Here is Action which suits my Taste. The multiplicity of Credit Card charges remains the great abomination of the financial world. Card companies use the complexity of fees, all of varying rate levels and unknown rate-fixing policy, to impose whatever Card Costs they require to remove any Risk from themselves. Central Banks or Government Regulation should have forestalled this practice long before, it being a constraint of Trade and elimination of Competition. Annual fees should be forbidden, to cut discriminatory charges for non-use of the Card; a $50 annual fee requires an average of 14 Credit transactions with any Card to prevent Violations of most usury laws still on the Books of some States (Debit transactions, and Credit charges paid within 30 Days of Billing, will run into usury violation unless monthly balances average about $700 per month for over four months). Exchange Costs are business costs which should be integral to the adaptability of the Cards, and are the responsibility of the Card companies themselves; not mechanical Costs to be borne by the Card-Holders. Card companies should be legally bound to charge a unitary Charge of a percentage rate of the Amounts utilized, based upon the length of time which the funds are used, and the largesse of the outstanding balance.
A Translation of such Credit Card practice would be a 0.5% charge on the first $1,000 for the first month, 0.75% charge on the next $3,000 borrowed in the first month, and 1% for amounts over $4,000 for the first month. Delay of Payment past the first month should raise all Charges to 1% per month for the remaining balance. No other financial charges should legally be allowed, with Card companies allowed the sole venue of setting Credit limits to reduce Risk. The real heart of any such legislation or policy would be prevention of Charge Rate increases above 12% per year, unless Central Banks funds rate raise to within 5% of the allowed Rate limit–above 7% per year. Such a policy would establish sound banking practice for the Credit Card industry, and prevent the distortion of Consumer information which is currently existent.
This Piece from Larry Summers, coming by venue of Mark Thoma, outlines the fight I need make against the current trend of Economic Thought, from both Liberal and Conservative sides. A Tax Cut of the amount proposed, $50-75 billion, would be swallowed by the Economy considering its current size, and would do nothing to alleviate the root causes for the malaise. It would simply be throwing Good Money after Bad. Reality states that the Economy has to bleed out all the inflated evaluations generated by bad Fed policy in the Past, and harried Homeowners must accept about a 30% depreciation in Home values. Banks will be forced to engage in renegotiation of Mortgages at lower Rates, or face the loss of value incurred in Foreclosures. It is actually a relatively good time for a Recession, with most business and industry incapable of Layoffs or Downsizing, without loss of sustainable productive labor. We have seen all types of Recessions, this may be Our first No-Layoff Recession. lgl
Wednesday, December 19, 2007
Tuesday, December 18, 2007
Direction of Economic Policies
Here is where Greg Mankiw and I reach a Divide, he asserting that only the size of the Incentive is required, while I would claim that the Stick is very important in the reach for compliance in maintaining health care coverage. Using a Stick approach, Violations will generate a repetitive Tax, one which will be inflicted every time the individual approach a health care need (a new Doctor, Specialist, Clinic, or Hospital visit); the cost of the fines could easily exceed the cost of the health care coverage within one year. Under the Carrot approach of a Tax credit, the value will never equal the cost of health care coverage, and the lucky individual could save money over the interim period of a decade of youth by avoiding health care coverage. There are times for a Carrot, but there are also times for a Stick; Greg should place the entire situation in an economic model by the size of the Incentive, he would find health care coverage becomes about 80% more valuable under the Stick approach, rather than the Carrot approach (under the Carrot–the Insured can only lose the size of the Incentive; under the Stick, the Individual could easily lose an average four times the size of the Incentive).
Tim Haab gives Us a View of the new Drug of Choice–Ethanol. Here is the essential problem: continual construction of ethanol plants will soon make ethanol as expensive as Oil, and will not decrease easily; constructed Plant develops its own economic demand for Product, simply to pay for the Cost of Construction and Operation (another subprime Mortgage crisis). Corn acreage will be excessive, and that excess will not be Short-run, but will continue through the lifetime of the ethanol plants. Ethanol subsidies appear to be a heady Growth factor, except for the fact that Food Consumers will be paying a huge Price for those subsidies; the later can be translated as a indirect Tax on Food Products, and a Tax which will incite a Short-run increase in Food Costs of 10-12%, with a doubling of Food Costs through the full lifetime of the ethanol plants. And Economists say that Tariffs are bad, and Subsidies are great economic incentives.
Alex Tabarrok has a point in stating that the Income Tax is still progressive, even though modern Accounting methods encourage Everyone to cheat on their Taxes, as was inferred by this Post by Cactus at Angry Bear. The error in Tax policy, though, does not reside in this arena; realistically, Taxpayers are paying about what they should in taxes. The Need is for removal of the complexity of Tax law so that Individuals can rely on their own Math skills and simple IRS rules to file their own taxes without Aid or Charge. The next element necessary is an Energy tax with both limits Consumption, and replaces the Tax revenue lost to excessive Government Spending. The final condition is to force Imports to pay the same penalty in Tax, as does domestic production. There is no reason or rationale, or even justification for economic incentives, in the deficit spending of Government. We can generate a Budget Surplus, and still have excellent performance of the Economy, though with an actual 8% decline of Consumption as an operating factor in the Economy (People will buy less, but of more durable Product). lgl
Tim Haab gives Us a View of the new Drug of Choice–Ethanol. Here is the essential problem: continual construction of ethanol plants will soon make ethanol as expensive as Oil, and will not decrease easily; constructed Plant develops its own economic demand for Product, simply to pay for the Cost of Construction and Operation (another subprime Mortgage crisis). Corn acreage will be excessive, and that excess will not be Short-run, but will continue through the lifetime of the ethanol plants. Ethanol subsidies appear to be a heady Growth factor, except for the fact that Food Consumers will be paying a huge Price for those subsidies; the later can be translated as a indirect Tax on Food Products, and a Tax which will incite a Short-run increase in Food Costs of 10-12%, with a doubling of Food Costs through the full lifetime of the ethanol plants. And Economists say that Tariffs are bad, and Subsidies are great economic incentives.
Alex Tabarrok has a point in stating that the Income Tax is still progressive, even though modern Accounting methods encourage Everyone to cheat on their Taxes, as was inferred by this Post by Cactus at Angry Bear. The error in Tax policy, though, does not reside in this arena; realistically, Taxpayers are paying about what they should in taxes. The Need is for removal of the complexity of Tax law so that Individuals can rely on their own Math skills and simple IRS rules to file their own taxes without Aid or Charge. The next element necessary is an Energy tax with both limits Consumption, and replaces the Tax revenue lost to excessive Government Spending. The final condition is to force Imports to pay the same penalty in Tax, as does domestic production. There is no reason or rationale, or even justification for economic incentives, in the deficit spending of Government. We can generate a Budget Surplus, and still have excellent performance of the Economy, though with an actual 8% decline of Consumption as an operating factor in the Economy (People will buy less, but of more durable Product). lgl
Monday, December 17, 2007
Why Christ Was Born in Winter
Kids must have their Toys, and be allowed to play, but one wonders at the rationality of the activity. Turkish military activity, even if it was directed at Wall Street, could not affect the supply of Oil in January. New Englanders are in trouble, if there is not already sufficient Heating Oil available in the area to protect against a blizzard. Children enjoy manipulation of such Toys as arbitrage, but continuous flow market theory will rightfully suggest such influence could not affect Prices past a basic 6-Week Period; Supply alterations will alter allocations within this Period, rendering no post-traumatic impact past that point–this means essentially that arbitrage can only affect about 8% of the total Supply, and do so only for about a month. The Run-up of Oil prices for next year, based on minimal threats of short duration, simply expresses Children are trying to get their Toys to work in the real World.
Retailers may have to accept the fact that Shoppers are coming, but are not buying. I wish the Big-Box stores would release Check-Out Counter data for the Season. It appears likely that the Sales/Customer are down drastically, and if this is the Case, Retailers will have to accept the Season will come in poor in the Dollars exchange. Customer volume appears relatively high, and they have been turning away from high Prices. It does no good to hide adverse economic data, which could present evaluative data for Retailers; who still do not understand that Customers have allocated about the same total volume of Funds for Christmas shopping as they did last year. Customers will not pick up on Sale prices, which are 3% higher in Price than was Full price last year.
