Playing the baseline--Craps terminology

I will start by asking my Readers to read this link, along with both the Cowen link and the Kling link. I literally cannot find any Creditanstalt. It is simply the old Banker Shell Game of people getting the Money when they pay enough Interest on the money, so that the Bankers are willing to play. Here is the interesting Side-Bet on the old Shell Game: if the Governments only raised more tax revenues, the Bankers would concede; they knowing that they will never get the higher Interest rates. The Governments realize, but do nothing about, the fact that what they need is higher taxes. The later would pay for the Government services which the citizenry demand, and would only cost the End-Game Consumer with higher Prices; something they will have to pay anyway, if the currency dilution plans are carried forward.

The Great Recession is much different from the Great Depression. Then, we had a vast overstock of Inventories without Consumers. We have a shortage of Production and a vast fund of Credit in the Great Recession; the problem here being How to repay all those Credit instruments at every level considering the limited Production dictated by both Business and Consumer. Keynes made a great Argument for Government fueling Recovery from the Great Depression through getting funds to the Consumer and Business. But will the same formula work for the Great Recession?

The answer to that is No! We have to make both Business and Consumer work harder to attain the Product and Profits that they want. Here is where I really make enemies! The only sound way to do this is by raising Taxes. I have chosen the most innocuous manner to do this that I can find, which happens to be a uniform tariff on Trade of 6%. It both raises tax revenues to hold off the Bankers, only makes Business Operating Costs uniformly higher–No Gain–No Foul–everyone stuck with the same marketing structure, and Consumers simply paying the higher Prices which they will have to pay anyway; the kicker being that their Money is still worth something in the long-run. People will scream that it will reduce Trade when it will only reduce Trade volume; can I plant a Yippe-Ki-Yah here? It would actually be quite beneficial to lower Port facility transfer volume by 20%, reduce the ships on the high seas by 12%, and reduce Transport fuel volume by some 20%; again, a little Secret, the worst polluting fuel existent. lgl

the oft-repeated argument

I read this Post of Don Boudreaux on Trade, and think how much people organize their own arguments on Trade, never directly answering the charges of other people. I here want to declare there is nothing wrong with the Boudreaux argument, just with the concerns which he does not address. I would like to get a more balanced prospective on the issue of Trade, if it can be devised. Understand my opponents will declare I am just as evasive as what I criticize simply because I have not answered some of the key questions which they would declare as paramount. It is not easy to get discussion, kids!

Almost every Country in the World has a different Price structure and given standard of living. This means that Wage scales must differ from country to country, simply to maintain the Living Standard customary to the Country. International Corporations recognize this fact, and alter their Price schedules country by country to maximize both Sales and Profits. They refuse to follow this program wherever possible when it comes to Wages, where it would cost them Profits. They also happen to do this with taxation, not paying the Tax rates consistent with the their activity in the country in question through false Income reportage. There is also no doubt there is a Carbon Consumption to Trade as well; I estimating that every Trade Dollar adds about 7 Ounces of Carbon Emissions from Transportation to the Carbon Emissions of actual Production; out of which almost 4 Ounces of Transportation Carbon Emissions could be eliminated by domestic production.

An uniform Tariff of 6% would have the impact of an Operating Cost on the actual Business format. Yet it would make domestic production 6% more profitable versus foreign production. The gain to Living Standard maintenance could reach almost double this amount of Profit over the Long-Run, as added domestic Wages increased the consumption of Business products. It is time to recognize that Trade is not the salvation of the economy, or is it the Savior of Business Profits. A tariff also possesses the capacity to suppress unnecessary foreign Products purchased by the domestic Consumers, all due to the added Cost; something which will lead domestic Producers to concentrate on Products devoted to fulfillment of domestic Consumer desires. I await the widespread Protest to my truisms. lgl

A Sour Stomach after Thanksgiving

Paul Krugman tells Us we are about to enter a new intellectual Dark Age. I feel this could be a fact only if academics refuse to consider adaptions simply because they do not meet established ideology. I do not know How to fight such intransigence, except to make one’s own declarations, and hope that Others will raise any valid arguments against the declarations within the morass of bull generated by any attempted difference. I therefore will outline my own Plan to straighten the mess which the World economy has assumed because of bad Spending patterns of both Government and Consumer. We need to both to cut the bad Expenditure patterns and force All to spend within their Means.

My program:
1) All Governments need Cash just to meet their current liabilities. I turn to one of the most efficient forms of Taxation ever devised–Tariffs. I advocate a uniform 6% tariff across the board on every Import, no deviation from that duty for any type of style of Import. Consumer and Business will import what Products and Resources they need, simply because of that need; meaning the quantity of such Product or Resource cannot be obtained within the domestic economy. Governments need the revenues to pay for their Expenditures, Consumers will pay the higher Prices because they must, and domestic labor finds a vast increase in competitiveness; solely due to the fact that there is 6% more potential Profit in domestic production. The uniformity of the tariff turns an great potential economic suppressant into simply an additional Operating Cost.
2) The second policy element stands as basically technical: Debt Service on Treasuries must be taken from tax revenues raised, while payments for Government Services, administration, vested programs, and Public Salaries must come from remaining tax revenues and acquisition of Debt. Congress must pass on any assumption of additional debt by majority vote established by the sectors outlined–each requiring monthly passage.
3) Congress should pass legislation requiring taxation of 1% on all Consumption debt which exceeds 3 years previous Income for any Individual; the Income taken from the filed Returns of the previous 3 years added, new labor given an exemption from the tax until 3 Income Tax Returns have been filed. Business and Corporation will be subject to the same Tax, only they are given 5 years of previous filings as limit, but must not exceed 5 times their current year filing.
4) Congress should pass legislation requiring all Welfare payments should not exceed a certain bi-weekly or monthly level established by Congress, no matter how many programs an Recipient may be qualified for–and I mean no greater amount despite the screams.
5) A national health care program should be initiated in the United States, with All subject to this program. It will limit the total yearly amount of medical underwriting of individuals, take away State liability for Medicaid Costs, pay for Emergency Services, and initiate average Cost medical insurance payments for medical services; eliminating the majority of Cost Accounting administrative Cost.

I could go on for hours, but I think I have caused enough consternation for the day. Understand that it is measures like these which will make a difference, else We simply await the collapse of our Governments and social systems. lgl

Perception

The Post which I link to here may seem to be way off from my Subject for today, but I wanted to show common perceptions of modern economics which can be found in the article links. Given the state of technological level in the 1930s, only about 12% of the World production could have potentially been exchanged. Today, that level may have been raised to about 34%. Just remember that in both cases, we are talking about a huge amount of Product here. The tariffs in the 1930s may have reduced the amount of Trade transfer to significantly less than 1% of total Production levels, while extreme Trade barriers and Tariffs could possibly reduce total World Production today in Trade to less than 4% of the volume. I talk in these Numbers because the advance in technology has led to far greater dependence upon foreign resources and Products. Contretemps, extreme tariffs and trade barriers placed upon necessary resources and Products could incur far greater damage than a simple overall tariff which could protect domestic labor to great degree while suppressing unnecessary Costs of Transportation that the Consumer must pay in Product price.

Rick Bookstaber wants Us to believe that technology stands in permanent deflation mode, when I do not believe it is in any way deflationary. The true problem with technology comes in the fact that it increases our interdependency throughout the World, shifting our need for specialized labor from a local area to a global area. This means an almighty pursuit of the lowest-Cost labor possible with the positive Job Skills for maximum production. This holds the real deflationary aspect of technology, and the great "consumption trap." Technology persists in not only demanding the lowest-Cost labor, but Business knowledge of the highest Profits possible to be gained in every local area. Here is created the real loss of the Standard of Living for labor.

The interrelationship of the World economy with advanced technology will of necessity demand a spiraling deflation in the Standards of Living for labor, as long as Government feels it is wrong to intervene with a moderate degree of tariffs and trade barriers. Economists of the 1930s decreed that tariffs and trade barriers were the great demons of the modern economy, and traditional economists have accepted this as dogma ever since that time. The trouble with such economics is that whenever the tariffs and trade barriers are removed, there is a gradual erosion of the standard of living and quality of life for all nations involved. When tariffs and trade barriers are utilized, the local standards are conserved to the local population’s benefit. Economists have yet to prove that removal of trade barriers and tariffs were themselves of any benefit to labor or Consumer. I say this knowing full well that economist and Business will protest that there has been massive rise in the quality of life and Living Standards for billions. It is said, though, when almost All of said Gain came with expansion of medical services and technologically-advanced Products; it all having nothing to do with the spread and use of foreign labor in distant production centers. lgl

Reality as I preceive it!

