My Sour Note for Today

Here is a Post which leads me to contest the rest of current economic thought in the Country. Every Easing of Finance in this Country has worsened the conditions under which this Country has to operate. We are leaving the Cash in the hands of Those who are not operating in the native economy. Whether Consumer or Business personnel are spending the Dollars from the Easing, they are spending those funds on foreign product. I must take the Readers on a far distant reach here, but it is the only resolution which makes sense: Current economic policy effectively only increased the Profits of Exports, even where there is no growth in Exports. This devolves into capital concentration within the Export sectors, with a discrimination against the capitalization of domestic industry. The upshot of this directional flow insists that Prices will increase in the domestic market, while Prices in the Export markets will be suppressed. Domestic Income will face increasing Price discrimination, while American Incomes will be drained.

People ask me what Solution I would advocate for a better Recovery. I suggest the truly hated venue–higher Taxes. The one aspect of Government Spending which makes it advantageous remains the fact that the funds must be spent within the domestic economy–which means Jobs. Higher Taxes suck a great amount out of Disposable Income, leaving Tied Income relatively alone; else there are many Politicians who face worse than Hanging in effigy. This decreases the Profitability of Imports with a favoritism shown to domestic production in the long-run with their wedge pricing for profitability against set production costs. Both Government and Private Sector begin to hire domestic labor as enhanced rates, while Imports reduce to resource necessities.

I am neither a liberal Democrat, or a capitalist Republican. I dislike Government Spending in almost every case, except for infrastructure construction and mass labor projects based upon minimum wages. Readers should be able to understand the first is for the advancement of Production, the later is to spur the economy under levels of unemployment. The first actually increases the Income levels in the areas impacted, while the later raise the Household Income of the labor involved; which is almost entirely spent on Consumer Goods. I do not believe, Now or Ever, that anything can be achieved by granting Rich people even more Tax Breaks. I do believe a change in philosophy must occur before We get a rising Standard of Living. lgl

What is the Purpose?

Where are We going here? It goes back to asking about Why recessions are such a problem. The only Answer which will hold up states that recessions are bad because people lose some share of their Standard of Living. Investors are an integral part of the population which suffers from recessions, but they are not the only segment of the population which suffers from the recession. They are not even the first to suffer, as Layoffs start long before poor Profits are reported. They are not the worst to suffer as well, with Labor losing a far greater share of their total Income. They do happen to be the most organized and vocal, with the greatest swing weight to influence Government officials.

Here is the Problem: Government, especially the Fed, categorically expound that there is little Inflation. What exactly is Inflation? Some who claim that it is only a change in Prices which is higher. I would advance another definition which will be picked apart drastically as soon as it is heard: Inflation is an alteration in the stasis between Income and Pricing, where Prices increase in percentage Cost in relation to Income. Inflation is often hidden under recessionary conditions, but it remains existent. People still suffer from the percentage Cost increase of Prices, even though nominal Prices have not altered. Now We enter into the realm of QE1 and QE2. Investors love Quantitive Easing because it lowers their Investment Costs, but What does it do for the rest of the Price Structure?

We can first fairly determine that it will not lower Consumer Prices in the Short-Run as would a Business demand to raise Cash through Sales, and increase those Prices in the Intermediate and Long-Run. This means that there is assured Inflation in the future, which the Fed states is needed. Is It? One has to ask if a Recession can be defined as Over when Average Income is still below the previous Average, and Prices have continued to increase. This is a good Question to answer, but there is an even more important Question to be asked: Have not QE1 and QE2 both been designed to worsen the loss of Average Income to the advantage of a specific Class–namely, the Investors? The Fed is part of the Problem, rather than a part of the Solution under these Conditions. These are definite indications that We are on the wrong Course, when We should be designing Mass Labor Public projects. lgl

How can You Win?

I wish sometimes that Greg Mankiw sounded as intelligent in the NYTimes as he does in this Post. It is at that point of discussion where We can have an intelligent discussion on Taxes. I have always wondered Why exactly that Economists insist that Taxes are an automatic distortion of the economic optimum. How can one define that Infrastructure Cost of Production without Taxation. There are Economists who consider Economics only from the position that the sole Goal must be maximization of individual wealth. The proper scope of economics should be the social growth of the entire economy. It must include Taxation as a Production Cost, else there would be no Production of magnitude. The deadweight Cost of Taxation must be amended by the enhancement benefit of Production increase by the infrastructure construction.

Tyler Cowen believes that marginal tax rates are morally wrong. It is true that its entire basis relies on the ‘Deep Pockets’ formula of lawyers, and enjoys all the respect that our dear lawyers possess. I suggest there is a way to remove the moral hazard of marginal tax rates for Tyler, but it is one he would not enjoy; eliminate the Work-up phase of Taxation; not granting lower Tax rates to the Wealthy on lower Income earned first. It would clearly delineate the difference in taxation between alternate Income levels, and positively assert the Social demand to Tax.

I will finish with this Post from Stan Collender. One can ask Why, and I will only state that all exemptions from taxation that one finds in the law have already garnered the support necessary to pass such legislation into law. This support rarely changes under any conditions, and Reformers face this opposition anytime they attempt a serious revision in tax law. It is admitted that current tax law is patently unfair through much of its operation, but the favored groups are organized, while Reform is not; particularly in the fact that it is idealistic, but not individually rewarding. Everyone is desirous of changing some aspect of tax law; still, the chances of making the situation worse are higher than the chances of making things better. lgl

How can you talk Turkey when they only gobble?

How often do you listen to Carnival barkers? My entire study of economics leads me to suggest that only a relatively set Interest rate of around 4.25% for the Overnight rate is the only sustainable rate with a steady rate of growth for the economy; the Fed maybe having a Percentage point to play with for or against. Higher than this rate causes Business to find it impossible to get the Operating Credit to do business. Lower than this damages the ability of all Investors, not just Depositors, to get a sound rate of Return; necessary for themselves to be a full participant in the economy. Taylor wants a sliding scale when there needs to be relative constant placement of Rates, while Meyer wants to give Business money, though there is absolutely no indication that Business would ever pass it on to Others. Bernanke made a reputation on claiming the Fed of Depression years was too Static in Policy; I must accuse Ben of being too flighty in applying Policy. Time will probably show that We were all Wrong!

The Nobel Prize Commission chose again to highlight current research into the latest economic problem–Unemployment. It is not that I think the Three do not deserve it; they have performed a profound level of research; I will tell the Reader now that if they do not pursue the Tyler Cowen link, they will miss an excellent experience. I differ from the Three Prize Winners in that I do not want a kick-start to the housing markets, before there has been a massive reduction in Housing prices. The Mortgage Crisis was caused by falling Home prices, and I would not see them replaced where they would fall again under economic stress. I personally would reintroduce a Selective Service Draft solely for military training, and run up to two million kids through it; it would build up necessary Reserves, and offer Trainees some Concept of military service other than the common liberal contempt. Such Thinking would present actual Household Income to a vast number of currently unemployed Youth.

Business and Politics will never truly invest in Labor, though they spend huge amounts at every other idiot thing. Millions could be employed and learn vital labor skills cleaning up and beautifying our environment. But Business and Politician will not consider anything which does not make some Business sector widely-inflated Profits. We have lost the sense of Community which got Us through the Great Depression. The attitude of the Criminals of the 1930s have migrated to the Business mentality. Politicians should learn that they can Vote for something, even when their Contributors do not gain from it; all it takes is to be the Right Thing to do. We will not likely see such behavior in our lifetime, though We might see the downfall of our Way of Life. lgl

Some of the Reason Why I am disliked!

I do not want to sound like Sour Grapes here, but Greg Mankiw breaks my heart over his oppression as a Taxpayer. He states that Taxes destroy his incentive to make more money. I say that if my desires were fulfilled, and the Tax Cuts of 2001-03 were completely withdrawn, then he would be working much harder. I will go on to ask him How Much he saves from these Tax Cuts before he hits the big $250k? While I feel terrible for his kids, how level is the Playing Field if they get through College without debt, when the rest of the Student Body had to borrow a quarter-million apiece to get the same degree? I should suggest that he also remonstrate with his kids not to purchase their housing based upon the level of mortgage they can get, or their inheritance will disappear without substantive gain. I will finish with the Comment that he may one day appreciate that increased Medicare taxation.

It seems that I must discuss Malpractice in the health care industry today. What amazes me about Malpractice arguments lies in their refusal to separate between Corrective Damages and Putative Damages. I first know for a fact that Insurance companies will not support malpractice reform if premium rates for malpractice are limited by the same legislation. I know that Corrective Damages will still incur, whether paid by malpractice Insurer or Government entity. I myself do not like the tort system, and would have every lawyer’s fees limited in magnitude for such Cases; I would suggest a maximum of $50k through completion of the litigation. I would insist that the Insurer pay all litigation Costs of the Plaintiff if found financially liable in the Case. I would follow with the provision that the lawyers are solely liable for the Plaintiff litigation Costs if they lose; this to forestall spurious claims. The entire medical Cost of any Injury will fall back upon Government programs if the Insurer can escape Claims, so the issue of Corrective Damages should be decided above and beyond Putative Damages. I think I can hear the malpractice Costs shrinking already.