Mish has a Post on California and its budget woes, which just shows that the discussion could be about the entire nation. The entire Situation shows the fallacy of economic policy which exclaims that Public Debt is a good and necessary thing. The prime justification of this policy resides in the claim that Business operates with this level of Debt continually. The difference between Government operation and Private Business contains the element of failure; Business will eventually start making a Profit on invested Capital, else the business format will fail. Government operation, though, will never make a Profit; if it does make a Profit, Funding to the operation is rapidly cut. Government borrowing only provides an added Expense which must be both paid, and pay Interest on what debt there is; what is an Operating Cost which is never Profitable–Government in full, in Part, and in Essence. lgl
Retailers may have to accept the fact that Shoppers are coming, but are not buying. I wish the Big-Box stores would release Check-Out Counter data for the Season. It appears likely that the Sales/Customer are down drastically, and if this is the Case, Retailers will have to accept the Season will come in poor in the Dollars exchange. Customer volume appears relatively high, and they have been turning away from high Prices. It does no good to hide adverse economic data, which could present evaluative data for Retailers; who still do not understand that Customers have allocated about the same total volume of Funds for Christmas shopping as they did last year. Customers will not pick up on Sale prices, which are 3% higher in Price than was Full price last year.
Mish has a Post on California and its budget woes, which just shows that the discussion could be about the entire nation. The entire Situation shows the fallacy of economic policy which exclaims that Public Debt is a good and necessary thing. The prime justification of this policy resides in the claim that Business operates with this level of Debt continually. The difference between Government operation and Private Business contains the element of failure; Business will eventually start making a Profit on invested Capital, else the business format will fail. Government operation, though, will never make a Profit; if it does make a Profit, Funding to the operation is rapidly cut. Government borrowing only provides an added Expense which must be both paid, and pay Interest on what debt there is; what is an Operating Cost which is never Profitable–Government in full, in Part, and in Essence. lgl
Sunday, December 16, 2007
New View
How to define the Lies one hears every day? Tom Redburn attempts an effort, but it falls far short of excitement. The Republican position on Taxes is idiotic, but the Democratic position on Spending is equally short-sighted and stupid. The first fact Readers should assimilate consists of the idea that the Economy will not expand more rapidly if Taxes are cut; We will actually be hard-pressed to keep the economy from withering under the bombardment of higher Energy Costs and Ageing Population, things which could be valuably improved with higher taxation. Economic performance is not impeded by efficient taxation. The second fact states that We could not afford a third Bush-style administration term; We are in the enviable position of either raising Taxes, or becoming a Third-World economy. Do Some imagine I am becoming hysterical? The current Mortgage Crisis has cost Our Neighbors about a Trillion dollars, We owe them at least an equal amount, and they are not in a Mood to lend more–check the climate control conference. Fact Three states simply that Tax Cuts cannot be funded, because We have no one to borrow the necessary Cash from, who is in any manner willing to provide it.
Here is a sample of the current American Thought on Carbon emissions. It seems very convoluted with interminable counter-proposals, not just in the article, but throughout the Political matrix. The complexity remains the Fault of the No-Taxes mentality. I will attempt to straighten out the Mess somewhat–and probably only generate more confusion. Americans consume too much, and this Consumption remained geared towards heavy Energy use. Production worldwide has made no transition; using Energy-intensive Production methods to produce Products which require heavy Energy use; American still consume more of these type Products than Anyone else, the real Threat being foreign adoption of American consumption practices. Economics will explain that the only effective means to reduce Consumption still remains Taxation; to the point, extreme Consumption practices will not be reduced until such time as they are taxed (this Statement does mean I am in favor of any type of Sales Tax nationally).
What is needed is a Taxation on specific types of Product, but universal throughout the World economy. The United States should lead the effort to gain Treaty acceptance of a Global tax system on Product. The agreed Taxation, like Our Income Tax, should be graduated based upon the average level of Income within each Country. Developed Countries would admittedly pay the highest taxation, and low Average Income Countries would pay only a minimal Tax; the beauty of the system, though, is the fact that each Country would maintain its own Tax collections, and use the tax revenues to defray the Costs of their own Government and Development. The real bone of contention will come with the next element: which is establishment of Tax rates for each type of Product–actually a multiple rate of three levels. I envision Americans paying 12% for their Agricultural products, 8% for Construction materials, 40% taxation on Electronics, and 40% tax on Vehicles; all based upon the flow of Energy consumption through its lifetime of creation and usage. Middle-Income Countries like China would pay 6%, 6%, 25%, and 30% in taxes in the various sectors. The real Gain here is the Statement that the Tax has to be collected, even for Exports. Placement on Exports give an Advantage to lower-Income Countries, who can export at lower Price because the Tax is lower, while insistent that Developed Nations of high Income must stay technically efficient to remain competitive on the World market. lgl
Here is a sample of the current American Thought on Carbon emissions. It seems very convoluted with interminable counter-proposals, not just in the article, but throughout the Political matrix. The complexity remains the Fault of the No-Taxes mentality. I will attempt to straighten out the Mess somewhat–and probably only generate more confusion. Americans consume too much, and this Consumption remained geared towards heavy Energy use. Production worldwide has made no transition; using Energy-intensive Production methods to produce Products which require heavy Energy use; American still consume more of these type Products than Anyone else, the real Threat being foreign adoption of American consumption practices. Economics will explain that the only effective means to reduce Consumption still remains Taxation; to the point, extreme Consumption practices will not be reduced until such time as they are taxed (this Statement does mean I am in favor of any type of Sales Tax nationally).
What is needed is a Taxation on specific types of Product, but universal throughout the World economy. The United States should lead the effort to gain Treaty acceptance of a Global tax system on Product. The agreed Taxation, like Our Income Tax, should be graduated based upon the average level of Income within each Country. Developed Countries would admittedly pay the highest taxation, and low Average Income Countries would pay only a minimal Tax; the beauty of the system, though, is the fact that each Country would maintain its own Tax collections, and use the tax revenues to defray the Costs of their own Government and Development. The real bone of contention will come with the next element: which is establishment of Tax rates for each type of Product–actually a multiple rate of three levels. I envision Americans paying 12% for their Agricultural products, 8% for Construction materials, 40% taxation on Electronics, and 40% tax on Vehicles; all based upon the flow of Energy consumption through its lifetime of creation and usage. Middle-Income Countries like China would pay 6%, 6%, 25%, and 30% in taxes in the various sectors. The real Gain here is the Statement that the Tax has to be collected, even for Exports. Placement on Exports give an Advantage to lower-Income Countries, who can export at lower Price because the Tax is lower, while insistent that Developed Nations of high Income must stay technically efficient to remain competitive on the World market. lgl
Saturday, December 15, 2007
The Real Grinch
Jared Bernstein rolls out an extensive Review of the Congressional Budget Office Report on Household Incomes. It basically states that 95% of the Households are losing out in the Income race against the top 5% of Households. Bernstein alleges that lower Income Households would have averaged a $3600 Income rise, rather than the $400 average (approximate) rise, if there had not been a $400 billion shift of Income to the upper 5% of Income Households. 63% of the Income Gain went to these 5% of high Income Households. Bernstein suggests this is unacceptable practice in a Democracy, a Thought which may be essentially true, but does not present a defensible value for Economists.
The Economist must start with the realization of the statistical Outcome, then question how that Outcome derived over the Period. Study outlined the Movement of the American economy from domestic production of Goods and Services, to outsourcing Product from foreign economies who possessed lower Production Costs. Households within the highest 5% of Incomes almost universally were involved in this transmission of Product, or had access to the Income and Profits generated in this transmission of Product. A great Share of the lower Income Households, on the other hand, had their economic fate tied to the previous domestic production; either as high-paying domestic production Jobs, or Income deriving from domestic production. It would seem that the general run of Households need to become involved in the transmission process of foreign Goods and Services.