People will eventually question me as to Why I consider this Bad News, coming as it does after reports from New York and Philly. It is all about the question of Quantitative Easing. Understand that Markets are strange creatures, Those involved believing quite correctly that Profits in Markets comes from anticipating the market trends. QE does not have effect once it is introduced, but after that Period when Participants are sure that QE will eventually take place. What I am getting at here is that QE has already been priced in, as the leading Market pundits would put it. The Reports can already tell you that QE has been a flop. Positive expectation of the QE had already been in place for over two months, and there has been no business expansion.

All indications remain that We are in decline, and I bring forth that old trash, Stagflation, to discuss the Inflation levels in all the sectors which Bernanke considers should not be considered. He sees Deflation everywhere there is no Inflation, and Inflation nowhere where it is. It seems that Prices are going up everywhere, except in the Paychecks of 95% of Americans. What amazes me is that the Fed accepts the Statements of Business, where Deflation is counted where Sales cannot be garnered where Business had desired Pricing schedules to be; accounting the failure of desired Price increases to be deflation. Business and the Fed considers it to be Deflation when Prices remain identical with previous years.

I am quite sure I will face much outrage at my expression of this datum, though it is not to say it is untrue. Business may think there is justification for their view, when they face higher Prices which they must meet while their own Pricing must remain the same. I, on the other hand, would account this simply to be a ceiling on the Profits they can extract from their industry; meaning that Corporate Pay Packages cannot continue their astronomical rise. My disappointment with the Fed enters when I conceive of this feature being a natural economy trying to redistribute Operating Profits to maximize Production; with the Fed seeing this factor as some defeat of economic performance which must be altered. lgl

The Welfare System

Arnold Kling is very analytical, and also very wrong in my estimation. The major problem with the analysis can be spouted in short Sentences. Politicians never stipulated any limitations on the underwriting of Social Security, and economists will not discuss introduction of those limitations. It remains exactly these limitations which will save the highly successful Social Security system. It is Why I am writing this Post today.

The first stipulation I would make is that the Social Security system functions well, Medicare does not! This Country should have introduced a comprehensive health care system a long time ago. Having a health care system solely devoted to the most expensive medically-treated segment of the Population without recourse to the Savings from universal premiums could be accepted only in America; no one else is quite so Stupid! The addition of Medicaid only makes the ridiculous somewhat idiotic; including only Those who pay no premiums at all!

Maintaining the link between Social Security and Medicare will result in every Social Security Account eventually exceeding the level of taxation paid into it, all without any real Interest being paid on the funds in the interim. We should advise a singular, uniform, unit monthly payment as benefit for all Social Security beneficiaries. A Statement here being that this benefit should not exceed the highest benefit level paid for Unemployment Insurance over the same Period; something to do with equal levels of labor added. Remember that saying that someone will not spend Us into debt as fast as someone else does not sound like a viable proposition.

The second major element structuring Medicare if retained by Social Security is the sharp limitation of benefits to be drawn any given year; I would suggest a maximum of $30,000 per year, with Supplemental Insurance on SS benefits entailed by law to cover up to an equal amount. Did anyone notice I said nothing about What insurance companies can charge for premium for this Coverage? I feel such a program with premium overages would limit the degree and type of medical care given over the long-run, without any undue amount of regulation by government. A like amount should be introduced for Medicaid, and tell One and All that it is time to search for that purported Charity no one can find. Doctors, Clinics, and Hospitals would quickly adapt to the new matrix, where their prime Patients did not pay more, and so they would have to lower Rates to acquire the poorer Patients; there might even be advertising campaigns to attract Patients.

This is How One approaches a discussion of the Social Security system, but it seems only I are really capable of discussing the subject on this level. We will never get anywhere until We begin to deal with the fundamentals of the Problem. lgl

Alternate Plan

We are again talking about a Government Shutdown. The consequences of this are immense, and the outcome will be tragic for All who engage in it. It will only serve to anger the American Public, who have never actually been with the Tea Party in its beliefs. All other Legislators plus White House, though, will come in for equal amounts of acrimony. I believe it is time for all Moderates to enter with a decisive program. I would personally go with the Full Tax Rule, where all Income is taxed at 21%, and all deductions, exemptions, and Tax credits are left to be repaid after Income Tax Returns have been filed. I like this decision, and will try to explain my position in the following paragraphs.

Such a Ruling gets the federal government the finance necessary to maintain the government. Legislators will have to come out and state exactly what federal programs they are opposed to funding, and how they should be cut. They will not be able to escape the specific responsibility by emersion in the general responsibility. Their fellow Legislators do not have to accept the general onus which would come from shutting down the essential services of the federal government. The second big reason will be that Congress will examine their position on the general run of Tax reductions on the books, as they contemplate the return of such huge amounts of Tax Receipts when the federal government actually needs the money. The discussion has suddenly become far more relevant, without the duress which the radical Conservatives would engender.

Such a huge draft of revenue out of the economy would create a number of factors which would be beneficial to the economy. The suppression of Wages in the Low Income and Medium Income ranges would be brought to an end, as the added taxation will vastly increase Wage Demand; such will pressure real increase in low Wages, while suppressing huge increases in the highest Income range. Business would require an enlarged variable Operating Account which will place huge pressure on Banks to return to normal lending practices; something which the Fed has not been able to accomplish. Legislators will be forced to view how much they return to all Parties in excess Tax deductions, exemptions, and Tax credits, and will have to justify such financial give-backs in the face of declaring it must all be borrowed funds which are returned. Business will also be faced with needed expansion, or undergo massive reduction of both Operating funds and Profits. I like this form of closure, which opens necessary discussion of alternate methods of operation. lgl

The Necessary Impact of Taxes

Menzie Chinn does a good Job of model analysis of the potential effects of a Tax increase. What he is basically saying states that there is not necessarily an efficiency gain from reduced Taxes. Upper Income Earners work approximately just as much under higher taxation as lower taxation. He does not scope the increased efficiency of Employee training which derives by higher Income Earners wanting more Time off, which I would imagine is inverse to the Tax rate, and at far greater extreme elasticity. The 4% replacement of Tax revenues coming from maintenance of the current Tax platform should lead intelligent people to assume that We cannot really afford to retain the low Tax rates.

We can now turn to David Leonhardt’s article. The Bush Tax Cuts initially seem actually to suppress the rate of economic growth. Renewal of these Tax Cuts show no indication that there would be an improvement. The one effect I do define positively to occur is the Government providing Business a place to invest their financial Profits safely; I am talking about the vast increase in the federal debt which was only lately reduced to low Profit yields. I hold to the thesis that Business will not adopt high-Risk ventures, if there is alternate lower-Profit investment opportunity, even if the Profits are much lower. It is all about being able to invest outside your initial venture areas while knowing little about the development strategies of other sectors. I wish Menzie Chinn would set up a model examining the elasticity of such investment based upon both the rate of Return, and the degree of Risk.

My precis would claim that Business personnel are as cautious at reaching outside of their area of expertise as any ordinary set of people. What pushes them out of their own sectors is over-development of their own sectors to the point they do not want further development at their own Risk, and lack of other safe investment arenas. It may not be clear to the Reader, but it is to me, that financial Profits must be re-introduced into the Production function at some point; and it is often where those Profits were not earned initially. Efforts must be made to minimize the cushion of Risk-free investments, and the best way to do eliminate such hedges remain Taxation. lgl

E-D Bonds

Someone was so rash as to question me about E-D bonds. I did a fast google and found no results, so they probably do not exist except in the fevered imagination of myself. A good Author cannot let such drivel distract from general bombast, so I will give a general description of E-D bonds; sometimes called End Decision bonds. Anyone thinking to contradict my description must accept I consider them to presently be a figment of my Nightmare, and lack any basic connection to reality.

Your basic E-D bond has only an Issuance Date with no duration on the bond, and no set Interest rate affixed to the bond. They are marketable securities, meaning that they can be bought, sold, and redeemed at the holder’s preference. Their only termination comes through the redemption by the original Issuer. The Interest rate will be determined by some fixed measure agreed at the issuance; the Treasury probably declaring the Overnight rate prime lending rate of the Fed. The E-D bonds can be issued in any amount up to probably around $5000, and the final settlement upon redemption will be the original amount plus (the Overnight rate currently in force times the total amount times the number of Quarters of Time since the original issuance). The E-B bonds will be set up like the title of a Vehicle, issued in the original name of the holder, but can be bought or sold at any Price until redeemed; simply noting both the Taxpayer Number or SS number of the Purchaser, and the price for which purchased on the last two folds of the continuous document.

The E-B bonds would be excellent for returning all Tax remittances after Tax Returns are filed, according to my scheme and the day before yesterday. They are easy to fill out and Issue, they can be issued at basic regular Quarters of Time, and they will hold Power to displace a ridiculous Fed position of a No Interest Overnight rate. This will improve the position of all Savings Accounts, Certificates of Deposit, and modified Transfer Accounts. I would like to see a limitation on these bonds insisting they cannot be redeemed for at least 180 Days, establishing a market for such bonds, and pressuring Taxpayers to build a Capital Savings account. No one ever told me that introducing simple mechanisms could not introduce great changes! lgl

How Wrong can Right be?

