THIRD RAILS - PROCESS VS. PRODUCT: Dalibor Rohac and Matthew Sinclair: Preparing Another Meltdown - WSJ.com
I recall the Ivy League discussions going back to the 1960's of "process vs. product".
Basel II and now III are clearly of the 'process' variety - i.e. don't use judgment, everyone is the same, happiness of lemmings and no one has to lose.
Clearly sovereign debt is emblematic of the idea of socializing outcomes without any requisite inputs from the recipients of income transfer, high tax benefits.
Another way of describing a bubble is too much for nothing.
As the year winds down, there are many talking about the unsavory outcomes that may await; but, as long as there's a way to finance a 'free lunch', who wants to call a halt?
Governor Christie was recently interviewed and said that the 'third rails' of decision-making are clearly now the only choices for many governors.
Tuesday, December 28, 2010
Saturday, December 25, 2010
Beneficial Manipulation - Barrons.com
IS SOMETHING MISSING?: Beneficial Manipulation - Barrons.com
To build things or provide jobs, it takes capital. And, capital is exactly what gets swallowed up by government consumption based entitlement programs.
The platform economy concept has enabled Americans to benefit from the very things that Donlan mentions - but these are jobs that take education and training.
Simple math shows that the US is not accumulating the capital (or the reward system) to create the jobs everyone would like to have for a middle class lifestyle.
The liberal establishment and unions believe the rich can be taxed to provide the wherewithal for everyone to have the cushy UAW type jobs of years gone by. However, these were years where the US was the dominant economic power and had a vastly disproportionate share of the world's resources. Now there is competition for those resources.
The goal to create jobs is noble; but, a high tax, union mentality economy isn't the needed investment climate needed.
Another question would seem to be if the GDP has supposedly recovered what was lost during the recession, I don't recall productivity statistics to justify the same production with what is now effectively 21% unemployment (add in post 2 weeks and 6 months (9.7, 17, 21%)?
To build things or provide jobs, it takes capital. And, capital is exactly what gets swallowed up by government consumption based entitlement programs.
The platform economy concept has enabled Americans to benefit from the very things that Donlan mentions - but these are jobs that take education and training.
Simple math shows that the US is not accumulating the capital (or the reward system) to create the jobs everyone would like to have for a middle class lifestyle.
The liberal establishment and unions believe the rich can be taxed to provide the wherewithal for everyone to have the cushy UAW type jobs of years gone by. However, these were years where the US was the dominant economic power and had a vastly disproportionate share of the world's resources. Now there is competition for those resources.
The goal to create jobs is noble; but, a high tax, union mentality economy isn't the needed investment climate needed.
Another question would seem to be if the GDP has supposedly recovered what was lost during the recession, I don't recall productivity statistics to justify the same production with what is now effectively 21% unemployment (add in post 2 weeks and 6 months (9.7, 17, 21%)?
Friday, December 24, 2010
Pensions Push Property Taxes Higher - WSJ.com
DEBT AND ENTITLEMENT BUBBLES: Pensions Push Property Taxes Higher - WSJ.com
It's interesting how unions are all 'gimme, gimme, gimme' with no thought for long-term sustainability.
Clearly the US needs to invest in its future, not sell off the proverbial family silver to pay for current consumption.
As for the 9 innings it will probably take to truly turn the US economy around, it would appear to clearly be stuck in Inning 3 - where government hopes that it can keep squeezing more cash (taxes or borrowing) to pay for current entitlement and social consumption and continue to put off both investment into new and the replacement of worn-out or depreciated economic necessities for growth.
Clearly the debt bubble that is building is tied to the entitlement bubble. Since they are both growing bigger....
It's interesting how unions are all 'gimme, gimme, gimme' with no thought for long-term sustainability.
Clearly the US needs to invest in its future, not sell off the proverbial family silver to pay for current consumption.
As for the 9 innings it will probably take to truly turn the US economy around, it would appear to clearly be stuck in Inning 3 - where government hopes that it can keep squeezing more cash (taxes or borrowing) to pay for current entitlement and social consumption and continue to put off both investment into new and the replacement of worn-out or depreciated economic necessities for growth.
Clearly the debt bubble that is building is tied to the entitlement bubble. Since they are both growing bigger....
Thursday, December 23, 2010
Jamie Whyte: Despotic Taxation - WSJ.com
A TWO-ENDED PUSH: Jamie Whyte: Despotic Taxation - WSJ.com
This article touches on a basic disconnect that many liberals have with business economics and investing - i.e. many liberals think that business will invest and create jobs without regard for the hurtle rates mentioned in this article.
The codicil to the above issue of liberal disconnect is that they somehow think the same investment will come about whether the business or investor keeps 100% of the return or maybe just 50% or less.
The lack of basic common sense (or math) is reminiscent of the Mark Twain saying, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."
Liberals do truly have a problem. They want to spend more money than the economy can afford to give them while remaining robust and growing.
Part and parcel of this is the fact that many people feel no need to keep working and as a result, high taxes discourage productivity from one end and high benefits discourage work and investment from the other end.
England is clearly not alone in this - the US has the same dilemma.
This article touches on a basic disconnect that many liberals have with business economics and investing - i.e. many liberals think that business will invest and create jobs without regard for the hurtle rates mentioned in this article.
The codicil to the above issue of liberal disconnect is that they somehow think the same investment will come about whether the business or investor keeps 100% of the return or maybe just 50% or less.