Does this seem like an effective program? Well, it isn’t! This general Transmission sector is already overfilled with Employees, Investors, and Businesses. The sector is beginning to shed excess capacity by labor reductions, low Profits, and low Sales. This Discard is being helped by the weakening Dollar, which makes Imports increase in Price, cuts Profits generated in Dollars less valuable, and propels much higher Production Costs for Transport industries. The Federal policy to weaken the Dollar by shipping American debt Overseas is only the Tip of the Iceberg; the real value loss comes in the reduced Productivity of American labor in real terms, who have ceased Production for their own maintenance. The economy, luckily, is Self-Correcting, and eventually the American Dollar will weaken to the point that foreign production for the American market will not produce an effective Profit; thereafter, Americans will have to go back to provision of their own Sustenance. lgl
The Economist must start with the realization of the statistical Outcome, then question how that Outcome derived over the Period. Study outlined the Movement of the American economy from domestic production of Goods and Services, to outsourcing Product from foreign economies who possessed lower Production Costs. Households within the highest 5% of Incomes almost universally were involved in this transmission of Product, or had access to the Income and Profits generated in this transmission of Product. A great Share of the lower Income Households, on the other hand, had their economic fate tied to the previous domestic production; either as high-paying domestic production Jobs, or Income deriving from domestic production. It would seem that the general run of Households need to become involved in the transmission process of foreign Goods and Services.
Does this seem like an effective program? Well, it isn’t! This general Transmission sector is already overfilled with Employees, Investors, and Businesses. The sector is beginning to shed excess capacity by labor reductions, low Profits, and low Sales. This Discard is being helped by the weakening Dollar, which makes Imports increase in Price, cuts Profits generated in Dollars less valuable, and propels much higher Production Costs for Transport industries. The Federal policy to weaken the Dollar by shipping American debt Overseas is only the Tip of the Iceberg; the real value loss comes in the reduced Productivity of American labor in real terms, who have ceased Production for their own maintenance. The economy, luckily, is Self-Correcting, and eventually the American Dollar will weaken to the point that foreign production for the American market will not produce an effective Profit; thereafter, Americans will have to go back to provision of their own Sustenance. lgl
Friday, December 14, 2007
All I Want for Christmas--Bah, Humbug!
The International Energy Agency adjusted their estimate of Oil consumption upward next year to 87.8 million barrels per day. The Countries providing protection subsidies to their citizens are expected to continue their increasing rate of use of energy. This, in conjunction with the obvious manipulation of the Price of Oil in the Markets, will bring on a Oil balloon within the coming year; Oil Demand remaining constant in the developed nations. It may be time for the Federal Government to develop a real structural Reserve (unlike the current one) dedicated to a build-up of a 6-Week supply of Oil, and utilize the Buying agency organized to regulate Oil prices by direct intervention in the Markets. The Reserve should be strategically sited throughout the Country, so as to provide Security against Pipeline disruptions. Oil Specialists will declaim the program, citing the difficulty of acquiring the Oil without major disruption of the Oil market, but it will eventually have to be done, and Sooner will be easier than Later.
The Consumer Price Index jumped 0.8% in November, with the core CPI advancing at 0.3%. Consistent December performance will put Us on the road to a year over year 4.2% inflation rate. Further Fed fund rate cuts would throw Gasoline on a raging fire. The whole Situation , combined with the Producer Price Index, has brought on a challenge; the December CPI is likely to be higher than November’s rise.
Europe is suffering under the impact of Inflation as badly as the Americas. Unlike Edward Hugh, I can express a Hope that We are entering a Recessionary period, this because it would be a lot less painful than the Scenario which I suggest is developing–Stagflation. The evil Beast was not vanquished in the 1980s, only left to sleep until the Money managers would again awaken it. Excess Development was pushed ever since the Tech Bust, and We are left with a Mortgage debacle (Business as well as Homes) over-financed, with little chance of effective payment without rising Prices for Product; Production obviously being in decline to cut excessive Costs. I estimate the Stag will be running free within the year. lgl
The Consumer Price Index jumped 0.8% in November, with the core CPI advancing at 0.3%. Consistent December performance will put Us on the road to a year over year 4.2% inflation rate. Further Fed fund rate cuts would throw Gasoline on a raging fire. The whole Situation , combined with the Producer Price Index, has brought on a challenge; the December CPI is likely to be higher than November’s rise.
Europe is suffering under the impact of Inflation as badly as the Americas. Unlike Edward Hugh, I can express a Hope that We are entering a Recessionary period, this because it would be a lot less painful than the Scenario which I suggest is developing–Stagflation. The evil Beast was not vanquished in the 1980s, only left to sleep until the Money managers would again awaken it. Excess Development was pushed ever since the Tech Bust, and We are left with a Mortgage debacle (Business as well as Homes) over-financed, with little chance of effective payment without rising Prices for Product; Production obviously being in decline to cut excessive Costs. I estimate the Stag will be running free within the year. lgl
Thursday, December 13, 2007
Cracks in the Foundation
Reports would seem to deny my pessimism about the resilience of American Consumers, but I still await the end of the Christmas Season. The Producer Price Index went up 3.2%, and Economists attempt to put a pleasant face on it by stating it was only 0.4% rise when Food and Energy prices are subtracted from the mix. This brings forth two Protests: the first states 0.4% inflation at the Wholesale level is no small number as Retail outlets pass almost all Costs forward; the second element declares that almost all Consumers raise their consumption of both Food and Energy during the Christmas season, so they make a much greater contribution to overall Consumption. My mind would ease if I could locate some numbers on actual Physical Product Gains and Losses.
Here is what Economists make of the Situation of good Retail Sales for November. Drew Matus of Lehman Brothers may express the sentiment best if the trend in Consumer Spending continues, but I doubt most Economists would publicly concur, though almost All would surely Wish it so. Brian Fabbris honors the only real component of the Report, when general merchandise sales rose about 0.5%; this later is something which I doubt, considering such Sales on a long November as basic furnishings on Construction closings (I could certainly be wrong on this aspect). The Grinch could still steal Christmas, but Santa may escape one more year.
Phil Izzo and The Skeptical Optimist both note the decline in Federal Corporate Tax receipts. This is partially the fault of the continually revamped Tax laws concerning Corporate Tax breaks, but it also highlights the fact there is too much Corporate paper out there; paper which must generate a higher level of Profits to cancel the percentage increase of the paper. This has nothing to do with the level of Tax receipts, but will impact the value of the Corporate stock. It is mentioned here because Households are extremely reluctant to shift their Investment schedules to an increase in Consumption; yet, they will be purchasing less valuable Product (Corporate paper), and likely to minimize their Consumption to maintain Investment schedules. lgl
Here is what Economists make of the Situation of good Retail Sales for November. Drew Matus of Lehman Brothers may express the sentiment best if the trend in Consumer Spending continues, but I doubt most Economists would publicly concur, though almost All would surely Wish it so. Brian Fabbris honors the only real component of the Report, when general merchandise sales rose about 0.5%; this later is something which I doubt, considering such Sales on a long November as basic furnishings on Construction closings (I could certainly be wrong on this aspect). The Grinch could still steal Christmas, but Santa may escape one more year.
Phil Izzo and The Skeptical Optimist both note the decline in Federal Corporate Tax receipts. This is partially the fault of the continually revamped Tax laws concerning Corporate Tax breaks, but it also highlights the fact there is too much Corporate paper out there; paper which must generate a higher level of Profits to cancel the percentage increase of the paper. This has nothing to do with the level of Tax receipts, but will impact the value of the Corporate stock. It is mentioned here because Households are extremely reluctant to shift their Investment schedules to an increase in Consumption; yet, they will be purchasing less valuable Product (Corporate paper), and likely to minimize their Consumption to maintain Investment schedules. lgl
Wednesday, December 12, 2007
Faulty Decisions
The November Import Price increases in combination with the October Trade Deficit increase expresses to me, if not Anyone else, that the Trade Deficit position will only worsen for the United States with a weakening Dollar. Widespread segments of the economic community believe that a weakening Dollar will gain the United States a Trade advantage. The Import Price increases clearly show that the multiplex World economy will adjust Prices equally as rapidly as American business competition, and a weakening Dollar will only generate immediate Production Costs increases. The convex is also true, and a strengthening Dollar will lower Production Costs. Monetary policy will not sell Product, only quality Product at efficient Production Cost will sell Product.
Here are initial numbers which I do not trust very much, though they may be solid. Wall Street may expect a 0.6% rise in Sales, but I smell an air of putridity in that belief. Car Sales, Gas Sales, and Home furnishings Sales all dropped, and Black Friday Sales did not continue through the month, though many of the Discounts of the Big Box stores remained in place. December Sales seem a far-off dream for an increase, especially in the face of the volatility of the Markets in recent Weeks. American Consumers feel a great deal of insecurity as the present time, something which is not conducive to strong Sales increases.