I will finish with this attraction. I personally like the Japanese system of medicine, where Doctors own their own small hospitals, must hire their own staff, and receive Government support based upon their successful provision of health care. It is clear that there is too much Cash in American health care, that medical Patents are an expensive Joke, and medical Insurers make too much Money denying claims–which have to be paid by alternate (read Government) means. Medicare should not be an arena where Everyone can make a 20% Profit on their Prostitution. I would still like to witness Doctors switched to Government Employee status after filing over $80k/year in Wage claims from the Government–Local, State, and Federal lumped together to derive the amount. Modern hospitals are super-sweet hotel rooms with fine Service, where We need the potential for massive bed space. I would pay hospitals a flat rate for occupied beds paid by the Government, and a rate which will increase with the number of beds actually filled. Hospitals will scream if they get only say $500/day per Government-paid Patient, but I equally believe they will find a method to make a Profit at that provision. It will take a Bully to change the health care system, not a bunch of lobbyist-controlled less than Public Servants. lgl

Honesty and Deception

I do not think most of my Readers possess the economic technique sufficient to understand all of this Post–I don’t! The graphing of moral hazard leaves something to be desired, counting as it does a constant Public reaction under financial risk. This variable reaction can alter the shifts in MR and MC, as both MR1 and MC1 are actually a sonic wave pattern. Government policy can also be perceived as a wave pattern as well, with sudden shifts in temperament. Ex-ante constraints will always be suppressed by the financial industry itself, and not rigorously enforced by government regulators under constant pressure. Mark Thoma does possibly not realize it, but he has proposed the only solution to apply constraint to shadow banking. This cannot be Insurance, and cannot be in-line failures, and must not be firm failures. The only Answer left is immediate Takeover of all shadow banking firms upon loss of liquidity by Government regulators; assets never to be returned until all liabilities are paid, and Government Costs are subtracted. Mark will contest my implying that Insurance is impossible, but it remains so when the amounts at risk cannot be formulated at any level than that of the shadow bankers’ desire to draw percentage Profits from the deals.

I do not agree with Mish at all on this one, but it stands as more coherent than the entirety of the Right. Here is my stance: Higher Taxes will not further slow the economy, or will it impede further Gains in the Private sector; the high-paid, heavily-pensioned Government Workers should go, I stand with Mike on this, but massive employment of Workers at the Minimum Wage level will produce much needed Income for Households especially if it covered by health care insurance bought by the Government as bargain rates; Business needs no further re-balancing of Spreadsheets, myself firmly opposed to Business welfare, they need to bear normal Risk in order to earn those Profits they acclaim; and finally, there is real need to turn the health industry semi-Public through a Surtax on all Profits above 10% annually to pay for Welfare health Costs which are unfunded. The problems of Cost Over-runs on public projects should insist that Business absorb the same Cost as the Public; on Public projects, Business need a tax equal to the percentage Over-run incurred mandated and collected–this to assure that the Real Costs are integrated into the Bids.

I will not go further Today, imaging that most Readers will be like me, and bored to Death to all the Solutions out there to a limited number of Problems; none of which is likely to work. I would like to create a mandatory Political Court, where every official and elected person must endure periodically; the entire idea is that the individual must pay a $2500 Fine for every Lie or Misrepresentation he has made Publicly, after which he did not fulfill the implied Promise made to the Public. Americans can take a ‘No Comment’ or Bad News, but We tire of the bull—. No one thinks like myself, though, because of the huge increase of Unemployment which would probably occur. lgl

It's not Bad, It's not Bad, awh Damn!

There is a ton of material on the BLS Job Report today, but this quick Post might express it better than windier Posts. Mark Thoma would desire more quantitative easing, but I cannot find any value in a policy so obviously failed. The Fed simply does not have the pull to turn the economy around by itself, and it has no help anywhere. Business is simply using the funds to create Profits for themselves. Banks are not lending, because there are safer investment elsewhere with better Profits for themselves. The increase in Part-Time employment only means that Business is gearing for a bad Christmas Season and coming year. Labor is being shorted, and Households are losing Income, yet everyone expects Consumer Demand to remain steady–I do not!

The data I would like to preview is the activity of the used Product markets. A rise in this area will mean bad News for the economy, especially if the new direction of Start-Ups begins to resemble Repair Shops. This would mean a downgrade of Consumer Preference to older, but reliable, Products. Purchase of older Vehicles because of Price premium may be beyond Us, as also in the Sale of Used Furniture and Appliances. The Reader may find this to be far-fetched, but Dealers are relying on a $3000 Mark-Up for newer Used Cars. Vehicle Warranties will not hold up under this resort, if Consumers need transportation and cannot afford the $3000. Economists will tell you what this will do to the New Car market, if long-term New Vehicle purchasers cannot afford the $8000 Mark-Up price.

Three years of current economic trend could lead to the American economy beginning to resemble the Mexican economy, with heavy usage of aged Product. It is my fear that the American Consumer is getting ready to Downshift, and the economy will only suffer from such an assault. I have been trying to source data for my estimate, but my Guess is that Computer equipment is as Aged as it have been since the early 1980s. There is indication that Main Street Consumers are not upgrading their Software, as long as it effectively works. Blockbusters–the highest-priced of the Trade stores–has filed for bankruptcy, and the greatest Sales of DVDs are found in the Used Disk Counters. I know positively that Amazon’s Resale program has ruined independent Authors, who get nothing from Used Books. I share not the optimism of Wall Street, and am cognizant of Wall Street’s partying most heavily right before the Crash. lgl

Anyone want a Job?

I tend to discount Mike Shedlock’s approach sometimes because it sounds a little more dire than warranted, but this account is truly sad. (Roubini never had it so good!) I am trying to remember an old Report on budgetary channeling from the Dark Ages of the 1970s, as I spout the drivel which might have changed with the advent of Credit Cards with serious balances; this stating that Christmas Shoppers never begin to budget seriously for the Christmas Season until October. We might be getting Unemployment at exactly the wrong moment in history. The mortgage foreclosure rate and the decline of labor hours may join with the above information to suggest the largest buying segment of the Christmas Shoppers may be short a significant number of people. Mortgage holders traditionally are well-adjusted Tw0-Income families with young children, the Shopper who has the most to buy with the heaviest Mark-Ups. Card-Holders have been paying down their balances throughout the Recovery, but is it enough to produce effective Christmas budgets?

Catherine Rampell also notes the growth of Job Seekers, but from another venue. The interesting fact here may be that the Hire rate for Professionals and Business personnel is much slower and analytical than for Construction Workers. Construction foremen find Job Skill levels much easier to track, as they only need to know what previous Job sites the Workers have worked to understand the viable capability of the Worker. Professional and Business want to pick the exact composite which is right for their business model, and truly interview the Job Seeker. Both methods are effective for the sectors involved, but it does make a difference to our model. Construction labor with likely be receiving Income at the end of October, over labor undertook in the early part of October. Professional and Business Job Seekers will likely start getting their first Paycheck somewhere in late November. Economists will tell you this stands as too late to save the Christmas Season for these new Job Holders.

The information can be considered so dire to the point that I would include this link. My entrance on discussion of this Post must be the Cost of a Retraining program to eliminate or forestall the destructive criteria of Obsolete. What does this Retraining Cost do to the natural investment for Retirement? What does the use of Retirement funds for Retraining do for that Retirement fund? Is the fundamental Cost of Education cancelling the real value of Education, under a Business model and program sheering Labor at immediate sign of Profit weakness? Could this not be the real problem which Government policy should concentrate upon? lgl

Can my Voice be heard in the Wilderness?

I agree and disagree with Joseph Stiglitz in this article by Phil Izzo. Central banks are certainly raising havoc with banking practice, Government expenditures, and Consumer Demand. Central banks are extending Cash to individual banks practically for nothing, destroying Interest rates for Depositors along with their Consumer Demand. Governments are borrowing Cash at extraordinary rates on every level because of low or nonexistent Taxes and huge expenditures. No one should even imagine that this Government debt will disappear before the Interest rates return to normal. Banks Depositors are following the banks themselves in investing only in Treasuries–the only place where there is any rate of Interest; Consumers going further and curtailing normal Spending because the 10-year Treasuries exact a great deal of Time before you get repayment or even market sale. Banks can derive a secure rate of Return by investment in Treasuries, or much higher Risk Return by investment overseas. None of this helps the American economy, where Unemployed Labor cuts its Consumer Expense drastically.

I agree with Stiglitz that there should be great Government expenditure on Labor programs, especially cheap level Employment which brings high Return in Consumer Demand. Paying Business to provide this Employment is stupid, though, and is much too expensive to be withstood. We do not need Business to borrow all Operating Capital funding from Banks at Prime rates, then give Business a 20% Return on their investment, simply to employ large numbers of people. Government can borrow at much cheaper rates, hire more people at cheaper rates than Business, pay managerial personnel much less, and additionally coordinate the national effort. Government programs have an added advantage over Business–greater ease of downsizing past the period of Recovery; Business demands continued program maintenance after their initial capitalization. It should not be the economic policy of the Government to maintain Businesses in the Black, when they should themselves downsize.