The lack of basic common sense (or math) is reminiscent of the Mark Twain saying, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."
Liberals do truly have a problem. They want to spend more money than the economy can afford to give them while remaining robust and growing.
Part and parcel of this is the fact that many people feel no need to keep working and as a result, high taxes discourage productivity from one end and high benefits discourage work and investment from the other end.
England is clearly not alone in this - the US has the same dilemma.
Wednesday, December 22, 2010
The Euro-Zone Crisis is Speeding up - WSJ.com
LIBERALS ON HUMAN BEHAVIOR AND BASIC MATH: The Euro-Zone Crisis is Speeding up - WSJ.com
It would seem an opposite perspective could be gleaned from the latest census results in the US, which highlight that overspending and overtaxing states in the US are losing population. Do we talk about the dollar breaking up with states like New York, California and Illinois running unsustainable budget deficits?
Let alone the US.
Some people are talking about an early 2011 global liquidity squeeze. After all, the banks and institutions have been funding unsustainable government entitlement policies that constrain growth.
But, to tell a liberal that someone might work less if taxes go up or that somehow there will be less investment if there is less money left to invest with after taxes - well, liberals just don't understand this kind of behavior or math.
It would seem an opposite perspective could be gleaned from the latest census results in the US, which highlight that overspending and overtaxing states in the US are losing population. Do we talk about the dollar breaking up with states like New York, California and Illinois running unsustainable budget deficits?
Let alone the US.
Some people are talking about an early 2011 global liquidity squeeze. After all, the banks and institutions have been funding unsustainable government entitlement policies that constrain growth.
But, to tell a liberal that someone might work less if taxes go up or that somehow there will be less investment if there is less money left to invest with after taxes - well, liberals just don't understand this kind of behavior or math.
Tuesday, December 21, 2010
U.S. Regulators Mull New Push to Shape Bank Pay - WSJ.com
BLAMING THE HORSE INSTEAD OF THE JOCKEY: U.S. Regulators Mull New Push to Shape Bank Pay - WSJ.com
I'm not that familiar with European rules other than that there was an apparent happy marriage between the Basel II requirements (which effectively let banks transfer the assessment of risk to the credit rating agencies) and the American Congress' push to have Fannie and Freddie give loans with looser credit conditions to expand the rate of homeownership.
Republicans tried to rein in Fannie and Freddie, but the Democrats in Congress (like Barnie Frank) refused to curtail this lending.
The rating agencies didn't have any competition and thus were able to act in a lemming fashion with no logical consideration of the fact that housing prices were going up much faster than salaries - while, at the same time, there were few constraints on the supply of new housing. (Obviously the study of supply and demand had been missing in their socially-minded economics courses.)
So, we had an apparent process-oriented reaction in Europe supplied by inane policies coming out of government in Washington (plus of course the Fed's support for low interest rates).
Now that there is Basel III and the new financial regulatory act in the US, I'm missing something in each case addressing the above-noted causative factors for the bubble and crash?
Somehow all this blame on bankers seems misdirected - sort of like blaming a horse for running in a race (the banks being the horse and the government and regulators the jockey).
I'm not that familiar with European rules other than that there was an apparent happy marriage between the Basel II requirements (which effectively let banks transfer the assessment of risk to the credit rating agencies) and the American Congress' push to have Fannie and Freddie give loans with looser credit conditions to expand the rate of homeownership.
Republicans tried to rein in Fannie and Freddie, but the Democrats in Congress (like Barnie Frank) refused to curtail this lending.
The rating agencies didn't have any competition and thus were able to act in a lemming fashion with no logical consideration of the fact that housing prices were going up much faster than salaries - while, at the same time, there were few constraints on the supply of new housing. (Obviously the study of supply and demand had been missing in their socially-minded economics courses.)
So, we had an apparent process-oriented reaction in Europe supplied by inane policies coming out of government in Washington (plus of course the Fed's support for low interest rates).
Now that there is Basel III and the new financial regulatory act in the US, I'm missing something in each case addressing the above-noted causative factors for the bubble and crash?
Somehow all this blame on bankers seems misdirected - sort of like blaming a horse for running in a race (the banks being the horse and the government and regulators the jockey).
Thursday, December 16, 2010
HEARD ON THE STREET: Washington Taxes Own Credibility - WSJ.com
Caution from a lack of leadership and mixed messages: HEARD ON THE STREET: Washington Taxes Own Credibility - WSJ.com
Let's see?
The president and Keynesians are worried that everyone gets to consume by redistributing wealth.
Supply siders believe people need to get to keep a certain amount of what they produce in order to support production and growth.
There is clearly a disconnect between America's ability to pay for all the entitlements and benefits that the liberals want while providing a fair return (18-19% of GDP max to government) to producers.
As the administration and the Republicans appear to be unwilling to confront this great policy divide, the lack of leadership becomes more acute.
So one question might be whether the cautionary response to the lack of leadership will be greater than the modest stimulus (actually just to consumption, not really long-term returns to capital and investment)?
Oh yes, and this is tied part and parcel to the Administration going against the oil companies in the Gulf for an oil spill, at the same time its wants to tout having spent 4 hours the same day listening to business leaders. Can we say another mixed message day?
Let's see?
The president and Keynesians are worried that everyone gets to consume by redistributing wealth.
Supply siders believe people need to get to keep a certain amount of what they produce in order to support production and growth.
