse to release of financial power even to Ownership. The Whole makes me imagine that any added liquidity or stimulus will not promote any meaningful economic growth.
Avoidance of a Stimulus Package and low fed rates (too late I know) might be best summed up by this article. Oil, Utilities, Cable, Internet, and Phone access already show indication of Price Mark-up; none with any realistic provision of extended or better Service. Oil companies will not pump or refine more, and other Commodities are equally rising. Most Retail outlets are planning in-Store Downsizing, combined with higher Prices. Ethanol subsidies express no Input effect, except for higher (much higher) Food prices. There would seem to be little planned Investment given the higher Prices and stability of Consumer Income. Screaming ‘Fire’ in a crowded theater may be illegal, but why is it punished more severely than throwing phosphorous Grenades in the same theater?
Paul Krugman told Us yesterday that the low fed rate was the way to go, and I feed timorous bucking such a Nobel-potential Economist; but this article could explain my own doubts on the feasibility of a monetary solution to the economic downturn. Vehicle Sales were down 10% in February, and people say ‘Well, there is the rise in Oil and all that!’ The problem with this Explanation resides in the nature of Vehicle sales. Vehicles are the easiest and most immediately deferrable major-ticket item on the market. People facing a Credit crunch first delay Car purchases before most other things, and Household Incomes often bring actual increases in Vehicle Resales when operating under duress. The lag-time for such Resale increases are approx. 6 months after the downturn in new Vehicle sales, and reflect Household decisions that they cannot afford new vehicles. There will likely have been severe reductions in other Retail sales in the intervening period, if Households are actually in trouble. It may be time for Economists to adopt the solemn demeanor of a funeral director. lgl
Avoidance of a Stimulus Package and low fed rates (too late I know) might be best summed up by this article. Oil, Utilities, Cable, Internet, and Phone access already show indication of Price Mark-up; none with any realistic provision of extended or better Service. Oil companies will not pump or refine more, and other Commodities are equally rising. Most Retail outlets are planning in-Store Downsizing, combined with higher Prices. Ethanol subsidies express no Input effect, except for higher (much higher) Food prices. There would seem to be little planned Investment given the higher Prices and stability of Consumer Income. Screaming ‘Fire’ in a crowded theater may be illegal, but why is it punished more severely than throwing phosphorous Grenades in the same theater?
Paul Krugman told Us yesterday that the low fed rate was the way to go, and I feed timorous bucking such a Nobel-potential Economist; but this article could explain my own doubts on the feasibility of a monetary solution to the economic downturn. Vehicle Sales were down 10% in February, and people say ‘Well, there is the rise in Oil and all that!’ The problem with this Explanation resides in the nature of Vehicle sales. Vehicles are the easiest and most immediately deferrable major-ticket item on the market. People facing a Credit crunch first delay Car purchases before most other things, and Household Incomes often bring actual increases in Vehicle Resales when operating under duress. The lag-time for such Resale increases are approx. 6 months after the downturn in new Vehicle sales, and reflect Household decisions that they cannot afford new vehicles. There will likely have been severe reductions in other Retail sales in the intervening period, if Households are actually in trouble. It may be time for Economists to adopt the solemn demeanor of a funeral director. lgl
Monday, March 03, 2008
Off the Record
OPEC is trying to play the Oil market, and it will cost them and the World economy. The Oil price is economically controversial, but almost all economists would agree that much of the price of Oil is based upon Speculation; the real Problem generated by the automated Buy orders of the major Funds. I have an even more controversial model (it is in my head, and it will stay there), which suggests that fiscal policy measures will not impact the economy, if Oil stays above a relatively low $81/barrel market price; notice I did not say Contract price. Other Economists who might like to follow the puzzle I outline should introduce the average amount of Oil (in evaluated Dollars) per unit of Production as an equal component to the finance Cost per unit. The non-variance cost equality must be proven to be economically sound to be economically correct, but a practical reality will suggest that the variance could not exceed 9%, about the exact difference between Market and Contract price for Oil over the next Contract session. The key element here states fiscal policy means nothing, if Production Costs increase faster than the removed financial charges.
The Question is whether Production Costs are increasing faster than the financial charges removals? The Answer seems somewhat obvious, and indicative that increased Production will not be profitable. Here is where the listed elements run across competitive factors. Increased Production will not pay for itself, Consumption will fall against an increased Price-forward movement, and Speculation-fed Commodity Prices will increase under advanced Production, or even continued levels of Production. The Dollar will fall against other Currencies if fiscal policy initiatives are adopted, as other Currencies attempt to hold their position on Production Costs. Current Projections only express that fiscal policy will not generate economic activity, but will erode the Dollar severely; putting at Risk a whole range of Production and Consumption schedules. There is a Point where fiscal policy becomes the enemy of economic performance.
My Solution for economic fuel would work in opposite fashion. I call for an immediate return of Fed interest rates to 4.2%, the immediate Repeal of the Bush Tax Cuts, and a 2% Tax on all Government Supply Contracts payments coupled with a 60-Day delay of Contract performance. The later may not be understood by the Reader, but I will state it will cause a reduction of non-economic, off-the-board Government expenditures. Government is not the End-Consumer who We wish to stimulate. We will have immediately reversed the shrinkage of Tax revenues, eliminated the Tax measures which have turned into the negative column of economic stimulation, and reduced Government Supply Costs closer to normalized Business Production Cost levels. The Dollar will rebound against other Currencies, and Import Costs will reduce; in a framework where domestic production will become more profitable. Will it Work? All I know is that what We are doing is not Working! lgl
The Question is whether Production Costs are increasing faster than the financial charges removals? The Answer seems somewhat obvious, and indicative that increased Production will not be profitable. Here is where the listed elements run across competitive factors. Increased Production will not pay for itself, Consumption will fall against an increased Price-forward movement, and Speculation-fed Commodity Prices will increase under advanced Production, or even continued levels of Production. The Dollar will fall against other Currencies if fiscal policy initiatives are adopted, as other Currencies attempt to hold their position on Production Costs. Current Projections only express that fiscal policy will not generate economic activity, but will erode the Dollar severely; putting at Risk a whole range of Production and Consumption schedules. There is a Point where fiscal policy becomes the enemy of economic performance.
My Solution for economic fuel would work in opposite fashion. I call for an immediate return of Fed interest rates to 4.2%, the immediate Repeal of the Bush Tax Cuts, and a 2% Tax on all Government Supply Contracts payments coupled with a 60-Day delay of Contract performance. The later may not be understood by the Reader, but I will state it will cause a reduction of non-economic, off-the-board Government expenditures. Government is not the End-Consumer who We wish to stimulate. We will have immediately reversed the shrinkage of Tax revenues, eliminated the Tax measures which have turned into the negative column of economic stimulation, and reduced Government Supply Costs closer to normalized Business Production Cost levels. The Dollar will rebound against other Currencies, and Import Costs will reduce; in a framework where domestic production will become more profitable. Will it Work? All I know is that what We are doing is not Working! lgl
Sunday, March 02, 2008
Taxes are Good!!!
It indicates the status of American society that this article on Unemployment could occupy four pages of the Sunday NY Times. The key component in this article is the Statement that the Job market does not have the Hiring lists to justify the Advanced Training, which Economists claim is the real Solution to the Unemployment problem. The key factor here remains that though Business has repetitiously been given Tax breaks to cut their Production Costs, this has not been a spur to raise Production and hire on more labor; Business choosing to translate the Tax breaks into higher Business and Trade Profits. The Problem with this Business policy consists of the lack of American production has eroded the value of the Dollar, leaving actual real Business Profits, adjusted for Inflation, at approx. the same level; all this while destroying the economic viability of American labor. It is long past Time to stabilize the Dollar, even by the hated medium of raising overall Taxes, especially the hated Business taxes.
Now that Everyone has had the opportunity to scream in Outrage, We can turn to examination of the actual facts. The first consideration establishes the Economist belief that no fiscal or economic policy will much affect the current level of GDP, basically due to the American Consumer already living on what constitutes a Consumption Diet, and has been ever since the Mortgage Crisis arose last Spring; it does not matter that the Diet is incredibly high Calorie by World Standards, this is America after all. The second element states that the lowered Business taxation is not translating into increased real hard Capital investment, only Paper instruments which only act as a real drain on Production Profits; a State of increasing the parasitic drain of Middleman Costs–this time from the financial sector. Trade Import Costs increase at a rapid rate, as the Dollar devalues, and those Imports find alternate Sales throughout the World; such Sales fueled by the switch of the American economy to foreign production. The American economy is buying itself out of real involvement in the World economy.
The American economy has to go back to Work, discontinuing the practice of finding a foreign bidder for the Production. The later practice has to be suppressed, and national economic policy must be the suppression factor. There are basically only two methods to attain this End, taxing the Imports, or raising Taxes overall, so that Americans must find a higher level of Income; current Profits flow ratios insisting such channeled Income could only come through increased native Production. The less-articulate Economic thinkers can subsist on the Statement: Increased Taxation will propel Business leadership to go back to Work, rather than play on the Markets; because they will not like the loss of Income. The reapproachment of Business to Production will find incredible opportunity to compete with foreign production with high Profits; introducing more technologically-advanced Product, more efficient Sales and Distribution methods, and creation of new American Consumer desire. The really hard Job will be convincing a bunch of conservative Businessmen and Economists of the Proposition: ‘Taxes are Good!' They pay Government bills, and provide financial incentive to increase Income to maintain Investment schedules. They employ people who need more Income. American Business leadership responded to the clarion call of ‘Greed is Good!’ trumpeted by a long-ago movie. Let Us hope that they will integrate the new Call to Arms. lgl
Now that Everyone has had the opportunity to scream in Outrage, We can turn to examination of the actual facts. The first consideration establishes the Economist belief that no fiscal or economic policy will much affect the current level of GDP, basically due to the American Consumer already living on what constitutes a Consumption Diet, and has been ever since the Mortgage Crisis arose last Spring; it does not matter that the Diet is incredibly high Calorie by World Standards, this is America after all. The second element states that the lowered Business taxation is not translating into increased real hard Capital investment, only Paper instruments which only act as a real drain on Production Profits; a State of increasing the parasitic drain of Middleman Costs–this time from the financial sector. Trade Import Costs increase at a rapid rate, as the Dollar devalues, and those Imports find alternate Sales throughout the World; such Sales fueled by the switch of the American economy to foreign production. The American economy is buying itself out of real involvement in the World economy.
The American economy has to go back to Work, discontinuing the practice of finding a foreign bidder for the Production. The later practice has to be suppressed, and national economic policy must be the suppression factor. There are basically only two methods to attain this End, taxing the Imports, or raising Taxes overall, so that Americans must find a higher level of Income; current Profits flow ratios insisting such channeled Income could only come through increased native Production. The less-articulate Economic thinkers can subsist on the Statement: Increased Taxation will propel Business leadership to go back to Work, rather than play on the Markets; because they will not like the loss of Income. The reapproachment of Business to Production will find incredible opportunity to compete with foreign production with high Profits; introducing more technologically-advanced Product, more efficient Sales and Distribution methods, and creation of new American Consumer desire. The really hard Job will be convincing a bunch of conservative Businessmen and Economists of the Proposition: ‘Taxes are Good!' They pay Government bills, and provide financial incentive to increase Income to maintain Investment schedules. They employ people who need more Income. American Business leadership responded to the clarion call of ‘Greed is Good!’ trumpeted by a long-ago movie. Let Us hope that they will integrate the new Call to Arms. lgl
Saturday, March 01, 2008
To Have and Have Not!
More representative centers of mathematical coagulation seem like a Winner to me. Now, if only some bright Economist good at Math would organize a parameter outline for likely Investment outcomes per industry, We could get actually relevant Read-Out values for Tech capitalization. I could also Thank Mark Thoma for the link, something I do not do for him all too often; I want him to understand I am thinking of him even if my Readers are not. Math for me is one of those foreign languages with the facility of most Americans in Paris. This new centroid organization will not only identify likely Gene constructions, but potential Profits for specific investment; that is, if the Numbers don’t start lying to me again!
My favorite Investment which I have always avoided, seems to be in trouble again. The municipal bond market has always appeared a Winner, because they are always somehow repaid, and have some interesting Interest rates. The trouble comes in the unreliability of Bond ratings, a history of Interest and Principal payment delays, and some coerced refinancing demands. There is not as much Interest reduction fiats as once held sway, but they absorb Money far faster than they repay it. The market is basically in trouble in the fact that Investors want both high liquidity and surety of repayment in a timely manner. High Interest rates seem unlikely to find significant numbers of bidders for the Instruments.
Mark Thoma again got me interested in a Paul Krugman Draft (pdf) on Trade and Wage Inequality. The first Part of his Four-Part study made me consider the implications far more than the Introduction or the Conclusion. The United States is losing Trade Advantage far faster than imagined, and Wage stagnation holds greater danger with a loss of value in the Dollar. Trade Goods are growing in Price irrespective of American labor productivity, truly a very dangerous Sign. We are finding American industry supplanted by lower-Cost foreign industries; and while this conforms to Short-term Economic and Business interests, it spells disaster to the American Consumer in the Long-term. America needs a new industry, all bright with foreign envy in that they cannot compete with American provision. Many Economists would disagree with that sentiment, but wait until We have $5/gallon Gas. lgl
My favorite Investment which I have always avoided, seems to be in trouble again. The municipal bond market has always appeared a Winner, because they are always somehow repaid, and have some interesting Interest rates. The trouble comes in the unreliability of Bond ratings, a history of Interest and Principal payment delays, and some coerced refinancing demands. There is not as much Interest reduction fiats as once held sway, but they absorb Money far faster than they repay it. The market is basically in trouble in the fact that Investors want both high liquidity and surety of repayment in a timely manner. High Interest rates seem unlikely to find significant numbers of bidders for the Instruments.