I have always advocated the elimination of the Bush Tax Cuts of 2001-03 at all levels; they should have never been instituted in the first place. Current economic thought suggests a policy of maintaining Business activity, even in those areas where Capitalization is bloated, and Profits are truly marginal. Their Solution is a ever-increasing award of Tax Cuts. I would take the exact opposite course. Everyone–Consumers, Business, Corporate, Capital Gains, and Inheritance should be taxed at rates which will pay for Government Expenditures at least in Boom periods; this means adjusting Tax rates to fully pay for Government Expenses at the time of the height of the last Boom. Government expenditures which are higher than they were at such a time will be repaid by a return to Boom conditions, or at least seriously retard our Debt acquisition. Such a policy would force Business to reinvent itself in order to maintain Profitability, spark a considerable amount of domestic investment to reduce taxation, and narrow the gap between High and Low Incomes in this Country. It is interesting that the effort would actually improve Business performance, as it forces the business remodeling which always occurs in a return to a economic boom. lgl

Balmy--but Happy!!!

I do not doubt that all of these Concerned Experts know what they are talking about. But it is actually not about the Money. The Cash can be found and impounded for the necessary Work, just as soon as the real Cracks in the system (pun intended) can be found and curatives identified. My Thought, though, holds an incredible assumption, which is this Century may be known as the Period of Road Removable, in the sense of the current Road system. I am not getting all Sc-Fi weird here, simply acknowledging that current systems are rapidly running out of viable Resource and Material. Do I believe that the current Transport systems will be replaced by a new, better system–Yes. Will it come close to being the current style of system–No!

I will state for the Record that I do not agree with this Evaluation. No expenditure of Public funds will rebalance the World economy. The Developing nations will never be able to take the lead from the Advanced nations no matter How Much economists would desire it; the Developing nations simply need too much Technology and Finance from the Advanced nations. What is needed is for the Advanced nations to find a new direction for growth, which is Why I implanted the previous paragraph. Nothing could be as beneficial to all nations as the development of an entirely new Transportation system; low on Energy Cost, heavy of Freightage, and with great durability.

It is time for mechanical Engineers to shine, like their Computer and Electrical brethren. I am currently thinking of closed-liquid canals with propellent of liquid flow–possibly with Pull straps upon Cargo. It would be nice if it could be a liquid Plastic made from waste Fuel by-products. I am thinking of uniform Cargo barges transported clear across the Country on a level canal sped by canal flow and grinder gears propelling the barge the full length of the barge to attain the canal flow. Automatic switching would divert Cargos to proper destination with drainage locks, and wheels on the barges to simple hook up tractors to pull to final placement. It would require immense amounts of electrical energy to drive the grinder gears, and there would need be great banks of such gears to develop the liquid flow ahead of the barges between cities, but once started; the flow would be much easier to maintain. Insane?–Possibly, but We need a massive new direction for the economy, and this would be a massive endeavor and accomplishment. lgl

Try Ridiculous if All Else Fails

I may not intrinsically agree with all of this article, but Arnold like always makes an excellent statement. I am an old Hand at this stuff, and believe all economic Downturns come from mis-structure of the Profit distribution. When participants in the economy do not receive their proper allocation of Wage and Profit, then they do not maintain their normal Expenditure patterns; this leading to further shortage of normal Profits distribution, all leading eventually to Production failures. That Statement is easy to spout, but not as easy to prove. This stands as the base insecurity in the economy: everyone knows there is something wrong with the economy, but no one can precisely point out the trouble with effectiveness.

I like this Piece, because it made me reconsider my precepts. Robert Higgs says that Consumer Demand has been growing nicely, and cannot be the source of the Downturn. He has a Point which is hard to contradict. He relies on belief that the Downturn comes from the threat to private investment, which has declined. I will grant him this Point. The Question to be answered is what caused the reduction of private Investment. I think the source of the reduction came from two activities, on which most economists will not agree.

The first is the rise of Property taxes and Utilities Costs. These forced small firms to raise their Retail prices some 18-20% higher than the rise in Production and Distribution Costs increases. They lacked the volume and Cost-shifting capacity of the large Retail outlets, and competition forced small firms out of the markets. The image of Sole Proprietorship became tarnished and unprofitable–Investment left the small, independent Concerns; the greatest source of Employment. The second disaster was the Bush Tax Cuts. They insisted that there must be a continual growth of Government debt in magnitudes never before seen; this due to the great growth of Government Spending. Private Investors found a source of low-Profit, but absolutely Safe, investment. Where Have all the Flowers Gone?–to bankroll the Government everywhere. lgl

Am I the only One?

I really like this Piece from Paul Krugman, though I do not agree with his conclusions. It at least explains the Race of Death trying to connect Labor, Finance, Capital, and Production. The Keynesian approach fails to stipulate the relationship of Treasuries to M1 and M2 in that Treasuries are the creation of Money when they are eventually Cashed; even if only to be renewed. It is the old Story of the original Holders of the Funds getting back their starting funds, plus a considerable amount of Interest, while the Government still owes the same magnitude of debt plus Interest payments. Keynesians would not call this a massive growth in the Money Supply, yet it does make an incredible number of people feel considerably Richer than they are; all based on the printing of Paper. It would work from the Keynesian View, if the production managers believed the misconception. They, and Consumers, fail to appreciate the great growth of Wealth; they maintain their original stance, and well, people are still unemployed.

Ferguson’s listed Remarks are also some bother to myself as well. He asks who is going to buy the Treasuries, as any competent economist should understand immediately: exactly those People who find further Investment Capital to enhance Production to be currently unprofitable. This means the Government is only providing an alternate Investment center for massive amounts of funds no longer devoted to Production growth. I don’t know if it is valid economic policy for Government to provide an acceptable rate of Profit for obtained funds which, in many instances, came from economics Profits that corroded the original Boom.

A little Hint to the Readers here: Downturns are the natural Pressure value which presses economic profits from an economy. These economic profits always build up in a Boom, as Producers start charging above viable Price to increase their Profits. The Downturns result from normal Profits being suppressed under the economic profit pricing. Now many in Government suggest paying Business to build those economic profits through paying Interest on those Profits during Downturns is a genuine good economic policy. I would dissent, as it simply continues an imaginary pursuit of artificial Wealth. It prevents normal Profits from reasserting its control over the economy, and creates a false new Class of Wealth. lgl

The Dogs will be nipping at my heels!

There have been Requests for greater explanation of yesterday’s Post as to effects on Production, mainly issuing from malicious individuals who want to watch me fall on my face. There still remains that small segment of the reading Public who would want clarification, so I advance with full Warning that mysterious are the ways of Production, and I am the last person to ask about the Process. The heaviest inquiry seems to be for my definition of scope between the factors, an area where Anyone will fail; simply pick the advantageous Period of Time, and Error will resound! Here is my estimate of the Situation, and I will state categorically that it will be wrong some 30% of the Time.

I will start with the easiest–Supply contracts. The first statement on them is that they are always fulfilled; something to do with financial liability. They are of two types: those in which you guarantee a certain provision of Product, and those in which you are guaranteed a certain level of Product. Some are of set Price for the Product, others are tied to a sliding Scale based upon an agreed upon estimate of Inflation. When you are guaranteed a certain level of Delivery, reduction of Production schedules lead to intricate problems of building Inventory without maintenance of Production schedules. When you promised to deliver a certain level of Product, then the above mentioned financial liability comes into being. Production schedules are almost always maintained to eliminate the problems associated with Supply contracts; outside of the issue of declared bankruptcies. The current economy suffered from a shortage of Supply contracts before the last downturn, as everyone figured that Production Costs would reduce while Consumer Demand would remain High; seriously sapping a normal Recovery mechanism.

No one takes to the Time to supply me with a fund of accurate Answers to the following, so I am giving my best guess-estimates. Prices affecting Production schedules seem to center around these rates: a 1% rise in Material Costs equate to roughly a $.70 increase in the unit of Energy utilized and/or about a 4% rise in the Cost of Capital (holding True only in the Short-Run, and then only until Interest Costs reach 9% Prime rate). Land or Capital Costs came be contemplated to remain the Same throughout the intermediate period, and affect Production only in the long-term. Labor is the most difficult to judge, but I estimate that a 1% Material Cost increase, a $.70 Energy Cost, a 4% Finance Cost, and a $2.15 labor unit Cost (Hour) remain roughly the same in impact on total Production Costs. Remember that all these sub-Costs are in flux, and can counter each other’s impact. The final element must be stated that Consumer Demand is second in power only to Supply contracts, and can be impacted by all of the sub-Costs, but has relatively no impact upon the sub-Costs in the Short or Intermediate Runs. I will Now leave it to any and every decent economist to acclaim that I am full of it! lgl

The Wages of Sin--not! The Sin of Wages

I will allow my Readers to ponder this Post with its varied links. I will let them read all the materials, which I of course didn’t. I ask only that they consider a series of Questions:

1) Output is determined basically by managerial schedules. There are various factors which go in to establishment of Production schedules: Land, Labor, Material Costs, Taxes, Energy Costs, prior Supply contracts, and Consumer Demand. Most of this examination suggests that loss of Profits from one Cost sector can be counterbalanced by gain of Profits from lower Costs in another sector. Attempt to adjudge the value of each element within the creation of any Production schedule. What carries the most Weight? How will one sector affect the other surrounding sectors in the complex of schedule formation? What is the heavy Hitter in determination of Production schedule choice?