There is clearly a disconnect between America's ability to pay for all the entitlements and benefits that the liberals want while providing a fair return (18-19% of GDP max to government) to producers.
As the administration and the Republicans appear to be unwilling to confront this great policy divide, the lack of leadership becomes more acute.
So one question might be whether the cautionary response to the lack of leadership will be greater than the modest stimulus (actually just to consumption, not really long-term returns to capital and investment)?
Oh yes, and this is tied part and parcel to the Administration going against the oil companies in the Gulf for an oil spill, at the same time its wants to tout having spent 4 hours the same day listening to business leaders. Can we say another mixed message day?
Tuesday, December 14, 2010
Caution With the Cash is Wise Policy - WSJ.com
LEMONADE AND PRUDENCE: Caution With the Cash is Wise Policy - WSJ.com: "- Sent using Google Toolbar"
This article is too kind to the Obama Administration and it and Congress' misguided policies.
Clearly the administration and its Democratic allies are guided by Keynesian liberal thinking that assumes business and investors are there to serve the needs of the underprivileged and disadvantaged.
History is replete with the failures of this thinking; but, as Mark Twain said, there is nothing more dangerous than someone who believes something that is clearly wrong.
As such, businesses need to be as conservative as possible with their resources. (A recent read of the history of the success of C. Vanderbilt in building his fortune in the 19th c. shows the wisdom of such conserving of cash).
Some waiting time bombs are clearly the government deficits in the US and Europe. The debt bubble the administration is ignoring is getting more and more attention from those willing to look at the obvious.
There are so many positive things the administration could be doing to support investment and risk taking - but, frankly one sees almost none; and, those seen are overwhelmed like a tsunami by the anti-business policies.
A major reassessment of the priorities of government spending are needed (e.g. the drug war and open-ended entitlements) - none of which are seen by the liberals and the administration.
On the opposite side, the conservatives and Republicans let their myopic social values (and hate) stand in the way of progress (e.g. the vote on repealing 'Don't Ask, Don't Tell').
And, while the platform economy (e.g. manufacturing in China) may have worked and been working, a capital reserve in case of something going wrong (at the same time the capital markets freeze up with a liquidity squeeze (as noted yesterday by a commentator on Bloomberg, Dec. 13) likely in the first quarter of 2011) is absolutely requisite and prudent.
One somehow can't help but think of Obama as going up to little kids trying to earn a bit of money selling lemonade and asking them why they bother - and, instead recommending playing and asking for an allowance (entitlement) from their parents?
This article is too kind to the Obama Administration and it and Congress' misguided policies.
Clearly the administration and its Democratic allies are guided by Keynesian liberal thinking that assumes business and investors are there to serve the needs of the underprivileged and disadvantaged.
History is replete with the failures of this thinking; but, as Mark Twain said, there is nothing more dangerous than someone who believes something that is clearly wrong.
As such, businesses need to be as conservative as possible with their resources. (A recent read of the history of the success of C. Vanderbilt in building his fortune in the 19th c. shows the wisdom of such conserving of cash).
Some waiting time bombs are clearly the government deficits in the US and Europe. The debt bubble the administration is ignoring is getting more and more attention from those willing to look at the obvious.
There are so many positive things the administration could be doing to support investment and risk taking - but, frankly one sees almost none; and, those seen are overwhelmed like a tsunami by the anti-business policies.
A major reassessment of the priorities of government spending are needed (e.g. the drug war and open-ended entitlements) - none of which are seen by the liberals and the administration.
On the opposite side, the conservatives and Republicans let their myopic social values (and hate) stand in the way of progress (e.g. the vote on repealing 'Don't Ask, Don't Tell').
And, while the platform economy (e.g. manufacturing in China) may have worked and been working, a capital reserve in case of something going wrong (at the same time the capital markets freeze up with a liquidity squeeze (as noted yesterday by a commentator on Bloomberg, Dec. 13) likely in the first quarter of 2011) is absolutely requisite and prudent.
One somehow can't help but think of Obama as going up to little kids trying to earn a bit of money selling lemonade and asking them why they bother - and, instead recommending playing and asking for an allowance (entitlement) from their parents?
Saturday, December 11, 2010
Blame the Fed - Barrons.com
Several Thoughts on Modeling: Blame the Fed - Barrons.com
(from the article):
"In three forthcoming academic papers, Brown University economist Jerome Stein shows there were early-warning signals in 2005 that financial institutions were overleveraged. The tool he uses is one used by NASA to guide rocket trajectories, with the daunting name of stochastic optimal control.
Stein argues that optimal debt and leverage are not one-size-fits-all numbers but rather constantly changing variables that can and should be tracked and optimized...
...There is a Hebrew saying that clever people can extricate themselves from disasters but wise people avoid them."
The alarm bells on the debt bubble should be ringing - but, sort of as you say, its a sound too harsh to bear.
So this weekend Germany says it won't let the improvident banks go bust for lending to the improvident EU periphery countries; and, the Administration and the Republicans hope the bell doesn't toll on their entitlement wonderworld.
As said, it would appear 'cleverness' is the hope and prayer of those administering the economy.
(comment: let's remember that after the dot.com bust, many were worried about a Japanese deflationary scenario, and justifiably so.)
It's true that Bush didn't really understand the needed changes to the economy - other than, he did get tax rates lower (maybe in retrospect, especially for corporations, not low enough); but, the other aspects of making American friendly to business instead of unfriendly (e.g. immigration policies) weren't there.