I did slightly better than Tim Haab, coming in with about $2080 bn saved! It surprises me to a great degree, because the Options offered came nowhere close to what I would advise. I would first propose expandable Income Tax rates–same percentages, but with higher Income divisions. I would call for a Transactions Tax on Market transactions equal to 1% of the total amount of trade. I would advise a higher Step-Off level of taxation, but insist that the Estate Tax be 35% above that level with no Exemptions. I would split the Wealth, and state that any bequest over $100 million will be taxed 100%; Will-writers will be advised to spread out their dispersions. Capital Gains would be taxed as ordinary Income with ordinary Income rates, beyond a $10,000 per year deduction for each Taxpayer–twice this amount for Joint filings of married couples. The mortgage tax credit would be a set amount of $5000 per household, with proof of payment required. Churches, Charities, and Foundations will be taxed at residual rates, by the amount by percentage of Income which did not go to charitable or academic research; if only 30% of Income went to fund these operations, then the tax rate will be 70%; if 70% of such funds were used for the purposes proclaimed, then the tax rate would be 30%. I state the above knowing full well the separation of Church and State, but no one said a damned word about Taxes.

I will insist in the future on my desire to take 21% of all Income, while waiting until after the filing of Tax Return for any deductions, exemptions, tax credits, or reductions of any type. This I believe to be essential, even if none of the Above will be adopted. The rationale behind this is to place federal spending on the same level playing field as private consumption. The Private sector must make a unilateral choice with every purchase, where Income spent on one item cannot be spent on any other item. The Government, though, simply thinks to continue Spending; leaving it to the Treasury to come up with the added Cash. The practice places extreme pressure on Prices, driving them artificially upward. The set Tax Assessment reintroduces the concept of natural Demand dispersal into the economy, with the Government taking the financial resources out of the economy which they spend; all without undue pressure on Product pricing.

Most economists will likely possess high reservations about my analysis, but I cannot perceive any measure which can cancel the adverse effects of Government spending, especially deficit spending, outside of a targeted, uniform Tax Assessment. I have never joined the Keynesians in the belief that there need be a continual deficit programs for maximum economic performance. My belief has been that it must be long-term adverse to the economy, cutting capitalization funding in the Short-Run, and pressuring economic profits in the Long-Run. I may be Right, I may be Wrong, but I do know that Government is not doing any Good anymore! lgl

I am gettng outright Rude

I will be the Dirty Old Man in the scenario, and state that this is not only true, but what should occur. We need higher taxes, and more on the order of 26%, than on the order of 10%. Our dear President and Congress should grow a Pair, and start to straighten out the Mess. There are a number of reasons for that Statement, and I will try to explain; forever engendering the anger of Conservatives and Business. I will want to present the ideation that Government makes a poor Consumer of Last Resort, and Congress and President should be enticed to spend much less, which they will not do unless Taxpayers are actually pressured by taxation.

1) There is an increasing lack of validity to Government expenditures, unless they are paid for; a good Case in Point being an individual I know who had never made more than $20k in his entire 45-year Work life, but already has had over $2m in health care courtesy of the Government. Medicare and Health Care in general are the most tense Subjects in the federal budget, but has to be addressed.
2) Government Spending is the only source of Inflation today, and Bernanke is hot to maintain the Inflation–entirely the wrong idea. Inflation will pick up again, and come from its natural source; this being a boom in the economy. The Problem here is that Inflation will pick up far faster than the Fed can get out of the economy once it starts–think 18 times faster–and removal will have the same flavor as the sunset of the Bush Tax Cuts.
3) We are destroying the reconstructive ability of the US Dollar which will destroy the Wage platform of Americans, not only smashing the current suppressions of Inflation, but Savings, Capital accumulation, and Service payments. Try paying the Plumber $2000 for a Job that he wanted $200 for in 2005.
4) The above payment would be fueled by higher Capital Costs, higher Operating Costs, higher Insurance premiums, and only a small increase in Taxes.
5) My example gives a good Accounting of what I describe: Top-Down Inflation is worse than Stagflation or Deflation, where Corporations bully their way to Inflation elimination, but only by destruction of the business format under which Small Business must operate.

I here call for a automatic 21% flat Tax Assessment against all Income, all reductions of Such only to granted upon filing a Tax Return, then paid only in some form of US Treasuries. FICA taxes will be included as applying to the Assessment level of taxation, and the Assessment will not mean a limitation to the total Tax burden eventually collected. It simply means that the federal government is collecting enough tax revenues to pay the Cost of their Expenditures, and giving back only Funny Money which Taxpayers must unload on Someone for Cash. I guarantee that such a Process will lead All to be more Budget Conscious. lgl

Crazy is a natural state of mind!

I thought to bring this short Post to my Readers’ attention. Countries tend not to exhibit conjoined development of standard of living and economic performance. Rodrik is concerned with the divergence, while I see optimism within the trend. It highlights that the overall economic development need not increase, to get sizable increases in the standards of living. The major inputs required for the later is heightened levels of education, and simplistic sanitation models. It means We have to adapt cultural mores in only minute degrees to get massive alterations in the standards of living. It can also guide developmental policies to get the low-hanging fruit of development, even if the long-term advances may be impossible to apply.

I will guide Readers to this Post, expressing true Students should examine all links presented in the material. I personally never could stand this stuff, probably expressing my limitations in economics. There will always be oversupply within market competition, as Suppliers detest leaving unanswered Demand for Product, and venue for alternate disposal always exist. This is an important parameter in itself, stating that oversupply will never exceed alternate methodology for disposal. This is because excess Product without disposable impedes further production and storage of Product. This is where I introduce a strange thesis, where Production levels can be estimated by the development of alternate disposal methods for oversupply. Reader can ask Why I would come up with such a stupid precis, and the Answer states both Productive capacity and relative levels of Consumer Demand can be estimated by the level of development of alternate disposal methods.

It sounds like Tyler Cowen wants to provide his Teddy Bear with a vacation! I have often heard of extreme ways to finance extended vacations, but a Photo Shoot for favored stuffed animals must rank up there. Would your carry two or three traveling bags filled with stuffed animals through airports and train terminals? Even if it was the only way to be able to travel? I may be just lazy or something, but I think I would rather possess photos of French women to a picture of my stuffed dinosaur in front of a French champagne bottle. lgl

Break the Deadlock

Read this Post, and ask yourself How we can move away from a polarized, political position on the deficit. Both Democrats and Republicans yodel that it is all about Taxes, but this is only half of the equation. There are a number of ways to look at the federal debt and deficits, and I think it is time to consider these conceptions. There is the fundamentalist view, where the federal debt is considered an obligation which must be repaid; this view would declare that all Taxes which are eschewed Today must be added to already high sustained Taxes in the future in order to repay the debt. The devolvement of this conceptualism insists that economic performance in the future must be suppressed, in order to promote greater enhancement of the economy at present; if and only if, of course, One believes that Taxation actually acts as a detriment to economic performance.

Another conceptualism of the federal debt and deficit consists of the idea that the later acts as an Operating Budget of Government and economy, and will consistently expand as the economy and Government grows. This view is most prevalent within the Business community, who have become quite comfortable about risking other peoples’ money on their own risk ventures. They have derived great experience in limiting their own risk to losing control of their own ventures when such ventures enter Receivership, carefully protecting their own assets. There is a relative degree of doubt that such a business model will work beneficially within the parameters of a Government bankruptcy.

The above are probably the main views held concerning the federal debt and the deficit. There is a Concept underlying either view, which is the statement of ‘Screw the Children’. Neither will likely work at all well in the long-run, and violent dislocations are bound to descend upon Us. I would suggest an alternate course, but What? My basic ground suggestion would be to collect such Taxes as necessary to pay for ongoing Government services, and only grant deductions and Tax breaks after Tax Returns have been filed, and then only in the form of US Treasuries. It does two great things, insisting that Taxpayers take responsibility for political Spending, and forcing them to take a Stake in the success of the Debt acquisition. All Participants must exhibit concern on the success of the Treasuries markets. lgl

Do Unto Others!

The Lady is Right, but what can We do? Politicians will not anger their wealthy Constituents, those who provide both Votes and Cash. They do not want Taxes, yet, they still want Services; even when they are not qualified for those Services in the context of Need. We face the real fact that Rich want exactly the same Services as the Poor, if the Poor receive them. The whole Concept of Means-Testing might as well be forgotten. It is also a fact that American Business finds itself making more Profits from sending Accounting paper than in producing Consumer Product. We belong in a special society which has rewarded those manic designs which foster Expenses on a trusting Consumer society which does not understand the chicanery. I have developed a Stepped Plan to reduce the hazards easily apparent in our society.