2) Remember We are looking at these things from the viewpoint of Production managers who must set Production schedules. How would a 25% Rise in Energy Cost per Unit affect the other sectors?—clearly need to know the number of Energy units utilized in the Production process. What impact would a 3% Rise in Material Costs do to the Production schedule?–again, We must know how much of the Production Cost can be attributed to Material Costs. What would a 3% reduction in Finance Costs do to the Production schedule?–here We must find the total Cost of Finance to the overall Production Cost. We come to Labor and its Impact upon the Production schedules. We would first have to determine the Labor Cost per Unit in the Production process.

3) Is it likely that Labor Cost per Production unit equals even 50% of the total Production Cost?–maybe in some Third World country where the Production floor is rolling Cigarettes by Hand. Rule of Thumb here: Figure that Material Cost is about 20% usually, Plant is functionally about 40% of Production Costs, Energy Cost range around 12-25%, and Labor Costs come in around 25%–though It can vary about 15% in the Production process.

4) Economists make a really big deal about the difference between nominal Wage levels and real Wages levels. What exactly could be the difference between the two levels?–Hint: think about 14-16% actual or real, though Business personnel like to dream of 50% or greater. How great a factor can 14-16% of 25-40% of the Production Cost impact the decision-making of the managers, when they are setting up Production Schedules?

The heavy Hitters in managerial decision-making on Production schedules are prior Supply contracts and Consumer Demand. Neither are affected by the Costs of the Production schedules, but both can increase the Costs of Distribution and Marketing the Product. Understand that Distribution and Retail establish their own Cost level which is priced into the Product Pricing; this to solidify the Profit margins for the Product. I wish that good economists would ignore the Wage issues which constrain Production–which they really don’t–and concentrate on Wage issues which markedly impact Consumer Demand. Economists and Business personnel want Inflation everywhere except in Wages. lgl

The Simplest Tax Plan

Watch this thing here, then ask what We should do. There have been multiple commentaries on my own specifics of potential Tax changes, and some have asked for the simplest Plan for Taxes which can be imagined. There are also stipulations most of the time for Tax plans which could possibly find passage. My irreverent Thought pattern suggests there is no possibility of Tax change unless the Wealth make Money from it. Still, we cannot let such an assessment inhibit Us in our quest for something better than this raft of S**t!

The first Step is to account all federal taxes, except Excise taxes, to be Tax payments. The second Step is to find the lowest Taxation demanded on the first $20,000 (I would have suggested $10k except then the Tax would equal 0). One cannot tell where legislators would set the Tax level at this point, but hopefully between $700 to $2300. We state for third Step that all Taxes are to be considered within the $20k segments, with Incomes falling within a segment following the first segment paying a percentage of tax equal to the percentage of Income earned within the segment. We stride forth and acclaim that Everyone must pay the same Income tax on every $20k segment, no matter what their Income happens to be. We slip in a few Odds and Ends, like doing away with all Tax breaks, Exemptions, and Deductions–this makes it a straight Tax. We study on the Issue somewhat, and state firmly that WE can see no difference in Income between Personal Income, Capital Gains, Corporate Income, Business Income, Partnership Income, or even Inheritance Income; it all seems to spend the same, be invested the same, etc. ad infinitum. Remember that this is no Straight Tax, but a modified Straight Tax–because not Tax Breaks, Deductions, or Exemptions are allowed. It is simply the least amount which legislators can seem to agree on at any given Moment.

Did I mention about the tax on Patent Rights and Royalties? I would allow these to remain low, but on second thought, I think not! None ever seems to wind up in my bank account anyway. Here We have the simplest Tax Plan: no favoritism possible, and Everyone after the least amount possible in tax payment. The Plan will not only generate Curses, but tax revenues. No one will be able to claim bias–except possible against me! lgl

And They call Me a Fool!

I will leave it to the Readers to guess how best to limit the looming deficits. There is no easy solutions, and no one will like any Outcomes. All programs had been developed as a form of Christmas Present, promising vast Savings to a strapped American. We cannot live up to the Promises, and everything keeps getting more expensive because We even try. Here are some of the hard choices I would recommend:

1) Combine Social Security, Unemployment Insurance, Medicare, and Medicaid. Set one flat payment per Week for every qualified Recipient of such Aid–one and only one payment per Week, no matter the combination of the Need. Here it does get Tricky–the flat payment never alters, One gets Security and Sustenance from the payment–or one failed to do so, and We are back to Charity.
2) Taxpayers must not only pay the Wage for Tax Preparers, but also for the Time involved of federal labor to review and accept the Tax filing. The Jury is still out on whether We should let Taxpayers deduct the Cost of either the Tax Preparers or Reviewers.
3) Assess a $50 Filing fee for every use of a special Tax Break or Deduction in Tax returns. You should pay some Charge, if the Tax Savings is in the Hundreds of Dollars.
4) Every federal employee must prove their use of Public Transport to come to Work, or pay $5 per Workday as Parking or Congestion Fee.
5) Every federal agency and Dept. must file a Income Tax Return, and a Special Tax Review Committee will review every such Return, and assess a Agency tax based upon the relevance of the Expenditures according to Congressional Audit Rules, which the Agency or Dept. must pay out of its future budget.

Does this sound sufficiently ‘Big Brother’ for you? The goal is to take the Graft out of Government, and grant the Citizenry what advantage they should have from their governance. Notice that the first programs have been turned into a pure ‘Shift of Wealth’ payments; the only type of Payments which really work. They are also the only type of payments which can be paid for! The middle initiatives would limit the gout of bloodletting from tax revenues caused by Congressional granting Tax Breaks for Votes. The last factor would establish a real supervisory organization to control excesses of Government Spending; it produced by real loss of budgetary funds. As Clint would say: "Go Ahead,. Make my Day!" lgl

Explaining the Inexiplicable

I first would like to apologize for my Post yesterday, where it seems that only I understood what I was talking about. There are many ways to figure medical costs, and lots of people estimate they are getting a good deal under the socialized system. What I was trying to describe was the fact that Americans before Medicare spent about 4% of their annual Income for medical services. Today after Medicare, most Americans pay their share of the deductible system, which adds up to about 4% of their annual Income. Many Americans will claim that they get Supplemental Insurance to handle the side Cost, which generally adds up to about 4% of the annual Income of the average American. Health Care Costs will generally rise more rapidly than the Operating Costs of the overall economy as long as the premiums for this Supplemental Insurance constitutes less than about 4% of the average annual Income. The interesting fact of the above data outlines the fact that the Government pays about 10% of the average American Income for health care Costs of only a limited membership of beneficiaries. This is the inflationary and artificial Price support system I was trying to describe.

Here is another direction for the Problem examined above. Americans are not optimistic about the economic future. No one believes it is going to get much worse, but no one thinks it will get any better. One of the very real dangers which will cripple the economic future of Us all comes from the misallocation of capital within the economy–consider the federal underwriting of the health care industry described above. We are talking about a misallocation which is equal to about 10% of annual GDP. Other well-meaning but adverse Government programs shift another 6% of total annual GDP to the wrong economic sectors in attempted Protection which is not accomplished. Economists will explain that any economic activity is better than no economic activity; even if it is Wrong in direction, and eventually shrinks the long-term growth of the economy. This entire Post is about What it does do, which has been described generally.

This is the Ocean of disaster on which the American economy floats. We must redirect that misplaced capital if We want the economy to grow. Will We be able to overcome the entrenched resistence in the political realm. I doubt it! Politicians have long ago learned you can sell even the worst policy, simply by convincing the Polity that they are gaining something from the Policy. It does not matter if the policy envisioned or in use is actually injurious to the Polity, if they can be made to believe that they gain from it. Politicians become quite adept at the practice of delusional expression, and Lobbyists possess even greater expertise at the flim-flam. The concept of the Judas Goat is alive and well, though the Herd may be dying. lgl

Bad Government

I specifically like this Post because it attempts to place Government within a evaluative context. Megan tries to present a basic argument for both sides on the value of Government. I would like to offer a third evaluation. My belief states that it is not Government itself, but the corruption of Government, which remains the Culprit which must be controlled. I will try to explain my thesis in the rest of my Post.

Legislators take a Concept, I will utilize Medicare, which can gain widespread Public support, and promise a universal End. Medicare thereby was passed to handle Senior Expenses for health care. Those who would profit from Government guarantees immediately spring into action. Various Groups immediately petition to be included within the Guarantee, even though they do not meet the passed Age stipulation–greet Medicade, aid to the Disabled, special consideration to Veterans, and expansion of all the covered services. There is a second very important Group, who are the Providers of such services demanding immediate increase of Pay and Profits from such provision. The profitability of providing medical services immediately begins to grow much more rapidly than the overall economy. Medical services, in Pricing, increased approximately at twice the rate of overall Pricing in the economy since the mid-1960s.