Now of course we have the entitlement bandwagon going full blast with even less understanding of turning around the economy.
It's sort of like the housing bubble - i.e. how can house prices go up at a rate faster than incomes, esp. when there is no barrier to supply more houses.
Likewise today, how can an economy have the wherewithal to grow when Administration policies are anti-business and anti-capital formation and pro-union so labor remains mis-priced?
Let basic logic prevail over stochastic modeling (not that the modeling isn't helpful and nice) - etc.
(from the article):
"In three forthcoming academic papers, Brown University economist Jerome Stein shows there were early-warning signals in 2005 that financial institutions were overleveraged. The tool he uses is one used by NASA to guide rocket trajectories, with the daunting name of stochastic optimal control.
Stein argues that optimal debt and leverage are not one-size-fits-all numbers but rather constantly changing variables that can and should be tracked and optimized...
...There is a Hebrew saying that clever people can extricate themselves from disasters but wise people avoid them."
The alarm bells on the debt bubble should be ringing - but, sort of as you say, its a sound too harsh to bear.
So this weekend Germany says it won't let the improvident banks go bust for lending to the improvident EU periphery countries; and, the Administration and the Republicans hope the bell doesn't toll on their entitlement wonderworld.
As said, it would appear 'cleverness' is the hope and prayer of those administering the economy.
(comment: let's remember that after the dot.com bust, many were worried about a Japanese deflationary scenario, and justifiably so.)
It's true that Bush didn't really understand the needed changes to the economy - other than, he did get tax rates lower (maybe in retrospect, especially for corporations, not low enough); but, the other aspects of making American friendly to business instead of unfriendly (e.g. immigration policies) weren't there.
Now of course we have the entitlement bandwagon going full blast with even less understanding of turning around the economy.
It's sort of like the housing bubble - i.e. how can house prices go up at a rate faster than incomes, esp. when there is no barrier to supply more houses.
Likewise today, how can an economy have the wherewithal to grow when Administration policies are anti-business and anti-capital formation and pro-union so labor remains mis-priced?
Let basic logic prevail over stochastic modeling (not that the modeling isn't helpful and nice) - etc.
Friday, December 10, 2010
Companies Keep Tight Grip on Cash - WSJ.com
Scylla and Charybdis: Companies Keep Tight Grip on Cash - WSJ.com
All of this reminds me of a recent reading of how the original Cornelius Vanderbilt held onto cash through the 19th century with all of its financial upheavals. It let him take advantage of the over-leveraging of others.
One can't help but be concerned when governments in Europe and the US have promised benefits they can't afford and feel as though taxing business and investors won't really impact job growth.
It's like Mark Twain said, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."
And here we have Republicans supporting a tax bill that makes no sense (e.g. who does investment planning with a 2-year time horizon, knowing tax rates could explode after 2 years, along with vastly higher interest rates) and Democrats thinking that more taxes on upper earners will support job creation. These people are all ignoring the basic recommendations of the recent Deficit Reduction Committee - and, here today, we find them restoring what are unequivocally 'earmarks' such as the ethanol subsidy.
These politicians don't get it. Luckily some corporate leaders are smart enough to see the snake pit that is the economy of either the Dems or Republicans - sort of like Scylla and Charybdis.
All of this reminds me of a recent reading of how the original Cornelius Vanderbilt held onto cash through the 19th century with all of its financial upheavals. It let him take advantage of the over-leveraging of others.
One can't help but be concerned when governments in Europe and the US have promised benefits they can't afford and feel as though taxing business and investors won't really impact job growth.
It's like Mark Twain said, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."
And here we have Republicans supporting a tax bill that makes no sense (e.g. who does investment planning with a 2-year time horizon, knowing tax rates could explode after 2 years, along with vastly higher interest rates) and Democrats thinking that more taxes on upper earners will support job creation. These people are all ignoring the basic recommendations of the recent Deficit Reduction Committee - and, here today, we find them restoring what are unequivocally 'earmarks' such as the ethanol subsidy.
These politicians don't get it. Luckily some corporate leaders are smart enough to see the snake pit that is the economy of either the Dems or Republicans - sort of like Scylla and Charybdis.
Wednesday, December 8, 2010
Package Would Give Obama Stealthy Stimulus - WSJ.com
FINGER IN THE DIKE: Package Would Give Obama Stealthy Stimulus - WSJ.com
Let's see?
More money chasing more or less the same goods plus what is shipped in from Asia?
A two-year window of perhaps lower taxes followed by? (1) even bigger tax increases; (2) much higher interest rates; etc. - how many businesses have a net return in a 2-yr cash flow projection?
Aren't we still avoiding dealing with making the economy and the US business-friendly?
What about the idea of another (can we say the 3rd) year of extended unemployment benefits while certain firms like Google are doing across-the-board raises to retain staff? Is no one seeing the disconnect?
More debt ($900 billion in the SS stimulus) and only a short-term tax break (2 yrs). Didn't we all learn that people only modify behavior (i.e. add jobs, expand businesses) when there are permanent changes?
Perhaps this is a 'finger in the dike' economic program, but it sure seems as though we really need some major economic restoration and rebuilding - all of which appear to be ignored!
Let's see?
More money chasing more or less the same goods plus what is shipped in from Asia?
A two-year window of perhaps lower taxes followed by? (1) even bigger tax increases; (2) much higher interest rates; etc. - how many businesses have a net return in a 2-yr cash flow projection?
