Growth Key for Euro-Zone Deal - WSJ.com
Governments talk growth but they don't do what long-term growth requires - instead, it's borrow now for an extra trip to the discount store selling imported goods.
Why not talk about rationalizing the cost of labor? Of course, we know why not. The unions feel they're entitled to certain types of jobs and therefore those are the jobs there should be. But clearly the economic models that bring together all of the forces that make economies thrive or crash are ignored.
(As an example, Cain is supporting the idea of enterprise zones in depressed areas that forego minimum wage laws.)
Also, nothing is said about supporting long-term plans (tax, regulatory, etc.) to support growth. It's all short-term support that again is nothing more than one more shopping trip on the country's credit card.
When one reads that 6% interest is 'unsustainable' for Italy long term, the US should think back at what rates were like in the 1980's - let alone the 1970's.
Monday, October 31, 2011
Saturday, October 29, 2011
BEYOND DEBTOR'S PRISON: Animal Spirits Rising - Barrons.com
Animal Spirits Rising - Barrons.com
Somehow, it would seem as though the US has pioneered the solution to the obloquy of debtor's prison.
But, the Europeans seem averse to the idea of moving on and a fresh start.
Some comments this weekend on the perfidious nature of Greek social benefits was, sad-to-say, even more of an eye opener to the nexus of the Greek's problems.
But, bankruptcy, no other credit and time to reflect and restart would seem and suggest itself as preferential to what is happening now.
Oh yes, the world should take note that socialist policies with expanded government benefits doesn't pencil out in the end. But, then again, who should be lending to the US government either?
Somehow, it would seem as though the US has pioneered the solution to the obloquy of debtor's prison.
But, the Europeans seem averse to the idea of moving on and a fresh start.
Some comments this weekend on the perfidious nature of Greek social benefits was, sad-to-say, even more of an eye opener to the nexus of the Greek's problems.
But, bankruptcy, no other credit and time to reflect and restart would seem and suggest itself as preferential to what is happening now.
Oh yes, the world should take note that socialist policies with expanded government benefits doesn't pencil out in the end. But, then again, who should be lending to the US government either?
The Democrat-Union Succubus: This Week: Greek Deal, Gupta Charges, H-P Turnabout - WSJ.com
This Week: Greek Deal, Gupta Charges, H-P Turnabout - WSJ.com
Another Take on Jobs and Incomes
If one thinks about jobs in the economy in a broader sense, there is an easy analogy to ordinary personal behavior - i.e. if something goes up in price (labor costs), one looks to make substitutions (capital goods).
As unions and liberals define labor as needing this benefit and that, the cost of labor goes up (both in terms of real costs and net costs or benefits to the employed).
As a result, producers that want to stay in business have to pay attention to global competition.
As recently reported, Obama's Administration has put in more and more expensive regulations that cost American businesses real money. Thus, less money left to pay labor.
In a poor African country, a farmer won't own machinery, he'll find it cheaper to hire low-paid laborers. In the US, it's just the opposite.
But, to have the skills to handle sophisticated capital goods (equipment) or to run a highly sophisticated business (advanced information technologies) takes skills. These get paid commensurately higher salaries.
Thus, as the liberal part of society tries to equalize outcomes, it marginalizes the incentive to develop skills. As a result, there is high unemployment (due to wage distortion and substitution) and large numbers of unfilled jobs where particular skill sets are needed.
The solution to the unemployment problem begins by recognizing the need to remove artificial inhibitors to demand (labor) meeting supply (job openings and job opportunities).
Occupy Wall-Streeters have succumbed to the Democratic-Union succubus that they are 'entitled' so they should get - rather than the need to remove restraints to opportunity.
Another Take on Jobs and Incomes
If one thinks about jobs in the economy in a broader sense, there is an easy analogy to ordinary personal behavior - i.e. if something goes up in price (labor costs), one looks to make substitutions (capital goods).
As unions and liberals define labor as needing this benefit and that, the cost of labor goes up (both in terms of real costs and net costs or benefits to the employed).
As a result, producers that want to stay in business have to pay attention to global competition.
As recently reported, Obama's Administration has put in more and more expensive regulations that cost American businesses real money. Thus, less money left to pay labor.
In a poor African country, a farmer won't own machinery, he'll find it cheaper to hire low-paid laborers. In the US, it's just the opposite.
But, to have the skills to handle sophisticated capital goods (equipment) or to run a highly sophisticated business (advanced information technologies) takes skills. These get paid commensurately higher salaries.
Thus, as the liberal part of society tries to equalize outcomes, it marginalizes the incentive to develop skills. As a result, there is high unemployment (due to wage distortion and substitution) and large numbers of unfilled jobs where particular skill sets are needed.
The solution to the unemployment problem begins by recognizing the need to remove artificial inhibitors to demand (labor) meeting supply (job openings and job opportunities).
Occupy Wall-Streeters have succumbed to the Democratic-Union succubus that they are 'entitled' so they should get - rather than the need to remove restraints to opportunity.
CRYING BABIES: Doubts Rise on EU Deal - WSJ.com
Doubts Rise on EU Deal - WSJ.com
Sadly, the culpable parties are the unions and socialists who create and sustain unrealistic expectations of a free lunch with no consequences.
Now that the lunch bill is coming do, people are looking everywhere to find someone to blame who is perhaps not quite faced with such a large bill and such meager resources.
The US is doing the same and the Occupy Wall Street Crowd is even more emblematic of blaming the wrong people.
It's the old look in the mirror first issue.
People want more than what their neighbors and the rest of society want to give them; they don't want to work as hard as they should or take the risks that bring rewards.