I think highly of Mark Thoma as an economist, but disagree with him on this one. The Fed action will put more nominal cash in Markets unlikely to expand significantly due to exterior economic conditions; adding excess funds pressuring a weaker Dollar. The Move will push up the Price on Oil, overall Imports, and Wage Demands; all without producing an expansion of business. The Market positions will worsen, as P/E ratios become untenable with artificial increase in P and reduction of E through Capital Cost charges. Economists and Wall Street wants the easy Money which fueled the Mortgage Crisis in the first place, but it comes with hazard equally as great as when it was generated by the Crisis run-up. lgl
Here are initial numbers which I do not trust very much, though they may be solid. Wall Street may expect a 0.6% rise in Sales, but I smell an air of putridity in that belief. Car Sales, Gas Sales, and Home furnishings Sales all dropped, and Black Friday Sales did not continue through the month, though many of the Discounts of the Big Box stores remained in place. December Sales seem a far-off dream for an increase, especially in the face of the volatility of the Markets in recent Weeks. American Consumers feel a great deal of insecurity as the present time, something which is not conducive to strong Sales increases.
I think highly of Mark Thoma as an economist, but disagree with him on this one. The Fed action will put more nominal cash in Markets unlikely to expand significantly due to exterior economic conditions; adding excess funds pressuring a weaker Dollar. The Move will push up the Price on Oil, overall Imports, and Wage Demands; all without producing an expansion of business. The Market positions will worsen, as P/E ratios become untenable with artificial increase in P and reduction of E through Capital Cost charges. Economists and Wall Street wants the easy Money which fueled the Mortgage Crisis in the first place, but it comes with hazard equally as great as when it was generated by the Crisis run-up. lgl
Tuesday, December 11, 2007
What is Wrong!
Edward Hugh usually comes up with a useful set of graphs and charts, and does a superb job this time. I gaze at his material on Japan, and wonder how the context differs from the American outlook. I believe there is a deep-rooted similarity in the attitude among both Japanese and American Consumers. They perceive relatively stagnant Wages, overall rising Prices, and Businesses making a healthy Profit from the Price raises. Everything is attacking their standard of living, as the big Business interests rejoice at the Cost increases where they draw a likely 12% Profit from the increase. Of course, only the Money men and the Corporate environment feels such joy; small business join the Consumers in bemoaning the loss of economic viability.
Jeff Cornwall may have pinpointed the problem exactly. Small business optimism dropped with the Fed rate cut in September. Small businessmen recognize what is generated in an economy when there are heavy inflationary pressures, and Government thinks to flood the Markets with easy Cash–high Inflation. The later is far worse for small business finance than is even a Recession. Small Business remains based on provision of Goods and Services of basic nature to Consumers, and actually wear well under recessionary conditions; that is, they would if they had a Source of reasonable Credit, which they will not have with Inflation rates approaching 5%. They still can acquire adequate business finance, but they also know that the Fed and Congress are planning to open the economy up to heavy Inflation.
This may be why We have such a poor operational system of a Democracy. Candidates slam early primary States, spending Big Bucks, promising great things, and presenting a Vision of Greatness to a few million Voters. All hope to gain the cherished momentum which is continually echoed by the lunatic fringe (modern Journalism). The Millions spent in these States have disappeared by November Election Day, but so has the Promises and images of Greatness; still, We are left with the repetitious tarnished Candidates. The worst element comes in the permanence of Special Interest policy in Washington, they who paid for the charade in the first place. lgl
Jeff Cornwall may have pinpointed the problem exactly. Small business optimism dropped with the Fed rate cut in September. Small businessmen recognize what is generated in an economy when there are heavy inflationary pressures, and Government thinks to flood the Markets with easy Cash–high Inflation. The later is far worse for small business finance than is even a Recession. Small Business remains based on provision of Goods and Services of basic nature to Consumers, and actually wear well under recessionary conditions; that is, they would if they had a Source of reasonable Credit, which they will not have with Inflation rates approaching 5%. They still can acquire adequate business finance, but they also know that the Fed and Congress are planning to open the economy up to heavy Inflation.
This may be why We have such a poor operational system of a Democracy. Candidates slam early primary States, spending Big Bucks, promising great things, and presenting a Vision of Greatness to a few million Voters. All hope to gain the cherished momentum which is continually echoed by the lunatic fringe (modern Journalism). The Millions spent in these States have disappeared by November Election Day, but so has the Promises and images of Greatness; still, We are left with the repetitious tarnished Candidates. The worst element comes in the permanence of Special Interest policy in Washington, they who paid for the charade in the first place. lgl
Monday, December 10, 2007
The New Dictatorships
Bryan Caplan often gets a little Wild in his postulates, but he occasionally asks the right Questions in a correct format, like this Post where he tries to define the popularity of dictatorships. He lists three structural rationales for longevity for Dictators. His first definition should be rewritten, and defined as the fear of the Alternatives to the in-place Dictator; especially if those Alternatives espouse radical change at the Social level. I glanced at Bryan’s new Paper, and wished I had the time to read it (found in his Post). I believe seriously (like von Mises) that Dictators are constrained by the events which brought them to power, and have little ability to alter from that initial direction; remember, the creation of ruthless Police power almost guarantees a violent replacement mechanism. Propaganda and Brain-Washing has relatively little power until an entire Generation has been raised from childhood under the tautology; while violent Police power operates effectively from the Start. Propaganda also only works well when it does not have to face alternative opinion, possessing only about 10% of the enjoined commitment if there is alternative discussion.
William Polley brings Us an Argument which seems to have no relevance to the previous Post by Bryan, but it still concerns the Expectation of the Polity for provision from what is understood as an economic dictatorship; the Big Box stores have the Routing mechanism to provide quick Supply of disaster materials. It does not matter the manner of payment for those Services, the Big Box outlets would be crucified, if they were not seen as part of the Recovery effort. It is a question of the Dictators stepping up to the Plate, and has nothing to do with the Cost of the performance. The Dictators (Big Box outlets) must show some Concern for the Polity, else they would be ousted; the problem being this Aid is too often pro forma without content, because of the Cost involved.
Mark Thoma and Paul Krugman point out that the Bush administration's plan for the Mortgage Crisis is basically a pro forma instrument without content, designed solely for the purpose of deflecting popular demand for adequate relief. The Plan basically protects the Money interests which provide the basic support for the Administration, while giving lip service of helping the Mortgage debtors. It only provides Cover for the financial administrators who created the crisis by bad lending practice, and effectively grants little Relief to debtors. This gives the image of Concern and Involvement to the Administration, while allowing Escape for Those culpable. Such are the mechanisms of Power. lgl
William Polley brings Us an Argument which seems to have no relevance to the previous Post by Bryan, but it still concerns the Expectation of the Polity for provision from what is understood as an economic dictatorship; the Big Box stores have the Routing mechanism to provide quick Supply of disaster materials. It does not matter the manner of payment for those Services, the Big Box outlets would be crucified, if they were not seen as part of the Recovery effort. It is a question of the Dictators stepping up to the Plate, and has nothing to do with the Cost of the performance. The Dictators (Big Box outlets) must show some Concern for the Polity, else they would be ousted; the problem being this Aid is too often pro forma without content, because of the Cost involved.
Mark Thoma and Paul Krugman point out that the Bush administration's plan for the Mortgage Crisis is basically a pro forma instrument without content, designed solely for the purpose of deflecting popular demand for adequate relief. The Plan basically protects the Money interests which provide the basic support for the Administration, while giving lip service of helping the Mortgage debtors. It only provides Cover for the financial administrators who created the crisis by bad lending practice, and effectively grants little Relief to debtors. This gives the image of Concern and Involvement to the Administration, while allowing Escape for Those culpable. Such are the mechanisms of Power. lgl
Sunday, December 09, 2007
The World According to Carp
The lead article in the NYTimes claims that a lot of net Exporters of Oil are going to become net Importers in the next decade, and present some data which is very scary. Is this Oil shortage predictable?–Yes, but it is also unlikely. One must first decipher that the economies of these Countries are not Stand-Alone economies, which can subsist in any form of autarchy. They must possess a Credit of Exchange that their current Oil production currently provides them; in most cases, Oil is the only viable Export which they possess. They will be unable to compete with other Trade Goods in a World where all other nations are trying to produce the same mix of Goods for Export. Most of these nations depend upon Oil to finance their own Governments. None of these Countries can really afford to adopt the American model economy. The Result will not be a shortage of Oil, but a Price for Gasoline and Diesel equalized in the World by taxation.