Aren't we still avoiding dealing with making the economy and the US business-friendly?
What about the idea of another (can we say the 3rd) year of extended unemployment benefits while certain firms like Google are doing across-the-board raises to retain staff? Is no one seeing the disconnect?
More debt ($900 billion in the SS stimulus) and only a short-term tax break (2 yrs). Didn't we all learn that people only modify behavior (i.e. add jobs, expand businesses) when there are permanent changes?
Perhaps this is a 'finger in the dike' economic program, but it sure seems as though we really need some major economic restoration and rebuilding - all of which appear to be ignored!
Tuesday, December 7, 2010
Obama Attempts to Quell Democratic Unrest on Tax Deal - WSJ.com
GOLDEN GEESE: Obama Attempts to Quell Democratic Unrest on Tax Deal - WSJ.com
Yes, customers are good; however, the producers of typical goods are likely to be Asian or Chinese.
As for American producers, the incentive is still to produce offshore (e.g. tax rates on corporations, etc.).
If you think of the 'platform' business model, it still doesn't support adding jobs to the US.
All the things the US needs to do to create jobs are being left alone with a blind attempt at Keynesianism.
The question guiding all these tax policies should be will it improve conditions for investing and building businesses in the US?
Somehow the Democrats think the credit lines will last indefinitely so, like taxpayers with credit cards, they buy what they want - all the time. Never do they consider the end game of paying off the cards!
As an insightful commentator mentioned on tonight's news - by breaking the relationship between social security taxes and social security benefits, the Republicans have just handed the Democrats a golden apple - i.e. all taxes can be used for social benefits and social benefits come first.
No one is looking at the example of where the Democratic social model policies have been in effect.
The most outrageous examples were communist states in Eastern Europe. Then there are the socialist states - let's particularly look at Greece.
It's clear the Republicans have really lost this round.
Job seekers have also been dealt a harsh blow. Most of them will probably buy into Obama's claim that the 2% savings in SS employee withholding will encourage jobs. As a result, things will have some negative surprises.
As Einhorn said, the US avoided dealing with the problem in the last round and pushed a solution forward. Thus, the solution will be more difficult and the events to force the solution will have to be that much more severe.
But heck - believe the glass is half-full and Obama has it right or not. But, an objective look around at where these policies have been tried before should raise eyebrows. There is no place I know of where socialism has added jobs and improved living standards.
It's like children are taught with the goose that laid the golden egg - i.e. you may think killing the goose will get you lots of eggs, but instead you get none.
The US should want to have golden geese want to be in America; yet, instead, it is doing everything to chase them away.
Yes, customers are good; however, the producers of typical goods are likely to be Asian or Chinese.
As for American producers, the incentive is still to produce offshore (e.g. tax rates on corporations, etc.).
If you think of the 'platform' business model, it still doesn't support adding jobs to the US.
All the things the US needs to do to create jobs are being left alone with a blind attempt at Keynesianism.
The question guiding all these tax policies should be will it improve conditions for investing and building businesses in the US?
Somehow the Democrats think the credit lines will last indefinitely so, like taxpayers with credit cards, they buy what they want - all the time. Never do they consider the end game of paying off the cards!
As an insightful commentator mentioned on tonight's news - by breaking the relationship between social security taxes and social security benefits, the Republicans have just handed the Democrats a golden apple - i.e. all taxes can be used for social benefits and social benefits come first.
No one is looking at the example of where the Democratic social model policies have been in effect.
The most outrageous examples were communist states in Eastern Europe. Then there are the socialist states - let's particularly look at Greece.
It's clear the Republicans have really lost this round.
Job seekers have also been dealt a harsh blow. Most of them will probably buy into Obama's claim that the 2% savings in SS employee withholding will encourage jobs. As a result, things will have some negative surprises.
As Einhorn said, the US avoided dealing with the problem in the last round and pushed a solution forward. Thus, the solution will be more difficult and the events to force the solution will have to be that much more severe.
But heck - believe the glass is half-full and Obama has it right or not. But, an objective look around at where these policies have been tried before should raise eyebrows. There is no place I know of where socialism has added jobs and improved living standards.
It's like children are taught with the goose that laid the golden egg - i.e. you may think killing the goose will get you lots of eggs, but instead you get none.
The US should want to have golden geese want to be in America; yet, instead, it is doing everything to chase them away.
Obama Attempts to Quell Democratic Unrest on Tax Deal - WSJ.com
NO CLOSER TO THE 4TH INNING: Obama Attempts to Quell Democratic Unrest on Tax Deal - WSJ.com
Hope everyone saw Charlie Rose's interview with Einhorn tonight.
Anyone who thinks the Administration is even on the right planet in terms of guiding the economy of the country should get a good shake-up.
Except of course, died-in-the-wool Keynesian's can't imagine producers need incentives. They just want to goose consumption.
So, I guess we can look forward to the worst of both worlds - i.e. more debt for consumption and short-term incentives for capital preservation - but nothing long term to encourage investments in job creation back in America.
As said many times, we haven't left the third inning yet and the fourth inning - the longer it takes to get there, will likely be all that more horrific.
Hope everyone saw Charlie Rose's interview with Einhorn tonight.
Anyone who thinks the Administration is even on the right planet in terms of guiding the economy of the country should get a good shake-up.
Except of course, died-in-the-wool Keynesian's can't imagine producers need incentives. They just want to goose consumption.