Socialism thinks the 'other guy' can always give up something for the socialists to have more.
Eventually the game ends. It just seems to have ended sooner in Greece than elsewhere. Socialists are like little children. They want something so they think they should have it. Whether the parents can afford it is immaterial. How many crying babies have we all heard?
Sadly, the culpable parties are the unions and socialists who create and sustain unrealistic expectations of a free lunch with no consequences.
Now that the lunch bill is coming do, people are looking everywhere to find someone to blame who is perhaps not quite faced with such a large bill and such meager resources.
The US is doing the same and the Occupy Wall Street Crowd is even more emblematic of blaming the wrong people.
It's the old look in the mirror first issue.
People want more than what their neighbors and the rest of society want to give them; they don't want to work as hard as they should or take the risks that bring rewards.
Socialism thinks the 'other guy' can always give up something for the socialists to have more.
Eventually the game ends. It just seems to have ended sooner in Greece than elsewhere. Socialists are like little children. They want something so they think they should have it. Whether the parents can afford it is immaterial. How many crying babies have we all heard?
Friday, October 28, 2011
Regulatory shut-down of small business and entrepreneur lending: Allan H. Meltzer: Four Reasons Keynesians Keep Getting It Wrong - WSJ.com
Allan H. Meltzer: Four Reasons Keynesians Keep Getting It Wrong - WSJ.com
From my own conversations with people, a key stumbling block that needs removal is the regulations and regulatory environment that has effectively neutered the banking system.
Sure there are low rates, but no one except those who fit within the definitions of acceptable risk from Washington politicians and regulators can qualify.
Thus, the powerful job creating engine of small entrepreneurs and businesses has effectively been shut down.
From my own conversations with people, a key stumbling block that needs removal is the regulations and regulatory environment that has effectively neutered the banking system.
Sure there are low rates, but no one except those who fit within the definitions of acceptable risk from Washington politicians and regulators can qualify.
Thus, the powerful job creating engine of small entrepreneurs and businesses has effectively been shut down.
THE 'YES' AND 'NO' OF PARENTING: EU Pact Does Little to Lift Greek Spirits - WSJ.com
EU Pact Does Little to Lift Greek Spirits - WSJ.com
People don't want to see what they don't want to see.
(I think of a little kid who wants candy. One parent says 'no, it isn't good for you' etc.
The other parent doesn't want to say no.
Who does the kid go to?
And, to make the joke even funnier; when the kid is obese, has early diabetes and rotted teeth, who does the 'yes' parent blame? Of course not his or herself. The government must be to blame - or, society!)
People don't want to see what they don't want to see.
(I think of a little kid who wants candy. One parent says 'no, it isn't good for you' etc.
The other parent doesn't want to say no.
Who does the kid go to?
And, to make the joke even funnier; when the kid is obese, has early diabetes and rotted teeth, who does the 'yes' parent blame? Of course not his or herself. The government must be to blame - or, society!)
GROWTH AND JOB CONSEQUENCES: The Irony of the EU Deal - WSJ.com
The Irony of the EU Deal - WSJ.com
You may not have much of an economics background - but, think who is setting interest rates? In the US, it is clearly the Fed. And, both those with money (including retirees) and those who would borrow (other than government and super-sized corporations) are facing government engineered and dictated regulatory obstacles.
So, put the blame where it belongs - and, that is 'government' and regulators.
Market prices should reflect the value to you or me of deferring consumption and saving for a rainy day; and, the value to people with new ideas for a business or investment of borrowing money. That would be the clearing price for different types of saving and investment and borrowing and equity instruments.
All is distorted.
My favorite example to think of is the UK one with a 50% tax rate. Suppose an entrepreneur wanted to borrow 5 million pounds. The bank would lend it for 5 years.
To pay the bank back the principal, the investor would have to earn 10 million pre-tax to get 5 after-tax.
Add to this some additional risk factors for the need for a higher investment return, etc. and you can see what happens to growth.
I'd say blame government and those who think social spending doesn't have growth and job consequences.
You may not have much of an economics background - but, think who is setting interest rates? In the US, it is clearly the Fed. And, both those with money (including retirees) and those who would borrow (other than government and super-sized corporations) are facing government engineered and dictated regulatory obstacles.
So, put the blame where it belongs - and, that is 'government' and regulators.
Market prices should reflect the value to you or me of deferring consumption and saving for a rainy day; and, the value to people with new ideas for a business or investment of borrowing money. That would be the clearing price for different types of saving and investment and borrowing and equity instruments.
All is distorted.
My favorite example to think of is the UK one with a 50% tax rate. Suppose an entrepreneur wanted to borrow 5 million pounds. The bank would lend it for 5 years.
To pay the bank back the principal, the investor would have to earn 10 million pre-tax to get 5 after-tax.
Add to this some additional risk factors for the need for a higher investment return, etc. and you can see what happens to growth.
I'd say blame government and those who think social spending doesn't have growth and job consequences.
Too much chronic care and too little higher education: Taxes Remain Stumbling Block For Deficit Panel - WSJ.com
Taxes Remain Stumbling Block For Deficit Panel - WSJ.com
There are clearly two opposite philosophical and economical perspectives here and perhaps they are best highlighted by the following:
An article this week in the Wall Street Journal pointed out that Massachusetts was spending some 70% of its healthcare budget on 'chronic care' and that the state was thinking of asking private insurers and managed care outfits to take over the management of such healthcare.
Now, to put a point on it - we have people in the process of dying!
Another series (this time of articles) including an Obama administration speech over the past two weeks was decrying the 'high cost' of 'higher education'.