Robert Frank delivers an important Argument about the need to raise Taxes. I will put the entire Issue in a slightly different light. Americans are living way above their means, and the only method to maintain the charade is to pass the mythical beast of Debt onto the Government through demanding Services without Taxation. The only problem with the mythical beast is that it must be paid Interest, and finally must be paid off in full. Some mythical Political leadership has designs on the value of the Dollar, insisting its value be cut in half, before the mythical beast of Debt must be paid; dependent on their own personal Earning Power being maintained. Why it is all mythical resides in the fact that the World will not let Us get away with it; and two, the greatest majority of Americans will only be ground down by the practice. An honest Taxation could still have Us running a Surplus, like We did during much of the Clinton administration, until Politicians starting playing with the Tax laws again. Fool Me once, shame on you; Fool Me twice, shame on Me. I guess the American people want to be called Fools.
I like this article because it is basically honest, unusual in modern Journalism. Consumers are a bit down, and Economists ask why? Could it be that overall Prices rose better than 3% last Year, Energy Costs rose better than 8%, Property taxes and Licensing requirements have increased by more than 4% year over year, and actual Take-Home Pay has been stagnant for a couple of years. Add that the wide run of Christmas Run-up Sales has reduced Christmas Shopping Costs to approximately a Price some 3% more than last Year. I think Consumers are in a grouchy Mood, especially as Interest rates on Consumer Credit may have doubled year over year. Don’t worry about it–Santa loves you All; though he may be filing for Bankruptcy next year. lgl
Robert Frank delivers an important Argument about the need to raise Taxes. I will put the entire Issue in a slightly different light. Americans are living way above their means, and the only method to maintain the charade is to pass the mythical beast of Debt onto the Government through demanding Services without Taxation. The only problem with the mythical beast is that it must be paid Interest, and finally must be paid off in full. Some mythical Political leadership has designs on the value of the Dollar, insisting its value be cut in half, before the mythical beast of Debt must be paid; dependent on their own personal Earning Power being maintained. Why it is all mythical resides in the fact that the World will not let Us get away with it; and two, the greatest majority of Americans will only be ground down by the practice. An honest Taxation could still have Us running a Surplus, like We did during much of the Clinton administration, until Politicians starting playing with the Tax laws again. Fool Me once, shame on you; Fool Me twice, shame on Me. I guess the American people want to be called Fools.
I like this article because it is basically honest, unusual in modern Journalism. Consumers are a bit down, and Economists ask why? Could it be that overall Prices rose better than 3% last Year, Energy Costs rose better than 8%, Property taxes and Licensing requirements have increased by more than 4% year over year, and actual Take-Home Pay has been stagnant for a couple of years. Add that the wide run of Christmas Run-up Sales has reduced Christmas Shopping Costs to approximately a Price some 3% more than last Year. I think Consumers are in a grouchy Mood, especially as Interest rates on Consumer Credit may have doubled year over year. Don’t worry about it–Santa loves you All; though he may be filing for Bankruptcy next year. lgl
Saturday, December 08, 2007
Any Health Care Plan
Everyone should read this Opinion by Paul Krugman, though I really don’t know why, as We all understand that any Health Care plan must be paid for; and any Payment plan must have some form of mandate. I would approach the entire Problem in a different manner, which seems somewhat complicated in design, but would be very simple in action. I will try to outline the basic components of the Plan, warning All that the opposition from the Health Care industry will be great.
The biggest Problem with Health Care comes from the increasing Costs of that Care. The entire health care industry is currently geared towards providing the most expensive health care available, as all of the newer medical techniques are covered by Patents, in one form or another. The health care industry goes to great Expense to educate medical personnel in these new techniques, so that they are readily adopted. Older, less expensive techniques, no longer covered by Patents, are still viable in most medical Cases, and could be utilized in the greatest majority of Cases. Any mandate must be coupled with some form of compulsion on the medical community to utilize the cheaper forms of health care, until more expensive forms of medical treatment are found to be necessary. The rationale for this coercion lay in the necessity of making universal health care as Cost-effective as possible.
My Plan would consist of a legislative mandate which would limit all medical Payments to Doctors or Clinics to an amount per Patient equal to the estimated yearly Cost of any health care tax imposed upon Workers; an equal amount which would impact as tax upon all Employers. Surgical procedures and Hospital Stays per Patient would be limited payment equal to only four times the average yearly Cost per Worker of the taxation. Medical Equipment will be amortized over the life of the Patient, where Payment cannot exceed one month’s estimated Average of Cost of a Worker’s yearly mandated health care tax; the total Price of the medical equipment is treated like a Mortgage, and paid by the Health Care Plan. The legal Mandate for the health care system would dictate that nothing in the health care industry can bill any Patient any year, for more than one month’s Average Estimated Cost per Patient of any health care taxation as Co-Payment. The legal Mandate for the health care system will precisely state that all Health Care Providers must average their Costs among their entire Patient load, and assume any financial burden which is assumed with individual Patient Care exceeding the limits imposed. Will it work?–We’ll see. lgl
The biggest Problem with Health Care comes from the increasing Costs of that Care. The entire health care industry is currently geared towards providing the most expensive health care available, as all of the newer medical techniques are covered by Patents, in one form or another. The health care industry goes to great Expense to educate medical personnel in these new techniques, so that they are readily adopted. Older, less expensive techniques, no longer covered by Patents, are still viable in most medical Cases, and could be utilized in the greatest majority of Cases. Any mandate must be coupled with some form of compulsion on the medical community to utilize the cheaper forms of health care, until more expensive forms of medical treatment are found to be necessary. The rationale for this coercion lay in the necessity of making universal health care as Cost-effective as possible.
My Plan would consist of a legislative mandate which would limit all medical Payments to Doctors or Clinics to an amount per Patient equal to the estimated yearly Cost of any health care tax imposed upon Workers; an equal amount which would impact as tax upon all Employers. Surgical procedures and Hospital Stays per Patient would be limited payment equal to only four times the average yearly Cost per Worker of the taxation. Medical Equipment will be amortized over the life of the Patient, where Payment cannot exceed one month’s estimated Average of Cost of a Worker’s yearly mandated health care tax; the total Price of the medical equipment is treated like a Mortgage, and paid by the Health Care Plan. The legal Mandate for the health care system would dictate that nothing in the health care industry can bill any Patient any year, for more than one month’s Average Estimated Cost per Patient of any health care taxation as Co-Payment. The legal Mandate for the health care system will precisely state that all Health Care Providers must average their Costs among their entire Patient load, and assume any financial burden which is assumed with individual Patient Care exceeding the limits imposed. Will it work?–We’ll see. lgl
Friday, December 07, 2007
Value of Trade
Students should read this Post by Greg Mankiw, who tries to define Paul Samuelson’s position on Trade, by citing the Bhagwati, Panagaryia, and Srinivasan (2004) rebuttal of Samuelson’s Paper. It sounds good, but may contain some elements of confusion (remember this comes from a individual who has read only parts of the Samuelson Paper, and none of the Rebuttal). The first Step in the Trade cycle develops, not necessarily because of Comparative Advantage alone, but also because of a lack of knowledge (Technology and Expertise) in the continuum of Sales in the Other’s domestic markets. The second Step is achieved with the Trader learns to effect Sales in the Trading Partner’s domestic markets, providing competition in those markets under the pressure of minimizing Production Costs. The third Step consists of domestic Producers learning to match the competition of their Trading partners effectively, and much of the value of Trade dissipates for both Trading Partners, with Trade reduced to basic raw Production materials. I happen to agree with Samuelson, and believe that the spread of Information and Technology will destroy any Comparative Advantage of Trade, except in the realm of raw Production materials, over the long haul.
Hillary Clinton may be mistaken on her views on Trade, but where has this ever stopped any Politician? My contention, possibly or impossibly backed by Samuelson, attests that Economists overinflate the value of Trade. My ideation fundamentally asserts that all Trade must be either discriminatory or confiscatory (as hidden taxation), based upon a lack of Information and technology spread. Even raw materials must be based upon a Worldwide Pricing system, with full spread of Information, to avoid this artificial taxation. The basic trouble with Ricardo’s Comparative Advantage lay in its excellent analysis of Costs; its basic failure comes in its inability to integrate Assets pricing successfully into the spectrum.