Mark Thoma again got me interested in a Paul Krugman Draft (pdf) on Trade and Wage Inequality. The first Part of his Four-Part study made me consider the implications far more than the Introduction or the Conclusion. The United States is losing Trade Advantage far faster than imagined, and Wage stagnation holds greater danger with a loss of value in the Dollar. Trade Goods are growing in Price irrespective of American labor productivity, truly a very dangerous Sign. We are finding American industry supplanted by lower-Cost foreign industries; and while this conforms to Short-term Economic and Business interests, it spells disaster to the American Consumer in the Long-term. America needs a new industry, all bright with foreign envy in that they cannot compete with American provision. Many Economists would disagree with that sentiment, but wait until We have $5/gallon Gas. lgl
Friday, February 29, 2008
Accounting Procedures
Washington is again Talking past each other, and it is just as well. Judges do not need to get involved in writing Mortgage terms, the federal government does not need to own troubled Mortgages–it has a troublesome one of it’s own, $4 billion to rehabilitate abandoned Housing is a simple giveaway to construction companies, and it is only Job-seeking that drives any need for Mortgage counseling; understand that Mortgage lenders will only change Mortgage language to regain the confusion they desire. The Republican position may be equally as stupid, as We need those higher Mortgage interest rates and larger Down payments in order to prevent future crisis in the Mortgage industry. The most important Republican item, making the Tax Cuts permanent, only ensures default on the greatest Mortgage of all–the federal debt!
We can find excellent examples of primetime Accounting, where Investors find bad business decisions only after they have reached the state of Bankruptcy. One can ask what is the basic problem with this Accounting. Executives–and not just in the Banking industry–take high Risks to generate high Profits, all in order to obtain huge bonuses and Pay packages; they being little concerned with the Risk level of these investments, as they estimate a high Percentage of the investments will work out. The trouble comes in the fact that there is a vast difference in the performance factor of these Investments because of the state of the Economy; they are almost always paid in a growing economy, and have major default rates during Recession or no-Growth economic conditions. Regulation will never divorce this Policy-making from the Corporate structure, because of Executive thirst for Cash. I would suggest a law, though, which would insist on Executive firing (termination of employment by the Corporate entity) if off-the-Balance-Sheets losses exceed 25 times the Executive’s Pay Packages yearly, and where all Executive must sign for all the off-the-Record business investments.
Evan Dooley identifies the problem described above. Dooley could see supposed market advantage with which he could make extreme Profits, but he did not possess the financial potential to exploit the Profit-making potential. He simply did what he had likely been doing for years, entering bids which he could not cover without a Market gain, thereby making a personal Gain as the market paid him off; an easy way enjoyed by many such Traders to triple or quadruple their Incomes. The trouble only arises when the market in the Commodity tops out. Evan Dooley tried to ride the wheat market for too long with too high a commitment. He got caught short. The Reader should understand all Executive types try to make a successful career from risking other peoples’ money. Accounting practice is utilized to make sure these Risk-Takers employ only viable Risk options, but they are naturally Plungers in search of vast wealth for themselves. The Result is predictable without rigid Rules of Accounting compliance. lgl
We can find excellent examples of primetime Accounting, where Investors find bad business decisions only after they have reached the state of Bankruptcy. One can ask what is the basic problem with this Accounting. Executives–and not just in the Banking industry–take high Risks to generate high Profits, all in order to obtain huge bonuses and Pay packages; they being little concerned with the Risk level of these investments, as they estimate a high Percentage of the investments will work out. The trouble comes in the fact that there is a vast difference in the performance factor of these Investments because of the state of the Economy; they are almost always paid in a growing economy, and have major default rates during Recession or no-Growth economic conditions. Regulation will never divorce this Policy-making from the Corporate structure, because of Executive thirst for Cash. I would suggest a law, though, which would insist on Executive firing (termination of employment by the Corporate entity) if off-the-Balance-Sheets losses exceed 25 times the Executive’s Pay Packages yearly, and where all Executive must sign for all the off-the-Record business investments.
Evan Dooley identifies the problem described above. Dooley could see supposed market advantage with which he could make extreme Profits, but he did not possess the financial potential to exploit the Profit-making potential. He simply did what he had likely been doing for years, entering bids which he could not cover without a Market gain, thereby making a personal Gain as the market paid him off; an easy way enjoyed by many such Traders to triple or quadruple their Incomes. The trouble only arises when the market in the Commodity tops out. Evan Dooley tried to ride the wheat market for too long with too high a commitment. He got caught short. The Reader should understand all Executive types try to make a successful career from risking other peoples’ money. Accounting practice is utilized to make sure these Risk-Takers employ only viable Risk options, but they are naturally Plungers in search of vast wealth for themselves. The Result is predictable without rigid Rules of Accounting compliance. lgl
Thursday, February 28, 2008
Friendship and Power
Bill Buckley made you curse, then smile, then smile and curse at the same time. He was the Voice of Firing Line, and One didn’t read him, you only argued with him. He was so prolific that you had to be a librarian, just to keep track of him. One didn’t agree with him, because that was an impossibility. He knew everything about what you never wanted to know about, and explained your problems before you even knew they existed. He was the Don Quixote of American Society, and defined a Generation better than they did themselves. He was your Mentor, though more reminiscent of your Academic Advisor for a Dissertation. You wanted to put him in a hole and bury him, and you are crying now that it is finally going to happen. He was The Enemy and your Best Friend, and what a emptiness in your life now that he is gone!
Here is an article which brings a complete Opposite to the reaction to Bill Buckley. The Clintons are good people, and truly care for the outcomes which impact people, but one finds it hard to develop a real friendship with them; though the American people could easily accept another Presidency from their camp, even if it can be avoided. Could it be because they are professional politicians, or is it that their search for political support leads them into the wrong circles. Alternate Energy is overwhelmingly necessary, ethanol subsidies are more injury than value. The Clintons live among the Bottom Feeders, and the smell of backroom deals may permeate their clothing and outlook. They are on your side, and are an obvious help, and you don’t deny them; you just wish they were more circumspect.
I suppose I should return to some discussion of Economics. This article talks of the G7 Countries standing ready to maintain the stability of World markets. It also mentions the Japanese discussion of Japan’s possible creation of a Sovereign Wealth Fund. Both ideas hold many pitfalls. Government intervention in the Markets could only mean distortion of those Markets, and a Japanese Sovereign Wealth Fund would join a Group which will eventually create a super-Great Depression, as they forestall any Recession to stop their own losses until such Time as there is no reality to the Markets. Governments have never held the power to forestall Recessions, only the power to restart economies after a Recession, and their Debt loads are even eliminating this effective power. lgl
Here is an article which brings a complete Opposite to the reaction to Bill Buckley. The Clintons are good people, and truly care for the outcomes which impact people, but one finds it hard to develop a real friendship with them; though the American people could easily accept another Presidency from their camp, even if it can be avoided. Could it be because they are professional politicians, or is it that their search for political support leads them into the wrong circles. Alternate Energy is overwhelmingly necessary, ethanol subsidies are more injury than value. The Clintons live among the Bottom Feeders, and the smell of backroom deals may permeate their clothing and outlook. They are on your side, and are an obvious help, and you don’t deny them; you just wish they were more circumspect.
I suppose I should return to some discussion of Economics. This article talks of the G7 Countries standing ready to maintain the stability of World markets. It also mentions the Japanese discussion of Japan’s possible creation of a Sovereign Wealth Fund. Both ideas hold many pitfalls. Government intervention in the Markets could only mean distortion of those Markets, and a Japanese Sovereign Wealth Fund would join a Group which will eventually create a super-Great Depression, as they forestall any Recession to stop their own losses until such Time as there is no reality to the Markets. Governments have never held the power to forestall Recessions, only the power to restart economies after a Recession, and their Debt loads are even eliminating this effective power. lgl
Wednesday, February 27, 2008
The Real Danger of Bush
Who was that poor guy who suggested that Iraq might even cost a $100 billion? As long as We are pointing fingers at people, We should charge him with Fraud at well. Bush and McCain are wrong about Iraq, but it is nothing new when Republicans are connected with foreign policy. I am not being specifically partisan in saying that; it is just fact. I think the basic problem lies in the Republican demand to treat foreign policy with the formulas utilized in Corporate Board room fights; a Conceptualism which they can understand. This is not to say that Democrats hold a greater proficiency in dealing with foreign policy. The basic problem with the approaches of Each comes in their demands to publicize all Initiatives; foreign policy best conducted in the dark of night, without Public knowledge of the concessions exchanged. Politicians have never understood that Transparency clutters foreign policy with a widespread commentary which operates in opposition to effective policy.
Alex Tabarrok indeed holds the correct attitude towards Life, and reflects the American attitude towards the Stimulus Package; Freebees should be spent on the irrelevancies of life, never distorting the Business format of Anyone. I would suggest Anyone could send such Gratuities to myself, as I could utilize an additional T-Bone Steak, and fill the old Truck. The impulse of Americans to act like a Millionaire for a night may be one of the strongest forces in American society; think how many Poor insist on taking their children to Disney World, at an average Price of $6000 per trip. It is not up to Economists to adjudge the morality of such Expense, but simply to integrate such funds into Consumption sales. Here is a group of people who does not understand the principle of letting People blow their money in methods which are detrimental to the Savings function; leaving alone the Status symbolism of owning a Product which is overpriced and not economically efficient.
I have now supplied a supplemental list of Readings which provide some kind of ethical attempt to counter the nonsensical attitude of my blog, so I can turn to the main Thought of my Day, which is the fact that American foreign policy actually stops during the Election years. No one, Domestic or Foreign, holds great desire to make any deal with Bush, who is a lame-Duck, short-term possessor of an Office, and who will be replaced with an alternate Candidate and management policy. There is no guarantee to any Deals which could be made, so delays are instituted in order to not cancel potential Negotiating strengths. I am quite sure that Bush himself complains that the Machine does not move with the old alacrity. The trouble comes in the fact that such a lengthy Vacation from effective policy remains disastrous to American Interests. lgl
Alex Tabarrok indeed holds the correct attitude towards Life, and reflects the American attitude towards the Stimulus Package; Freebees should be spent on the irrelevancies of life, never distorting the Business format of Anyone. I would suggest Anyone could send such Gratuities to myself, as I could utilize an additional T-Bone Steak, and fill the old Truck. The impulse of Americans to act like a Millionaire for a night may be one of the strongest forces in American society; think how many Poor insist on taking their children to Disney World, at an average Price of $6000 per trip. It is not up to Economists to adjudge the morality of such Expense, but simply to integrate such funds into Consumption sales. Here is a group of people who does not understand the principle of letting People blow their money in methods which are detrimental to the Savings function; leaving alone the Status symbolism of owning a Product which is overpriced and not economically efficient.
I have now supplied a supplemental list of Readings which provide some kind of ethical attempt to counter the nonsensical attitude of my blog, so I can turn to the main Thought of my Day, which is the fact that American foreign policy actually stops during the Election years. No one, Domestic or Foreign, holds great desire to make any deal with Bush, who is a lame-Duck, short-term possessor of an Office, and who will be replaced with an alternate Candidate and management policy. There is no guarantee to any Deals which could be made, so delays are instituted in order to not cancel potential Negotiating strengths. I am quite sure that Bush himself complains that the Machine does not move with the old alacrity. The trouble comes in the fact that such a lengthy Vacation from effective policy remains disastrous to American Interests. lgl
Tuesday, February 26, 2008
No Good-Time Early Out
Here is a good Post to explain the Options available to Federal policy, both the Reserve and Congressional stimulus action. Cactus may have the most efficient plan, which is to do nothing. PGL critiques a program which would reduce Consumption Demand, when there is already a decline in Investment Demand. One Salient Oversight advocates an Austerity program of high Interest rates and raising Taxes. I happen to agree with the assessment, but must say that the Author loses me in the pontificating of the policy. This is the manner in which I would approach the Problem.
Congress should enact the 1993 Tax law once more, and nothing else; nullifying all Tax concessions granted in the interim period. I suppose I should present some rationale for such a Policy, though I played hokey this morning, and decided I preferred the practice. Anyway, here is an attempt at a serious defense of my policy. The first Item states that We already have evidence that modern Business formations can navigate such taxation, and quite successfully. The second Item states that reversion to this earlier successful Tax policy will negate whatever misguided fiscal and economic initiatives have been adopted in the interim period. There is primary evidence available that this impact of Taxation could not reduce Employment below 2005 levels, a magnitude which could at most lose about 2.3 million Jobs; but the previous transition in 1993 expressed an eventual Gain in Employment, due to Business preoccupation with recouping lost revenues to Taxation. The rise in Tax revenues would aid in provision of welfare services associated with a Recession if it comes, and help to reduce federal debt levels if no real Recession occurs (my estimate of the likely Outcome).