So, I guess we can look forward to the worst of both worlds - i.e. more debt for consumption and short-term incentives for capital preservation - but nothing long term to encourage investments in job creation back in America.
As said many times, we haven't left the third inning yet and the fourth inning - the longer it takes to get there, will likely be all that more horrific.
Wall Street Journal: The Obama Administration Should payroll taxes be reduced for one year to stimulate the economy?
700 vs 900, did everyone fail math?: Wall Street Journal: The Obama Administration Should payroll taxes be reduced for one year to stimulate the economy?
clearly this is more of the give the average taxpayer some extra money to spend - and, maybe (Keynesian thinking) this will add jobs in America (vs. China).
One comparison immediately comes to mind: By extending the upper bracket Bush tax cuts (which were credited with 'increasing' the percentage of income taxes paid by the top brackets from '48%' to '52%') at a cost of $700 billion, the administration is now going to try and put more spending money in taxpayer pockets at a cost of $900 billion.
The biggest joke (or blatant lie) is that this $900 billion is supposed to support job creation.
As shown elsewhere in today's paper, American kids still rank below other countries in math skills - so perhaps an excuse; but:
1) 2% of what the employee pays (i.e. 2% vs the 15% it costs the employer). Can anyone really see this as a meaningful number to the employer? (clearly it's just money in the worker's pocket)
2) Can one really in one's wildest dreams think that incentivizing basic (average taxpayer $800 per year) consumption is going to be more job creating - in the US (vs. China, etc.) - than giving corporations and investors a reason to expand in America?
Clearly this is a sign that the people running the US economy from Washington are Keynesians with no clue about how to turn around the unemployment problem.
clearly this is more of the give the average taxpayer some extra money to spend - and, maybe (Keynesian thinking) this will add jobs in America (vs. China).
One comparison immediately comes to mind: By extending the upper bracket Bush tax cuts (which were credited with 'increasing' the percentage of income taxes paid by the top brackets from '48%' to '52%') at a cost of $700 billion, the administration is now going to try and put more spending money in taxpayer pockets at a cost of $900 billion.
The biggest joke (or blatant lie) is that this $900 billion is supposed to support job creation.
As shown elsewhere in today's paper, American kids still rank below other countries in math skills - so perhaps an excuse; but:
1) 2% of what the employee pays (i.e. 2% vs the 15% it costs the employer). Can anyone really see this as a meaningful number to the employer? (clearly it's just money in the worker's pocket)
2) Can one really in one's wildest dreams think that incentivizing basic (average taxpayer $800 per year) consumption is going to be more job creating - in the US (vs. China, etc.) - than giving corporations and investors a reason to expand in America?
Clearly this is a sign that the people running the US economy from Washington are Keynesians with no clue about how to turn around the unemployment problem.
Monday, December 6, 2010
Bernanke on CBS’s ‘60 Minutes’ - Real Time Economics - WSJ
BAILING WATER VS. FIXING THE CRACKS IN THE HULL: Bernanke on CBS’s ‘60 Minutes’ - Real Time Economics - WSJ
One of the old sayings I used to like is that "its the net not the gross".
For the small business person noted by Mr. Bernanke, the fact that interest rates might be low isn't as material as the present value of net after tax return for taking on risk and work. This also applies to big businesses and international corporations - who have options outside their local community and the US.
Bernanke may be making a valiant effort to overcome the fiscal drag from Democratic (and some Republican) policies, but, if it is 'pushing on a string' - then the outcome will be more like the 1970's in the US than the 1980's.
Clearly the states are in a whole over too much spending and too much given to public employees via unions. The Feds are borrowing (and would like to tax) a greater share of GDP. This reduces the funds to support education and economic investment.
Clearly cheap loan money isn't the answer to what is ailing the US economy. The Democratic expansion of government is also clearly exacerbating the lack of jobs rather than helping to ameliorate it. But, the Democrats haven't a clue that they and their policies are part (a big part) of the problem.
So, Bernanke may be trying to get a bucket brigade going to bail out an economic ship with a number of major breaks in its hull, but the Administration captaining the ship is deluded to think the structure of the ship is in good shape.
If the high tech and platform corporate economy may be doing OK, it may be because they are on the top deck of the ship where there are lifeboats and it may also be that they are already moving away from the ship in these lifeboats. Again, the Administration/captain may not like to see these people leave, but the Administration doesn't understand that the water is building up in the ship and it makes no sense to stay on board a boat that's effectively wallowing in the water making little headway.
One of the old sayings I used to like is that "its the net not the gross".
For the small business person noted by Mr. Bernanke, the fact that interest rates might be low isn't as material as the present value of net after tax return for taking on risk and work. This also applies to big businesses and international corporations - who have options outside their local community and the US.
Bernanke may be making a valiant effort to overcome the fiscal drag from Democratic (and some Republican) policies, but, if it is 'pushing on a string' - then the outcome will be more like the 1970's in the US than the 1980's.
Clearly the states are in a whole over too much spending and too much given to public employees via unions. The Feds are borrowing (and would like to tax) a greater share of GDP. This reduces the funds to support education and economic investment.
Clearly cheap loan money isn't the answer to what is ailing the US economy. The Democratic expansion of government is also clearly exacerbating the lack of jobs rather than helping to ameliorate it. But, the Democrats haven't a clue that they and their policies are part (a big part) of the problem.