1) Every Government agency, department, and Employee will charge an Administrative Cost charge of $1.25 per page of all applicants for communication. The law will stipulate that the communication will be discarded without review if a Check whose amount equals the total number of pages plus additional Envelope at $1.25 times the total number of pages. This begins to pay for the federal government with its huge labor costs.
2) The law goes on to require a electronic transfer of funds equal to $.50 per 25 lines of Transcript for electronic filings or emails of any type, else the entire file will be discarded without review. The government agency will set a Payment system which it will bill for the proper amount, which must be approved before consideration of the filing will be made.
3) The law will go to stipulate that every American receiving any Mail must receive $.25 per page of bills, $1.25 per page of Questionnaire, and $2 per page of Advertisement. Mail addressed to Resident will not longer be delivered, and every notification of failure to provide the directed payment by Check to a Postal employee will incite a $10 Fine to the Sender; which Fines which are not cleared every 3 months, will engender stoppage of Postal service to the Sender until the Fines are paid in full.
4) The Intent of the law is to ensure that all Communications will be clear and concise, and that American Consumers receive just compensation for the duress of having their Time diverted to examination of unwanted Communications.
5) The law will also stipulate that Government agents cannot contact American Citizens except for specific reasons, and that every Government agent will be limited by a specific number of pages or electronic lines which may go to any individual Citizen; I would suggest 20 pages of material, or 500 lines of electronic Transcript. The Government agency or Department exceeding this amount must return a portion of their operating budget for the indiscretion at $5 per instance. Individual Government Workers will be warned 3 Times before dismissal if their total communications exceed 30% of their granted Communication level.
6) The Office of Management and Budget will be directed to supervise the entire legal process of the Communications Law, and empowered to assess Fines–both Public and Private. All revenues raised will be returned to the general fund.

Did I make the Businessman’s Day, or did I make the Businessman’s Day? I should not get gross here, but Pricks in high office are still Pricks; no one should have the right to intrude into Anyone’s day without recourse or measures of restitution. Do I sound especially Mean today? I am actually having fun at others’ expense–does it remind you of Anyone? lgl

Cold Analysis

Mark Thoma gives a nice rundown of the trend of economic thought, but grants little Insight into the viable level of government intervention within the economy. I will start with my doubt that government can stimulate anything, especially the Taxpayers who are later forced to pay for the stupidity. The second statement I would make would be to keep it simple–Stupid! Government stimulus will never devolve through more than one level of performance, after which normal Profit-Taking by Rent Seekers will absorb any benefits which could apply. Some children may not know of which I speak, but I will simply refer them to Charities, where only 30% of most Contributions actually go to Anyone but the traditional Rent Seekers. Volunteerism has become a dirty word, and Business has enshrined a 20% Profit. What does all this mean to the Taxpayer and Economy?

The Fed and Treasury paid Big Business big bucks, and the Small Business still could not get an Operating loan. Big Brokerages received a wealth of Cash, and Stockholders lost Money. Paying at the Top does in no way guarantee a more open Spigot at the bottom; in actuality, it often means a tighter closure with unmoveable handle, simply to supply the great Profit ratios for the major Players. Devaluing the Dollar simply means that the large mass of Retirees and older Labor find they were paid much less for their labors in previous years, with no growth in Production to make up even a Tenth of the Cost. The major Players, though, love all of the Above simply because they can record such Profits to their own benefit, and almost no one else.

So here is where it stands: Government can help, but only in a very involved mode; no paying Others to do the scrub work of Stimulus. Government can stimulate if they hire labor themselves in massive quantities; such labor requiring only Minimum Wages being paid because of the Cost. It is not bad, though, because such Wages almost all convert to Consumption; people taking such Jobs really need the Work, and know exactly how to distribute the Income. Loans by Government to Business, even small business, only bring dis-economies; the guiding element here being such Business activity is consequence of Government loan practice, and almost All must be considered uneconomical under natural economic conditions. Tax Cuts are relatively purposeless, granting the Savers a greater build-up of Cash reserves, while Investing is still totally governed by the basic principles of Supply and Demand; which never calls for extended Production under recessionary conditions with reduced Consumption. Government can make a difference, but will never achieve that difference if the Rent Seekers are allowed to formulate policy. lgl

Pounding in the Nail with a Gunbutt!

Kevin Warsh is a good man, and has much of the right idea, though I worry seriously at Those who fear Deflation. No one has yet proven to myself that you cannot have productivity without Inflation. I know that one cannot achieve Productivity without relatively full employment and equivalent Consumption levels. It is here that I got a bright idea, which might seem old and brittle to Others. It is the Concept that We make all Tax Cuts conditional on performance. Does this seem outrageous to you? You might want to join the Conservatives.

Here starts the real difficulty: how to make the Tax Cuts conditional; and how to insist on performance. The Bush Tax Cuts are about to run out, and can be readily changed; at least stopped until the Conservatives agree to amendment. It is not the best way to discuss legislation, but one has to recognize the structure of Washington D.C. today. Now is the time to throw a sea anchor into the Water, and get some vital Concessions.

My pet idea just dreamed up is to make all such Tax Cuts conditional with the employment of 5% of businesses labor force as Apprenticeships. They will have to be paid a minimum of the Minimum Wage or more. They must be employed for 2000 hours per year, and test out by Government testing with a minimum Grade of 70 at year’s end to qualify the individual business for all additional Tax Cuts that Congress may pass or extend. The program does many things which are beneficial: it trains future labor in production detail; provides labor with an alternate to Unemployment Benefits when they run out; ensure that a far greater number maintain at least minimum participation in Consumption; and makes sure that far fewer labor cadres lose their edge in production operation. Business, on the other hand, will face a different set of limitations: they will need to find the most qualified as they need to get these Apprentices to test out positively; they must fulfil their function as Educators to get positive Results; get a trained labor force for potential expansion, and can write off their Training Costs as Expenses.

Business has the ability to tell Apprentices "Sorry, there is no followup Job" when conditions warrant, and simply hire new Trainees. Failed Apprenticeships can simply apply for Apprenticeship with another business, most likely in an related area. All businesses improve their Hiring sequence and practice, and all Labor get a firm grounding and foundation to later accept employment. I like the idea, and probably no one else will. Such is Life! lgl

I know that this gets boring!

I will start by saying that the Reader must read all the links to this Post, before he will be able to understand the issues involved. All the information stands as sound, derived from a basic, though minor, disagreement as to effects of a monetary policy. The underlying Question for me was mounted by Mark Thoma’s protestation that Inflation can not occur unless there is a solid uptick to Demand. Inflation and monetary policy differ in even greater degree than do Microeconomics and Macroeconomics. The first relies on individual players in the Markets, while the second is a uniform attempt to counter the impact of those individual players. Inflation is even more intensely individually personal; work with me here, participation in the market itself has already established the Demand on the part of the Individual with no group influence. Monetary policy can only grant more Cash–or less–in hand as he approaches the market in question. Now, a market denotes that We have at least two players in competition for the Product available, different only in the amount of Cash they can bring to the market, and their desire to possess the Product. Supplying extra Cash to both will naturally raise the bids made by both–Demand constant–with the Winner being the One willing to spend the most on the Product.

Condition One–We must have Demand–supplied by the creation of the Market. Condition Two–We must have competition, else there is no Market, but only a Product Price. Condition Three–the Price of the Product will rise if there is additional supply of Cash. Too many economists assume that Demand is an All-or-Nothing condition, never accepting the reality that there is always present a lower Demand level, which might not be maximized but still present. This is all We need to establish at this Point. Demand-Competition-and higher Product prices when market participants hold more Cash.

Inflation, in one form or another, is always figured as the difference between averaged Sums between the Present, and some Point in the Past. This highlights an aspect of Inflation, which is acknowledged though often only barely; here We are at the point where the Fed seeks to deny Inflation coming from volatile Sectors–this meaning Ones where there is actually Inflation. Inflation comes from the bottom, not the Top, and only in individual increments of Changes in each and every particular Product. I am saying that individual players in the Markets set the Inflation rate at a very individualized and personal level, having almost nothing to do with monetary policy; except for it perhaps stipulating how much Cash they can bring to the competition. The problem comes in that my old Granddad advised me not to take a knife to a gunfight; he even stipulated that I should load my gun before my opponent loaded his. There can be Inflation even under recessionary conditions, which is the full intent of my Post. lgl

Pig in a Poke???

One can grasp the Employment situation from this link; I will say now that Heidi Shierholz and Stephan Stanley probably make the most sense at this point in Time. The later is something which I would like to discuss at this time. Most economists don’t, but should, track the productivity per Worker across their labor lifetime. This vastly changes the Productivity levels of Labor, as period of non-labor appear as 0 within the Average. Labor lifetimes under such a Scenario should likely fall over a 35-year Period of Time, though many Workers work much longer or shorter periods of time. I say this because Recessions could be gauged in terms of lost labor hours, and Booms in terms of gained labor hours. The Average labor Wage can be produced at any point in time, and the real Cost or Gain from such things can be judged for Labor. The Trick, here, is because loss of Savings comes naturally under unemployment conditions, and the Gain or Loss will naturally reflect gain or loss of domestic Consumer Demand within the Period in Question.