The only trouble We ever had with the Tax policy of the early Clinton years consisted of attempts to streamline it to promote Business. I have previously stated that Capital aggregation was redundant with the advent of the modern Banking system. Claims that it is necessary for Investment is false, even at the Corporate level; early success in the Economy simply turned to Rent-seeking through adverse lobbying efforts, eventually distorting the impact on the Tax base. Changes are on the Wind, and We need an adequate Tax policy to channel those Changes. Labor Participation will have to rise within 7 years, and Wages will inevitably regain position in the Income format. The Dollar will have to stabilize, else Americans will lose their position as prime Trading partners; this can only be accomplished with relatively active repayment of Our foreign debt obligations. Too many Economists fail to recognize that the Austerity program is already with Us, and We need an effective Tax policy to cancel the agony of that fact. lgl
Congress should enact the 1993 Tax law once more, and nothing else; nullifying all Tax concessions granted in the interim period. I suppose I should present some rationale for such a Policy, though I played hokey this morning, and decided I preferred the practice. Anyway, here is an attempt at a serious defense of my policy. The first Item states that We already have evidence that modern Business formations can navigate such taxation, and quite successfully. The second Item states that reversion to this earlier successful Tax policy will negate whatever misguided fiscal and economic initiatives have been adopted in the interim period. There is primary evidence available that this impact of Taxation could not reduce Employment below 2005 levels, a magnitude which could at most lose about 2.3 million Jobs; but the previous transition in 1993 expressed an eventual Gain in Employment, due to Business preoccupation with recouping lost revenues to Taxation. The rise in Tax revenues would aid in provision of welfare services associated with a Recession if it comes, and help to reduce federal debt levels if no real Recession occurs (my estimate of the likely Outcome).
The only trouble We ever had with the Tax policy of the early Clinton years consisted of attempts to streamline it to promote Business. I have previously stated that Capital aggregation was redundant with the advent of the modern Banking system. Claims that it is necessary for Investment is false, even at the Corporate level; early success in the Economy simply turned to Rent-seeking through adverse lobbying efforts, eventually distorting the impact on the Tax base. Changes are on the Wind, and We need an adequate Tax policy to channel those Changes. Labor Participation will have to rise within 7 years, and Wages will inevitably regain position in the Income format. The Dollar will have to stabilize, else Americans will lose their position as prime Trading partners; this can only be accomplished with relatively active repayment of Our foreign debt obligations. Too many Economists fail to recognize that the Austerity program is already with Us, and We need an effective Tax policy to cancel the agony of that fact. lgl
Monday, February 25, 2008
Gloom, Doom, and Agony on Me!
The mentality of Military Procurement almost dictates the creation of Corruption in the process. Two companies are vying for the Contract–too few in number to actually be competition. There is no competition in Price–living as these Companies do with only lack of Add-On imagination as limitation of Cost. No one in the Military imagines that Congress will ever fund more than 18-20 of these planes per year. No one in the Military believes either Tanker model is actually superior in design or performance. Everyone in the Military expects the Companies to demand Cost Overruns with the Award of the Contract, likely almost double the Bidding Prices. No one, in the Military or Congress, suggests that Duplication would increase the Cost of Maintenance of the Craft; which functionally would have to be sent back to the factories involved for such servicing along with any Upgrades. Still, it seems that federal Tax dollars must be locked in to the tune of 180 billion Dollars over 15 years, rather than buying yearly based upon adequacy of provision within the Time allotments necessary.
Tyler Cowen will always make a person worry, basically because he presents actual viable Scenarios; I must say all of the listed Components are likely to operate. What then? Humanity is likely doomed, at least I am; Tyler should get a Job with the History Channel. I believe some young, astute Economist should design a smoking volcano model, where emitted Carbon emissions by humanity are equated with volcano emissions; I believe We would be somewhere around 3.5 smoking volcanos. Is humanity eventually going to die off this Earth–Certainly! Is degradation of our civilization going to occur–equally certain, and probably much quicker than eventual extinction. The History Channel will relate that the average lifespan of a human civilization approximates about 300-700 years of existence, and We are getting to be an elderly Civilization; maybe the Mayan prediction of 2012 Apocalypse is correct. Now if We only had another five smoking volcanos.
Mish has a somewhat confusing Post on the relationship (or lack of it) between Commodity prices and Inflation. Readers should keep this Thought in mind when reading: Commodity prices restrain Household budgets, and Inflation equally restrains Household budgets; but that there is no connection between the two forces, until there is an inflation in Household Incomes. Sitting on Household Income will reduce Consumption Sales, and the Business Profits based upon those Sales; without the expansion of Credit. The main Point is that a financial suppression of Credit will present Recessionary conditions, but One has also to remember, that Recessionary conditions will have little effect on the Economy, unless and until Household Incomes are cut. Japan is living proof that a long Recession can be endured with rising Living Standards. lgl
Tyler Cowen will always make a person worry, basically because he presents actual viable Scenarios; I must say all of the listed Components are likely to operate. What then? Humanity is likely doomed, at least I am; Tyler should get a Job with the History Channel. I believe some young, astute Economist should design a smoking volcano model, where emitted Carbon emissions by humanity are equated with volcano emissions; I believe We would be somewhere around 3.5 smoking volcanos. Is humanity eventually going to die off this Earth–Certainly! Is degradation of our civilization going to occur–equally certain, and probably much quicker than eventual extinction. The History Channel will relate that the average lifespan of a human civilization approximates about 300-700 years of existence, and We are getting to be an elderly Civilization; maybe the Mayan prediction of 2012 Apocalypse is correct. Now if We only had another five smoking volcanos.
Mish has a somewhat confusing Post on the relationship (or lack of it) between Commodity prices and Inflation. Readers should keep this Thought in mind when reading: Commodity prices restrain Household budgets, and Inflation equally restrains Household budgets; but that there is no connection between the two forces, until there is an inflation in Household Incomes. Sitting on Household Income will reduce Consumption Sales, and the Business Profits based upon those Sales; without the expansion of Credit. The main Point is that a financial suppression of Credit will present Recessionary conditions, but One has also to remember, that Recessionary conditions will have little effect on the Economy, unless and until Household Incomes are cut. Japan is living proof that a long Recession can be endured with rising Living Standards. lgl
Sunday, February 24, 2008
Afghanistan and Mortgages--Same Thing!
What can you say about Afghanistan? Americans are oversupplied with heavy weaponry, Insurgents are oversupplied with light weapons. The only real defense from L-ambushes are utilization of flankers, but how does a Commander use flankers in mountainous terrain? Americans still have not learned that they talk only with Insurgent leadership, as no neutral Civilians will be allowed to conduct long-term negotiations with the Enemy. Stop-loss of key personnel destroys troop morale, while making experienced personnel paranoid; American leadership still not integrating WWI doctrine of leaving troops in Risk areas no longer than 5 Weeks, before transfer to a low-threat area for Rest. American Outposts lightly manned and flown in must be positioned along traditional routes, and only these Outposts should be allowed access to Air munitions assets. Patrols should only be conducted within Daylight hours, and never where they cannot overnight at an Outpost; the later situated where they can oversee Patrol movements, and assign potential Air assets upon Need. Outposts need to be organized and zeroed in, so that Outposts can be defended by artillery fire. Sniper teams need to be rotated between Outposts, and allowed free fire upon confirmation of the transference of military weaponry by Insurgent elements. The overwhelming need is to switch the Risk from American military assets to Insurgent elements.
Alan Blinder has many good ideas, but has to worry about introducing too great a complexity. A Mortgage salvage Agency must keep it as simple as possible, because it will become confusing enough when placed in operation. The first doctrine is to employ the initial Issuers of the Mortgages, basically so they become too busy to engage in future poor financing practice. Criteria should be that Mortgage refinance is approved if a Property will retain 75% of its value, if Housing prices drop 25% in value. Federal law should be constructed so that the Federal Government only assumes the Mortgage, with Mortgage-holder agreement to assume a longer-Period Mortgage of lower Payment which will pay off the total value of the initial Mortgage. The Periodic Payments required will be within 70% of the originally-set Payment value, and the Time of Payment will be of whatever duration necessary to complete payment to the federal Agency. The federal government will be committed only to the payment of the original mortgages, and subsequent payment failure by the Homeowner will lead to federal foreclosure and sale of the Property. Federal involvement in the Mortgage debt will be minimized, with the least expenditure of Public funds, a set criteria for repayment of that federal expenditure, and will avoid the debacle of trying to straighten out the complex mess of failed financial instruments–ill-designed.
One can find Reasons for the Mortgage Crisis everywhere One looks, and is the prime rationale for federal law regulating the Mortgage industry. The simplest law I can conceive of would be One that required the filing of a One-Page Declaration form with the County Assessors Office with every Change of Title. The document would list Total Price, Interest Rate charged, the monthly Payment charges, the magnitude of any Late fees charged–both in total magnitude by Percentage and maximum amount levied per monthly payment, and prepayment charges which might be applied–both in Percentage and total amounts, and stipulation that the Loan officer could face 3 years imprisonment for any deception in the above declarations, or his failure to explain each declaration. Each stipulation of the Declaration page must be initialed by both the Mortgage borrower, and the loan officer; the Signature of both Borrower and Loan Officer required at the bottom, before Title will be altered. lgl
Alan Blinder has many good ideas, but has to worry about introducing too great a complexity. A Mortgage salvage Agency must keep it as simple as possible, because it will become confusing enough when placed in operation. The first doctrine is to employ the initial Issuers of the Mortgages, basically so they become too busy to engage in future poor financing practice. Criteria should be that Mortgage refinance is approved if a Property will retain 75% of its value, if Housing prices drop 25% in value. Federal law should be constructed so that the Federal Government only assumes the Mortgage, with Mortgage-holder agreement to assume a longer-Period Mortgage of lower Payment which will pay off the total value of the initial Mortgage. The Periodic Payments required will be within 70% of the originally-set Payment value, and the Time of Payment will be of whatever duration necessary to complete payment to the federal Agency. The federal government will be committed only to the payment of the original mortgages, and subsequent payment failure by the Homeowner will lead to federal foreclosure and sale of the Property. Federal involvement in the Mortgage debt will be minimized, with the least expenditure of Public funds, a set criteria for repayment of that federal expenditure, and will avoid the debacle of trying to straighten out the complex mess of failed financial instruments–ill-designed.
One can find Reasons for the Mortgage Crisis everywhere One looks, and is the prime rationale for federal law regulating the Mortgage industry. The simplest law I can conceive of would be One that required the filing of a One-Page Declaration form with the County Assessors Office with every Change of Title. The document would list Total Price, Interest Rate charged, the monthly Payment charges, the magnitude of any Late fees charged–both in total magnitude by Percentage and maximum amount levied per monthly payment, and prepayment charges which might be applied–both in Percentage and total amounts, and stipulation that the Loan officer could face 3 years imprisonment for any deception in the above declarations, or his failure to explain each declaration. Each stipulation of the Declaration page must be initialed by both the Mortgage borrower, and the loan officer; the Signature of both Borrower and Loan Officer required at the bottom, before Title will be altered. lgl
Friday, February 22, 2008
Do I Worry?--Nah!
I glanced at this Post of James Hamilton this morning, before I went to see my personal banker, who told me I would be paid only 3% on my renewing CDs; facing as I am escalating Costs in my own Consumption, I feel extremely comforted that the Fed are relaxed about further Rate reductions. I still believe I should restudy John’s Post, as it is always filled with amazing Insight. It seems that Core Inflation is near the high end of restraint levels, but would be capable of additional cheap liquidity. I felt almost Tears of Joy, recognizant that I would have to roll over future Certificates of Deposit in the near future. It appears that the Economy is structured well, except for a lack of cheap assessable liquidity, and could easily endure a combination of Price rises and lack of New Orders. There exists little complaint about anything other than a lack of ready Cash and raging Commodity prices. Only Mortgage-holders and End-Consumers elicit any temper tantrums, and good Economists try to deflect notice of such Spoiled Sports (pity that I am one of the later).
The New York Times tells Us that 8.8 million Mortgage-holders are underwater; a beautiful term for a Mortgage more expensive than the home it is based upon. The Reader should recognize that this state was created by a Housing balloon which burst, combined with a sponsored Consumer mentality (boosted by a greedy Banking community) that espoused a high-level of Mortgage Risk to create a Tax-Writeoff. The Bubble burst, and Mortgage-holders found they had to kick more into the Pot; in some Cases, more than the Tax Savings which were ever realized. The Zero-Down Bankers now blame the Mortgage-holders for the later’s fiscal irresponsibility. Indeed, there is incessant Demand by Bankers that the Federal Reserve and Government save them from the dastardly fiscal irresponsibility.