So, Bernanke may be trying to get a bucket brigade going to bail out an economic ship with a number of major breaks in its hull, but the Administration captaining the ship is deluded to think the structure of the ship is in good shape.
If the high tech and platform corporate economy may be doing OK, it may be because they are on the top deck of the ship where there are lifeboats and it may also be that they are already moving away from the ship in these lifeboats. Again, the Administration/captain may not like to see these people leave, but the Administration doesn't understand that the water is building up in the ship and it makes no sense to stay on board a boat that's effectively wallowing in the water making little headway.
Saturday, December 4, 2010
Should You Believe Paul Volcker or the Happy Days Crowd? - Barrons.com
THE BIFURCATED ECONOMY AND JOB CREATION: Should You Believe Paul Volcker or the Happy Days Crowd? - Barrons.com
It is true that the tail can wag the dog and, in the current circumstances (should we be in a debt bubble), the debt balloon is certainly feathering the nest of its minders – i.e. the banks and financial houses (oh yes, hedge funds, etc. too).
And, with governments and much of the benefit receiving public in denial that anything could really be wrong with an ever-expanding credit-card consumption model, it’s no wonder that the banks are feeling again well.
But is all this debt bubble and concentration on the financial sector really creating wealth? Or, in other words more productive capacity that needs workers?
Apparently, the answer continues to look like ‘no’.
(A simple thought would be, if every world-class economic job in the US takes as much capital as it used to (and likely much more), then the Obama administration model of more capital being consumed by government (and given to non-producers) would clearly translate into ‘fewer’ jobs with the same capital requirement.)
(Another stab at the same issue would suggest that if more and more education is required to fill the needs of the Googles of the world for workers (and Friday on Richard Quest a headhunter admitted that new job skills were needed for the jobs now open), then this also takes capital – i.e. savings from consumption.)
So in either of the above scenarios, it would appear that the administration’s policies are anathema to job creation or the move of the economy into the new demands of a global economy in which the US can retain its above-the-mean standard of living.
It would appear as though lots of people are voicing solutions to job creation, but they can’t co-exist with an attempt to return to an old model where a high school education guaranteed a middle class lifestyle and when that didn’t work out, government would raise taxes from industry and thrift and give away a middle class lifestyle by depriving the economy of the very capital and rewards for effort that economic success requires.
Just a thought; but, it sure seems we’re on the wrong track.
It is true that the tail can wag the dog and, in the current circumstances (should we be in a debt bubble), the debt balloon is certainly feathering the nest of its minders – i.e. the banks and financial houses (oh yes, hedge funds, etc. too).
And, with governments and much of the benefit receiving public in denial that anything could really be wrong with an ever-expanding credit-card consumption model, it’s no wonder that the banks are feeling again well.
But is all this debt bubble and concentration on the financial sector really creating wealth? Or, in other words more productive capacity that needs workers?
Apparently, the answer continues to look like ‘no’.
(A simple thought would be, if every world-class economic job in the US takes as much capital as it used to (and likely much more), then the Obama administration model of more capital being consumed by government (and given to non-producers) would clearly translate into ‘fewer’ jobs with the same capital requirement.)
(Another stab at the same issue would suggest that if more and more education is required to fill the needs of the Googles of the world for workers (and Friday on Richard Quest a headhunter admitted that new job skills were needed for the jobs now open), then this also takes capital – i.e. savings from consumption.)
So in either of the above scenarios, it would appear that the administration’s policies are anathema to job creation or the move of the economy into the new demands of a global economy in which the US can retain its above-the-mean standard of living.
It would appear as though lots of people are voicing solutions to job creation, but they can’t co-exist with an attempt to return to an old model where a high school education guaranteed a middle class lifestyle and when that didn’t work out, government would raise taxes from industry and thrift and give away a middle class lifestyle by depriving the economy of the very capital and rewards for effort that economic success requires.
Just a thought; but, it sure seems we’re on the wrong track.
Friday, December 3, 2010
Retailers November Sales Show Healthy Start to Holiday Season - WSJ.com
ARE DRUGS REALLY ILLEGAL FOR STATISTICIANS?: Retailers November Sales Show Healthy Start to Holiday Season - WSJ.com: "- Sent using Google Toolbar"
Let's see?
We have a bifurcated economy with the educated, high-tech sector needing more workers than it can find and paying raises.
On the other hand, we have the regular economy which is being hit with ever more indirect costs for employment which further raise the gross cost of labor to the employer without increasing the salary of the employee (all thanks to the benevolent, yet malicious government).
And, while big companies can access cheap loans, small companies can't and all investment and equity dollars are going to be much more expensive - thanks to the Democrats.
So, somehow the math doesn't work?
We have a debt bubble building (more demand by government in the US and Europe for loans but no encouragement for savings), a need for massive investments in education and businesses to keep the jobs we have - and, they are saying the economy is turning around????
Oh yes, and, the unemployment rate just went up?
Didn't they say drugs were illegal? Maybe not for everyone!
Let's see?
We have a bifurcated economy with the educated, high-tech sector needing more workers than it can find and paying raises.
On the other hand, we have the regular economy which is being hit with ever more indirect costs for employment which further raise the gross cost of labor to the employer without increasing the salary of the employee (all thanks to the benevolent, yet malicious government).
And, while big companies can access cheap loans, small companies can't and all investment and equity dollars are going to be much more expensive - thanks to the Democrats.
So, somehow the math doesn't work?