I remit to you this article by Michael Konczal. It seems that Unemployment remain a semi-permanent condition with semi-permanent effects. Labor has to relocate to find Work, and loss of Labor time and relocation Costs make a permanent dent in their net worth. Localities do not recover from such Recessions in the Short or Intermediate Run, and there is evidence that localities recover in the Long Run only after serious readjustment of the Tax and Welfare structure. It is assurance that it takes more than economic policy to regenerate any economy.

I ordinarily do not like to link to such a Post, basically due to dislike of the Thought that Americans conceive of the Vote as a way to punish Incumbents for previous performance. There is the fact, though, that many actions are unpopular with the Voters, and Incumbents can lose support because of their position which angers their base. It did happen this time to a relative ‘swing’ degree, and I say this believing that the Change was probably Good even though I back Obama’s positions. I opposed the TARP, but they passed it anyway; the notice here being that it was a Republican Congress which did that. It is not to say that I like Democrats any more; yet, I think politicians should be hung for their own behavior, not that of Others. What truly amazes me is the lack of core Democrat response to the constant attack by Republicans through they years since Reagan. Could it be that they are truly Republicans in Sheeps’ Clothing; bought and paid for with Conservative, Republican, Corporate Cash? lgl

Quantitative Easing

I would advise my Readers to assess this article. These are the major doubts of Economists concerning QE. These have been suggestions that I provide my own reservations to quantitative easing. And here I thought I had been perfectly clear about my misgivings, but I will give it a second Shot across the bows. I would first like to tell my Readers that it is all a matter of Timing. Why do I say this: because it all consists of when the Inflation hits from any financial policy which is introduced.

Markets always respond to expansion of the Money Supply; what is the difficulty is determining When exactly it will impact. Bernanke and the Fed hope that the impact will be immediate, but I doubt that seriously. The markets will integrate the expanded Money Supply, though it will not reflect in higher Pricing until there are shortages in the Markets. Here is the Kicker: Once the Markets have absorbed the expanded Money Supply, they will not give it back! What does this mean to the economy?

The Fed desires the Inflation to be immediate, which will not occur without a Pick-up in Production schedules. There will be no upturn in such Production until there is observable Demand. The Money will simply flow in, and be waiting like a Rattlesnake, with an occasional rattle to let people know that it is still there. The Problem comes when the Fed thinks to reduce their balance sheets, and the time that Inflation will truly appear; in a form and rapidity most undesirable. The Markets will not release such funding, even though they will repay the Fed. They will retain the funds through very rapid rises in Prices. The Fed will not get their desired Inflation until it is undesirable, and much too rapidly for Anyone’s peace of mind. This is the real Threat, and Bernanke is posed to enter the Trap. lgl

Pragmatism in Action

This type of Post which really bothers, as it is based upon hard statistics with early reportage, and little chance of revision–except for possible growth in the extreme. An element which Rampell explores, but does not identify, is the Thought that all Hiring comes in the form of Immigration; where native Hires must transplant across geographic regions. I cannot define the mantra of large Corporate hiring at this time, but highly suspect that Corporations want their new Hires moved from local areas where they could possess associate support groups. These entities want a labor force who a subject to direct pressure in any framework of Job loss. Economists may consider me to be too paranoid, yet Corporate structure seems to want their labor force wholly dependent upon them; this eases Corporate ability to reduce Wages and Benefits in the long-run, and puts further pressure on Employees to enter into unsafe or environmentally unsound production practices.

Here is another example of Corporate practice in provision of health care. You study the superficiality of the Numbers, and One would consider that Business has done a good Job of handling Worker needs. Understand I have no Numbers here which in any way could be considered valid. Corporate Profits have increased far more rapidly than Wages, and this Post states far faster than health care coverage for Workers. The profitability of such Corporations is hidden by further Sale of Corporate stock; this accomplished by outright giving of Stock blocks to Corporate executives, or Stock Option to these executives. Pay and Wealth for corporate executives have increased at far greater pace than any other segment of economic society–especially the nominal Stockholders of these self-same Corporate stocks. Corporation get Cut-Rate premiums for the health insurance they buy, all because of the magnitude of business they provide. Individual Employees, though, do not get those self-same Cut-Rates for their share of the premium. Corporations aggregate great Wealth which does not escape the Corporate boardroom, while everyone else suffers the pressures of Inflation and run-wild health care Costs.

Such type Posts always reach me. I believe that the power of the Fed to affect the economy passed with the passage of TARP. It was actually the last time the Government was not printing Money in real-reaction terms. Corporations and Small Business will not alter their Production schedules because of QE–One or Two. Wall Street will simply claim higher Profits, while the actual Consumption markets will not budge. No one plans on development of Product when there exists no Buyers of that Product. Neither the Fed or Congressional action has done anything to increase those Consumption levels. The insecurity of the World economy will decrease the level of American Exports, even when they are cheaper. We cannot look for Aid from the outside, but must provide Incentives to Production in the interior economy. lgl

Playing with loaded Dice

I will provide a general sample of the ISM for October Business. It is Good News and Bad News; otherwise termed the Kiss of Death. Business is signaling that they have functionally filled their Inventories to the level desired. The employment index would have to be around 70 to replace the lost labor since the Recession Start, and about 80 to return to the full employment of 2000 in percentage numbers. New Orders only indicated that the Christmas Season is upon Us, and Retailers are attempting to pretend that Sales will match Desires. Autos, Electronics, and Exports are closed industries, which eat up their own Customer base with previous provision. There is practically no Repeat business, except with destruction of purchased Product through usage. I remember the memorable Chinese torture of being Tickled to Death with Feathers.

Paul Krugman believes that he has proven something with this Posting, yet I wonder seriously if it is so. My real problem here is the question of repetitive QE. All percentages to my way of thinking must be estimated from prior to the first QE, not from the start of the Second QE. It is here that One can determine the degree of Inflation generated under QE, and the Numbers are much less desirable. There comes a time when central bankers must admit that they are simply inflating their Currencies to express Profit levels for themselves and private industry. I don’t know that much about these things, of course, but I have some conceptualism of printing Money from sheer braggadocio.

Such things as this information leads me to disarray, coming as it does that People must eventually pay for their Consumption through Personal Income. There is the fact that year-over-year increase in Wages was up 2.4%, but Wages are still less than before 2008. There has been much Inflation since the last Boom, even if Bernanke deems it dismal; remember, We are not even back to 2008 Wages. One has to ask Why economists insist that Recovery will be sluggish; I think the Answer might be because the Speedometer is reading nothing but Inflation, which could admittedly be getting rather Slow. The real Problem becomes do We want, and can We stand, to inflate our way out of Recession? lgl

Labor Compression

We find labor lamentation here. I feel that I must discuss Labor Compression at this Point. The later consists of a developing sector of the economy adding more and more labor until it hits a maximum point; noting here that labor assets are introduced initially because they are the cheapest resource to bring online at any given point in time, and that every developing sector is in a rush to fully develop as long as markets for their Products have excess Demand. Still, there is an outside limit to the labor which can be employed in the industry even before the full development of the sector due to Costs of Capital, Resource, available Land, and limits on Labor Supply. Read the previous Sentence several times, and consider the implications!

The first Consideration must be that each economic sector will only hold a relevance in relationship to the rest of the economy. Labor will drift to areas where Wages are higher. Technology will craft equipage for the economic sector only when paid amply, and never when those technological resources can find higher employment elsewhere; this means that technological development meets stiff competition in attempted technological development, all based upon the amounts of Cash the economic sector will devote to technological improvement. Land can also be constrained, due to the pollution of the economic sector, it’s relationship to a developed Transportation network, and the ease of acquiring the necessary resources; totally inside a stiff competition for the most desirable Production areas. Finance often enjoys the Flavor of the Month concept, and often makes Capitalization more difficult just when there is great opportunity for expansion–the Flavor greatly influenced by the Speed and Largesse of the Profits within the economic sector. This all grinds away under a process of Mechanization, where labor always loses out to Machines, because of their infallibility and higher production levels; they do not Rest, and work perfectly until they break down.