We should not worry, though, because Mark Perry assures Us that the monetary base grew only by 40%, instead of the 70% during the 1970s which was the last Period of Stagflation. I possess two Thoughts about this: the first being how the Eight year periods compare prior to the actual Start of the Stagflation, rather than to the period of Stagflation itself? The second Thought arises that the last Period of Stagflation exited without any reduction of funds in the monetary base (I may be mistaken, as I am simply Guessing), and current economic activities already contain the expanded monetary base of the first Stagflation Period. Until such time as I actually witness a 40% real economic growth (Product Expansion) in the last 7 years, I might be inclined to continue to worry. lgl
The New York Times tells Us that 8.8 million Mortgage-holders are underwater; a beautiful term for a Mortgage more expensive than the home it is based upon. The Reader should recognize that this state was created by a Housing balloon which burst, combined with a sponsored Consumer mentality (boosted by a greedy Banking community) that espoused a high-level of Mortgage Risk to create a Tax-Writeoff. The Bubble burst, and Mortgage-holders found they had to kick more into the Pot; in some Cases, more than the Tax Savings which were ever realized. The Zero-Down Bankers now blame the Mortgage-holders for the later’s fiscal irresponsibility. Indeed, there is incessant Demand by Bankers that the Federal Reserve and Government save them from the dastardly fiscal irresponsibility.
We should not worry, though, because Mark Perry assures Us that the monetary base grew only by 40%, instead of the 70% during the 1970s which was the last Period of Stagflation. I possess two Thoughts about this: the first being how the Eight year periods compare prior to the actual Start of the Stagflation, rather than to the period of Stagflation itself? The second Thought arises that the last Period of Stagflation exited without any reduction of funds in the monetary base (I may be mistaken, as I am simply Guessing), and current economic activities already contain the expanded monetary base of the first Stagflation Period. Until such time as I actually witness a 40% real economic growth (Product Expansion) in the last 7 years, I might be inclined to continue to worry. lgl
Thursday, February 21, 2008
Inflation-Fighting??
A combination of factors are pushing the Fed to the edge of a Cliff. Member banks and the Bush Government demand cheaper Cash and more liquidity, in the face of mounting inflationary pressures. The Reserve board has already bowed twice to the pressures exerted, and faces increasing pressure to reduce the fed funds rates further. Here is the Problem: other Countries are finally shifting higher Energy Costs forward onto the Import prices which We pay, funds which American Importers account as total loss of Profitability, unless the higher prices are passed to the American Consumer. The American economy is currently tied to Imports, a situation which I have criticized for decades. The inflation arriving on American shores is intrinsic, and nothing the Fed does can alter it. American business, on the other hand, demand that the Fed provide the liquidity to pay for it; a generation of a source of domestic inflation. The combination of the two forces will create stagflation.
Nothing will stop the progress of any Recession which might come, remember We have yet to see visible evidence of it as yet, as inflation has hidden the drop in actual Product. Recessions are built upon forces operating on the Production cycle, and liquidity will not affect the Scenario until there is need for Recapitalization; a condition which does not exist with the updated technology currently in force. A Monetarist policy will not be able to help, but it can hinder dramatically the stability of the economy. American business now demands an easy payment of Short-term bills, but this is exactly the wrong proscription. My Solution would not be draconian, though it would be claimed as such; I would advise the Fed to cancel all attempts to provide liquidity, and raise the fed funds rates to 4.2% at the March meeting. This would force American business and banking to register a Profit loss immediately, but would mean little else to economy except continued decline in Housing and the Mortgage market. The foreclosures will occur anyway, because of the pressure of Consumer prices, and loss of Business Profits will erase a great share of the Paper Profits which have embedded within the last decade, these Paper Profits existing only as a drain upon the real Profits generated by Production.
My proposed policy relies upon the magnitude of the American economy, which will concentrate upon the supply of Necessities to the American households. It would be assisted by alteration of American Tax structure to penalize American business and industry for reducing Employment; I would like to see a Tax charge on saved payment of Wages for the rest of the Tax year as Income, for all reduced Employment. There are some other methods to maintain Employment as well, like double payment of Unemployment Benefits taxation if a Business lays off more than 10% of its Labor force yearly. Employment numbers can be held relatively constant will relatively little duress to the economy or businesses themselves; a combination of the Above Tax measures could not possibly exceed $30 billion per year. It will notify American business management that there has been a definite change in Government policy, and one which will punish deviant business practice which is of injury to the overall American economy. lgl
Nothing will stop the progress of any Recession which might come, remember We have yet to see visible evidence of it as yet, as inflation has hidden the drop in actual Product. Recessions are built upon forces operating on the Production cycle, and liquidity will not affect the Scenario until there is need for Recapitalization; a condition which does not exist with the updated technology currently in force. A Monetarist policy will not be able to help, but it can hinder dramatically the stability of the economy. American business now demands an easy payment of Short-term bills, but this is exactly the wrong proscription. My Solution would not be draconian, though it would be claimed as such; I would advise the Fed to cancel all attempts to provide liquidity, and raise the fed funds rates to 4.2% at the March meeting. This would force American business and banking to register a Profit loss immediately, but would mean little else to economy except continued decline in Housing and the Mortgage market. The foreclosures will occur anyway, because of the pressure of Consumer prices, and loss of Business Profits will erase a great share of the Paper Profits which have embedded within the last decade, these Paper Profits existing only as a drain upon the real Profits generated by Production.
My proposed policy relies upon the magnitude of the American economy, which will concentrate upon the supply of Necessities to the American households. It would be assisted by alteration of American Tax structure to penalize American business and industry for reducing Employment; I would like to see a Tax charge on saved payment of Wages for the rest of the Tax year as Income, for all reduced Employment. There are some other methods to maintain Employment as well, like double payment of Unemployment Benefits taxation if a Business lays off more than 10% of its Labor force yearly. Employment numbers can be held relatively constant will relatively little duress to the economy or businesses themselves; a combination of the Above Tax measures could not possibly exceed $30 billion per year. It will notify American business management that there has been a definite change in Government policy, and one which will punish deviant business practice which is of injury to the overall American economy. lgl
Wednesday, February 20, 2008
Economic Views
I would not agree with either David Gordon or Paul Krugman, but David wrote a masterful Review of Paul’s ‘ The Conscience of a Liberal’. I say this because David adopts a effective description of Paul’s work, clearly outlining the disagreement between themselves in a lucid manner. David establishes that Paul may be too harsh in his anger at the growth of the Super-Rich, and sets the foundation for the necessity of Incentives. The trouble enters with the fact that von Mises was also forever too harsh in the promotion of those Incentives; marginal utility must be brought to the table, what is exactly the value of the added Marginal Dollar of Profit? The economic theory, of which Gordon says the Krugman book is so remiss, would suggest that progressive taxation is valid when added Riches to the Individual will not have the utility as in its expenditure by Government programs. Still, no one brings the proper economic model to the Problem.
Both Author and his Critic mix economic and social values quite liberally. What is the Marginal Dollar value of Charity v. Government Expenditure? It is obvious that Hayek’s Lack of Information will exist to great degree in the provision of Charity, the later never capable of handling the magnitude presented by the health care industry. It must be Government Expenditure, or lack of Provision for Those incapable of paying the high Charges of the health care industry. Krugman’s solution remain too generous of other peoples’ money, but Gordon’s solution would leave the health care industry stunted with Millions not receiving proper medical care. Economics suggests that the health care industry must have effective funding, but Krugman’s proposal that Everyone gets the Best is equally unsustainable.
Gordon punishes Krugman’s support of Unions, and praises the Tax Cuts of the current era. The criteria seems to be invalid. The Poor and Middle Class suffer from high Taxes, this affliction coming from a withdrawal of forwarded Tax revenues from Business and the Wealthy. Both of the good Gentlemen may disagree with that assessment, but it is true, and has more to do with the creation of the Super-Rich than does the loss of Unions. The common economic contention that We could not have had the economic growth We have achieved without those Tax remissions, I would place in the Wrong column. Economic growth has always remained far more dependent on liberal amounts of Labor and Talent, than it has ever been dependent on the mechanisms of funding the resultant economic growth. If they are there, they will build it! lgl
Both Author and his Critic mix economic and social values quite liberally. What is the Marginal Dollar value of Charity v. Government Expenditure? It is obvious that Hayek’s Lack of Information will exist to great degree in the provision of Charity, the later never capable of handling the magnitude presented by the health care industry. It must be Government Expenditure, or lack of Provision for Those incapable of paying the high Charges of the health care industry. Krugman’s solution remain too generous of other peoples’ money, but Gordon’s solution would leave the health care industry stunted with Millions not receiving proper medical care. Economics suggests that the health care industry must have effective funding, but Krugman’s proposal that Everyone gets the Best is equally unsustainable.
Gordon punishes Krugman’s support of Unions, and praises the Tax Cuts of the current era. The criteria seems to be invalid. The Poor and Middle Class suffer from high Taxes, this affliction coming from a withdrawal of forwarded Tax revenues from Business and the Wealthy. Both of the good Gentlemen may disagree with that assessment, but it is true, and has more to do with the creation of the Super-Rich than does the loss of Unions. The common economic contention that We could not have had the economic growth We have achieved without those Tax remissions, I would place in the Wrong column. Economic growth has always remained far more dependent on liberal amounts of Labor and Talent, than it has ever been dependent on the mechanisms of funding the resultant economic growth. If they are there, they will build it! lgl
Economic Decision-Making
I may have always misunderstood the genius of Ronald Gallatin, but the auction rate market seems to be failing, as I expected it would. Here is a market dependent upon the appearance of buyers who have Parking Cash, buying high-Risk securities at low Interest rates, in the hope of penalty Interest rates being imposed; all based upon guarantees published by unreliable Bond holders. The entire market is based upon Parking Cash–excess funds without other short-term Investment opportunities–which disappears rapidly upon the appearance of safer and more lucrative Investment than the poor auction Interest rates. The securities possess high incidence of Term fulfillment failure, and Bond-holders show instability under failure conditions. I have never been a financial specialist, but there would seem to be too many loss-points, with very inadequate Return rates.
Mike Moffit brings Us an excellent Post on the Tax impact of Carbon taxes. It explains the shift of marginal efficiency Costs (MEC) of the tax impact, transferring from a high MEC to a lower one, while maintaining a revenue-neutral taxation. The trouble I have with this type of Reasoning lies in the position of maintaining a lower MEC and revenue-neutrality in the first place. The goal of Carbon taxation is a reduction of Carbon emissions. Both revenue-neutrality and a lower MEC work to insure a constant level of Consumption can be held. It is hoped that Business will devote the saved potential to Carbon conservation efforts, but it smells amazingly like the Stimulus Package passed by Our Government; Everyone knows how the funds will be spent, though they wish Consumers would chose otherwise.
Fears truly traumatize American markets, an excellent Case in Point being the Oil market. We have run up to a $100/barrel Oil each of the last 3 months. Each movement was based upon fears of human reaction, this time being other refineries could not make up the loss from the refinery explosion in Texas (which provides an insignificant percentage of the Refining capacity), the Nigerian rebellion which has been with Us for years, and a distrust of OPEC reaction to the World economic downturn. Horse Hockey!! Alternative Refining capacity will increase if there is a market for more Fuel, neither Nigerian Government or Rebels will seriously interfere with Oil exportation (which funds both), and OPEC will not destabilize the market for their Product. Fund Speculation is the real danger to the American Consumer. lgl
Mike Moffit brings Us an excellent Post on the Tax impact of Carbon taxes. It explains the shift of marginal efficiency Costs (MEC) of the tax impact, transferring from a high MEC to a lower one, while maintaining a revenue-neutral taxation. The trouble I have with this type of Reasoning lies in the position of maintaining a lower MEC and revenue-neutrality in the first place. The goal of Carbon taxation is a reduction of Carbon emissions. Both revenue-neutrality and a lower MEC work to insure a constant level of Consumption can be held. It is hoped that Business will devote the saved potential to Carbon conservation efforts, but it smells amazingly like the Stimulus Package passed by Our Government; Everyone knows how the funds will be spent, though they wish Consumers would chose otherwise.
Fears truly traumatize American markets, an excellent Case in Point being the Oil market. We have run up to a $100/barrel Oil each of the last 3 months. Each movement was based upon fears of human reaction, this time being other refineries could not make up the loss from the refinery explosion in Texas (which provides an insignificant percentage of the Refining capacity), the Nigerian rebellion which has been with Us for years, and a distrust of OPEC reaction to the World economic downturn. Horse Hockey!! Alternative Refining capacity will increase if there is a market for more Fuel, neither Nigerian Government or Rebels will seriously interfere with Oil exportation (which funds both), and OPEC will not destabilize the market for their Product. Fund Speculation is the real danger to the American Consumer. lgl
Tuesday, February 19, 2008
Old and New
Exactly the News that I didn’t want to hear, Rift-splicing by the Fed to rescue bad Bank debt. One-Month debt would be acceptable, but Everyone knows that the Banks will renew, and the TAF can only expand. Running a revolving debt of that magnitude will adversely affect Deposit Interest rates, and is bound to expand. The Term Auction Facility stands as a mechanism to save Bankers from registering Bankruptcies. The concept is laudable, except for the fact that it does little more than hide Banking malfeasance, and the Fed becoming the Depositor of Last Resort is too easily transferable to Money creation; the worst form of Inflation existent. I had my doubts about the TAF from the Start, and can say now that this example of Bankers covering their own Ass, will have very serious down-the-Road consequences.
China’s Inflation has Good News and Bad News. The Good News will be a welcome spread of competition throughout the World, as numerous other Countries can more easily match the Production Costs of the Chinese. The Bad News is that Chinese inflation will raise Import Costs in both the U.S. and EU, without having any reduction of the advantage of foreign production in comparison with native domestic production. I should say that what increased competition is induced, will improve Quality Controls of Production throughout the World, as competition extends beyond outright cheap Cost. It is a sadness when the Good News is not good enough, and the Bad News is worse than expected.