Economists will say the Above is a Question of Ethics, not Economics, and they will ignore the natural Cost pricing of discrimination. There is real reason why leading Trade partners invariably lose their preeminence in World Trade, which is basically the spread of technology and expertise. Great Britain was the leader in Trade in 1900, and trailed drastically by 1950. Japan was a major leader in the 1970s, and has been struggling since the 1990s. Is this some major loss of Comparative Advantage? Well, yes, but a specific loss through Information Spread; remember, Japan still remain as a technological leader. American Economists should realize that the United States needs to take the lead in some industrial advance–Computers and Boeing jets are getting a bit worn. lgl
Hillary Clinton may be mistaken on her views on Trade, but where has this ever stopped any Politician? My contention, possibly or impossibly backed by Samuelson, attests that Economists overinflate the value of Trade. My ideation fundamentally asserts that all Trade must be either discriminatory or confiscatory (as hidden taxation), based upon a lack of Information and technology spread. Even raw materials must be based upon a Worldwide Pricing system, with full spread of Information, to avoid this artificial taxation. The basic trouble with Ricardo’s Comparative Advantage lay in its excellent analysis of Costs; its basic failure comes in its inability to integrate Assets pricing successfully into the spectrum.
Economists will say the Above is a Question of Ethics, not Economics, and they will ignore the natural Cost pricing of discrimination. There is real reason why leading Trade partners invariably lose their preeminence in World Trade, which is basically the spread of technology and expertise. Great Britain was the leader in Trade in 1900, and trailed drastically by 1950. Japan was a major leader in the 1970s, and has been struggling since the 1990s. Is this some major loss of Comparative Advantage? Well, yes, but a specific loss through Information Spread; remember, Japan still remain as a technological leader. American Economists should realize that the United States needs to take the lead in some industrial advance–Computers and Boeing jets are getting a bit worn. lgl
Government Mentality
Here is a prime example of the Workings of Government, Science, and bureaucracy. Even if they can finally establish that there is a Danger, any Solution can be blocked by any segment by multiple counter-Proposals. I will tell Kids right now, that if We are actually dependent upon reaching some critical goals within a specified Period–We are doomed! I am reminded of the old Racist statement that if you put Two Jews in a room, you would come up with five Opinions; I have always contended it cannot just be restricted to Jews. Before I scare these same Kids about the Danger of Global Warming, I will say that if Greenhouse Gases continue to be released by humanity at current expanding rates, We should equal five active Volcanos somewhere in the next thirty years. We might fry in Our own homes, so be it; I think We should talk about scraping the Greenhouse Gases out of the atmosphere, a sensible Plan which could also counteract those Volcanos.
Here is another instance of the intricate workings of bureaucracy. The Federal Government wants to put a driver away for life, because he drove bin Laden around. They claim this individual knew of the Sept. 11 attacks prior to that date. So what? What were the Options of the individual involved? He might have made a Collect Call to the White House. He might have told bin Laden to hell with his $400 a month Job, which would not have stopped the Attack or saved anyone, but would have showed he was not a Terrorist. He might have refused to carry Weapons in his car, though he had a legal Permit to carry firearms, and there has never been any Injunction seriously enforced to carrying Arms in Afghanistan–ask any Taliban member or American soldier. It is another instance of burning the Small Fry, while leaving the real issues unresolved.
We now turn to the subprime Mortgage bailout announced by Bush, but devised by the industry itself. The industry only wants to save those Mortgage holders who cannot possible renegotiate new Mortgages, with all the charges of refinance. They lock in those losers into paying what they originally agreed, and forcing all Others to refinance with all the expenses involved. A real humanitarian effort exhibited by the big money Lenders; who can claim righteously that they have been injured horribly, and insist on even more years of indebtedness for the Mortgage debtors–at higher Interest rates. I love America, if you can stay above the flow at floor level. lgl
Here is another instance of the intricate workings of bureaucracy. The Federal Government wants to put a driver away for life, because he drove bin Laden around. They claim this individual knew of the Sept. 11 attacks prior to that date. So what? What were the Options of the individual involved? He might have made a Collect Call to the White House. He might have told bin Laden to hell with his $400 a month Job, which would not have stopped the Attack or saved anyone, but would have showed he was not a Terrorist. He might have refused to carry Weapons in his car, though he had a legal Permit to carry firearms, and there has never been any Injunction seriously enforced to carrying Arms in Afghanistan–ask any Taliban member or American soldier. It is another instance of burning the Small Fry, while leaving the real issues unresolved.
We now turn to the subprime Mortgage bailout announced by Bush, but devised by the industry itself. The industry only wants to save those Mortgage holders who cannot possible renegotiate new Mortgages, with all the charges of refinance. They lock in those losers into paying what they originally agreed, and forcing all Others to refinance with all the expenses involved. A real humanitarian effort exhibited by the big money Lenders; who can claim righteously that they have been injured horribly, and insist on even more years of indebtedness for the Mortgage debtors–at higher Interest rates. I love America, if you can stay above the flow at floor level. lgl
Thursday, December 06, 2007
Short-Sighted Economic Theory
This BLS Report may miss the boat. It bases its evaluation on past performance, not resorting to a study of economic trends. I will first say there is no obvious indication of a Recession anytime soon, but that a Recession will undoubtedly occur within the next 5 years, based solely on the extreme complexity of current economic integration. The next Recession, whenever it comes, will create a great Watershed; Government having already exploited almost every venue to expand the economy: the National Debt is huge, the Dollar is already declining, and the economy has already expanded into sectors capable of utilizing lowered Interest rates because of quick Profits turnover. The Government will itself be a major Debtor looking for subprime financing, which will not be found. It is my Thought that the only avenue out of a new Recession will consist of a reconstruction of American industry, there being no where else to regenerate positive growth. We are going to need those Blue-Collar Workers once more.
Gilles Saint-Paul presents an insightful Argument on the impact of interest rates as a price of a Product–financing. A Fed-dominated Interest rate constitutes artificial shelving of Product at non-Market pricing, remaining unconcerned about the quantity of the Product unless it raises the prices of other Products. Normal economic theory would suggest that the practice would bring constriction of Product provision–or finance. The trouble resides in there being a inversion of normal economic theory concerning the flow of Money resulting from the practice of Reserve banking. Extension of Loans become increases of Reserves, through the simple practice of the Debtor, or later Seller of other Product, redepositing the funds back into the banking system. Reserve banks obtain an almost limitless supply of Reserve funds to be lent out, all they need is the Debt purchasers. The Fed can set the interest rates, or Reserve rates, too low, and suddenly there are more Borrowers than is economically sound.
Gilles touches on how low Interest rates will affect Imports, which will increase in amount. Debtors and Product Sellers will wind up with a larger flow of Income because of low Interest rates, and will want to spend a greater share of that flow on themselves. Demand outstrips Supply of Consumer Goods, and foreign Imports quickly fill the Gap; a practice helped by Production Costs historically being cheaper Overseas. Those Products which must be filled by domestic production rapidly increase in Price, due to the increased Demand; Gilles’ increase is assets pricing. Saint-Paul says bubbles might be created, I will say that bubbles are automatic under such practice, it only being an equation of impactive Time and Pressure. lgl
Gilles Saint-Paul presents an insightful Argument on the impact of interest rates as a price of a Product–financing. A Fed-dominated Interest rate constitutes artificial shelving of Product at non-Market pricing, remaining unconcerned about the quantity of the Product unless it raises the prices of other Products. Normal economic theory would suggest that the practice would bring constriction of Product provision–or finance. The trouble resides in there being a inversion of normal economic theory concerning the flow of Money resulting from the practice of Reserve banking. Extension of Loans become increases of Reserves, through the simple practice of the Debtor, or later Seller of other Product, redepositing the funds back into the banking system. Reserve banks obtain an almost limitless supply of Reserve funds to be lent out, all they need is the Debt purchasers. The Fed can set the interest rates, or Reserve rates, too low, and suddenly there are more Borrowers than is economically sound.