An interesting element enters the discussion at this point, which states that there exists blockage within the basic context of Land, Labor, Capital, and Resources. Economists and Students can easily determine How Capital often limits Labor and Wages, but do not understand that the lack of trained Mechanists can limit Capital expansion. Pollution Concerns limit both Land and Resource, and the Finance of both. Immigration seems like a Godsend to Some who witnesses the lack of Skilled Labor, and native refusal to undertake Unskilled Labor. All must be judged by what is brought to the Table of economic production. What bothers me is the fact that Capitalized Technology will always reduce Labor elements, and the introduction of new economic sectors into the economy is very limited, both in terms of Invention, and in terms of expansion into the Finance, Land, and Resource sectors. This is Why Immigration bothers Me, because of serious doubt that it will induce Long-Run reduction in Unemployment. I believe that the more unenjoyable elements of Labor will proliferate under Immigration; a contestation with the views of Tyler Cowen, outlined in his current NYTimes article–which I should have a link but do not as yet! lgl

Cutting Out the Middlemen

I have read this article, and now wonder how We could have gone so wrong. I started thinking on the issue, and decided Government was not only going to continue borrowing, but have to pay Interest on that borrowing; this meaning nothing at present, though most important when Creditors cease to desire Us so highly. I contemplate the Tax Code, and think as how no real revenues will ever be raised under such a mishmash of nightmare regulations. It is time for Change, and I mean real Change!

I continued my Thought, and decided it was time to set up a rational borrowing system. Suddenly, a great Light did appear in my head, even if Some could confuse the result with adverse effects of alcohol–though it is morning, and I have not been drinking. I decided We are taking exactly the wrong course in the collection of taxes, and also in the payment of Interest on public debt. We are letting a considerable number of exterior organizations make a substantial amount of Profit from our Confusion. I studied on the issue, and here is a list of proposed Changes:

1) I would first decree that all Income coming to any Individual or Organization be deemed simple Income, no matter How derived. There would be only Income; Capital Gains, Inheritance, etc. would be taxed in one and only one way.
2) There would be a set flat Tax–I would suggest 21% which must be paid by Everyone–Rich or Poor. There would be no Tax Exemptions or Deductions at this Point at all–meaning that the Tax would be collected. This is what will be collected at this Point, actual Tax rates could be higher. There would not even be a personal deduction allowed, special deductions for Children, any cut rates for marriage, or allowance of any type for retirement funds.
3) Is the entire Taxpayer World up in arms at this Point? This is where I set the Hook by the way! All of these tax allowances will still exist, but only come to the fore with the filing of a Tax Return. Everyone can file away claiming any and every deduction they can think of, and the IRS will not only return the desired funds, but an Interest rate on those funds equivalent to the federal Overnight rate for the entire Period before of the funds.

Many great things will likely occur with passage of such a Tax law. Congress may think to revise many of the deductions and Exemptions which they have issued. We as a Government and Community would be far less dependent on exterior sources of Cash and Debt. The Fed might be more inclined to leave Interest rates alone. Taxpayers would find a lump-sum method of Savings, which they would be less inclined to blow on Consumption, or payment of Consumer Debt. Business would be far more discretionary about Capital Expenditures, knowing immediate access to funds are delayed. Further legislation would insist that Social Security (FICA) taxes would be maximized before Taxes were extended to the general fund–bringing security to the Social Security system. We all get benefits from the revision, though We would have less Cash to spend in the Short-Run; it is still returned in the Intermediate Period plus a Profit. lgl

Too Strident???

An old Politician I knew in bygone days once said that gaining a Majority on any political issue was like starting a barbecue; you first must start the coals glowing. Congressional Democrats, deeply influenced by lobbyists, refused to bring the issue of Tax Cuts forward before the Election. They did not realize that this denial left them without a platform. Democrats, if they lose this Election, lost it through timidity. The Vocals in Congress could have energized a Democratic Voter as no other, and a Republican block of any final Vote on the Issue would have solidified Democratic cohesion. The reason Democrats did not bring the Issue forward was likely the fact that they did not want to tax themselves and their Class to any greater extent than the current faulty Tax spread.

I myself oppose any extension of the Bush Tax Cuts. My last Post on this site explained my hesitation such type Stimulus. The damage has always been greater than any immediate benefit, bodes to inflict catastrophic injury in the Long Run. The loss of tax revenues cost Us a share of the additional federal debt, and contributed to the concept currently in vogue of No Interest on federal extension of Credit to financial institutions. There has been a channeled Fan to rob both Depositors and Investors of a rational rate of Return. Low and Medium Incomes have had their profitable venues of Investment canceled–which is a studied taxation of low Incomes. Income channels for Investment have been redirected towards sources of Investment which enhance the profitability of higher Incomes through management manipulation at much greater rate than what is granted to normal Investors. Business leadership, rather than Stockholders, maintain their high Incomes through control of the mechanisms of Investment operation.

The Owners of the traditional portfolios find their Returns sequestered at any point where there is likely to be a Profit. Refusal or minimized provision of Dividends, excessive Executive Pay Packages, business deals delayed until corporate Executives can buy a cheap position in the Stock expected to advance, and stocking of Executive Pay Packages overseas. Courts have defended Corporate Boards from revelation to Stockholders of Pay Packages, degree of Corporate liquidity, what percentage of Profits which Dividends actually comprise, and the largesse of liquid funds unused by the Corporation in investment. The situation becomes worse each year, and the rate of Return on Investments decreases for the average Investor every year. It is time for a Change. lgl

Where I disagree with Economist and Business

I have not checked these numbers, and do not expect to do so, though I would imagine they are about right. I do not quite agree with Justin on the culprit being the loss of tax revenues precisely, but the Republican negative Spending of Tax cuts, combined with both Parties insisting on the Pork Barrel for their individual States to election support. The elimination of the Tax Cuts, and suppression of outrageous Pork Barrel, would have easily led to a distinct Surplus of tax revenues. It is my estimate that there would have been no Financial Crisis, Recession, or Stimulus without the Tax Cuts, and this leads Us to consider the Question of funding Government at all levels through the Interim Period.

Join with economists in the groan realizing that these are my estimates. The real Question becomes where does One start to unravel the complex puzzle. I’ll start with the contention that there would have been 21% less Construction commissioned since 2000 without the full Republican Tax Cuts, and the joint Tax deductions favoring Mortgages. This would lead me to surmise that 74-78% of the at risk mortgages would not have been issued. It also leads me to the conclusion that Resource pricing for Construction would have been some 14% less in Price over the entire Period than was experienced. Occupancy rates among Commercial Property would never have dropped below 70%, and the added Rents would have provided equal Profits to the financial community which they did experience. Consumers would never have refinanced their homes to subsidize their Consumption patterns, and their debt ratios would have been about 31% less than it is at Present; this within a scenario that actual Retail consumption would not have decreased more than 8% of the rates expressed through the Period.

We now turn to the question of Employment. Business would have had to take measures to reinforce Consumption throughout the Period under discussion, and would have accepted a Profit/Item ratio which was 11% less, and resulted in Business Profits which were only about 18% less overall. The interesting element here, comes in my consideration the about 8% of that lost Profit/Item would have went to Labor Cost. Here will come the real contention with my estimates: my belief that the 8% of Profits/Item would have developed into a 21% increase in the Labor Rolls over the entire Period. People have often asked Why I was so against the Bush Tax Cuts and Tax Deductions; I think you may better understand my position. lgl

Me Talking Big Again!

Should you ignore this? I would advise that you not be an ostrich! First, I would say that Investors are nervous Nellies! Any News shakes the markets, and bad News reminds of a woman reaching menopause. Erratic behavior is to be expected. The sheer existence of an Election means an alteration potential in leadership. Candidates can easily worsen the situation with Talk about Change, a circumstance certain to shake the confidence of any Investor; who made his investment decisions based upon a static Reality. Here is the humor of the situation: the nervous state of the Investment world practically ensures there will be no real Change in policy; a least, any Change which will have a measurable, adverse impact. This factor, though, does not lessen the extreme possibility that it will lead to another Recession; remember I mentioned that Investors were subject to Hot Flashes!

Here is a man who is wrong, but would not admit even if he believed it; it simply confounding his basic economic mores. Brad knows that Government investiture in private securities will alter the nature of Pricing of these securities, and that Investors will forever demand Government action to secure such investments every time there is a threat to their maintenance. Brad, though, believes the economy needs more Cash, and here is an easy manner to obtain it through Fed purchase of private securities. The economy first does not need the added Cash, and would not employ it in economic production if it is received. We cannot involve the Fed in private securities without Investors demanding a continuous Price Support for these Securities, utterly destroying the limited Pricing mechanism which discourages excessive Debt collection, while it encourages artificially low Interest rates which will not pay for the Debt aggregation or capital renewal. We should not attempt to stop a forest fire by starting a backfire in a downtown shopping mall. This is saying that down the road injuries should be avoided in immediate Aid practice–for Those of Us resembling myself.