The BBC ended its Shortwave English Broadcasts to Europe last Monday. The historian within me feels saddened by the passage of a major symbol of Empire, considering the contributions of this Service in its time. The economist, on the other hand, wonders at the longevity of the Service outdated with the development of the Internet. Computers and Internet access have become almost as cheap as Shortwave Receivers today, and the self-programming choices available on Internet makes it far superior to the editing efforts of the BBC. Young Readers, though, may not understand the conflicting emotions of old Hands hearing of this cancellation, never having listened to the Service or having watched the old Movies highlighting the Service. lgl
China’s Inflation has Good News and Bad News. The Good News will be a welcome spread of competition throughout the World, as numerous other Countries can more easily match the Production Costs of the Chinese. The Bad News is that Chinese inflation will raise Import Costs in both the U.S. and EU, without having any reduction of the advantage of foreign production in comparison with native domestic production. I should say that what increased competition is induced, will improve Quality Controls of Production throughout the World, as competition extends beyond outright cheap Cost. It is a sadness when the Good News is not good enough, and the Bad News is worse than expected.
The BBC ended its Shortwave English Broadcasts to Europe last Monday. The historian within me feels saddened by the passage of a major symbol of Empire, considering the contributions of this Service in its time. The economist, on the other hand, wonders at the longevity of the Service outdated with the development of the Internet. Computers and Internet access have become almost as cheap as Shortwave Receivers today, and the self-programming choices available on Internet makes it far superior to the editing efforts of the BBC. Young Readers, though, may not understand the conflicting emotions of old Hands hearing of this cancellation, never having listened to the Service or having watched the old Movies highlighting the Service. lgl
Monday, February 18, 2008
Sources of Wealth
One needs to read this article, though One does not need to agree with it. I have a problem with it, as I suspicion that it will take a Recession as curative of many of the structural problems in the American economy. Here is the Problem: Many new structural financial mechanisms have been introduced within the last decade, and a great share of them are proving to be unmanageable and unsustainable. The trouble comes from the banking industry attempting to maintain their operation, even though they have been a proven failure. It is exactly this refusal to bankrupt and shell these mechanisms out that threatens the American economy. The Fed actions, and the Congressional Stimulus Package, may simply be building on shifting Sands. It might take a Recession to blow out these faulty mechanisms, and reach bedrock again. This article may help explain the creation of the muddle which has to be resolved.
Morris Altman, thanks to Tyler Cowen for the link, has published this Paper (PDF) carrying this Abstract:
The hypothesis that economic freedom and related variables are significant determinants of
real per capita income and growth is critically evaluated. Economic freedom is found
necessary for higher levels of per capita income and growth largely in terms of threshold
effects as opposed to persistent marginal effects. More economic freedom does not appear to
yield higher levels of per capita income. And securing particular levels of economic freedom
does not guarantee higher levels of per capita income or growth. Secure private property
rights is found to be a most significant positive causal variable as is sound money, whereas
moderate amounts of labor regulation and big government are not found to be bad for the
economy. Also, good corporate governance, in addition to economic freedom, is of
considerable import. Unlike most studies, traditional statistical methods are supplemented by
graphical analysis in an effort to determine threshold values for economic freedom and its
components.
This generally conforms with my own beliefs, but I have as yet not found the time to research the Paper throughly; I am getting lazy and behind Schedule.
Paul Krugman agrees with the Financial Times which finds that growing up in Poverty stunts development, later forestalling the successful struggle from Poverty. I could agree with that assessment generally, but also suggest that it is the lack of Parental Example of cheating the system that could be at fault. Much of later-day wealth has been consistently earned through the Cheating of trusting Investors. Again and again, the high flyers are found to be deviant in behavior mechanisms of social structure, to the detriment of their Peers. Is it lack of opportunity, or too great an addiction to honesty which impedes the Poor’s success? lgl
Morris Altman, thanks to Tyler Cowen for the link, has published this Paper (PDF) carrying this Abstract:
The hypothesis that economic freedom and related variables are significant determinants of
real per capita income and growth is critically evaluated. Economic freedom is found
necessary for higher levels of per capita income and growth largely in terms of threshold
effects as opposed to persistent marginal effects. More economic freedom does not appear to
yield higher levels of per capita income. And securing particular levels of economic freedom
does not guarantee higher levels of per capita income or growth. Secure private property
rights is found to be a most significant positive causal variable as is sound money, whereas
moderate amounts of labor regulation and big government are not found to be bad for the
economy. Also, good corporate governance, in addition to economic freedom, is of
considerable import. Unlike most studies, traditional statistical methods are supplemented by
graphical analysis in an effort to determine threshold values for economic freedom and its
components.
This generally conforms with my own beliefs, but I have as yet not found the time to research the Paper throughly; I am getting lazy and behind Schedule.
Paul Krugman agrees with the Financial Times which finds that growing up in Poverty stunts development, later forestalling the successful struggle from Poverty. I could agree with that assessment generally, but also suggest that it is the lack of Parental Example of cheating the system that could be at fault. Much of later-day wealth has been consistently earned through the Cheating of trusting Investors. Again and again, the high flyers are found to be deviant in behavior mechanisms of social structure, to the detriment of their Peers. Is it lack of opportunity, or too great an addiction to honesty which impedes the Poor’s success? lgl
Sunday, February 17, 2008
Will the real Correlation please Stand-Up
Correlations, Anyone? Impactual relationships being Variables has become the modern Fad of Economics. James Joyner would state that many of the Relationships are tenuous at best, and designed to be politically misleading. I will agree with that sentiment. I would like Someone to find a significant correlation sometime, like the evaluative data between Price Controls and Alternative Resource use. This would give me some relevant data for a posit I am trying to entertain, on whether some degree of Price Controls on the price of Beef Products in this Country could actually increase the literal size of beef herds. My Concept states that the lack of alternate land use would engender an increase in the herds through the advent of Price Controls, the potential damage existing in the ease of exit of Beef Producers from the industry. Would relevant beef Price Controls lead to the adoption of a reduced Profit per Unit with expanded beef herds, or would it only provide rapid leave-taking of beef Producers from the industry? Such a Correlation must be known before it is even worth the effort to design a Price suppression program.
Tyler Cowen presents a good Opinion piece, but it is just an exercise in common assumptions held by most of the educated elites. Here is another place where it could be helpful to find existent Correlations between expressed policy of Candidates, and their eventual Record in fulfilling those campaign initiatives. Another comparison of value would be Electee response to countervailing Special Interest demands to cancel the impact of those campaign promises. One could stipulate that Numbers have the power to connect Policy to Reality, if Statisticians would dedicate themselves similar to the expressed dedication of the Journalists; though the later has shown little real interest in defining the Truth.
Like most elements on the Internet, I find this Post by Henry at Crooked Timber which highlights my sentiment towards revealed preferences. Correlations revealed are often very weak, if existent at all, and the Internet should somehow achieve a Rating system to present the Readers with the estimate of the equivalent value of the material. Now I know many Readers would say I am advocating throwing myself off the Internet, but even Newspapers and Periodicals possess some form of Content editing. It may be time for the Internet to grow up, and establish some Evaluative system. I would favor a channel box, where every Post could be rated by each Reader on a scale of 1 through 10, with the Average updated with each Rating. Please–no throwing of Garbage, I already have enough around the Place. lgl
Tyler Cowen presents a good Opinion piece, but it is just an exercise in common assumptions held by most of the educated elites. Here is another place where it could be helpful to find existent Correlations between expressed policy of Candidates, and their eventual Record in fulfilling those campaign initiatives. Another comparison of value would be Electee response to countervailing Special Interest demands to cancel the impact of those campaign promises. One could stipulate that Numbers have the power to connect Policy to Reality, if Statisticians would dedicate themselves similar to the expressed dedication of the Journalists; though the later has shown little real interest in defining the Truth.
Like most elements on the Internet, I find this Post by Henry at Crooked Timber which highlights my sentiment towards revealed preferences. Correlations revealed are often very weak, if existent at all, and the Internet should somehow achieve a Rating system to present the Readers with the estimate of the equivalent value of the material. Now I know many Readers would say I am advocating throwing myself off the Internet, but even Newspapers and Periodicals possess some form of Content editing. It may be time for the Internet to grow up, and establish some Evaluative system. I would favor a channel box, where every Post could be rated by each Reader on a scale of 1 through 10, with the Average updated with each Rating. Please–no throwing of Garbage, I already have enough around the Place. lgl
Friday, February 15, 2008
New Educational Format
David Brooks suggests an idea which I agree with, but Arnold Kling and King find fault with active participation in any form of community service force. I could take an entirely economic stance, and sketch out an economic model which would show that the Marginal utilities of Labor must adjust to the lowest value Labor entrant (l+0.43% of Minimum Wage) at base Wage, to avoid waste of Tax revenue in military Pay; Economists could laugh at this, but should account Military Wages as a Percentage of total Tax revenues. The Military, for all its gadgets, is a Labor-intensive occupation; tax revenues taken to pay for military forces must come from other programs usage. The United States, by the way, is unique in its regular payment of military wages, unlike most nations of the World in their history; I would not term the condition Slavery.
I did not undertake this Post to criticize, though, but in the hope of offering an alternative which would please neither David or Arnold, but could provide both the criteria of personal freedom and the benefits of personal Discipline. My Concept would state that military Basic Training be made a Mandatory Course at High School level, something I could find as equally rewarding as English Lit or going out for basketball. I know I am a heathen! It would still provide Students with an understanding of the military regime, and perhaps even some Camping skills. It might even instill an awareness of the propriety of a Dress Code, and could suggest more adequate Study habits to avoid a lumpen placement in the Workforce similar to the military usage.
An Incentive would have to be given to enjoin Parents to surrender their Children to such harsh conditions as a Mandatory Basic Training. The Opportunity exists right in the academic community itself. I would advocate Military Fund payment of Community college attendance, if the Students would take Specialized Courses equivalent to Specialty Training in the Military. Students would gain not only the appropriate Entrance Courses for a following College education, but also Specialty Rank in the Military Reserve. Students would be subject to 12 years of Reserve duty at Pay, but could obtain in addition almost 50% of their total College Education Costs. The Concept of Press Gangs has not disappeared, simply becomes more socially acceptable. lgl
I did not undertake this Post to criticize, though, but in the hope of offering an alternative which would please neither David or Arnold, but could provide both the criteria of personal freedom and the benefits of personal Discipline. My Concept would state that military Basic Training be made a Mandatory Course at High School level, something I could find as equally rewarding as English Lit or going out for basketball. I know I am a heathen! It would still provide Students with an understanding of the military regime, and perhaps even some Camping skills. It might even instill an awareness of the propriety of a Dress Code, and could suggest more adequate Study habits to avoid a lumpen placement in the Workforce similar to the military usage.
An Incentive would have to be given to enjoin Parents to surrender their Children to such harsh conditions as a Mandatory Basic Training. The Opportunity exists right in the academic community itself. I would advocate Military Fund payment of Community college attendance, if the Students would take Specialized Courses equivalent to Specialty Training in the Military. Students would gain not only the appropriate Entrance Courses for a following College education, but also Specialty Rank in the Military Reserve. Students would be subject to 12 years of Reserve duty at Pay, but could obtain in addition almost 50% of their total College Education Costs. The Concept of Press Gangs has not disappeared, simply becomes more socially acceptable. lgl
The Modern State of Being
American ranchers are beginning to deal with a Problem which they deem as a environmental concern, but is in reality a bio-diversity issue. The rural investiture of a past century must be coupled with the lines of Credit of the current era. We need Feed Lots which process 300 animals at a time, Packing Plants which process 50 Head per Week, and Grain Elevators that distribute Feed by the single, Straight Truck to a multiplicity of animal feed operations. This requires a Population density triple the current rural setting, with a line of Operating capital open to all. Land and Animal husbandry must be intensely monitored, and guaranteed a potential equivalent Income to urban populations, under the constant criteria of being economically efficient. It is a basic Return to the Land, without suffering the constrictions of Living Standards current in the modern transfer. Many People will scoff at the Concept, but it may be the most important Concept of the coming Century.
Here is a Case where I wish the Echos of the Past would Shut Up. I have come to feel a Disappointment with Mr. Greenspan since he has left Office. An incredible amount of economic performance depends upon the optimism of Business leadership, the Government has passed a Stimulus program, and Mr. Bernanke is basically following a Monetary policy with which Greenspan agrees (even though I don’t); he does not have to be a foremost Doomsayer. The World will flow on, even with the tired old men becoming disgruntled; of course, the Same could be said of me.