We have a debt bubble building (more demand by government in the US and Europe for loans but no encouragement for savings), a need for massive investments in education and businesses to keep the jobs we have - and, they are saying the economy is turning around????
Oh yes, and, the unemployment rate just went up?
Didn't they say drugs were illegal? Maybe not for everyone!
Economy Added Fewer Jobs Than Expected in November - WSJ.com
WHY PUNISH SUCCESS?: Economy Added Fewer Jobs Than Expected in November - WSJ.com
Wouldn't it be nice if the US would focus on supporting and building the businesses of the future (rather than supporting old-line unions and public employment).
This will mean cutting back on lots of sacred Democratic wealth-transfer programs.
In the meantime, the debt bubble (as Peterson discussed today on Bloomberg) is building across the developed world (particularly the US and Europe); and, as he said, no one knows when it will burst - but, it could be very quick and nasty.
The unemployment rate would seem to attest to the fact that the Pelosi-Obama administration went down the exactly wrong track in terms of turning the economy around. And, the open question would appear to be even more apparent that the country won't embrace the job and wealth creating policies without some type of seminal event. Will we have to wait until the debt bubble bursts and interest rates start to skyrocket (or the Fed just prints money like crazy as an interim step)?
As noted elsewhere in today's WSJ, the Democrats thought they could take the Federal government's share of GDP to 25% and higher. One does wonder if they even thought of the logical consequences?
Because if they did, supporting more consumption and more tax driven redistribution of production and investment gains surely should have suggested less investment and less jobs. But, then again, logic seems to exclude the fact that producers like to keep what they produce, along with investors and that taking too much (the old number used to be about 19% of GDP in the 1980's) of GDP by government brings about stagflation.
Clearly the society is bifurcating into the educated, information-based society that is globally competitive and the un- or under-educated part that is not competitive. Right now policies are trying to punish the successful parts of the educated society for their successes. This wouldn't seem a very bright idea?
Wouldn't it be nice if the US would focus on supporting and building the businesses of the future (rather than supporting old-line unions and public employment).
This will mean cutting back on lots of sacred Democratic wealth-transfer programs.
In the meantime, the debt bubble (as Peterson discussed today on Bloomberg) is building across the developed world (particularly the US and Europe); and, as he said, no one knows when it will burst - but, it could be very quick and nasty.
The unemployment rate would seem to attest to the fact that the Pelosi-Obama administration went down the exactly wrong track in terms of turning the economy around. And, the open question would appear to be even more apparent that the country won't embrace the job and wealth creating policies without some type of seminal event. Will we have to wait until the debt bubble bursts and interest rates start to skyrocket (or the Fed just prints money like crazy as an interim step)?
As noted elsewhere in today's WSJ, the Democrats thought they could take the Federal government's share of GDP to 25% and higher. One does wonder if they even thought of the logical consequences?
Because if they did, supporting more consumption and more tax driven redistribution of production and investment gains surely should have suggested less investment and less jobs. But, then again, logic seems to exclude the fact that producers like to keep what they produce, along with investors and that taking too much (the old number used to be about 19% of GDP in the 1980's) of GDP by government brings about stagflation.
Clearly the society is bifurcating into the educated, information-based society that is globally competitive and the un- or under-educated part that is not competitive. Right now policies are trying to punish the successful parts of the educated society for their successes. This wouldn't seem a very bright idea?
Thursday, December 2, 2010
The Bright Side Hides a Darker Reality - WSJ.com
LURKING QUESTIONS: The Bright Side Hides a Darker Reality - WSJ.com
It would certainly seem to be an open question as to how all of this over-lending to and over-borrowing by governments (and, lets be honest, their social welfare systems) will work out.
The money that could have gone into new productive capacity, technologies, better education, etc. has instead gone to overly generous benefits to public employees, retirees and those who never work.
At some point, there has to be a limit as to how much money there is. We all know Bernanke is printing money and the ECB is buying government debt that no one else will buy.
But government is hard put to cut back enough.
So what will it be: More printing to meet the needs of all these governments (the US of course included - both federal and state)?
Luckily the Chinese are still supply goods at low prices.
There doesn't seem to be any ability of government to cut back on expenditures without raising taxes. And, all tax increases effectively diminish the investment needed for economic growth.
China, etc. is moving up the technological sophistication scale in a society that consumes less and much less is given to non-producers.
Europe and the US are relatively blind to the need to aggressively increase the level of investment and of education (see U. of Chicago Rajthan? on education).
It would certainly seem to be an open question as to how all of this over-lending to and over-borrowing by governments (and, lets be honest, their social welfare systems) will work out.
The money that could have gone into new productive capacity, technologies, better education, etc. has instead gone to overly generous benefits to public employees, retirees and those who never work.
At some point, there has to be a limit as to how much money there is. We all know Bernanke is printing money and the ECB is buying government debt that no one else will buy.
But government is hard put to cut back enough.
So what will it be: More printing to meet the needs of all these governments (the US of course included - both federal and state)?
Luckily the Chinese are still supply goods at low prices.
There doesn't seem to be any ability of government to cut back on expenditures without raising taxes. And, all tax increases effectively diminish the investment needed for economic growth.
China, etc. is moving up the technological sophistication scale in a society that consumes less and much less is given to non-producers.
Europe and the US are relatively blind to the need to aggressively increase the level of investment and of education (see U. of Chicago Rajthan? on education).
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