There were clearly times in the past where the government wasn't taxing and spending its money on such chronic medical care and instead was providing 'affordable' college educations at state colleges!
So, now we find the young are once again sacrificing their futures for the old and dying. Etc.
Clearly something is wrong with our policies for the chronically ill!
(I know in my 93 year old father's case, the doctors and hospital would have been more-than-glad to keep him alive on a respirator and colostomy bag (chronic care). Luckily, we were able to let him die with some dignity - saving Medicare likely hundreds of thousands of dollars.)
There are clearly two opposite philosophical and economical perspectives here and perhaps they are best highlighted by the following:
An article this week in the Wall Street Journal pointed out that Massachusetts was spending some 70% of its healthcare budget on 'chronic care' and that the state was thinking of asking private insurers and managed care outfits to take over the management of such healthcare.
Now, to put a point on it - we have people in the process of dying!
Another series (this time of articles) including an Obama administration speech over the past two weeks was decrying the 'high cost' of 'higher education'.
There were clearly times in the past where the government wasn't taxing and spending its money on such chronic medical care and instead was providing 'affordable' college educations at state colleges!
So, now we find the young are once again sacrificing their futures for the old and dying. Etc.
Clearly something is wrong with our policies for the chronically ill!
(I know in my 93 year old father's case, the doctors and hospital would have been more-than-glad to keep him alive on a respirator and colostomy bag (chronic care). Luckily, we were able to let him die with some dignity - saving Medicare likely hundreds of thousands of dollars.)
Thursday, October 27, 2011
How many non-workers does a worker support today (vs. the past)? - implications and results: Economy, Politics Fan American Discontent - WSJ.com
Economy, Politics Fan American Discontent - WSJ.com
An interesting thought here might be the following - because clearly, while there are iPod, iPad advantages today, many people are looking back and saying they had it better growing up than kids and young people today (I particularly think how much more fun college was when the drinking age was 18!).
Notwithstanding, the economic robustness with which Americans came out of WW II and the 1950's had the US consuming a far greater percentage of the worlds resources than it does today. (Today, of course, it's still something like 25% and 3% last I recall.)
So, in a way, the US has been under-investing to maintain its economic prowess.
Here, it's clearly the liberal view that all should have benefits - not just those that earn them or receive them from private charity.
So, this gets us into the next issue, which is how many people each worker in the US now supports. A simple number to take would be to compare the number of workers per Social Security recipient.
Very blandly, this says each young person has to support far more 'others' than the young person of 20 or 40 years ago. Read into this what one will! (Note: there is no real social security or medicare trust fund where the US can just pull money out of a bank account. What the US has to do is take tax money to pay off the loans held by the trust. Again, a drain on the funds the economy would have for investment vs. consumption.)
An interesting thought here might be the following - because clearly, while there are iPod, iPad advantages today, many people are looking back and saying they had it better growing up than kids and young people today (I particularly think how much more fun college was when the drinking age was 18!).
Notwithstanding, the economic robustness with which Americans came out of WW II and the 1950's had the US consuming a far greater percentage of the worlds resources than it does today. (Today, of course, it's still something like 25% and 3% last I recall.)
So, in a way, the US has been under-investing to maintain its economic prowess.
Here, it's clearly the liberal view that all should have benefits - not just those that earn them or receive them from private charity.
So, this gets us into the next issue, which is how many people each worker in the US now supports. A simple number to take would be to compare the number of workers per Social Security recipient.
Very blandly, this says each young person has to support far more 'others' than the young person of 20 or 40 years ago. Read into this what one will! (Note: there is no real social security or medicare trust fund where the US can just pull money out of a bank account. What the US has to do is take tax money to pay off the loans held by the trust. Again, a drain on the funds the economy would have for investment vs. consumption.)
Some real issues we should think about: Europe Leaders Forge Greek Bond Deal - WSJ.com
Europe Leaders Forge Greek Bond Deal - WSJ.com
Someone asks whether we aren't sick of hearing about Greece?
Well, could it be that the media is focusing on Greece to avoid people starting to think there might be something wrong with Obamanomics?
Just ponder a simple precept - i.e. that everyone needs money; and, few countries have enough and are running deficits. The real rate of return to savers is negative (so why save money and lose purchasing power). So, the ECB and Fed are printing money.
So - too much government spending and socialist consumption. No incentives for investment or growth (just the opposite - more and more tax increases - especially on investors and entrepreneurs and no change to labor laws to spur hiring or make it easier). As with GM and Chrysler, private lenders to Greece get a haircut or wiped out (??? how much is covered by default insurance).
Now one has to ask oneself if it doesn't seem that all of this is going to end badly; and, the longer it takes to end, the bigger the badly?
Someone asks whether we aren't sick of hearing about Greece?
Well, could it be that the media is focusing on Greece to avoid people starting to think there might be something wrong with Obamanomics?
Just ponder a simple precept - i.e. that everyone needs money; and, few countries have enough and are running deficits. The real rate of return to savers is negative (so why save money and lose purchasing power). So, the ECB and Fed are printing money.
So - too much government spending and socialist consumption. No incentives for investment or growth (just the opposite - more and more tax increases - especially on investors and entrepreneurs and no change to labor laws to spur hiring or make it easier). As with GM and Chrysler, private lenders to Greece get a haircut or wiped out (??? how much is covered by default insurance).
Now one has to ask oneself if it doesn't seem that all of this is going to end badly; and, the longer it takes to end, the bigger the badly?