Gilles touches on how low Interest rates will affect Imports, which will increase in amount. Debtors and Product Sellers will wind up with a larger flow of Income because of low Interest rates, and will want to spend a greater share of that flow on themselves. Demand outstrips Supply of Consumer Goods, and foreign Imports quickly fill the Gap; a practice helped by Production Costs historically being cheaper Overseas. Those Products which must be filled by domestic production rapidly increase in Price, due to the increased Demand; Gilles’ increase is assets pricing. Saint-Paul says bubbles might be created, I will say that bubbles are automatic under such practice, it only being an equation of impactive Time and Pressure. lgl
Wednesday, December 05, 2007
Extortion and the Abuse of Police Power
Cactus at Angry Bear provides two Graphs which should make the Reader contemplate current Conservative economic theory. Marginal Tax Cuts do not appear to operate as economic theory would dictate. I have previously written of my belief that higher Tax rates with sound Tax collection practice, if not beyond the absorbent qualities of the economy, provide a spur to economic growth; my position being that Management is forced to work harder, greater Wage Demand exists, and Service industries expand to acquire the added Wages generated. Cactus may focus on the lax Tax collection practices under Republicans, but the real Story is that there is a spur to economic growth under higher Taxes, and elimination of a spur to growth with Tax Cuts.
The EPI studies the better outcomes of Canadian health care compared to the United States system, while the U.S. spends almost double that of Canada. They also note that Canadians consult with Physicians almost twice as often (6.0 v. 3.8). The American practice of limiting Medical School enrollments has been a major factor in the last statistic, which is not endured by the Canadian system. The limitation has cost the American economy greatly, ever since the Grenada invasion to rescue American medical students. Why must Americans go Overseas to attain Medical School, if We possess the finest health program in the World?
This Piece brings Us back to the original paragraph, but ties in with the second paragraph in an insane manner. My Comment on the Free Exchange Post is that if the American economy was overheated by the low Taxes, the disparate Government Spending deficits of the Bush administration, and unsound Pork Barrel Spending of both Parties, then an excess of liquidity will not propel growth, only Inflation. Mark Thoma makes the essential point that Consumers are in the mood to pay down Debt, rather than engage in further Spending. I do not like the arguments of Thoma, and agree mostly with William Polley. He thinks there should be a lower funds rate, which I happen to also disagree with in both theory and practice. My Solution would be to eliminate the impediments to economic growth now on the books, like the above difficulty of obtaining a medical license if qualified. I would also incite new laws, like compelling fines for use of Tires more than 50,000 miles (Fine to be equal to the replacement cost of the Tires). A spectacular number of things can be accomplished with the simple application of Fines for non-performance, like a $200 Fine for filing a late Income Tax Return. Employment would rise if there was a $100 Fine per Compliance Report not filed upon scheduled Date. There are multiple way to affect Change. lgl
The EPI studies the better outcomes of Canadian health care compared to the United States system, while the U.S. spends almost double that of Canada. They also note that Canadians consult with Physicians almost twice as often (6.0 v. 3.8). The American practice of limiting Medical School enrollments has been a major factor in the last statistic, which is not endured by the Canadian system. The limitation has cost the American economy greatly, ever since the Grenada invasion to rescue American medical students. Why must Americans go Overseas to attain Medical School, if We possess the finest health program in the World?
This Piece brings Us back to the original paragraph, but ties in with the second paragraph in an insane manner. My Comment on the Free Exchange Post is that if the American economy was overheated by the low Taxes, the disparate Government Spending deficits of the Bush administration, and unsound Pork Barrel Spending of both Parties, then an excess of liquidity will not propel growth, only Inflation. Mark Thoma makes the essential point that Consumers are in the mood to pay down Debt, rather than engage in further Spending. I do not like the arguments of Thoma, and agree mostly with William Polley. He thinks there should be a lower funds rate, which I happen to also disagree with in both theory and practice. My Solution would be to eliminate the impediments to economic growth now on the books, like the above difficulty of obtaining a medical license if qualified. I would also incite new laws, like compelling fines for use of Tires more than 50,000 miles (Fine to be equal to the replacement cost of the Tires). A spectacular number of things can be accomplished with the simple application of Fines for non-performance, like a $200 Fine for filing a late Income Tax Return. Employment would rise if there was a $100 Fine per Compliance Report not filed upon scheduled Date. There are multiple way to affect Change. lgl
Tuesday, December 04, 2007
The Blitz never works
Here and here are two articles which reflect the pressures which Wall Street is trying to apply to the Federal Reserve for lowering Interest rates. Here is my dilemma: I have always wanted the Overnight rates to be pegged at 4.25% forever without change, and cannot fault the Fed if they cute the rate by 25 Base Points. The Economy, though, fails to meet the criteria for a Rate Cut. Mortgage rates have returned to Interest rate levels from which they will not decline. The DOW Industrial index is over 13,000, and cannot reach much higher numbers without inflationary pressures. The Slowdown for the next year is a basic restructuring to meet current Demand, and will not be viably altered by the presence of easy money. Little more Product will be produced, cheap money or not. The value of the Dollar has suffered drastically this year, and a Rate cut will incite foreign exit from their Dollar Holdings, probably without increase in the purchase pattern for American Products. Neither Wall Street or the Fed will gain from a Rate Cut, and it will provide an additional Shock to an already battered Economy.
Edward Hugh puts an intelligent Take on the stability of the American economy. The real factor remains the growth of foreign competition to American development, a reoccurrence previously seen in the 1960s with the rise of the Japanese economy. The real problem comes in the U.S. economy being tied to systemic technologies due to previous Capital investments in the technologies, while Developing nations placed initial Capitalization into sounder technologies. The whole situation will revolve to an improved American position with further Capitalization, though We currently have reached a certain plateau. The American economy is not going to disintegrate in the interim Period; it will simply redirect its Capitalization efforts. Efforts to propel faster change will fail, and stupid efforts to do so will worsen the situation. lgl
Edward Hugh puts an intelligent Take on the stability of the American economy. The real factor remains the growth of foreign competition to American development, a reoccurrence previously seen in the 1960s with the rise of the Japanese economy. The real problem comes in the U.S. economy being tied to systemic technologies due to previous Capital investments in the technologies, while Developing nations placed initial Capitalization into sounder technologies. The whole situation will revolve to an improved American position with further Capitalization, though We currently have reached a certain plateau. The American economy is not going to disintegrate in the interim Period; it will simply redirect its Capitalization efforts. Efforts to propel faster change will fail, and stupid efforts to do so will worsen the situation. lgl
Monday, December 03, 2007
The New Wrong Direction
Here is an erudite article about the potential Gains and Risk of Deflation. I remain a prime Deflator on the basis of theory, knowing Currency stability must include the provision of Risk, in order for Value to restock in the currency; pure Economics insists that any Product cannot be set by Market forces, if measures are taken to artificially support the Product price–impacting Currency as seriously as any other Product. The most serious fault with such Protection comes from excess liquidity, which compounds what inflationary pressures are existent. Giving Consumers more and cheaper Money is not the Means to fight Inflation.
I am most offended by the Concept of making Debt too onerous to repay. Debt should be hard to repay, it being the sole inhibiting force forestalling Spendthrift policies. The Fed may take the Credit for the loss of Savings in this Country; educating an entire Generation to live on Credit Cards and Mortgages until the Debt is so preponderantly great that it is time for Bankruptcy. Everything is today organized to empower Everyone to Spend until they literally Drop, without any recourse to establishing financial reserves. We now have a Government which has the lowest Taxes but greatest Debt, the greatest instability of Low Income and High Debt coupled to a lack of financial reserves, and a continuous need to refinance Debt obligations. There once was a Time when a new House cost about 3 years Wages; today, 70% of Labor will retire with outstanding Mortgage debt still existing on their homes.
There are Economists who exclaim that this Condition holds no impact on Prices. There is underutilization of Product throughout the Market; how many empty Business facilities exist, solely to gain the Tax advantage of Mortgage Costs, such new facilities ever more elaborate and expensive to increase the Tax deductibility. All Product prices increase due to the transfer of the financial costs of financing Sales to the initial Price offering; this is no mean thing, which can generate 30% of the total Cost of the Product. Garbage Dumps are filled with last year’s Christmas Gifts and PCs, most still in fairly good operating condition.