Government initially designed to assist its Populace becomes a Rattlesnake getting ready to Strike. I refer to Rattlesnake because you can plainly hear it coming long before the actual Injury. One can ask How much such previously-discussed Pricing can increase, but that Answer is easy: It will increase to fill what the Market will bear: until Individual paying a deductible percentage of the Cost is paying what they would have paid under the previous Pricing. The special Groups will beg for inclusion until such time that the Coverage is universal. Government activity–so well-meaning–simply support a inflationary Price Support system which actually causes Injury, because of the denuding of other necessary economic enterprises of Talent and Resource; which has deserted prior industry for the Price Support system with its higher Returns. This is basically what is wrong with Government, and the guilty Parties here are the Greedy who would work the system for their own benefit. lgl

Posing as Common Sense

Paul Krugman stands as absolutely Right in this Post, but I, of course, would add a few Words. The first Concept I would express is that Americans have been living above their Means; and by this, I do not mean the acquisition of debt. They purchase $400k Homes, when they should be purchasing $200k Homes. They are buying two $40k cars, when they should be purchasing one $20k car. They are purchasing 10 pairs of $100 Jeans, when they need 5 pairs of $30 Jeans. They buy a dozen $80 Shirts, when they need 7 $20 Shirts. They stay in $200 a Night hotel accommodations, when they could quite acceptably stay in a $60 a Night room. Their Credit slips reflect this lifestyle choice, as due their end-of-the-month payments. Should We go out and eat Lobster tonight, even though We could stay home and eat Hamburger Steak?

It is not that Americans are in a massive amount of Consumer Debt. That is a Given, and relatively necessary for a functioning economy. There are Those who would contest this declaration, but they lack a replacement evaluation. There is the factor that if Everyone purchased the cheaper Products, these Products would rise in Price, while the Price of luxury would lower. That is simply an economic fact, and need not be contested. Buying properly does make being Poor far more sustaining, while making it easier to be Rich. There are Those who feel there is something Insulting within this Statement. Consider this Aspect: the Poor should be much more self-sustaining, and it should be easier to be Rich; Hint, this makes it easier for the Poor to eventually become Rich.

The real Problem with this over-rich Buying comes in the form of debt service to overall Income. Those bills take too much of a chunk out of monthly Income. They also rack up too much Interest on unpaid balances. One cannot buy High, and pay even Higher, on a structurally-limited Income. The later is where Income will not rise faster than the Inflation rate, and may even fall under the obstinance of Management. Every Income-Earner should have estimated the amount of monthly payment for debt they are capable of paying, and take active measures to stay at, or below, this level of expenditure. Economists would disagree with me on this, but I find this effort to be the most important element in economic recovery which is sustainable. lgl

Form of Government

I read this Posting, and ask myself where is the justification of Government. We have two forms of proposed Government activity, and a third Opinion. None get to the core issues of Government: what it should do, where it should do it, and when it should take effect. I see an entirely alternate direction for Government to take, but how do you explain it? The President has become nothing but a Hawker of Programs, when he must be an administrator. Congress has become a marketplace, going to the highest bidder, and not the bidder who even pays the most Taxes. The Judiciary responds only to Those who can afford the greatest legal Costs–supporting lawyers everywhere. We have government programs which did not make sense even when initiated, and long outdated. I think the scope of government must change, and would set efforts to make real change.

I will start off with Taxes. Now, individual taxpayers can shop for Tax Breaks, anywhere and everywhere; all at the behest and for the gain of Congressional members to increase both their power and their political contributions. I will dredge up the ancient Concept of Tax Farming. I would allow any group of Taxpayers to set up their own Collection agency, which would determine How and When their membership will be taxed; the kicker here being that Congress will determine the magnitude of tax revenue which must be delivered, and all membership of chosen must commit to pay their determined level of payment. Any membership can change to alternate representation of Tax Agency after any given Tax year, and the Taxing agency can lobby Congress in total load determination of Tax, but the total of tax revenues must be paid every year; the alternative being all delinquents–agency personnel or membership–will be jailed until the tax assessment has been paid. Congress will also be limited within their periphery of action; they will face a reduction in Wage to the exact percentage that they did not balance the budget each year, and such accumulations will be permanent and addictive.

Government provision of services–whether Retirement, Unemployment Insurance, medical assistance, Work Training, or Welfare will be set by Congress each year as a specific Dollar amount; after which expenditure, further Aid to the Individual by Government will be suspended for the rest of the year. Education will be altered by enactment of this legislation–granting a Government-sponsored Tuition per Student unit which is identical from Pre-School through Graduate college programs. All Schools will be prohibited from assessing further Tuition, and must rely on Patrons and other Contributors. The entirety of the program system will state that All do not necessarily draw substance from government, but that the level of that financial substance is limited in amount. Business will itself be constrained in financial Gifts from the Government, as will legal charities, Partnerships, Corporations, and all other Associations. Insurance companies will be legally committed to paying at least a monetary amount of 30% of all claims made against their Insurance in order to maintain their license to sell Insurance; unless and until that they can prove in a Court that the claims are fraudulent; the Insured by legal mandate represented by the local District Attorney–whether County, State, or Federal–determined by the placement of claim of dispute by the Insurer. I have not covered an incredible range of necessary action–but it is a Start. lgl

Someone Need Listen

Study this Post including the Comment, and ask for a bit of Reality. The Republican pledge will do nothing new or different, and the amount of Government Spending will go on. The Democrats propose every asinine idea ever dreamed up since the Great Society, and these will be defeated for the reasons that they were originally defeated. Both Democrats and Republicans are setting up the platforms to get Nothing Done for the next legislative period. The real factor which is not discussed remains the fact that Government–not Business or Banking–must spend Us out of the Recession which is not a Recession; remember that all Sides are using the Inflation which is supposedly not there to get Us the numbers denying the Recession.

No one, except myself, presents any program to actually transfer funds to the Households, which are necessary to impel the Consumer Demand needed. Dozens of different Work programs can be designed to generate Jobs, but absolutely None are discussed. The ugly humor from all this lies in the much cheaper expenditures for such programs, much less that either of the political party proposals. I have suggested increasing the national Military Reserves by one million Troops. Housing, Maintenance, Food Provision, and Training personnel would push the total Jobs created to almost two million. The Cost would likely be less than the continuance of the Bush Tax Cuts. I advocated a federal program to renovate substandard Housing, Capital infrastructure, and Recreational facilities–almost certainly less than the Fed program to artificially inflate the Markets and suppressing Lending because of low Interest rates. Such a renewal program could be supervised by Local Maintenance, and potentially employ up to 6 million. I herein call for a new federal program, a law stating all federal employees must be paid for two hours per Week in Good Time–not Cash; all saved funds to go specifically to employ replacement labor for the added Leave time taken by mandate; this added about 1 day of Leave for every month of employment.

I don’t know what it is, but the political spectrum seems dedicated to stalemate. No one wants to adopt anything genuinely New, though everyone knows that the old ways have failed. Our Bones are hardening, and arthritis is setting in. We are being caught by Countries around the World, who can produce More somewhat better, and a lot cheaper. We are letting the Problems swamp Us when there is no need. It is time for Change, but real Change, not the wildcatting idiocy of Days Gone By. lgl

Hitting Harder

A pattern begins to develop within economic and financial circles: Those who believe that further monetary action will produce Results; and Those who believe that all structural changes must originate elsewhere than in the financial world. I belong to the latter Camp. I think that Bernanke has dug the Fed into a Hole, and intends to widen it into a Grave. The Fed already has too many illiquid assets on its books, an no ability to alter course without impacting the Dollar adversely; something which will not improve Trade in the current environment. What I worry about the most consists of the fact that the Fed loses elasticity with such involvement in the economy; losing its ability to be a floating fund in case of need for Recession reversal. It remains especially troubling as I expect that the Fed can initiate no action at this time which could improve business conditions. It all calls for Government action, not financial action.

Readers will probably want to understand what and why monetary policy could not have much effect. Read through this Post all links, which will give some better understanding of the issue. I do not agree with the author’s summation that the Fed should take action, but it stands clearly that such Fed action would be marginalized at best. What becomes the rationale for more Cash on Hand, if Business will not expend the Cash? Business does not want to expand into Hiring, even if they could be enticed into capital investment. We cannot get the Consumer Demand without further Hiring, and the Fed spreading more Cash will not do the Trick.

Readers will Now want some Answers of what will work to restart the Economy. They should read my Post of yesterday, and I will follow with the Statement that Government must enter the old CCC mentality, though mostly affixed to the local area and conditions. I would pass a Junk Removal Act, run by local area Maintenance, where Labor will be employed for Minimum Wage with health care under local supervision; all in order to remove Eyesores and other elements. These Crews will tear down older structures, clean Lots, and tear out unwanted capital investment for limited Cost to Property ownership. This Act would be directed at unemployed Youth, but also Any whose Unemployment benefits have run out. Local participation can be obtained by a Fine system for untended Property after a certain date. The Act should also include free Labor for elderly low Income individuals which does not include health care provision. There are other endeavors which can be utilized, and it is time to use them. lgl

This will likely offend even God

Here is an individual with the correct ideation, but the wrong expectations. He remains correct about the behavior, and the mechanisms, of the players in the market. His solution set, though, will not alter the matrix of the Equilibria. Nick suggests that there are sticky expectations which there are; but then, he outlines How to pay the participants for their sticky play. What is needed is reward for abandoning the Status Quo. Translation: you make it costly to stay in a static position. I would revoke the advantages of the Bush Tax Cuts by elimination of the Tax Cuts entirely, and then feed them a Carrot; like a Tax Credit of some magnitude if they can prove they contracted losses by lowering Prices below Production Costs within the United States, in order to clear the markets of backed-up surplus.