You can find the basic positions of members of the FOMC to the question of QE2. I will go immediately on Record and say I vote NO! Of course, this means absolutely nothing, as they would not let me on the FOMC even if I promised to throw in the money for QE2. There is absolutely no indication that such reckless financing will even induce any added Investment in the economy. It is exactly like Tax Cuts; giving a Profit to Business personnel who cannot make a Profit by simply managing their businesses. I would suggest a simple alternate Rule to replace a ridiculous increase in the Money Supply. This simply to state that Banks cannot keep their FDIC insurance, unless and until 40% of their loans and 30% of their funds go to small and intermediate business investments. Much simpler, and lacking all the great Threats existent to financial stability. It might seem harsh, but I think even the bankers would approve of this Ruling. lgl

Through my tired, old Eyes

Paul Krugman cannot believe there is an eternal and external value which makes competitive devaluations especially bad. I will try to explain in my poor, unorganized manner. One can start by stating there must be a transfer mechanism to transmit Value across Time. This is normally attributed to be called Property; and yet, there can not be an understandable medium of transmission without some form of universal value exchange–what I am talking about here is Money! Now the perfect transfer mechanism would be without Inflation or Deflation, just a constant Pricing of Property. No one would be able to mistake the intrinsic value of any Property. Such an idyllic state could not long exist with humans involved, with their rabid desire for chicanery.

Property Holders want greater payment than the Value they ever put into their Property, and Debtors never desire to repay the full value of what they borrowed. Herein, Inflation is a God, as long as it is slow and steady; Deflation is a Demon–Satan himself–because people must separate themselves from Dollars which buy more if only retained. It is now time to discuss a Special Class, which I will define as Labor. These are people who work hard, and even do what their Peers–the Property Holders–tell them to do; which is Save their Money. They often put in years and decades doing exactly this, but find that they never have the wherewithal to join the major Property Holders. This leaves them with a dim prospects for use of their limited amount of Money. They can place their Money in banks, buy shares in their Government–here called Treasuries, or involve themselves in equity schemes–whether Mutual Funds, Hedge funds, or wildcat self-delusion Investing.

We now come to a combination of forces which must be discussed. Bernanke and the Fed insist that banks be precluded from paying a decent Interest rate to Depositors through the supply of artificial cash from elsewhere–another term for printing Money without the Ink. Mutual Funds and Hedge Funds always come up with enough Charges on Money-handling that they never pay more than banks would normally pay for Savings deposits. The deluded individual Investors regularly watch their capitalization wiped out, while Investors in Mutual and Hedge Funds periodically witness their 401k plans get cut in half; a taxation much greater than ever coming from taxation ever in history. Everyone is told to put in their funds, which they will only lose if they think to remove those funds on a uniform basis; the important item here being what happens to market prices whenever there is a serious removal of such funds. Now economists assert that the proper use of said Money is to devalue it, when and however it is removed. The devaluation, though, remains a devaluation of the labor which went into the making of said funds in the first place; this all meaning that Labor bears the full Cost of every Inflation–Great or Small–which is never made up in sustained economic growth; thereby inciting the slashing of those 401k plans once more. lgl

The Cost of Doing Business

Read this article, and go where it leads you! The fortitude of the Brits shows vastly greater support than in America; methinks, this may be due to having already endured a Thatcher rather than a Reagan, who only manned up in 1987. Brits remember Thatcher straightening out the shoddy budget practice, and genuine economic gains did result. We got the S&L Bailout, and Clinton stabilization. This was fine, except that Clinton surrendered in 1997 due to personal attacks. Tax-Cutters imagined Victory, and think continually to extend it. This later sentiment has already destroyed the Clinton stabilization, and will soon destroy the Country.

This Post may be a little challenging for those of my Readers who are like me, somewhat deficient in the arena of details. It is all about the leadership of a foreign central bank. I bring mysticism to the discussion because here is the Question to be asked: Can any institution operating in an environment larger than itself hope to avoid reducing to being simply another Player on the market? I ask this because the Federal Reserve suffers from the same possibilities. A Player influences the markets, but cannot control them. They also possess a most disturbing aspect: their action, or lack of action, comes to be expected, and thereafter figured into the Pricing of all aspects of the markets. Under this Scenario the institution in examination imposes an new Opportunity Cost into the entire matrix of markets, increasing the costs of doing Business without intention; the Whole shifting the Supply Curves downward. The situation actually makes an economy more recessive, and Recovery much more difficult.

I will now give my Readers this Post. I prefer Professor Stiglitz’s analysis here. Here are the things I consider important. Past labor is being discounted with the loss of value in the Dollar, and the lack of Interest paid to Depositors, and owners of Treasuries. I would put up model presentations if more acclimated to such graphing, but can exclaim that the current policy of the Fed seeks to cancel the power of the Baby Boomers, through artificial loss of Wealth. Joe Stiglitz is absolutely right in the claim that equity Prices will be only marginally affected, and that Investment will not likely increase at all. What worries me is the fact that Banks will show no increased inclination to loan to small and Intermediate businesses. The American people are posed to lose a great amount of their economic advantage for very little Gain for the interior economy. lgl

Hard Choices maybe made Easy

Wheels pounding down, and We have a short time to get there! Read this Post from the Tax Foundation. State and Local entitlement commitments continue to increase at real performance rates, yet taxes are assumed to be gaining; though not anywhere near 2008 standards. Current recapture rates means there will not be a equivalent Tax base until sometime in 2014. It is my estimate that State and Local commitments will have increased by around 28% within that Time-frame, and States were not paying the bill even in 2008.

The situation is left in the air with this Post information. You can really begin to groan when We reach the understanding this concerns federal commitments, and not the State and Local commitments discussed in the previous paragraph. We are short of revenue at all three levels of Government, and almost no one comes to rescue even with Suggestions. The We face the reality that any redress proposed will be opposed by practically half of the body politic. It may be time to await the Collapse, but I will attempt some sensible Rules which might get a mild majority of support.

Rule Number One: Separate Social Security and Medicare. It is the only way to shore up the real Social Security Fund, and allowed Medicare to integrate with Medicaid and Private Health into a guaranteed Health Care program. This later is utterly necessary to save State and Local forms of Taxation without breaking the bank.

Rule Two: Establish a formal agreement between Local, State, and Federal Government on the type and consistency of taxation. This agreement should clearly outline that Localities are expected to pay for 70% of their budgets from Property taxation, and receive the rest (30%) of their budgets from State transfer of Sales taxes, and Entertainment admittance Taxes. States will collect all Sales taxes, but are committed to paying 20% of Local budgets from Sales taxes. States will also collect 20% of all Property tax revenues within the State, the Sales taxes, and no more than 20% of their budget requirements from Income taxation. The federal government will receive full value for all Excise taxation, and all Income taxation must be based upon the federal Income tax system. The federal government, in order to get State and Local agreement to limit their intrusions in federal tax areas, will pay Local governments the entirety of all Capital Gains collected within the locality; this while granting State and Local authorities to stop reduction of such Capital Gains below 15%. States will be disallowed from collection of Inheritance taxes, but the federal government must agree to collect at least 15% on all inheritances exceeding $5 million which they must share equally with State and Local governments (33%-33%-33%). Now We can start the Argument. lgl

Contemplative Problems

I decided, in the goodness of my heart, that I should request my Readers to read this link. I personally like Smith and Ricardo, but do not think that Schumpeter is a flake. There was definite economic life before Smith, and it evolved to quite a high state. Ancient Athens itself had sliding scale tariffs, and even earlier Persia had higher taxes placed on items sold below what was considered Market standard. The Kings of Spain limited the speed of Gold sales from the New World, in order to maintain the value of Gold. I have some agreement with Kauder, but cannot quite understand the Rothbard denial of the Scholastic belief in Demand. The entire point about the later consisted of setting a utilitarian value of Demand, which went far beyond Price into the realm of God’s desire. They tried to fix a monopoly Price on what people should want, according to God’s desires. The Scholastics differ markedly from the Austrians, and shows clearly through the discussed issue of usury. Rothbard cannot understand the Scholastic stance while I can; they simply thought that God should profit, rather than individual, in all transactions; finding that God was the only true Owner of any fundamental Resource.

I now include this link, basically due to the fact that Karl Smith seems more understandable than Paul Krugman at this point. Karl starts by trying to define the two-tier yuan, where China will let Dollars in, but not yuan. Seems a little far-fetched, especially knowing the long tradition of Chinese smuggling; hauling currency seems as easy a smuggling item as you can find–easy to hide, and impossible to detect after it is spread. Foreign Consumers are given an advantage over domestic Consumers, but considering the splash of Wealth inside China; I do not believe it is very serious discrimination. It is my belief that the Chinese Government finds it far more convenient to take measures to forestall Utilities and Infrastructure from collapse, rather than it is an interest to sell more Chinese Goods overseas. I ask myself Why Paul Krugman and Karl Smith imagine that Chinese leadership has more capacity to affect their economy, than does Ben Bernanke to affect the American economy.