Sunday, October 23, 2011
Senator Markey and Malarkey: Clean Energy Is Winning in the U.S. — Letters to the Editor - WSJ.com
Clean Energy Is Winning in the U.S. — Letters to the Editor - WSJ.com
Gee - I read a lot of the new clean energy magazines - I haven't a clue where Markey gets his data - but it sure reminds me of the old saying 'figures lie and liars use figures'.
One also can't help but see that if 'clean energy' is a 'minor' part of the total energy picture (supplying the energy needs of Americans - whether petrol for cars or electricity for homes and factories, etc.), then, if the industry employs more people than convention means of providing energy - there has to be 2 big questions:
1) The salaries must be very much lower;
and/or
2) The sector must be vastly 'less' productive (more people and less energy).
Either way, Markey seems to be validating exactly what he trying to disprove.
Gee - I read a lot of the new clean energy magazines - I haven't a clue where Markey gets his data - but it sure reminds me of the old saying 'figures lie and liars use figures'.
One also can't help but see that if 'clean energy' is a 'minor' part of the total energy picture (supplying the energy needs of Americans - whether petrol for cars or electricity for homes and factories, etc.), then, if the industry employs more people than convention means of providing energy - there has to be 2 big questions:
1) The salaries must be very much lower;
and/or
2) The sector must be vastly 'less' productive (more people and less energy).
Either way, Markey seems to be validating exactly what he trying to disprove.
Wednesday, October 19, 2011
SOCIALLY-MINDED WRONG-HEADEDNESS: Divided CFTC Approves Limits on Speculative Bets - WSJ.com
Divided CFTC Approves Limits on Speculative Bets - WSJ.com
Something 'wrong-headed'. But then again, there are those that believe a socially-minded person makes better economic decisions than one that is not; and, that their position has to trump that of actual doers.
Just think how the socially-minded would like $10 oil; but, then again, no one would produce it and the world would suddenly run out.
It's the old game of price controls vs. market forces.
The sovereign debt game is exactly that now. The blow-out will clearly be stupendous and make the housing bubble a sideshow - unless something serious is done to reign in government spending.
But, how can government not tax and spend when there are all these 'social needs'?
Something 'wrong-headed'. But then again, there are those that believe a socially-minded person makes better economic decisions than one that is not; and, that their position has to trump that of actual doers.
Just think how the socially-minded would like $10 oil; but, then again, no one would produce it and the world would suddenly run out.
It's the old game of price controls vs. market forces.
The sovereign debt game is exactly that now. The blow-out will clearly be stupendous and make the housing bubble a sideshow - unless something serious is done to reign in government spending.
But, how can government not tax and spend when there are all these 'social needs'?
Tuesday, October 18, 2011
PRINTING, SKEWING, UNINTENDED CONSEQUENCES: Bernanke Details Evolution of Fed Policy - WSJ.com
Bernanke Details Evolution of Fed Policy - WSJ.com
There was an interesting article in this week's Barrons that highlighted that low interest rates also encourage banks not to lend (risk adjusted) but rather to buy government bonds (let alone what can be said of the bane of Basel II and III).
Surprisingly (or not) this was omitted from the above article and one assumes Bernanke's discussion.
Thus, as often happens, the law of unintended consequences finds less lending from attempts to skew the yield curve and to print money.
There was an interesting article in this week's Barrons that highlighted that low interest rates also encourage banks not to lend (risk adjusted) but rather to buy government bonds (let alone what can be said of the bane of Basel II and III).
Surprisingly (or not) this was omitted from the above article and one assumes Bernanke's discussion.
Thus, as often happens, the law of unintended consequences finds less lending from attempts to skew the yield curve and to print money.
Monday, October 17, 2011
After-tax net income repays loans:Wells Fargo Profit Rises, Revenue Slips - WSJ.com
Wells Fargo Profit Rises, Revenue Slips - WSJ.com
See Barrons discussion of how low rates hobbled business lending by banks in Japan.
There is no free lunch and the Fed is ignorant (and clearly the Dems don't have a clue) of the impact of their artificially low rates on the motivation of banks to lend.
An interesting exercise is to consider how much a business borrower needs to earn pre-tax to repay a bank loan - especially if they are a sole proprietor or S-corp - not just with current tax rates but the tax rates the Obama Administration and liberals would like to saddle high earners with.
Many politicians seem to forget that loans are repaid with after-tax net income.
See Barrons discussion of how low rates hobbled business lending by banks in Japan.
There is no free lunch and the Fed is ignorant (and clearly the Dems don't have a clue) of the impact of their artificially low rates on the motivation of banks to lend.
An interesting exercise is to consider how much a business borrower needs to earn pre-tax to repay a bank loan - especially if they are a sole proprietor or S-corp - not just with current tax rates but the tax rates the Obama Administration and liberals would like to saddle high earners with.
Many politicians seem to forget that loans are repaid with after-tax net income.
Talking about growth but doing nothing to encourage it: Southern Europe Could Learn From Ireland - WSJ.com
Southern Europe Could Learn From Ireland - WSJ.com
The entire article is worth a read; but, a trenchant quote (that government's are ignoring at their peril.
"...Spending cuts and tax increases drive GDP down faster than the deficit, causing the deficit:GDP ratio to rise rather than fall. These measures are being imposed on economies with rigid labor markets, no history of entrepreneurial innovation, high taxes, and regulations that strangle their private sectors. That is not to say that the roles played by governments should not be reduced: They should. But without growth-inducing reforms, all the cutting will continue to be for naught..."
The entire article is worth a read; but, a trenchant quote (that government's are ignoring at their peril.