Thanks to Mike Moffit for the link to the article. lgl
I am most offended by the Concept of making Debt too onerous to repay. Debt should be hard to repay, it being the sole inhibiting force forestalling Spendthrift policies. The Fed may take the Credit for the loss of Savings in this Country; educating an entire Generation to live on Credit Cards and Mortgages until the Debt is so preponderantly great that it is time for Bankruptcy. Everything is today organized to empower Everyone to Spend until they literally Drop, without any recourse to establishing financial reserves. We now have a Government which has the lowest Taxes but greatest Debt, the greatest instability of Low Income and High Debt coupled to a lack of financial reserves, and a continuous need to refinance Debt obligations. There once was a Time when a new House cost about 3 years Wages; today, 70% of Labor will retire with outstanding Mortgage debt still existing on their homes.
There are Economists who exclaim that this Condition holds no impact on Prices. There is underutilization of Product throughout the Market; how many empty Business facilities exist, solely to gain the Tax advantage of Mortgage Costs, such new facilities ever more elaborate and expensive to increase the Tax deductibility. All Product prices increase due to the transfer of the financial costs of financing Sales to the initial Price offering; this is no mean thing, which can generate 30% of the total Cost of the Product. Garbage Dumps are filled with last year’s Christmas Gifts and PCs, most still in fairly good operating condition.
Thanks to Mike Moffit for the link to the article. lgl
Sunday, December 02, 2007
Tyler Cowen presents an excellent argument for ignoring the declining Dollar, and there are sound economic reasons for such an attitude. The trouble resides in the fact there are some resounding economic arguments to support the Dollar. The major impact for Consumers sits within a rapid change in Pricing in Dollars, coupled with extreme resistence to Wage inflation. Business and Fed policy is firmly committed to Wage suppression, though rather open to Dollar devaluation; such a combination does horrid things to Consumer viability across decades. Tyler’s comment about there being little to do about Currency transactions may be a little evasive, as simple reduction of Federal Debt would have an immense impact upon a sound Dollar.
William Poole at the St. Louis Federal Reserve is admittedly a Front Man for Bernanke and the Federal Reserve Board, but he talks before groups, like the Cato Institute, who overembellish any Comments forwarded. Poole’s advocacy of interest rate cuts irrespective of current trends in the financial markets excites the rapid Profits crowd, who want the cut rates to finance the Margin markets. Mortgages are extremely tight, but this is because of decreasing Home values, not because of outrageous interest rates. We are coming off a extended Period of construction push, and a slowing construction rate was bound to bring Value adjustments. The fact exists that liquidity actually exists in the Mortgage market, if Mortgage applicants accept a sound Mortgage structure. Study of other Markets indicate acceptable liquidity, considering the high Stock values and Commodity pricing. The Federal Reserve should be cautious about an effective ‘Guns and Butter’ policy, when We don’t need the Guns, and the price of Butter is already too high. This Graph from Mark Perry proves my previous Point, as Mortgage rates are again coming down.
Here is a NYTimes article which accounts the corruption in Iraqi society, where Everyone steals from the Government and the U.S. This is a Feel-Good article pointing out how much safer and easier it is in the United States, where you have to be an Accountant to steal from either the Government or Private Contractors. The real point of the article, though, is that it is impossible to engender proper Business ethics, unless and until Splintered Law Enforcement can be eliminated. Punishment for Corruption must be uniformly applied to be applied at all. lgl
William Poole at the St. Louis Federal Reserve is admittedly a Front Man for Bernanke and the Federal Reserve Board, but he talks before groups, like the Cato Institute, who overembellish any Comments forwarded. Poole’s advocacy of interest rate cuts irrespective of current trends in the financial markets excites the rapid Profits crowd, who want the cut rates to finance the Margin markets. Mortgages are extremely tight, but this is because of decreasing Home values, not because of outrageous interest rates. We are coming off a extended Period of construction push, and a slowing construction rate was bound to bring Value adjustments. The fact exists that liquidity actually exists in the Mortgage market, if Mortgage applicants accept a sound Mortgage structure. Study of other Markets indicate acceptable liquidity, considering the high Stock values and Commodity pricing. The Federal Reserve should be cautious about an effective ‘Guns and Butter’ policy, when We don’t need the Guns, and the price of Butter is already too high. This Graph from Mark Perry proves my previous Point, as Mortgage rates are again coming down.
Here is a NYTimes article which accounts the corruption in Iraqi society, where Everyone steals from the Government and the U.S. This is a Feel-Good article pointing out how much safer and easier it is in the United States, where you have to be an Accountant to steal from either the Government or Private Contractors. The real point of the article, though, is that it is impossible to engender proper Business ethics, unless and until Splintered Law Enforcement can be eliminated. Punishment for Corruption must be uniformly applied to be applied at all. lgl
Saturday, December 01, 2007
I will never make a Bookie
One should read both the new Forecast and the News Release given by Eddie Lazear, provided by Greg Mankiw. My own Take on the Forecast is that it is too optimistic, I believing that growth will be present, but only about 1.5% for next year. The basis for my estimate is the fact that the American Consumer is shaken, and plans to pay down some of their Mortgage debt, refinancing more for safe Repayment schedules, rather than for more Spending. A real criteria to watch is the total Finance numbers on new Vehicles; if these numbers start to retreat, even if they are only very marginal, it means that Consumers have altered their Preference practices. The real element of discrimination will probably be the After-Christmas Sales, determined by the Percentage rollback of Product Pricing, conjoined with the total volume of such Sales. Eddie Lazear did an excellent Job in the Press conference, but he might be promoting a Product which will require an excessive amount of Advertising, and still fail.
You can find the major opposition to my Position here, with Lawrence Summers promoting an Activitist policy. I personally believe it is the wrong time to be loosening the Fed control, what with the shaken Dollar and rising Energy and Food Prices. I have always held the supposition that volatile Prices, if they exceed 3% of average Consumer Income, negate any reliance or trust in consistent Core Inflation; the volatile Prices will impact on Consumer Sentiment (maybe the exact Point at which to reset the Inflation rate). I will probably be crucified for this sentiment, but it might be time to Sunset the Bush Tax Cuts; they providing no stimulus–if they ever did, raised Tax revenues will stabilize the Dollar, Production impact will be effectively nil, and both financial markets and Business interests will find it easier to accept Profit Margin Cuts. It is a Mean Call, but Investors never liked me anyway!
I am not a whiz at Math, but I do not understand the equating of this game to Investing. All Investment I have seen possesses a premium for Engagement in the Game. A better formalization would have 4 White balls, 6 Black balls, and freedom to withdraw from the Game at any time. Continuance in play, though, would provide a 4% payment for the balls remaining in the hat, every time a ball was removed from the Hat. At a Dollar per ball, the preference premium under normal Investing was be $.36/removal of the first ball, $.32/removal of the second ball, . . . Initial investment is very profitable if White balls are pulled out, loss is minimized by the premium if black balls are pulled out, while the odds of pulling out White balls increase with every removal of a black ball. I might be wrong in this assessment of the actual functioning of Investment, but I will retain my own ideas, even if proven wrong (Born Loser). lgl
You can find the major opposition to my Position here, with Lawrence Summers promoting an Activitist policy. I personally believe it is the wrong time to be loosening the Fed control, what with the shaken Dollar and rising Energy and Food Prices. I have always held the supposition that volatile Prices, if they exceed 3% of average Consumer Income, negate any reliance or trust in consistent Core Inflation; the volatile Prices will impact on Consumer Sentiment (maybe the exact Point at which to reset the Inflation rate). I will probably be crucified for this sentiment, but it might be time to Sunset the Bush Tax Cuts; they providing no stimulus–if they ever did, raised Tax revenues will stabilize the Dollar, Production impact will be effectively nil, and both financial markets and Business interests will find it easier to accept Profit Margin Cuts. It is a Mean Call, but Investors never liked me anyway!
I am not a whiz at Math, but I do not understand the equating of this game to Investing. All Investment I have seen possesses a premium for Engagement in the Game. A better formalization would have 4 White balls, 6 Black balls, and freedom to withdraw from the Game at any time. Continuance in play, though, would provide a 4% payment for the balls remaining in the hat, every time a ball was removed from the Hat. At a Dollar per ball, the preference premium under normal Investing was be $.36/removal of the first ball, $.32/removal of the second ball, . . . Initial investment is very profitable if White balls are pulled out, loss is minimized by the premium if black balls are pulled out, while the odds of pulling out White balls increase with every removal of a black ball. I might be wrong in this assessment of the actual functioning of Investment, but I will retain my own ideas, even if proven wrong (Born Loser). lgl
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