View my Statement and ask What is all means. First, there must be a backed-up surplus to gain access to the Tax Credit; business managers must maintain Production in order to establish the surplus–Inventories must grow–inciting Employment. Second, they must lower their Product Prices to a point where they have the capacity to simulate Dumping procedure. Third, their Prices must be sufficiently low that it both adds Consumer Demand and higher Sales, and where they can at least pretend that they are losing Money. Fourth, Consumers will quickly assimilate the ideation that they are entering a Buyers’ market, where early Consumption will more profitable than later Purchase. Fifth, due to the nature of the Tax Credit passage, business will be eligible for such assistance only for a short Period–the expectation is less than 2 years of taxable Income.

Business will only gain the advantage of such Tax Credit with immediate entrance into the program. I would call for a Sunset on such provision of two tax years! I would stay within the operational boundaries of the economy, and define eligibility to rest only upon Price reductions between 8-40%. The Minima would draw out all Inflationary pressure, the Maxima not forcing undue Deflation; cheaper Temporary Products inciting the greatest reduction, Intermediate and Long-term Goods of insufficient Turnover to incite Profits from Sales more than 14% lower than within the current economic markets. It is obvious such mechanisms can hardly be maintained more than once, and I would suggest a Credit arena of Loss plus 16% of Loss as the Tax Credit. The End-Goal here is to get Business to reduce their Profit per Product, with the Government replacing the Profit plus Advantage from other business Profits of the businesses involved. I do not believe than final Cost to the Government will equal the previous passed Stimulus package, and may actually increase tax revenues with repeal of the Bush Tax Cuts. lgl

How to be an Ass without really trying

I rarely agree with this stuff, and not much has changed. The basic Issue devolves into We Should have Spotted This much Earlier!! The first element which must be understood consists of the fact that such overabundance of data flow continually churns, real factors of definition cannot be found prior to the economic event. Every new progression must be analyzed for its effect on subsequent events prior to those economic events–a sheer impossibility. The Second impossibility establishes no specific set of circumstances will ever be agreed as fundamental for economic Recovery or Failure (Boom or Bust). The Third stands as Speculation that economic forces suffer from Stress throughout the system, and forestalling the function of Stress in certain areas will only transfer that Stress elsewhere. I like to think of operation in the economy as Expansion and Consolidation. This makes it easy to understand that economic forces can only withstand a limited Period of Openness or Expansion, before the totally natural urge to take Profits comes to the fore. No one has studied the economic data, but there is remarkable similarity to new economic leadership attempting to secure their financial position.

I would not lay claim to Paul Krugman being Right or Wrong! I will point in an entirely different direction on the issue. There is a nescient economic element which is never preached to the affluent. This states that when the Poor have greater Income, they Spend more, and the overall wealth of the Affluent increases from the added Profitability. What impedes the knowledge transferring to the Affluent comes from two things: one is a delay of about 28 months from the period of added Income for the Poor, and the rise in Profitability for the Rich; the Second being current Management practice which freezes the Affluent from this added Profit by refusal to disperse such Profits from Stock ownership. The Affluent would do infinitely better in chastising Corporate Management from withholding such Profits, than in getting the Poor and Middle Incomes to pay more in Taxes; a situation which actually reduces the magnitude of their own Income.

I should be in the book-writing mode, and develop a Volume on Why Taxation can be the best stimulus under some circumstances. It could be written, but I am too old and lazy for such endeavor. The reality is that Taxation can establish or crack any order of Comfort quite easily, and what no economy can withstand is any significant segment standing Pat on their current revenue streams: they must either be striving to improve their revenue stream, or acceptant of declining revenue stream. Any other position is inconsistent with economic growth or advancement. Government Taxation and Welfare programs are the best method to destabilize peoples’ acceptance of current revenue streams. This disintegration of revenue stream plans leads to capitulation or enhanced effort to regain the revenue streams. Government needs to utilize this Discomfort through Tax measures and Welfare programs, if it finally expects to possess an economic policy which is effective. lgl

The Great Blame Game

I like this article, basically because of what it does not do. All political language and some economic terminology changes with the regime change. Opposition parties become deficit hawks unless the passed legislation is of direct benefit to themselves. Administration parties proclaim a Brave New World, and announce great new political slush funds. No one expects the slightest change to occur, and get almost manic when any does. Yet everyone would react with horror if We ever returned to the fabled reduced Government of our Great-Grandfathers. Politics make such strange bedfellows as well: Ben Bernanke would adopt the tight monetary policy of some of his predecessors who he had spent much of his life castigating, while at the same time trying to make people think he is spending like Johnson’s Great Leap Forward–wait, that was Great Society–they mix metaphors while I mix Countries. Tyler Cowen obviously perceives the irony in all this hype, knowing Monday morning will be Business As Usual.

I disagree with James Hamilton’s position on Unemployment, but his Post is too intrinsically sound to avoid. Labor Turnover has become a national and international fact, ever since Business turned to Project Hiring. It was Business, and not Labor, which turned away from career employment. Business wanted to cut Operational Costs like contributions to health care and retirement funds. They wanted a Shift to limited liability towards their Workers, and insisted that Labor absorb all the natural Costs of unemployment. Do not think their claims of paying excess Taxation for Unemployment Insurance has validity in fact; the truth being that they cause the ordinary Taxpayer to absorb such Cost–through Taxation, raised Pricing of their own Product, and shoving all placement Costs of new employment off on the Worker. James does not differentiate between Taxes and Tax reportage, which he should because the Tax reportage Costs equally with Safety Reportage is so high in Price; remember, that if Business lobbyists would allow revision of the Tax Code for simplicity and clarity, then such Costs of all types could be cut probably 70%. Study the Chart listed, and one can find that most of the delivered Cost could be avoided by regular Business compliance with law and regulation.

My basic Statement on the above issue stands that Business loses its cherished Profits early from a lack of Consumer Demand, and would blame everyone but themselves. Consumer access to Credit has become so convoluted that Demand had to drop; this intricacy all coming from Business trying to draw the same Profits from a smaller financial pool. Business is dropping their Labor the second their Work is done, without any attempt to shift Labor elsewhere and be as relatively effective; this continual Job loss drain accrued assets from Households. Business could avoid much of their Tax compliance Costs, if they chose to forego the complexity of available and obscure Tax breaks which they insist remain on the Books. Safety Compliance Costs could be equally reduced, if they simply devoted as much Capital to renovation as the Regulations call forth. Business always finds someone to blame, but they create their own troubles. lgl

Odd Observations from an odd Mind

I will give my Readers this link to pursue, though I am not totally in conformance with most of the ideation utilized. One has to ask How effective economic theory remains when it has generated two huge Bubbles within one decade. I have long questioned the economic authority which insists that Inflation is a mandatory element, and Deflation is a demon which must be forestalled by every means available. Japan endured a long Period of deflation, and homeland prices seem better adjusted for that drag. Japan might be an Exhibit of How an economy must endure a round of deflation in order to firmly implant a standard of living for participants in the economy on a sound-value platform. I do know that American Price values are disorganized, and China’s Prices are following the whipsaw swings of the Americans. The EU seems to be pushing much of the inflationary distortion between Product prices from their economies with their economic policy; which is sharply critiqued in this Country.

I forward this link to get my Readers to think about the value of a continually upbeat Look at life. My slant is different from the Post, in that I would ask where this places the value of Publicity and Propaganda. We can act like an Economist and examine past uses of both to determine the long-term gain or loss from their usage. Most Publications will probably be found to be long-term counterproductive to effective activity, this because of the misapprehensions that are created from the ideation. It also leads to the question of examination of the Expiration Dates from all Public issuances, where they eventually do turn counterproductive; there are Those who will say that good ideation never fails–but they are the true Optimists.

I think that Arnold is trying to turn Empirical into theoretical, though I may be far off the Mark. I think he is trying to get people to operate like myself, and guess a lot. Arnold uses the example of Phoenix and Detroit. I would advise Students to find the difference in average yearly Temperature between the two Cities, before entering into extensive comparisons. Where the comparisons must be entered, try to define the monthly operating Costs of maintaining small firms within both areas. I personally think that Arnold is on to something with his Recalculation theory with its focus on future performance, but most people can define trends; what is necessary remains How to define what people will need in the future. This stands as the Need of both the Businessman and Economist. lgl

Argumentative and Sour

I must always provide access to Arnold Kling because his arguments are so cogent, even when I disagree with him; as I do in this context. I work hard to get my Readers to study both sides of any argument, even if the process is rather boring most often. At least Arnold is never boring. Here Arnold alleges that Sales are a poor vehicle for understanding the stability of small business; this being an argument hard to deny. It is Why I always try to assess planned Production schedules in relationship to past Production schedules for the firms. Arnold will relate if asked that this is an amazing hard thing to assess as well, as most small business remains young business without substantial history. The fact remains that We have to start somewhere in attempt to understand the economy. I wish that Economists relied more on physical volume of Product–numbers of units–rather than dollar translations.