"...Spending cuts and tax increases drive GDP down faster than the deficit, causing the deficit:GDP ratio to rise rather than fall. These measures are being imposed on economies with rigid labor markets, no history of entrepreneurial innovation, high taxes, and regulations that strangle their private sectors. That is not to say that the roles played by governments should not be reduced: They should. But without growth-inducing reforms, all the cutting will continue to be for naught..."
Saturday, October 15, 2011
From the world of unexpected consequences - Bernanke and a Japan lesson: The Fed's Moves Have Backfired - Barrons.com
The Fed's Moves Have Backfired - Barrons.com
"...Translated from Fed speak, lower long-term rates will make borrowers more willing to borrow while lenders will be more eager to lend.
But, Hunt points out, ultra-low interest rates could have the opposite effect. To earn a profit, banks have to cover their costs, from payroll, overhead, taxes and "elevated" fees to the Federal Deposit Insurance Corp. Then they have to earn a spread to compensate for the risk the borrower could default. At very low interest rates, there aren't enough basis points left to lend profitably. The historical precedent is Japan, where banks would rather buy government bonds than make loans."
"...Translated from Fed speak, lower long-term rates will make borrowers more willing to borrow while lenders will be more eager to lend.
But, Hunt points out, ultra-low interest rates could have the opposite effect. To earn a profit, banks have to cover their costs, from payroll, overhead, taxes and "elevated" fees to the Federal Deposit Insurance Corp. Then they have to earn a spread to compensate for the risk the borrower could default. At very low interest rates, there aren't enough basis points left to lend profitably. The historical precedent is Japan, where banks would rather buy government bonds than make loans."
On Fed 'gas' and Democratic 'ice': The Fed's Moves Have Backfired - Barrons.com
The Fed's Moves Have Backfired - Barrons.com
" In other words, the Fed could set some target for the jobless rate—currently stuck at 9.1%—and indicate it will keep interest rates low until it sees that rate come down meaningfully"
This reminds me of someone keeping their foot on the gas while the car's wheels are spinning on ice. (In other words, if fiscal and other policies are economic ice, the monetary gas will do nothing. We also know what eventually happens with the hole the spinning wheels make in the ice!)
" In other words, the Fed could set some target for the jobless rate—currently stuck at 9.1%—and indicate it will keep interest rates low until it sees that rate come down meaningfully"
This reminds me of someone keeping their foot on the gas while the car's wheels are spinning on ice. (In other words, if fiscal and other policies are economic ice, the monetary gas will do nothing. We also know what eventually happens with the hole the spinning wheels make in the ice!)
Friday, October 14, 2011
Housing is tough; why not go for some or any of the easy stuff? GOP Candidates Ignore Housing Question in Debate - Barrons.com
GOP Candidates Ignore Housing Question in Debate - Barrons.com
While the above is interesting, it does skirt two rather salient points:
1) If incomes are down 10% since 2000, then what would happen to actual income-adjusted housing prices and housing standards?
One can't but guess people need to buy cheaper, smaller houses and it's likely the prices of housing have yet to come down some (let alone that incomes aren't rising, jobs aren't being created, etc.).
2) There are a plethora of things that could be done on a regulatory, tax, etc. policy front that don't cost anything except cherished values of government control. (I'd take this to include the drug laws but Sarbanes Oxley and ObamaCare would be a start.)
This isn't being done. So, let housing slide down the list and focus on the easy stuff first.
While the above is interesting, it does skirt two rather salient points:
1) If incomes are down 10% since 2000, then what would happen to actual income-adjusted housing prices and housing standards?
One can't but guess people need to buy cheaper, smaller houses and it's likely the prices of housing have yet to come down some (let alone that incomes aren't rising, jobs aren't being created, etc.).
2) There are a plethora of things that could be done on a regulatory, tax, etc. policy front that don't cost anything except cherished values of government control. (I'd take this to include the drug laws but Sarbanes Oxley and ObamaCare would be a start.)
This isn't being done. So, let housing slide down the list and focus on the easy stuff first.
Wednesday, October 12, 2011
Q&A - Union naivete: UAW Local Rejects Deal With Ford - WSJ.com
UAW Local Rejects Deal With Ford - WSJ.com
Question:
(CB)"...What amazes me is how naive people like you are to the education level of people in the labor unions...."
Answer:
What's sad is how simplistically you miss the point and the issue.
The unions have the mentality that they want high wages and benefits (including legacy benefits) and thus the world has to change to provide them.
The alternative is to recognize the complex interactions of a changing world and then try to make the best of them.
The unions are ignoring larger economic issues (as is the President). That is one of the problems with a Keynesian approach to economics.
Keynesians also ignore the basic forces that drive their own economic lives (such as grocery shopping) when they expand their economic view to include the macro-economy.
There is a basic equation that describes the relationship of jobs, etc.
Production = labor costs + capital costs + raw materials costs
It's all well and good to try to boost labor costs (gross to employer), but the 'production' or product cost is determined by competition - not the wishes of unions.
Capital costs include the cost of borrowed capital and the return on investors' funds put into the business (think of how the UAW and the Obama administration wiped out stock and bond investors).
Raw material costs are bought from global markets.
Thus, as an example, the unions and the Obama administration boost the cost of labor. They increase both regulations and regulatory risk (another cost factor impacting 'labor' costs vis-a-vis ObamaCare, for example; impacting capital costs vis-a-vis Dodd-Frank, FDIC regulations, bank bashing, higher taxes on entrepreneurs and investors; increasing raw material costs by having an anti-oil policy and misdirecting funds to favored new clean-energy policies, etc.).
So, the government is driving up costs across the board. The unions are at-a-minimum supportive and complicit.