I think I agree with Greg Mankiw on this One. The element I spot in this discussion comes in the discrimination found only in Joint filings of married couples. Any action taken in this area would suffer the same antagonism previous failures endured, not granting due homage to the bliss of married life and the family. I have long been an advocate of ridding the Tax system of all but Individual filings; the key here being that the extension of an umbrella cover to two Participants will never serve justifiably without chicanery. Participants will be tax evasive or overtaxed based upon the compilation of the two Incomes. The Result becomes a Average around a Pole Income, with anger and Greed being generated, based on how the Average rewards or injures. In all cases, single Incomes get to halve their liability, while equal Incomes often face more direct Tax impact without fully optimal Tax reducibility. No muy importante, but still capable of incurring great heat of debate. lgl
Here is a Case where I wish the Echos of the Past would Shut Up. I have come to feel a Disappointment with Mr. Greenspan since he has left Office. An incredible amount of economic performance depends upon the optimism of Business leadership, the Government has passed a Stimulus program, and Mr. Bernanke is basically following a Monetary policy with which Greenspan agrees (even though I don’t); he does not have to be a foremost Doomsayer. The World will flow on, even with the tired old men becoming disgruntled; of course, the Same could be said of me.
I think I agree with Greg Mankiw on this One. The element I spot in this discussion comes in the discrimination found only in Joint filings of married couples. Any action taken in this area would suffer the same antagonism previous failures endured, not granting due homage to the bliss of married life and the family. I have long been an advocate of ridding the Tax system of all but Individual filings; the key here being that the extension of an umbrella cover to two Participants will never serve justifiably without chicanery. Participants will be tax evasive or overtaxed based upon the compilation of the two Incomes. The Result becomes a Average around a Pole Income, with anger and Greed being generated, based on how the Average rewards or injures. In all cases, single Incomes get to halve their liability, while equal Incomes often face more direct Tax impact without fully optimal Tax reducibility. No muy importante, but still capable of incurring great heat of debate. lgl
Thursday, February 14, 2008
Speculation
Scientists are always right of course, but what would happen if they are wrong? The first Question should be what could they be right or wrong about. Read the links of this Post by Mark Perry. Here is the Scene: Greenhouse Gases are bad because they reflect Sunlight (and Heat) back into Space, cooling surface Temperatures. The World could continue to grow Colder as We heat Our homes. Heating your homes Today can freeze all Life on this Earth Tomorrow. The Mayans could have been Warning of another Ice Age in 2012.
The Scene is unrealistic, or is it? There would be a Warming Period (let’s say 200 years) before an adverse effect from the Greenhouse Gases, where these Gases would not reflect sufficient Sunlight from the Earth, but would help retain Heat on the Surface of the Planet. The Little Ice Age could have been a forewarning of future events, as severely dirty human practice created heavy Greenhouse Gas emissions shortly after the congregation of most of humanity in urban areas. There was a massive reversion back to rural settings, plus a massive transfer of population in exploratory settlement after the Little Ice Age; all with a reduction of Greenhouse Gas concentrations. Could the Scientists be Right about Greenhouse Gases, but Wrong about their impact?
One can attest that We are releasing far more Greenhouse Gases today than were being released before the Little Ice Age, but the geographic spread of those Gases are much greater today, while humanity has changed the Surface absorption capacities of the land from the Period prior to the Little Ice Age. Sunlight heats far more ground, concrete, stone, and fresh water today, rather than the Plant life it replaced. This means that the Days are much hotter, and the Nights cooler. I have not checked, but I suspect that concentrated human habitation produces greater Cloud cover; what happens under a permanently cloudy day? Do I believe what I have written–No! Do I doubt what I have written–equally No!. lgl
The Scene is unrealistic, or is it? There would be a Warming Period (let’s say 200 years) before an adverse effect from the Greenhouse Gases, where these Gases would not reflect sufficient Sunlight from the Earth, but would help retain Heat on the Surface of the Planet. The Little Ice Age could have been a forewarning of future events, as severely dirty human practice created heavy Greenhouse Gas emissions shortly after the congregation of most of humanity in urban areas. There was a massive reversion back to rural settings, plus a massive transfer of population in exploratory settlement after the Little Ice Age; all with a reduction of Greenhouse Gas concentrations. Could the Scientists be Right about Greenhouse Gases, but Wrong about their impact?
One can attest that We are releasing far more Greenhouse Gases today than were being released before the Little Ice Age, but the geographic spread of those Gases are much greater today, while humanity has changed the Surface absorption capacities of the land from the Period prior to the Little Ice Age. Sunlight heats far more ground, concrete, stone, and fresh water today, rather than the Plant life it replaced. This means that the Days are much hotter, and the Nights cooler. I have not checked, but I suspect that concentrated human habitation produces greater Cloud cover; what happens under a permanently cloudy day? Do I believe what I have written–No! Do I doubt what I have written–equally No!. lgl
Biotech, genetic defect of federal government, and tranching
The World is going Biotech, and the Reception is similar to the entire issue of Grafting a century earlier. I am not becoming an advocate for the Biotech industry, now that I am trying to explain the benefits and hazards of the Process. Mutations are common in all Living Tissue, and abominations are equally generous. I once suggested, and was highly criticized by the medical community, that there were 190,000 mutations per million human births every generation, and 99.99% of all such mutations were failures which did not transmit to following generations. Non-successful mutations do not make the Cut in fertility. Medicine’s greatest fear resides in the threat that direct Cancer will learn to genetically transfer. Biotech brings suggestible preventions of these types of fear, as well as creating such fears. I take the Doomsayer position, and claim it does not matter; a massive Pandemic will get Us anyway!
I received this article by way of Dean Baker. I agree with the article, and suggest that the federal government will always be too slow out of the Gate to moderate economic policy successfully. I disagree with Dean’s own assessment somewhat, thinking that bubbles do not affect Households’ economic reaction too heavily; and if they actually do, then Households must learn to cancel temporary Windfall Gains from their purchase patterns. It is a question of proper economic education and practice.
I picked this article, not because it is of very much interest to Anyone, but because it explains the extreme Sweating coming out of the pores of the high-ranked financial market. They bought heavily in the high-Risk market because of the high Profits involved, with equity tranches seeming to protect against loss, as long as the greatest majority of the Mortgage field were completed. Now, they are highly suspicious that an endemic Mortgage failure will occur, where no tranche can distribute the losses through the Profits at a gainful rate. They are looking to dump the tranches, but find no market for them. They are feeling like I do this morning. lgl
I received this article by way of Dean Baker. I agree with the article, and suggest that the federal government will always be too slow out of the Gate to moderate economic policy successfully. I disagree with Dean’s own assessment somewhat, thinking that bubbles do not affect Households’ economic reaction too heavily; and if they actually do, then Households must learn to cancel temporary Windfall Gains from their purchase patterns. It is a question of proper economic education and practice.
I picked this article, not because it is of very much interest to Anyone, but because it explains the extreme Sweating coming out of the pores of the high-ranked financial market. They bought heavily in the high-Risk market because of the high Profits involved, with equity tranches seeming to protect against loss, as long as the greatest majority of the Mortgage field were completed. Now, they are highly suspicious that an endemic Mortgage failure will occur, where no tranche can distribute the losses through the Profits at a gainful rate. They are looking to dump the tranches, but find no market for them. They are feeling like I do this morning. lgl
Wednesday, February 13, 2008
Outline Form
The CBO agrees with Greg Mankiw and myself, I choosing Greg’s rather than the Director’s blog because it is better organized. The trouble is that every time Someone puts anything in outline form, I think I have to do something like it. Most will have heard a great deal of this stuff previously, but I am trying to get a Pavlovian reaction here.
1) The Carbon Tax is a Tax, not a Commandment from Heaven. People and Business can burn whatever Carbon they need to burn, and have a definite concept of the total Cost. A Cap-n-Trade adds Cost to Carbon combustion, not solely through the Permit Tax and Energy Cost, but also through the usury Costs of the artificial market set up, where Speculation and Holding positions can be expected to add Cost.
2) Startup operations for new business and industry would always first need to access the Spot market for Permits, establishing a relative Permit Demand before Permit authorities recognize their need for Permits. This could raise Startup Costs by as much as 15%.
3) Consumers would have to pay for either Carbon Tax or Cap-n-trade, there is no doubt about this element. The Carbon Tax, though, will raise Government revenues, thereby canceling potential Tax increases elsewhere. Cap-n-trade Proponents say Government revenue would be raised by Carbon Permits as well, but it is a far more insecure revenue; over time, the gap between Permit purchase price and Spot Market price for Permits will widen to approx. 2.25 times the Inflation rate in Percentage terms (don’t ask for those numbers, as I even confuse myself), before entering into the Speculative phase.
4) Governing authorities will continually be burdened by Business lobbying efforts to issue more Carbon Permits, and at cheaper Price; added to by Public demand for creation of Jobs. Nobody is likely to lobby for a higher Carbon Tax, and authorities will enjoy a respite, until such time as it is evident a higher Carbon tax need be imposed. lgl
1) The Carbon Tax is a Tax, not a Commandment from Heaven. People and Business can burn whatever Carbon they need to burn, and have a definite concept of the total Cost. A Cap-n-Trade adds Cost to Carbon combustion, not solely through the Permit Tax and Energy Cost, but also through the usury Costs of the artificial market set up, where Speculation and Holding positions can be expected to add Cost.
2) Startup operations for new business and industry would always first need to access the Spot market for Permits, establishing a relative Permit Demand before Permit authorities recognize their need for Permits. This could raise Startup Costs by as much as 15%.
3) Consumers would have to pay for either Carbon Tax or Cap-n-trade, there is no doubt about this element. The Carbon Tax, though, will raise Government revenues, thereby canceling potential Tax increases elsewhere. Cap-n-trade Proponents say Government revenue would be raised by Carbon Permits as well, but it is a far more insecure revenue; over time, the gap between Permit purchase price and Spot Market price for Permits will widen to approx. 2.25 times the Inflation rate in Percentage terms (don’t ask for those numbers, as I even confuse myself), before entering into the Speculative phase.
4) Governing authorities will continually be burdened by Business lobbying efforts to issue more Carbon Permits, and at cheaper Price; added to by Public demand for creation of Jobs. Nobody is likely to lobby for a higher Carbon Tax, and authorities will enjoy a respite, until such time as it is evident a higher Carbon tax need be imposed. lgl
What is Wrong
Boutique creations and looking for sure political polling at Intrade. Does there seem to be a form of schizophrenia within the American fabric? We prefer to buy Tap water at $1/glass, rather than bottled water at a probable $2/bottle, and appear to be ‘sheik’ in the decision. We want the ‘bragging rights’ to honestly claiming We have won a bet on Intrade, only for a potential loss of $10. Is this how modern fortunes are made, by finding captivating methods to intrigue the American psyche? Could this mean that We must invest the American Public with Toys to play with?
I have a friend who has made a fortune from Wheat recently. How did he do it? By the same mechanism he has used for thirty years–simple farming. The Answer can be asked: When did Markets develop too much volatility to effectively distribute Product? The Culprit might be the overpopulation of the World, but this is a condition which has been with Us for decades. I think the real onus belongs to the Hedge traders, who altered Speculation into a institutional framework. Speculation left the realm of Betting, and entered the arena of automatic Buying and Selling, based upon mathematical models. The Hedge traders planned on making their fortunes by automatic manipulation of the Markets, but it got out of hand, and Windfall Profits have drifted to lucky Players based solely upon Position, and costs Everyone including the Hedge Traders. We may have to design Market structures eventually to limit such forms of mechanical Trading.
Here is an article designed to produce exactly the Result desired. The Fed has published a survey which says Economists believe there is a 47% chance there will be a Recession. Okay, fine! Business personnel read the article, and potentially change their Purchase policies to batten down their houses for a recession. What happens to the 53% Chance that there will not be a Recession? Economists, and especially the Fed, should change their Tune since the Stimulus package has already been passed; a Package which I believe has only value in inflationary pressure. I wish some responsible organizations were more responsible in their distribution of information. lgl
I have a friend who has made a fortune from Wheat recently. How did he do it? By the same mechanism he has used for thirty years–simple farming. The Answer can be asked: When did Markets develop too much volatility to effectively distribute Product? The Culprit might be the overpopulation of the World, but this is a condition which has been with Us for decades. I think the real onus belongs to the Hedge traders, who altered Speculation into a institutional framework. Speculation left the realm of Betting, and entered the arena of automatic Buying and Selling, based upon mathematical models. The Hedge traders planned on making their fortunes by automatic manipulation of the Markets, but it got out of hand, and Windfall Profits have drifted to lucky Players based solely upon Position, and costs Everyone including the Hedge Traders. We may have to design Market structures eventually to limit such forms of mechanical Trading.
Here is an article designed to produce exactly the Result desired. The Fed has published a survey which says Economists believe there is a 47% chance there will be a Recession. Okay, fine! Business personnel read the article, and potentially change their Purchase policies to batten down their houses for a recession. What happens to the 53% Chance that there will not be a Recession? Economists, and especially the Fed, should change their Tune since the Stimulus package has already been passed; a Package which I believe has only value in inflationary pressure. I wish some responsible organizations were more responsible in their distribution of information. lgl
Tuesday, February 12, 2008
The Old Rehash
I read this Piece by Greg Mankiw, and wonder about many things. I read this effort by knzn and can understand his desire to maintain the potential of Poor people to higher Income. PGL at Angry Bear sounds too angry, and takes the Argument far afield, though it must be admitted in a quite cognizant manner. They all make valid Points, but I could make some comments, which could possibly distort all the arguments, hopefully not in any adverse way.