I finish with this link, and ask if there stands a fundamental principle being violated here. Can Local Governments grant third Parties the semblance proprietary rights to an individual’s property without due process of law. Local Governments will claim it is simply assessment of property taxes in which the individual is delinquent; yet, the individual finds that the third Parties have been granted proprietary right never granted to themselves. The specific issue being the right of third Parties to purchase debt without the property-holders Consent, which is justified by local government recognition with allowing them to have paid the tax involved without assignment by the property-holder. Business has been trying evasion of property rights since they attempted to expand the right of eminent domain in years past. This is one of those issues which the US Supreme Court should issue a Ruling, especially the practice of local governments selling personal information of Taxes in arrears. lgl

Me and the Khmer Rouge

I read this article, and decide to take a radical stance on the entire issue of Poverty. I honestly believe that the disadvantages of the Poor come primarily from association with each other. Does this sound Rude and Cruel? I study on the issue of Poverty, and first decide it is too expensive to underwrite Poverty in the Cities where it occurs. Housing, Food, Clothing, and Medical Services are just too expensive within Cities to underwrite effectively. Everyone will imagine that I am in love with Small Town America past this point, and a ridiculous idealist who cannot understand the complexities of the issues involved. People should first understand that I am rather cynical and lack a genuine degree of empathy with Anyone, and Anger issues have never bothered me; I being rather Angry myself.

My solution to Poverty goes back to early America, and the creation of County Farms with a twist. I would purchase farmland of high quality to establish Garden farms. These would not be traditional modern Garden farms. I would establish several Rules, which will alter the nature of the farms. Here is my list:

1) There will be only traditional Garden vegetables and fruits grown on said farms.
2) All Produce sold by the farms must be processed on the farm; which means cleaned, Cooked or Canned.
3) Labor cannot purchase outside replacement vegetables and fruits on the Open market if such substances are produced on the farms.
4) All labor, except for Management supervisors, will be paid a standard Wage consistent with Minimum Wage of the States involved.
5) All such farms will be located in small communities, without respect for County or State boundaries.

Now the Reader will ask where the labor will come from? The Answer consists of current Welfare Recipients. Old Welfare Recipients will be required to relocate to such farms for a mandatory year before receiving further Welfare aid. New Recipients must start on the farms to enter the program. Free Health Care will be given to all residents of the farms. Every adult resident on the farms must work on the farm–whether in field work, the Processing Plant, or in Child Care and Cooking for the central kitchen provision of meals. Children will attend School through the entire year, but only in the morning, if they can maintain a B-Average; less than this Average will mean a 4-hour afternoon Study Hall must be attended. All management personnel on the farm will come from the transferred Welfare recipients whenever possible. All Sale of the Produce of the farms will go to defray the cost of the farms, with any Profits going to provide health care or expand the farm system. The goal will be to force every Welfare recipient to attend the farms for one calender year, and during such period to destroy the Housing from which they had come; the farms should provide a resettlement office to suggest relocation areas whenever possible. lgl

Vile Language--sometimes the only Comment possible

I never know what to write about when I start Writing, but decided on this article. It describes Japan under deflation, but considering the state of the rest of the World economies, can be utilized as a substitute for the rest of the World. It is time to make some general observations; which while a poor instrument, can sometimes provide Insight. The first and foremost element I would like to express consists of the fact that almost all Inflation has come not from the domestic markets, but from that ever-desirable God–Exports. I remember a famous description of Revolution in the old movie–The Professionals–where Revolution was defined as a raving Beauty at first, and the disappointment of Men when they find Revolution is a used, and old Whore. Trade is much the same as Revolution, where Participants imagine far greater beauty and honor than they actually find.

Everyone desires Trade, because Business sees an expansion of Profits from selling to more than the domestic market. Where it is initially successful, Labor and Resource Costs increase; where it is unsuccessful, Labor Costs are suppressed but Resource Costs continue to increase. The key element in this discussion states that whether Trade is successful or unsuccessful, it still destabilizes the domestic Profitability of native industry. Domestic industry must keep pace with the Resource and Labor Costs of the Export Trade, and therefore domestic Prices must rise. People find themselves in pursuit of a better life that eludes them because of the increasing Costs; said expenditures not geared to the Production Costs of domestic production, but of Trade production. The simple Transportation Costs of Trade raises the Transport Costs of domestic production around 2-4% at a continually maintained scale.

Trade Production Costs always sinks to the bottom because of those self-same Transportation Costs; and so, every nation easily loses its Trade advantage as Resource capital flows outward in search of higher Return. Loss of Trade advantage quickly bring declines in Production quantities, demanding less Labor and Resource; all making Capital less Profitable, so that further capitalization is less desirable. Production soon finds its way back to domestic production levels, facing stiff competition from Trade, and paying the enhanced Costs of Inflation which occurred in pursuit of Trade production. All deflation scenarios is actually only a devolvement back to the price and Profitability structures of domestic production; it requiring less Labor and Resource with less Capitalization. The is the problem with Trade and resulting deflation; she is truly the old Whore of which We speak. lgl

Rude Economic Modeling

I felt that my Readers ought to read this link today, even though I did not plan to Post; blogging being one of those Jobs where a Day Off is belittled. I would further advise pursuing her Recent Post links. I cannot say that I agree with all which she writes, but it is comforting to know that someone other than I considers Taxation to be a normal Operating Cost. It is relevant that it has been during the shrinking Tax Years (1997-2010) that Income Inequality has grown so proportionate–remember back when We talked about the Top 10%, rather than the Top 1%? It started immediately after Republicans starting the virtues of massive Tax Cuts. I remember back even so far as 1987 when Reagan himself thought there should be Tax increases–We were talking about the Top 20% back then.

I will follow with this link. The Risk premium seems only transferred to the Government, and necessary reorganization of the financial sector can be put off as too expensive for those Banks which are Too-Big-To-Fail. The whole thing holds a stench of protecting the funds of the One-Percent Icons, who already seem to possess too much influence within the halls of Congress. I could honestly back a 10% Surtax on a Individuals possessing more than $1 billion in assets, and all Corporations or Businesses holding more than $10 billion in assets. I seriously do not think it would curtail long-term economic growth, while probably raising the Trickle-Down Effect of economic productivity by 2000%. It might even quadruple the Dividend Yield of most Corporate venture stocks.

It is a Saturday, and I am feeling particularly lazy, so will finish only with the Observation that no human program–whether economic, social, or individual–will ever exist which does not possess limits. This means that initial benefits are generally Low, Intermediate benefits are generally High, but continuation beyond a certain point leads to a declining scale of benefit. Plot on a Bell Curve would tell Us We are currently below the X-axis on the issue of Tax Cuts. I am the only one to believe this, but almost all factors in the economy express this datum. lgl

View from the Backseat

I will start with providing this Link, and then turn to a slightly different analysis, even though I totally agree with Mike Shedlock on this Issue. I want to examine the situation from the point of view of the Consuming Household. They have primary Labor Income, and Secondary Income from whatever Investment and Retirement Portfolios they possess. Primary Labor Income is basically examined from the viewpoint of Pay per Hour or bi-weekly Salary. Secondary Income from Investments is graded by Percentage gain in total capital. The first suffers from total elimination at much greater rate than reduction of Pay. The later suffers almost totally from reduction of Return, though there is the hazard of total investment loss–rare, but always potentially existent. Now We must examine How each of these Incomes affect Consumption by the Household.

I will first answer Those who will point out I didn’t mention the hazard of reduced Hours of Work; this I don’t consider because this late in the Recovery (???), Partial Labor has already been primarily set. The elimination threat of Primary Labor Income may be Mild or Acute, but the possibility has little affect at this time, all due to the fact that Household Needs remain Constant, and are not permanently deniable. Primary Labor Income, therefore, has little impact on Consumption patterns at this late stage, unless there is complete elimination past this Point.

Now We must turn to Secondary Investment Income. Interest rates vitally affect the amount of this Income in that Depositors and/or Bond-holders receive a rate of Return which will pay for an expanded Consumption, or negate the possibility of an expanded Consumption. This is apparent especially in older households, where the adults are above the Age of 50. They are intent upon maximizing their Income before Retirement, or are already in Retirement; meaning that their Income for Discretionary Consumption comes principally from Investment returns. It is also true that Stocks which pay Dividends set that Return in relationship to the reigning Interest rates, as they do not wish to pay more than that which leads to investment in their venture Stock. Now, I don’t want to harp on a thing, but the amount of Discretionary Investment Income actually determines How Much older households are willing to spend on younger households, and Children and Grandchildren will get Shorted in both Gifts and Money; much of which is Clothing and Money for Necessities and Appliances; to say nothing about aid in Mortgage payments.

I have not studied the amounts or degree of Aid provided by older Households to younger Households, but know it is usually extensive and continuous; except when Someone like Ben Bernanke makes the mistake of thinking this natural flow of Income should be short-circuited. Mish has stated that replacement of Necessities is not naturally repetitive, and therefore not expansionary. Myself, I think the corruption of this Secondary flow of Income costs Business about 5 times what they retain in those fanciful Tax Cuts. In any case, low Interest rates are not going to spur anything! lgl

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