Thus, one shouldn't be surprised that the only part of the American economy doing well are those companies that can overcome all of the economic obstacles of labor, government, etc.
There are various ways in which these obstacles can be overcome - such as:
1. Outsource production (both in the USA (i.e. non-union, etc.)
2. Substitute equipment (i.e. capital) for labor.
3. Increase per worker productivity (technology)
You get the idea.
Question:
(CB)"...What amazes me is how naive people like you are to the education level of people in the labor unions...."
Answer:
What's sad is how simplistically you miss the point and the issue.
The unions have the mentality that they want high wages and benefits (including legacy benefits) and thus the world has to change to provide them.
The alternative is to recognize the complex interactions of a changing world and then try to make the best of them.
The unions are ignoring larger economic issues (as is the President). That is one of the problems with a Keynesian approach to economics.
Keynesians also ignore the basic forces that drive their own economic lives (such as grocery shopping) when they expand their economic view to include the macro-economy.
There is a basic equation that describes the relationship of jobs, etc.
Production = labor costs + capital costs + raw materials costs
It's all well and good to try to boost labor costs (gross to employer), but the 'production' or product cost is determined by competition - not the wishes of unions.
Capital costs include the cost of borrowed capital and the return on investors' funds put into the business (think of how the UAW and the Obama administration wiped out stock and bond investors).
Raw material costs are bought from global markets.
Thus, as an example, the unions and the Obama administration boost the cost of labor. They increase both regulations and regulatory risk (another cost factor impacting 'labor' costs vis-a-vis ObamaCare, for example; impacting capital costs vis-a-vis Dodd-Frank, FDIC regulations, bank bashing, higher taxes on entrepreneurs and investors; increasing raw material costs by having an anti-oil policy and misdirecting funds to favored new clean-energy policies, etc.).
So, the government is driving up costs across the board. The unions are at-a-minimum supportive and complicit.
Thus, one shouldn't be surprised that the only part of the American economy doing well are those companies that can overcome all of the economic obstacles of labor, government, etc.
There are various ways in which these obstacles can be overcome - such as:
1. Outsource production (both in the USA (i.e. non-union, etc.)
2. Substitute equipment (i.e. capital) for labor.
3. Increase per worker productivity (technology)
You get the idea.
Tuesday, October 11, 2011
On the source of decent wages: Report: Repatriation Tax Holiday a 'Failed' Policy - WSJ.com
Report: Repatriation Tax Holiday a 'Failed' Policy - WSJ.com
'Decent Wages' are what the Greeks wanted and previously got.
Once you move away from the supply and demand forces of an open economy to try and take from some and give to others, problems arise.
The unions may think high benefit, early retirement is an entitled decent wage; but, when you go to the store, do you buy based on price, the quality of the product or how much the workers made?
You know the basic equation for production = labor + capital + raw materials.
It's all well and good to keep increasing the 'labor' component, but the final test is whether the production is profitable (let alone 'break even').
As regulations and unions impact the returns and cost of any and all components, something has to give.
We are in a competitive global economy.
You want to make money on your savings and investment and you want your work to earn enough to cover the cost to the employer of paying you.
If something is distorted - i.e. as the Wall Street protesters feel in that there is money just lying around that could be providing them decent paying jobs, then why aren't some of them going out and creating those jobs?
If they don't want to create the jobs and they don't have a job, then they should ask what forces are inhibiting someone from creating those jobs - and, clearly, the profit motive says entrepreneurs will create jobs at some level of compensation.
If, with the alleged high profits of Wall Street such jobs aren't being created, then the place to look for problems is Washington and Albany.
Why is it that the labor component of production doesn't work to create jobs?
a) If investment returns are too low, why is that (taxes, etc.)?
b) If raw materials costs are too high, then why limit energy drilling - for example; or, why talk about having to pay more for electricity (green power); etc.
c) Or, if regulation and policy make labor too iffy a cost and too high a cost, what can be done about that? Should schools be based on vouchers? Should employee benefits be reduced or made optional? What can be done to reduce the 'gross' cost to the employer? Etc.
The issues are rather obvious; but, unions and Dem's would like to ignore the facts. Most Republicans aren't much better.
So, yes, it might be nice to dream and complain about not having 'decent wages' but to really produce them, one understand where they come from.
The Greeks are learning there's no 'free lunch'. Too bad the Wall Streeters aren't targeting the union halls and liberal politicians and the President. These are the people who support their wishes for good jobs but enact policies that inhibit their creation.
'Decent Wages' are what the Greeks wanted and previously got.
Once you move away from the supply and demand forces of an open economy to try and take from some and give to others, problems arise.
The unions may think high benefit, early retirement is an entitled decent wage; but, when you go to the store, do you buy based on price, the quality of the product or how much the workers made?
You know the basic equation for production = labor + capital + raw materials.
It's all well and good to keep increasing the 'labor' component, but the final test is whether the production is profitable (let alone 'break even').
As regulations and unions impact the returns and cost of any and all components, something has to give.
We are in a competitive global economy.
You want to make money on your savings and investment and you want your work to earn enough to cover the cost to the employer of paying you.
If something is distorted - i.e. as the Wall Street protesters feel in that there is money just lying around that could be providing them decent paying jobs, then why aren't some of them going out and creating those jobs?
If they don't want to create the jobs and they don't have a job, then they should ask what forces are inhibiting someone from creating those jobs - and, clearly, the profit motive says entrepreneurs will create jobs at some level of compensation.
If, with the alleged high profits of Wall Street such jobs aren't being created, then the place to look for problems is Washington and Albany.