Calculated Risk sees sunshine on the economic horizon. Nouriel Roubini resembles Arnold Kling, at least in the fact that he is too intelligent to be ignored; his analysis of the economy reminds of my present condition where the Operation was successful, though with no real Return to Normal as yet. Here it is a question of old economic activities fulfilling their duties, but without any real growth structure–a lack of robustness. One of the major problems he and I discern stands as no real replacement of goals organization. One hears business management discussing capital investment, new Product lines, and Profit ratios coupled with declarations of desired Product to be sold. No one discusses the widening problem of lack of Consumer Demand, and Shortfalls in Consumer Credit extension. Everyone awaits discussion of How the Consumer is supposed to pay for the extended Sales. By the way, I disagree with Roubini as well in How you generate Consumer Demand; it will not grow by simply throwing more Cash into the economy. What is needed is Jobs, but no one is seriously discussing Job Creation.

I will finish with this Post from David Beckworth, from whom I stole the previous link. I do this because David summarizes far better than Nouriel, giving a glimpse of What will actually happen in the future. Of course, I also disagree with David’s assessment of dropping Treasury yields, finding the greater amount of Treasuries on the market will kept the yields high. No one in truth wants to loan to the Treasury, and do so merely because of the guaranteed yield. The more Paper that exists, though, will insist on greater yield; something which neither Governments or central banks can alter, a greater supply of Product makes it less profitable to invest within. I simply hope David does not get his Christmas Wish, at least not in the form he desires. lgl

A new Poll

I feel the desire to turn Mean and Nasty when I read this article. I will instead turn to the venues of Economics and Polls to handle the situation; though, of course, I will not do the work itself, simply call for it. Some hardworking people must contact a multitude of business managers, and ask a serious Questionnaire. The aftereffect must be to publish their findings, and do so before the Elections. Here are some components of the effort which should be asked:

1) What are your plans for expansion within the near term?
2) How much would you increase your Productivity if the Stimulus was passed?
3) How much would you increase your Productivity if the Bush Tax Cuts are kept?
4) How would either the Stimulus or Tax Cuts affect your Hiring practice?
5) What is your forward-looking employment policy–how many Workers will you hire or fire in the future, and will passage of one or the other, or both, of the above policies affect that current decision?

The Poll should be extensive, so the Poll should be kept short. This means that 80% of all Employers hiring over 3 individuals should be contacted. I doubt that any Funding for such a Poll could be found among Anyone concerned with the political debate; they simply want the benefit of the Stimulus or Tax Cuts without Concern for its material effect. I call upon all graduate Economic students to devise their own local Polls, and publish their Results on the Internet. American Taxpayers should be aware of the likely effects of any political economic policy prior to the Election, and able to contribute to the political fight after the Election concerning these Issues. I know that I will get a groundswell of good-natured support for the effort–Right! lgl

Vicious Remarks

I side with El-Erian and Stiglitz on this one. Here is the Problem: Current officialdom–both Government and Banking leadership–passed the buck, insisting such regulation would apply only after their own tenure. This means that they will be fully empowered to continue doing business as usual, while placing the onus of failure upon their replacements. These replacements will find a much greater need to raise capital to maintain loan levels, and at a lower Profits rate per issuance. It might have been the only way to gain agreement for Basel III, but no one expects their successors to be genuinely in love with the restrictions; and there will be a Basel IV before Basel III is implemented. One can study the implications of Basel III here.

David Leonhardt may be a very smart young individual, but sometimes even the wisdom of age cannot cull the essential information. David claims that Inflation is nonexistent, and has not been present for almost two years. The hidden aspect behind this datum comes in the formation of the basket of Goods used to determine Inflation, and How that basket is used. I call this the Lux Rule, basically because I don’t think anyone else contemplated it. No Good should be used to balance the basket of Goods–not included in the Averaging of Prices–if over 20% of its Consumer Demand has dissipated through lack of Sales since the height of the last Boom. The Rule insists that the Good must still be within the Basket based upon Consumer Preference. A drop in Consumer Demand for a Good thereby cannot be accounted to be Deflation. Such a Drop from the basket is quite acceptable, because such Consumer Demand loss does not incite Inflation, but straightens the considerations in determining the Inflation in necessary Products which the Consumer cannot avoid.

I will finish Today with a rant against the Geithner plan to stimulate small business. Granting small business Tax advantages and loan guarantees will not increase Consumer Demand in any way. It will only result in higher business failures with a loss of equity for All concerned. Current successful business will splinter to meet the requirements for small business ventures with resultant loss of current management skills which have led to success. We need a reorganization of the Tax Code, not further confusion. The one thing we absolutely need to avoid is further Tax exemptions, deductions, and/or Tax Credits. The more you split the Taxpayer polity, the worse are all aspects for both business and Government. lgl

Choice of Weapons

Some will say that they finally pinned me down. One cannot be sure, as I am pretty slippery. The real bias of overconfidence remains the Will to do great things, even if the scope of the endeavor remains way beyond the individual. Readers should understand One should not be held back by the simple proposition that you don’t know what the hell you are talking about, but at the same time; the first 50 Answers which you get are probably wrong. A good View on all this is probably Study of business practice at the base level, where two basic models are existent: the business owner either starves for the first decade, or is on his third business attempt before success. No one would ever start anything if they had any statistical understanding of the level of their own ignorance. Trial and Error goes way beyond Scientific Tests.

Here is another approach to the problem I am trying to discuss this morning. The Experts are almost always the precise group who finds dissemination of information dangerous to themselves. Such data can only convict them of collusion or failure, presenting them with a personal liability. Any unwillingness on the part of the Outsider to investigate will defeat any accurate analysis of information. It stands in the Interest of Society to allow the misinformed and uninformed access to almost all information, as in about 20% of such instances, a alteration of authoritative policy or position will be engaged. Enlightened personnel will and should aid the Whistle-Blowers; the amount of disaster from such spread of information will never equal the magnitude of danger coming from hidden error.

The above knowledge brings my certitude in discussing What I know nothing about. Authority which cannot sustain the slings and arrow of its own constituency must rest on such profound error that it should prima facie be replaced. Whenever you hear Statements of state privilege, you should ask What they are trying to hide this time. Does this seem like too loose a social structure for you?–It is likely you have a Past which you wish to remain discrete. Mao Tse-tung had the correct idea in the Cultural Revolution, the Red Guard had entirely the wrong idea in the Cultural Revolution; transgressions should be exposed, but Punishment should be without Violence, and consist mostly of separation from the power in which they hid their malefactions. The Answer always lies in getting the Best possible, not in ostracizing the failures. lgl

Back in the Saddle

I really have some difficulty with the Krugman postulate. His model does not truly express any success except in the Short Run, and fairly fails in the Intermediate. I dislike a model which works only until the funds are exhausted, and then must be reloaded. There is no spring connected to that board. The banks did not go back to Lending, Business did not ramp up with no Consumer Demand in sight, and foreign trade did not better until the U.S. ramped up on Imports. China is also attempting the Krugman formula, and can’t seem to get the engine to restart. More of the same does not appear to be any form of rational policy.

I favor letting the Bush Tax Cuts run out for All. Make everyone work a little harder to bring the style of life which they prefer. The greatest element of this will entail Business altering their basic operational format. I am wary of a time where all major industries can continue to accumulate Profits while Production is in decline; there is simply too much liquidity in the mix. Investors would proclaim this is a prime policy because of immediate Profits, but there is not long-term capitalization and recapitalization. Labor will never present the long-range Consumption necessary for sustained Production if these conditions are maintained. The situation is not to Anyone’s benefit.

I am out of surgery with a good report, but it will be reflective of current conditions. It will cost more than the first go-round, and the actual Cost will have gone down; yet no one will witness a reduced Price for such work. It is useless to blame the Hospital or Doctor, and all Staff for well-trained and efficient. My recovery will probably be maximized. What We will find is that Insurance Costs will have gone up, and supportive services will have been minimized. The Question to be asked is How Much can the Services be pared, before the quality of Product drops. It will be an increasing issue of dispute in the coming decade. lgl

Corvee

Here is the type of economic policy I dislike, simply because it is futile. I will present a vastly different strategy, and one which I am sure everyone will disagree with, until some economists begin to study the ramifications of the issue. This is reaching back way into the Middle Ages, and may freak a great number of people out. I would implement a modern Corvee Law, where every Citizen or Inhabitant is required by law to supply a set number of labor every year as Community Service. It could also be called the Physical Tax. Outrage? Claims of Slavery and Involuntary Servitude? Does Anyone feel the urge to get out the Tar and Feathers?

The Devil is in the details of course. Congress gets to set the number of Community Service hours required of the Individual. All individuals working Corvee service will be guaranteed a Congressionally-sanctioned hourly wage. The individuals doing the Work will receive the Wages. Individuals, though, can substitute for Others, with a prior agreement they have formed; this must be identified by a standard release form which Both have signed, and will be kept for the federal Employer. Citizen/Inhabitants under the Age of 14, or over the Age of 70 will be automatically released from Community Service; though all Others are subject including the Disabled. The Penalty for failure to meet your Community Service yearly will be $10,000 for every year found to be delinquent. The Statute of Limitation on the Penalties will be a standard 10 years, with a potential $100,000 Fine assessed for noncompliance.