Greg Mankiw makes the argument that one treats leisure as a normal Good, though I ask if One can make that simple proposal. There are adverse effects to leisure either way, too much or too little are both bad. There are several semi-successful techniques to avoid too little leisure, most centered around a Love Affair with your Work. Too much leisure is not as accomplished in being circumvented. Most Efforts fail from either jaded boredom, or a lack of wealth to exploit the leisure in a meaningful manner. The only truly successful removal of excess leisure is occupation, which interesting enough, happens to repel any need for lower marginal Tax rates on higher Incomes. The Case can even be made that lower marginal Tax rates have impact only upon a range of Income extending from $60K-$95k in Our poor economy today; the only real Grouping of Income affected by the Tax rates. Below $60k per year, Income Earners will still pursue added labor to increase their Income, even if it is heavily taxed; all efforts heavily invested with the need to maintain their overall employment. Above $95k per year, only driven Individuals like Obama, Clinton, or McCain will work harder than a normal Workweek, if they work at all; this dependent upon facility to maintain their Income without effort.
Knzn suffers from the delusion that his version of a Safety net is not a Safety net, and would not have an adverse effect on the Work ethic. Poor people have to be convinced to jump for the good Occupations (actually, I agree with him because We need to fill all Jobs; still, I must present the Conservative argument), which can insure that they can permanently join the higher Incomes. PGL’s descent to the Dooh Nibor distortion to criticize the marginal tax rate debates is more Act of Faith than description of policy. I will finish by saying Greg would be seriously disappointed if the Concept of Externalities were extended to the marginal tax rates debate; of course, this is the standard old Progressive Tax debate. lgl
Greg Mankiw makes the argument that one treats leisure as a normal Good, though I ask if One can make that simple proposal. There are adverse effects to leisure either way, too much or too little are both bad. There are several semi-successful techniques to avoid too little leisure, most centered around a Love Affair with your Work. Too much leisure is not as accomplished in being circumvented. Most Efforts fail from either jaded boredom, or a lack of wealth to exploit the leisure in a meaningful manner. The only truly successful removal of excess leisure is occupation, which interesting enough, happens to repel any need for lower marginal Tax rates on higher Incomes. The Case can even be made that lower marginal Tax rates have impact only upon a range of Income extending from $60K-$95k in Our poor economy today; the only real Grouping of Income affected by the Tax rates. Below $60k per year, Income Earners will still pursue added labor to increase their Income, even if it is heavily taxed; all efforts heavily invested with the need to maintain their overall employment. Above $95k per year, only driven Individuals like Obama, Clinton, or McCain will work harder than a normal Workweek, if they work at all; this dependent upon facility to maintain their Income without effort.
Knzn suffers from the delusion that his version of a Safety net is not a Safety net, and would not have an adverse effect on the Work ethic. Poor people have to be convinced to jump for the good Occupations (actually, I agree with him because We need to fill all Jobs; still, I must present the Conservative argument), which can insure that they can permanently join the higher Incomes. PGL’s descent to the Dooh Nibor distortion to criticize the marginal tax rate debates is more Act of Faith than description of policy. I will finish by saying Greg would be seriously disappointed if the Concept of Externalities were extended to the marginal tax rates debate; of course, this is the standard old Progressive Tax debate. lgl
We are getting too damned Old!
The poor hedge fund managers need sympathy, as their $1.9 trillion bet against the market did not show a Profit in January. It appears that math models only work well when the Markets are ascending, where slow-moving Stocks can be immediately replaced by quicker Stocks; the trouble coming in that the faster moving Stocks are heading downward. Old Operators on Wall Street could explain this is the traditional bent in the Markets: they either move too slow to define a Trend, or they move too rapidly to take advantage of the Swing. I once tried to explain to an Individual that hedge funds were like flipping a Coin; the Odds would eventually even out. He did not wish to listen to me at the time, as I sounded somewhat too convincing.
The White House agrees with me on the proposition that there will be no Recession this year. The only real difference is that I actually believe it, while they don’t. The rationales behind Recessions have being altering from the traditional causation through the last several Recessionary periods. The old-style models do not encompass or explain the modern expanded economies. The Housing sector does not play a significant Determinant under the force of a programmed 401k system. Loss of funds from bad Mortgages is systematically replaced by a flow of funds coming to escape Taxes by Tax-allowed investments working with the Mortgage Tax Credit. The consistent flow of Money not only buoys the Markets, but bring the exchange Credit to fuel Production even when the Retail segment cash flow shrinks; i.e., Business can avoid constriction through Recapitalization and potential expansion into new Retail outlets. I believe that there will be zero Growth over the year, but doubt there will be little Contraction.
What I believe will happen this Year can be explained as Business will firm out their foundations by keying in Production and Distribution to maintain a consistent flow of Product. This entails not only Streamlining, but also expansion into new markets for their Product. It is a Question of Retail and Distribution catching up with advanced Production. It will be exploratory Marketing, though it should be successful, even if it holds little expansionary capacity. I believe that the American economy will find it much easier to accept zero Growth by the end of the Year because of this flow, a telling element due to the lack of Production expansion potential in the American economy; the American economy constrained by high Resource Costs, and an Ageing Consumption population as well as an Ageing labor force. lgl
The White House agrees with me on the proposition that there will be no Recession this year. The only real difference is that I actually believe it, while they don’t. The rationales behind Recessions have being altering from the traditional causation through the last several Recessionary periods. The old-style models do not encompass or explain the modern expanded economies. The Housing sector does not play a significant Determinant under the force of a programmed 401k system. Loss of funds from bad Mortgages is systematically replaced by a flow of funds coming to escape Taxes by Tax-allowed investments working with the Mortgage Tax Credit. The consistent flow of Money not only buoys the Markets, but bring the exchange Credit to fuel Production even when the Retail segment cash flow shrinks; i.e., Business can avoid constriction through Recapitalization and potential expansion into new Retail outlets. I believe that there will be zero Growth over the year, but doubt there will be little Contraction.
What I believe will happen this Year can be explained as Business will firm out their foundations by keying in Production and Distribution to maintain a consistent flow of Product. This entails not only Streamlining, but also expansion into new markets for their Product. It is a Question of Retail and Distribution catching up with advanced Production. It will be exploratory Marketing, though it should be successful, even if it holds little expansionary capacity. I believe that the American economy will find it much easier to accept zero Growth by the end of the Year because of this flow, a telling element due to the lack of Production expansion potential in the American economy; the American economy constrained by high Resource Costs, and an Ageing Consumption population as well as an Ageing labor force. lgl
Monday, February 11, 2008
Feelings--Nothing but Feelings
It is all a Question of what "Is" is. I agree with Strauss-Kahn of the IMF that the American economy will slow, but disagree with the thought that it will be long and sustained. A Slowdown which is a Downscale will be a permanent thing, but a Slowdown involving sharp cutbacks will be nonexistent. People who have a Job will likely continue going to Work, though their Employers might rotate. There might even be an increase in Part-Time labor, and such attained without a substantial Layoff of permanent labor. I can even see Opportunity for creation of additional new Temporary Labor organizations–thinking this Service industry may even increase somewhere up to 14% of its current load; Business desirous of location of Temp skilled labor. The pace of American activity will slow, but the volume of productivity may change little, as American business firms its foundations.
The Technology sector is finding a reduction in Growth projections, but still finding a sustained market, which is good indication of the temperament of overall business. Forrester Research expects a 2.8% growth in information technology this Year, down from their 4.6% prediction in December. The Crab Orders (long-term Upgrade Contracts) are firmly in place, and Retail Outlets are continuing their purchase pattern; Everyone hoping that Turnover rates will continue in Retail.
I continue to read this morning, and find that Paul Krugman filed a Post which a basic better rendition of my first paragraph. I have a basic contention with him in his Statement that the high Inflation of the 70s and 80s was caused by the high Interest rates of the Fed. The high Inflation of the era was incited by deficit Government Spending, where Government induced a massive resource inflation by their purchase pattern. Understand that the Housing sector has never come close to absorbing the GDP percentages as produced by the federal Government’s 20% of GDP. Heavier Government Spending has always incited a subsidiary round of Inflation, while debate still continues as to the exact impact of high Interest rates; they obviously can become so high as to impede economic performance, but where is that exact level. I believe that any Interest rate below 8% can be endured by normal business practice without itself being Inflationary pressure. I do know that a Government deficit spending increase of 3% of GDP will always bring inbreed Inflation. lgl
The Technology sector is finding a reduction in Growth projections, but still finding a sustained market, which is good indication of the temperament of overall business. Forrester Research expects a 2.8% growth in information technology this Year, down from their 4.6% prediction in December. The Crab Orders (long-term Upgrade Contracts) are firmly in place, and Retail Outlets are continuing their purchase pattern; Everyone hoping that Turnover rates will continue in Retail.
I continue to read this morning, and find that Paul Krugman filed a Post which a basic better rendition of my first paragraph. I have a basic contention with him in his Statement that the high Inflation of the 70s and 80s was caused by the high Interest rates of the Fed. The high Inflation of the era was incited by deficit Government Spending, where Government induced a massive resource inflation by their purchase pattern. Understand that the Housing sector has never come close to absorbing the GDP percentages as produced by the federal Government’s 20% of GDP. Heavier Government Spending has always incited a subsidiary round of Inflation, while debate still continues as to the exact impact of high Interest rates; they obviously can become so high as to impede economic performance, but where is that exact level. I believe that any Interest rate below 8% can be endured by normal business practice without itself being Inflationary pressure. I do know that a Government deficit spending increase of 3% of GDP will always bring inbreed Inflation. lgl
Sunday, February 10, 2008
The Washington Two-Step
Can you dance? One needs to when One thinks to operate in the Beltway. Bush criticizes Congressional earmarks, and Congress complains that the Bush administration uses as many earmarks; they are only better hidden in the Budget. The American Taxpayers must face the fact that both assertions are quite correct. Bush gives Us our first $3 trillion Budget, with a hoped Deficit of only $400+ billion. Congress, left to their devices, would traditionally cut about 4% of the Budget, and add on an accruemental 11% to the proposed Budget. Both will claim the fault lies with the other Branch of Government, and rigorous pursuit of their own agendas would result in fiscal conservatism. A Trade Secret: There has not been a fiscal Conservative in Washington since the Kennedy inauguration.
How could Anyone possibly control the Budget which is so large that it will not even be commented on by Experts on the Budget, once they leave their specialized areas? There is only one method which will work, and then to accomplish anything requires the passage of a Constitutional amendment. Here is the context of the amendment, which must eventually be passed:
Congress must set the level of Government Expenditures each Budget Year with the receipt of the Presidential Budget Request for the Year. They cannot entertain any other measure before it until this level is set by law–through passage by Congress and signature by President. Upon passage of the Budget Limit, Congress and President can determine what Expenditures it would provide for the Year, with proper Congressional passage and Presidential signature. Under no circumstances can federal expenditures exceed the Budget Limit, except in the Case of a passed Declaration of War, and then such Budget excess will be authorized for only one Period of Six months duration.
Does it sound Draconian? It is meant to be harsh and disciplinary. Elements of Variable Cost can be accounted to a set-aside Fund, called possibly the Acts of God Fund (Constitutional issue with Separation of Church and State), could provide the requisite funds for unexpected Costs; but only within the greater Budget. Will it work? Who knows and Who cares; it will surely embarrass the Politicians, at least provisioning Entertainment to the masses. lgl
How could Anyone possibly control the Budget which is so large that it will not even be commented on by Experts on the Budget, once they leave their specialized areas? There is only one method which will work, and then to accomplish anything requires the passage of a Constitutional amendment. Here is the context of the amendment, which must eventually be passed:
Congress must set the level of Government Expenditures each Budget Year with the receipt of the Presidential Budget Request for the Year. They cannot entertain any other measure before it until this level is set by law–through passage by Congress and signature by President. Upon passage of the Budget Limit, Congress and President can determine what Expenditures it would provide for the Year, with proper Congressional passage and Presidential signature. Under no circumstances can federal expenditures exceed the Budget Limit, except in the Case of a passed Declaration of War, and then such Budget excess will be authorized for only one Period of Six months duration.
Does it sound Draconian? It is meant to be harsh and disciplinary. Elements of Variable Cost can be accounted to a set-aside Fund, called possibly the Acts of God Fund (Constitutional issue with Separation of Church and State), could provide the requisite funds for unexpected Costs; but only within the greater Budget. Will it work? Who knows and Who cares; it will surely embarrass the Politicians, at least provisioning Entertainment to the masses. lgl
Saturday, February 09, 2008
The New Business Format
Tax Reform resounds as an absolutely necessary measure. This article offers a fair presentation of the growing debate, at least as seen through the politicized lens of Washington D.C. There are other Viewpoints, and Some of these need consideration. I will not try to discuss these Viewpoints here, but I will attempt to approach the Tax Problem from a comparison angle, and hope to obtain support for new initiatives.
American Households are, if anything, worse off since the origination of the last Round of major Tax breaks. Tax Savings from the new Tax Breaks do not quite equal the rise in Energy Costs to American Households since their inception. This is not actually incidental, as I have already gotten a Letter from my Vehicle maintenance unit, advising a list of high-Cost maintenance should be implemented immediately; guess what, the total of listed Charges equals about $450, the Letter mailed immediately upon it being apparent that Taxpayers would get the Stimulus rebate of $600, marking the most expensive maintenance efforts. This is the first rule of Tax Cuts: Business will expand their Prices and Services to absorb all realizable Tax reductions.