Why is it that the labor component of production doesn't work to create jobs?
a) If investment returns are too low, why is that (taxes, etc.)?
b) If raw materials costs are too high, then why limit energy drilling - for example; or, why talk about having to pay more for electricity (green power); etc.
c) Or, if regulation and policy make labor too iffy a cost and too high a cost, what can be done about that? Should schools be based on vouchers? Should employee benefits be reduced or made optional? What can be done to reduce the 'gross' cost to the employer? Etc.
The issues are rather obvious; but, unions and Dem's would like to ignore the facts. Most Republicans aren't much better.
So, yes, it might be nice to dream and complain about not having 'decent wages' but to really produce them, one understand where they come from.
The Greeks are learning there's no 'free lunch'. Too bad the Wall Streeters aren't targeting the union halls and liberal politicians and the President. These are the people who support their wishes for good jobs but enact policies that inhibit their creation.
Sunday, October 9, 2011
Children running amuck: Why Labor Backs 'Occupy Wall Street' - WSJ.com
Why Labor Backs 'Occupy Wall Street' - WSJ.com
Ms. Henry is clearly one of those people who want something and because they want it, it should happen.
The fact that they are actually working against the very things they want is beyond their ability to see; and, those that are really causing the problem have convinced her it can't possibly be 'their' fault - of course we are speaking about government policies and union policies that breed, fester and all to go epidemic - the sense of entitlement.
The world is full of people who want a free lunch and there's nothing more grating than not getting it when the leaders you've elected and have been pandering to you to get elected finally can't deliver.
The Greeks are finding that out and anyone with basic logic and math skills can see that if you beat up on bankers and come up with regulatory rules that sound good but are hollow (lets say Basel II for starters), then the banks don't lend (see the article recently on the banker in Texas who said every loan gets a thorough going-over and going-over again by the FDIC). So the government sets rules which inhibit bankers from lending - but then, of course, the government hues and cries it is innocent.
What is scary is that the crazies like this writer are about in the land spreading entitlement blah blah that is further hurting job creation. And, these people don't get it.
Sadly, there aren't enough politicians risking taking them on. Like kids with no adult supervision, children can easily run amuck.
Ms. Henry is clearly one of those people who want something and because they want it, it should happen.
The fact that they are actually working against the very things they want is beyond their ability to see; and, those that are really causing the problem have convinced her it can't possibly be 'their' fault - of course we are speaking about government policies and union policies that breed, fester and all to go epidemic - the sense of entitlement.
The world is full of people who want a free lunch and there's nothing more grating than not getting it when the leaders you've elected and have been pandering to you to get elected finally can't deliver.
The Greeks are finding that out and anyone with basic logic and math skills can see that if you beat up on bankers and come up with regulatory rules that sound good but are hollow (lets say Basel II for starters), then the banks don't lend (see the article recently on the banker in Texas who said every loan gets a thorough going-over and going-over again by the FDIC). So the government sets rules which inhibit bankers from lending - but then, of course, the government hues and cries it is innocent.
What is scary is that the crazies like this writer are about in the land spreading entitlement blah blah that is further hurting job creation. And, these people don't get it.
Sadly, there aren't enough politicians risking taking them on. Like kids with no adult supervision, children can easily run amuck.
Saturday, October 8, 2011
The Daily Democratic Gaff: Up & Down Wall Street - Barrons.com
Up & Down Wall Street - Barrons.com
"... If real growth is absent, employment and real income growth will not return. Real growth cannot develop with the national debt overhang. " BM
And, not just the debt overhang.
It's easy to see there has to be someone to blame - someone else of course - when things turn nasty.
But when one sees the Greeks striking against cutting wages and dismissing employees who have no meaningful job; yet, there may not be money to pay the wages in a matter of weeks, one does have to wonder if people who rely on others to keep coming up with the wherewithal haven't a problem that is un-addressed?
What is said is that Democrats are coming up with plans these very Greek strikers would believe in; and, with the same mindset.
As you say - there's no idea of real growth policies. Every day there is something else anti-growth the Administration embarks upon.
Sadly, there's no reporter or Republican candidate with a daily diatribe against the daily gaff of the Democrats and the President. Ah well!
"... If real growth is absent, employment and real income growth will not return. Real growth cannot develop with the national debt overhang. " BM
And, not just the debt overhang.
It's easy to see there has to be someone to blame - someone else of course - when things turn nasty.
But when one sees the Greeks striking against cutting wages and dismissing employees who have no meaningful job; yet, there may not be money to pay the wages in a matter of weeks, one does have to wonder if people who rely on others to keep coming up with the wherewithal haven't a problem that is un-addressed?
What is said is that Democrats are coming up with plans these very Greek strikers would believe in; and, with the same mindset.
As you say - there's no idea of real growth policies. Every day there is something else anti-growth the Administration embarks upon.
Sadly, there's no reporter or Republican candidate with a daily diatribe against the daily gaff of the Democrats and the President. Ah well!
On Elites and Then Elites: Up & Down Wall Street - Barrons.com
Up & Down Wall Street - Barrons.com
If by 'financial elite' you refer to the solons who dream up regulatory nightmares like Basel II and III and the generous liberal political souls who believe in a free lunch for the poor (let Barney Frank and Chris Dodd and of course the dear president come to mind) - then I would agree.
But, I believe these are the exculpated parties.
As such, you appear to call-to-account the liberal belief in being able to regulate away unpleasantness. So Basel says sovereign debt or AAA paper is like cash. No more thinking needed!
As such, the 'elite' might be and have been more like lemmings and faultless.