Here We have mandatory taxation of a different sort with a huge Penalty for noncompliance. Congress will obviously not insist on a great amount of Corvee labor–probably 100 hours or less. Government will have to supply a great number of labor-intensive Jobs–all of the spectrum from hauling Trash, sorting Trash, to planting Trees. Labor is guaranteed a Wage which can be supplemented by assuming additional Corvee labor for a Price. Congress can set a Wage limit which will not bankrupt the Treasury, but will get Income directly into Households. The Community gets cleaner Parks, better taken care of Elderly, and even painted Street Signs.

Final Note: They are planning on cutting some on me Friday. I may or may not require some intricate surgical technique. I will either be back shortly, or not for a considerable period; they tell me no more than a Month. lgl

The Riegn of Evil

I read this Piece, and think the Kids must understand more about the method of Taxation in this Country. We have a Step-system of Taxation, which means that people are charged only what others are charged in taxation until they reach the new Step rate. I do not know what the Tax rates are, and don’t care to learn; someone will think to put me to work at something with such knowledge. It is a decent order to examine the nature of this Tax thing, and consider real Tax revenues generated. Over the range of the first $200k, the upper bracket may pay some outside of $2000 more than their less well-off contemporaries; this is a complete Lie in its own way, as higher Income can always resort to special Credits and Exemptions. Here is the thing: the suppression of the maximum rate allows upper Incomes to save about $4000 per each additional $100k they earn. This means that Someone with $200k Income saves maybe $2000, with lesser Incomes saving much less in turns of the Bush Tax Cuts. Someone making $1 Million per year, though, can save the initial amount of the lower Incomes, plus about $36,000 more than that saved by the $200k Income. Incomes say in the $10 Million per year range save that probable $42000 of real Tax from the Bush Tax Cuts (remember they get to take off the tax cuts from the lower Income brackets), but get to add $360k in Tax break through the $10 Million.

Some state that these Tax Breaks aid the upper classes to accumulate Capital for Investment. No one but the multi-national corporations are stupid enough to bear the total Risk to their Capital. Everyone else acquire business mortgage and rotating operational funds. What I am getting at here remains that the economy does not need these additional finances for funding Investment. There are sufficient instruments for creating these Investment funds, and giving Tax breaks to the super-rich does not enhance this process. There is no need for the Rich to get richer, or improve the ease with which Entrepreneurs obtain Capital. The claim that any of the Bush Tax Cuts enhance the business formation machine is trash Talk (my Mommy would be so proud of my not calling it Horseshit–too bad she is no longer alive).

I have been against the Bush Tax Cuts since he put them in his political campaign in 2000. I could say I opposed such ideation ever since 1997. I feel that We had to endure three Bubble bursts since the original date, and was principally caused by those ridiculous Tax Cuts, and the regulatory debacle where approved legal regulation was not enforced. People do not understand that the troubles of People are caused by the People themselves, there being no one else to blame. When one witnesses economic distress, understand that you can actually blame Someone as the cause; this all due to the fact that it is true. Inflation is a state of Mind where economic leadership wants to increase their Income at the expense of Those who work for them. Bankers and Business always insist there must be some rate of Inflation, this being so they can meet their own Wage Demand increases while the actual Labor is left to stagnate. lgl

The search for Normalcy

Everyone dealing with the area of finance should be able to understand this Post; if one does not, they need serious help. I am against naked credit default swaps simply because any spread of Risk beyond the initial Players can only threaten the greater economy. CDS in no way affects the actual rates of default in finance, and naked credit default swaps transplant the Risk to previously healthy sectors of the economy. It would not make a difference except that these Swaps alter the nature of the Risk as well, in fact increasing the structural overhang. Higher risk options are funded at greater Risk, with a higher rate of default because of the Risk; but with no corresponding increase in the Returns demanded, always and eventually leading to a greater loss of capital without a correcting Return. I may have even confused myself here, so I will simply say that the Recovery schedule of capital accumulation has not been strengthened though the Risk has been magnified. I will state for Those still confused that We have left entrepreneurial Risk, and have entered into economic Risk; meaning that capital replenishment can not be accommodated by normal Profits, but only by economic Profits.

The Reader may ask Why I think the previous paragraph ideation is such a big deal. Economic Profits must insist upon economic injury to other sectors of the economy, who cannot draft a repayment economic Profit from their own Production. Two Conditions are created: the first consisting of a reduction of normal Profits in associated sectors; the second being a collapse of the converted sector when the economic Profits are forestalled. Both Cases lead to a loss of Productivity in the long-term at a greater rate than normal operations. This is Why there should be a complete ban on naked credit default swaps, and even high restriction in covered credit default swaps. Borrowers should not be allowed to Buy or Sell such Swaps, and Lenders should be allowed to sell such covered Swaps only to financial institutions who loan within the sector of Production.

I am not claiming any great skill within the area, but it is also clear that relatively no one else is asserting such Authority. I am simply trying to cut Fire-breaks around the forest of such activity which will limit exposure to the specific sectors involved. The result will save Us all from the perpetual Risk which must descend upon the greater economy. This means normal Production will not be under continual pressure from all sides from the use of credit default swaps. Sectors may fail in sequence like they always have, but not with catastrophic failure as is now existent. lgl

Give me a honest Prostitute any day!

The Internet is full of Posts dealing with the Jobs Reports. It is the old ‘glass half full, half empty" paradigm, where going nowhere seems rosy to Some, bad to Others. The Business world needs about 5 Weeks to get most occupational New Hires up to competitive production. It is clear that Business expects no sudden new growth in Consumer Demand. Most in the Business world finally understand that a cheaper Dollar will not get massive new foreign Sales. Importers know that Consumer Demand is going down, and more so with declining value to the Dollar. The rigid Costs–Utilities, Transportation, and Property Taxes–are all destined to rise, and Consumer Discretionary Income is vaporizing. Consumer refusal to sell their Soul to the Credit Devil leaves Finance with a declining sector Profit. The economy may seem like a highly-tooled engine, but it truly lacks fuel.

This Post is exactly what I fear the Most. I am probably the sole advocate of raising Taxes to stimulate the economy. I will make the general overall Statement that Business Tax Cuts will not stimulate the economy in the face of declining Consumer Demand; it will simply provide Business a Profit when said Business needs to change its business format to acquire Profitability. Elimination of the Bush Tax Cuts and even the introduction of a Draft Tax on financial transactions would raise a immense amount of revenue, stop the Investment programs of Business into Treasuries, and create increased Demand for higher Wages. Business will engage in the practice of Hiring cheaper labor wherever possible, to conserve higher-priced labor while devoting such labor to the proficiencies for which they were hired and retained. Politicians, though, will bow to Business demands, and conditions will only worsen.

We are in the midst of a Capital misallocation recession. We are where We are because Business leadership entered in a finance and investment mode which was poorly devised, and artificially implemented; it was a bad business judgement call. Now Business insists on being paid a Profit from the bad business decisions, and Tax Cuts are the only venue that they can adopt for such a Business return. Both Business and Finance must be forced to adopt alternate strategies, which they will not do if Government will pay them for previous mal-alignment. It does not matter How Much Government gives to Business, nothing will improve until Business practice does change; it never will with the Politicians being such Whores. lgl

Market Power

Here is a Question which every would-be analyst of markets must ask. Can a math model be compiled which will match market performance with sufficient statistical accuracy to provide fully adaptive investment policy? We have a random order market with individual elements acting in independent manner, only united in the goal to show a Profit. The success of Quants will reduce the success rate of other Traders, and thereby alter the direction of the market, unless herd movement adjusts to reduce the seminal advantage to success. No one doubts that Traders and Investors are getting more adept with sophisticated trading technology, but what does this do when it becomes uniform? This is the skew which Felix Salmon discusses.

My take on all this would state that Quants will blend into human trading behavior as the technology becomes more uniform. This means the place for human choice rises as the machine reaction of models lose their advantage over regular Traders; remember, in markets, Profits above the market average must be balanced by an equal constitution of Operations below the market average of Profits gain. The whole thing leaves the arena of a proposition to abandon model direction, to a proposition of When to abandon the models. We are back to a human Guess.

Now We come to the proposition of hazard Trading, where the models are ignored; to be replaced with a Gamblers’ Risk. Many will claim that Quants will have an advantage over hazard Trading, but no one has come up with a clear picture of such fact. One has to spend much less time on data input with hazard Trading, so more Trades can be achieved in the same Time frame. Statistical Odds will tell one that hazard trading will probably be Profitable some 50% of the Time, but incur Profit losses elsewhere. Hazard Trading, therefore, will meet the market average half the Time, fall below it half the Time. Spread of Risk sideways across greater numbers of different Stocks improve the lot, though hazard Traders are loath to sell Stock below what they paid for it; this reduces the amount of capital available for Spread of Risk. The humor of all this remains the fact that consistent performance with markets will cause the majority of Traders and Investors to leave the markets poorer than they entered; this due simply to the fact that markets grind up Profits in derivative payments to the market employees. Markets would be abandoned by Investors and Traders, except for the huge wealth which accumulates to that minority of Traders and Investors who prevail. lgl