It highlights a second reality of all Tax measures. Lobbyist efforts will always insure that Business is not harmed by the new Taxation measures. Households will get at most some $1200 from the Stimulus Package, while Business will get another $100,000 Write-off on their Capital outlays. Translation of the new Write-off could be thought: If you buy it, the Government will pay for the first $100,000. The measure has a slight detrimental effect of delaying actual Capital investment, as Business stage large Capital outlays over a number of years, to fully maximize the Tax break. Case in Point: A business needs $1 million in Capital refurbishment(with a new $250,000 Write-off limit), but it is not Time determinant, so the Business spreads the Capitalization over four years; allowing the Government to absorb the Capital Cost. Many would claim that Most Capital Investment is Time determinant, but a probable 70% of all Small Business can utilize up to 80% of the total value of the Tax break.
Almost all Business personnel will acclaim that these Tax Breaks must be mandated to remove undesirable aspects of Business Risk. This is not true, and Business delinquency is also protected by transference of Income across Tax Years. Business people can even get Tax Rebates to recoup losses, so as to continue future Business operations; either Capitalization of the old business, or creation Capital for a new Business. The ordinary Taxpayer faces discrimination from the current Tax laws, and must endure the real Risk of higher Taxation, simply because of their failure to start a Profits-Write-off enterprise. lgl
American Households are, if anything, worse off since the origination of the last Round of major Tax breaks. Tax Savings from the new Tax Breaks do not quite equal the rise in Energy Costs to American Households since their inception. This is not actually incidental, as I have already gotten a Letter from my Vehicle maintenance unit, advising a list of high-Cost maintenance should be implemented immediately; guess what, the total of listed Charges equals about $450, the Letter mailed immediately upon it being apparent that Taxpayers would get the Stimulus rebate of $600, marking the most expensive maintenance efforts. This is the first rule of Tax Cuts: Business will expand their Prices and Services to absorb all realizable Tax reductions.
It highlights a second reality of all Tax measures. Lobbyist efforts will always insure that Business is not harmed by the new Taxation measures. Households will get at most some $1200 from the Stimulus Package, while Business will get another $100,000 Write-off on their Capital outlays. Translation of the new Write-off could be thought: If you buy it, the Government will pay for the first $100,000. The measure has a slight detrimental effect of delaying actual Capital investment, as Business stage large Capital outlays over a number of years, to fully maximize the Tax break. Case in Point: A business needs $1 million in Capital refurbishment(with a new $250,000 Write-off limit), but it is not Time determinant, so the Business spreads the Capitalization over four years; allowing the Government to absorb the Capital Cost. Many would claim that Most Capital Investment is Time determinant, but a probable 70% of all Small Business can utilize up to 80% of the total value of the Tax break.
Almost all Business personnel will acclaim that these Tax Breaks must be mandated to remove undesirable aspects of Business Risk. This is not true, and Business delinquency is also protected by transference of Income across Tax Years. Business people can even get Tax Rebates to recoup losses, so as to continue future Business operations; either Capitalization of the old business, or creation Capital for a new Business. The ordinary Taxpayer faces discrimination from the current Tax laws, and must endure the real Risk of higher Taxation, simply because of their failure to start a Profits-Write-off enterprise. lgl
Friday, February 08, 2008
The Modern Business Environment
Biofuels are not Our friend, so says a new group of Scientists. Farmers love the $5/bushel Corn, but shortages of animal Feed is raising Food prices, and destruction of native habitat will release far more Greenhouse Gas than will be saved by use of biofuels; the article cites 93 times, but which is a highly suspect number, Crops normally absorbing about half the CO2 of simple pastureland, which sucks up about 25% of the CO2 of forest. This is not to say that agricultural farming of Energy will pay in the Greenhouse reduction program, but extreme numbers do not help in the argument. I still think the development of a liquid Plastic explosive, which will explode only with the introduction of a electrical charge is the best Bet; the added milling Costs recouped by greater combustion of the fuel, and that the proposed liquid could serve as its own lubricant.
Gazprom again has to apply pressure on the Ukraine by threats to cut Natural Gas shipments, in order to receive $1.5 billion in unpaid Supply to the country. The Ukraine is the transit pipeline for Gazprom supply to western European customers, and the nation will siphon off any Natural Gas necessary for domestic use; an unamusing form of Price Controls which neither the Company or its Western customers appreciate. We may be seeing the prelude to the first of the Gas Wars.
Exxon Mobil has been moving through the Courts to stop Venezuela from selling some $12 billion worth of Venezuelan Oil assets on the World Market. Hugo Chavez is running out of Cash, and he wants to spend it now. One wonders if he would actually get full value from such Sales, given his advocacy of nationalization of industries. His policy seems to be Nationalize, regain the assets, then resale; after a polite interval, again Nationalize and resale. This policy incites some hesitation among the World Business leadership, especially as Chavez shows no indication of paying Government Expenditures by any real form of Taxation. Doesn’t this sound like the subprime Mortgage crisis somehow–writing Mortgages, selling bundled Mortgages, declaring Mortgages are worthless, writing more Mortgages, again bundling Mortgages? lgl
Gazprom again has to apply pressure on the Ukraine by threats to cut Natural Gas shipments, in order to receive $1.5 billion in unpaid Supply to the country. The Ukraine is the transit pipeline for Gazprom supply to western European customers, and the nation will siphon off any Natural Gas necessary for domestic use; an unamusing form of Price Controls which neither the Company or its Western customers appreciate. We may be seeing the prelude to the first of the Gas Wars.
Exxon Mobil has been moving through the Courts to stop Venezuela from selling some $12 billion worth of Venezuelan Oil assets on the World Market. Hugo Chavez is running out of Cash, and he wants to spend it now. One wonders if he would actually get full value from such Sales, given his advocacy of nationalization of industries. His policy seems to be Nationalize, regain the assets, then resale; after a polite interval, again Nationalize and resale. This policy incites some hesitation among the World Business leadership, especially as Chavez shows no indication of paying Government Expenditures by any real form of Taxation. Doesn’t this sound like the subprime Mortgage crisis somehow–writing Mortgages, selling bundled Mortgages, declaring Mortgages are worthless, writing more Mortgages, again bundling Mortgages? lgl
Thursday, February 07, 2008
Real Program Costs
Some rapid Thoughts on a very thoughtful Post by Cactus at Angry Bear. He is correct in believing there is no value to a Government running at deficit, as there is for a Business; he mentions Tax advantages, though I could possibly supply the value of paying Operating Costs by shipping Capital Costs forward while leaving financial avenue for Profit-aggregating Short-term opportunities. A government cannot achieve this End, as all Government activity must pay the real-time Cost of resource utilization, from a periodic limitation of potential venues. Explain in English, Please! It simply means that Government must forestall Resource use by Taxation, or Government activity will inflate Resource Costs, said resource inflation persistent until such time as those Resources are saved from future Consumption by adequate Taxation of the Private Sector; a function clearly understandable in a fixed-rate Production cycle, even when it has an expanding Production Peak.
Cactus describes the ease of running up Government debt, all of which is true. He might has missed the greatest danger of Debt accumulation, which consists in Sector construction tied to the Government Spending. A good Case in Point can be the existence of the Medicare and Medicaid programs. I would first like to say that I advocate Universal Health Care, but most decidedly not with the current Health Care network construction. Back to Medicare and Medicaid, Specific Services are paid utilizing Payscales set by the Private Sector industry; an industry which insists on an intense Profitability and high Wage scales. We wind up with the situation that Poor people pay wealthy labor at Payscales set to maximize Profit ratios geared to extended Care for wealthy people; it all accomplished by redress to a rich benefactor–Government. The Situation is worsened by industry demands for limitation on Patient levels; Doctors and Clinics limiting their Patient load, and maximizing their Profits by artificial Check-up and Check-back Consultations. There is no doubt Americans would still be paying about 8% of GDP for health care today, as they were in 1965, but for the advent of Medicare and Medicaid, with comparable levels of health insurance premiums.
A secondary Sector construction is the military/industrial complex. We are going to be paying over $1 trillion this year, if Bush has his way, in military appropriations to combat Opponents who do not technically exist; while fighting two wars with Operational equipment and trained Personnel insufficient for the task. What does this tell Us? We have no Opponent to fight a War using the advanced military Hardware We are paying so much for, while at the same time finding Ourselves incapable of fighting in the old-fashioned methods. What I am trying to articulate in the economic sense states that Government-sponsored Sector construction by rich funding will never achieve the Goals desired, develop its own momentum for personal Profitability which lobbying efforts will sustain, and Government Debt will skyrocket. lgl
Cactus describes the ease of running up Government debt, all of which is true. He might has missed the greatest danger of Debt accumulation, which consists in Sector construction tied to the Government Spending. A good Case in Point can be the existence of the Medicare and Medicaid programs. I would first like to say that I advocate Universal Health Care, but most decidedly not with the current Health Care network construction. Back to Medicare and Medicaid, Specific Services are paid utilizing Payscales set by the Private Sector industry; an industry which insists on an intense Profitability and high Wage scales. We wind up with the situation that Poor people pay wealthy labor at Payscales set to maximize Profit ratios geared to extended Care for wealthy people; it all accomplished by redress to a rich benefactor–Government. The Situation is worsened by industry demands for limitation on Patient levels; Doctors and Clinics limiting their Patient load, and maximizing their Profits by artificial Check-up and Check-back Consultations. There is no doubt Americans would still be paying about 8% of GDP for health care today, as they were in 1965, but for the advent of Medicare and Medicaid, with comparable levels of health insurance premiums.
A secondary Sector construction is the military/industrial complex. We are going to be paying over $1 trillion this year, if Bush has his way, in military appropriations to combat Opponents who do not technically exist; while fighting two wars with Operational equipment and trained Personnel insufficient for the task. What does this tell Us? We have no Opponent to fight a War using the advanced military Hardware We are paying so much for, while at the same time finding Ourselves incapable of fighting in the old-fashioned methods. What I am trying to articulate in the economic sense states that Government-sponsored Sector construction by rich funding will never achieve the Goals desired, develop its own momentum for personal Profitability which lobbying efforts will sustain, and Government Debt will skyrocket. lgl
Disturbing Signs of Hysteria
What, oh what, gave Costco an Edge? Is it actually Customers, or a huge Employee Discount? I don’t mean to be Insulting, but maybe this is a Diving competition where you need to cut the High and Low. Walmart is understandable, there being too many Stores throughout the Country, so they acquire every suppressed neighborhood; they expressing incredible luck to get the half-point gain. When is a Gain a loss, a loss? When there is a 4% Inflation rate. There is a Revisionist, outlaw Opinion which suggests that Consumers are maxed out, like their Credit Cards, and someday must adopt a declining Consumption path. I shouldn’t be so rude so early in the morning, as I have made even myself feel bad.
Industry gets a good one-Quarter shot of high Productivity growth, then complains when they don’t get those Productivity growth rates every Quarter; they start a howl about rising labor Costs. Productivity growth rose a respectable 1.6%, while labor Costs rose 3.1% for the total of 2007. Business personnel look at these numbers, and start to scream they have been betrayed by Labor. The real lack comes in New Orders–the fault of Management and Sales–and Business and Investor must realize that recent year Record Profits was the anomaly. I told these People that they should keep up their Stock buyback programs–or did I? You put in a few dozen paragraphs, and you forget the Time references.
It sounds like the Fed is out of play, and will not further reduce Interest rates. I feel a profound sense of relief, even though it affects the Markets badly. Plosser mentions that the current Fed rates, coupled with the current Inflation rate, cancel each other out; a sensible evaluation which outlines the idea that We should not lose Profits in attempts to fuel the Economy from a Macro viewpoint. I should explain this Concept within a separate Post, but I am excessively lazy, and the positional points are hard to translate. Simply think that it an attempt to rob Peter to pay Paul, whose basic fallout is to raise Consumer Credit rates–nullifying any stimulus, but making Business balance sheets look better. What We do must aid Consumers, who We are trying to woo back. lgl
Industry gets a good one-Quarter shot of high Productivity growth, then complains when they don’t get those Productivity growth rates every Quarter; they start a howl about rising labor Costs. Productivity growth rose a respectable 1.6%, while labor Costs rose 3.1% for the total of 2007. Business personnel look at these numbers, and start to scream they have been betrayed by Labor. The real lack comes in New Orders–the fault of Management and Sales–and Business and Investor must realize that recent year Record Profits was the anomaly. I told these People that they should keep up their Stock buyback programs–or did I? You put in a few dozen paragraphs, and you forget the Time references.
It sounds like the Fed is out of play, and will not further reduce Interest rates. I feel a profound sense of relief, even though it affects the Markets badly. Plosser mentions that the current Fed rates, coupled with the current Inflation rate, cancel each other out; a sensible evaluation which outlines the idea that We should not lose Profits in attempts to fuel the Economy from a Macro viewpoint. I should explain this Concept within a separate Post, but I am excessively lazy, and the positional points are hard to translate. Simply think that it an attempt to rob Peter to pay Paul, whose basic fallout is to raise Consumer Credit rates–nullifying any stimulus, but making Business balance sheets look better. What We do must aid Consumers, who We are trying to woo back. lgl
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