If by 'financial elite' you refer to the solons who dream up regulatory nightmares like Basel II and III and the generous liberal political souls who believe in a free lunch for the poor (let Barney Frank and Chris Dodd and of course the dear president come to mind) - then I would agree.
But, I believe these are the exculpated parties.
As such, you appear to call-to-account the liberal belief in being able to regulate away unpleasantness. So Basel says sovereign debt or AAA paper is like cash. No more thinking needed!
As such, the 'elite' might be and have been more like lemmings and faultless.
Friday, October 7, 2011
The math of starting a business in Britain: Central Banks Step Up Battle to Contain Crisis - WSJ.com
Central Banks Step Up Battle to Contain Crisis - WSJ.com
The math of starting a business in Britain:
Borrow 1,000,000 pounds. Payback loan in 5 years.
Business Profits = ?
Well, the direct equity to be paid back per year would be (1m/5 ) 200,000.
Since this would be subject to tax (at 50%), then just to pay back the loan, the borrower would have to earn 400,000 (that is before any money for living expenses).
So for 1 million in borrowing, the business would have to generate 400,000 per year to pay it back in 5 years.
Gee - how many businesses can generate that kind of return - before of course any profits to the investor or entrepreneur?
The math of starting a business in Britain:
Borrow 1,000,000 pounds. Payback loan in 5 years.
Business Profits = ?
Well, the direct equity to be paid back per year would be (1m/5 ) 200,000.
Since this would be subject to tax (at 50%), then just to pay back the loan, the borrower would have to earn 400,000 (that is before any money for living expenses).
So for 1 million in borrowing, the business would have to generate 400,000 per year to pay it back in 5 years.
Gee - how many businesses can generate that kind of return - before of course any profits to the investor or entrepreneur?
Wednesday, October 5, 2011
catch 22: IMF Floats Bond-Buying Proposal in Europe - WSJ.com
IMF Floats Bond-Buying Proposal in Europe - WSJ.com
All the socialist countries (including the US) appear like the family living on credit cards - and now, suddenly, market forces want to adjust interest rates.
It would seem as though there is a catch 22. In other words, if the economy is in the tank, the rates stay low but taxes and growth can't compensate for social spending. If the economy rebounds, then interest rates will rise and the cost of previous social spending will be unpayable.
The outcome in either case would appear to be less than sanguine.
All the socialist countries (including the US) appear like the family living on credit cards - and now, suddenly, market forces want to adjust interest rates.
It would seem as though there is a catch 22. In other words, if the economy is in the tank, the rates stay low but taxes and growth can't compensate for social spending. If the economy rebounds, then interest rates will rise and the cost of previous social spending will be unpayable.
The outcome in either case would appear to be less than sanguine.
Saturday, October 1, 2011
Fool me once...fool me twice...: Markets Struggle to Price Uncertainty - Barrons.com
Markets Struggle to Price Uncertainty - Barrons.com
Let's see:
> The regulators snookered the banks into taking on Sovereign paper instead of keeping cash, gold or making loans to entrepreneurs.
> There isn't much of any growth - especially in the heavily socialized and unionized Southern parts of Europe.
> So all these countries talk about a 'growth agenda' (ostensibly so people won't concentrate on the terrible state they are in or their anti-investment, anti-growth polices; and, then, to top it off, they raise taxes.
Isn't this sort of like "fool me once...fool me twice..."?
Let's see:
> The regulators snookered the banks into taking on Sovereign paper instead of keeping cash, gold or making loans to entrepreneurs.
> There isn't much of any growth - especially in the heavily socialized and unionized Southern parts of Europe.
> So all these countries talk about a 'growth agenda' (ostensibly so people won't concentrate on the terrible state they are in or their anti-investment, anti-growth polices; and, then, to top it off, they raise taxes.
Isn't this sort of like "fool me once...fool me twice..."?
The type of presidential campaign I'd like to see - focused on jobs and the economy: Amateur Hour at the White House - WSJ.com
Amateur Hour at the White House - WSJ.com
It would be interesting to see some candidate for President - any candidate - spend all their time talking about restoring the economy.
What would this mean to me?
For starters, any day there is news about some anti-business, anti-economic policy being pursued by Obama (take the SEC this week and its prosecution based on negligence).
There are clearly those from the Obama administration and the general population who don't want solutions for the economy itself, they want 'to blame' someone else for the problem; or, to first ensure that the socialist benefits of liberal programs are protected (i.e. why not raise taxes on the very people who create jobs? That can't be a problem! Warren Buffet's in favor of it, right?).
Every day, a preferred candidate would start their stump speech with something that needs to be changed and is holding back the economy (this would not include taxing oil companies or preventing Boeing from opening a factory in the South. It clearly might include things to equalize the taxes businesses would pay in the US vs. another country.)
It would be interesting to see some candidate for President - any candidate - spend all their time talking about restoring the economy.
What would this mean to me?
For starters, any day there is news about some anti-business, anti-economic policy being pursued by Obama (take the SEC this week and its prosecution based on negligence).
There are clearly those from the Obama administration and the general population who don't want solutions for the economy itself, they want 'to blame' someone else for the problem; or, to first ensure that the socialist benefits of liberal programs are protected (i.e. why not raise taxes on the very people who create jobs? That can't be a problem! Warren Buffet's in favor of it, right?).
Every day, a preferred candidate would start their stump speech with something that needs to be changed and is holding back the economy (this would not include taxing oil companies or preventing Boeing from opening a factory in the South. It clearly might include things to equalize the taxes businesses would pay in the US vs. another country.)
Subscribe to:
Posts (Atom)
