A New Level of the Unimaginable

Government Deficits and Private Growth
http://online.wsj.com/article/SB20001424052748703932904574511243712388988.html?mod=djemITP#articleTabs%3Darticle

We really can't imagine that the US economy won't revive, but...

It's rather like loading up a camel - for a while, it works. When the camel decides enough is enough, the entire load has to be removed. To wit, the entire deficit and transfer of wealth from producers to non-producers.

It's a new level of the unimaginable. But, is it real? Everyone is making bets. Mine would be it's highly likely - but, who knows?


The Business-Labor Divide
http://online.wsj.com/article/SB10001424052748704533904574543662226907336.html#articleTabs%3Darticle

Stern's comment about unions distributing wealth is exactly the problem. It doesn't distribute wealth based on productivity or as a reward for doing one's work well; rather, it ties it to things like longevity/seniority (see teacher's unions and the UAW, etc.).

Also, the union has no ability to evaluate whether the company can stay competitive over time. It wants immediate and long term benefits and rewards.

Thus, we can't ignore what has happened with our domestic car companies and exculpate the unions. Rather, we should be looking in horror at what happened. (I'd jail the union leaders, but that might be going a bit far.)

However, the world sets a price for labor (and this price includes all of the benefits and social charges labor or the employer has to pay for). This has gotten out of hand in America as the individual worker isn't making these decisions (it's his/her union and the government - both at a state and national level).

Why one might ask are there such high salaries paid to certain people and not to others (as union leader Stern says). Well, it might be that the productivity and value of the work performed that generates the ability to pay those salaries is exactly what happens in a world of supply and demand.

Likewise, we've denied society the ability to create and employ people at more menial salaries because we think those salaries are too low, the benefits too sparse. So, either the jobs go undone or they are done by people who drop out of the productive salary-paying economy and do the jobs themselves (the labor conundrum).


The Economy and Finance
http://online.wsj.com/article/SB10001424052748704204304574543920660621900.html#articleTabs%3Darticle

What's missing from this discussion - although closest in what's said by Amex - with a lens of increasing and supporting employment as a focus of all policy decisions - is the issue of individual employee choice on the benefits they want to pay for.

In other words, too much is taken from the average employee to pay for things that government decides are important - but which, the current economic situation doesn't support.

As a result, it may cost an employer $400 for every $100 in gross employee salary; and, the employee will only net $65 or 70 (and some only $45).

With that type of allocation, the government has taken the decision-making away from the employee - with a benevolent intent and high degree of social consciousness - but with an ultimately destructive impact on employment.

Since this overreaching on the part of government was excluded from anything presented, one can't have a very positive view of the jobs picture. Instead, the government and Fed will be pushing on the job string as they have been with easy money. And, as indicated by the price of gold and commodities and the unemployment rate, it looks like investors see inflation down the road. (And, no change on the job front.)

Not so Different from the Movie 2012

The Coming Deficit Disaster
http://online.wsj.com/article/SB20001424052748704888404574547492725871998.html?mod=djemITP#articleTabs%3Darticle

What do current economic circumstances have in common?

As one recalls how people who held bonds got battered in the far better economic climate of the 1970's, one is only left to imagine how many retirees (and particularly early retirees) will come to rue the days ahead in the economy.

It reminds one of the part of the Titanic movie after the ship had struck the iceberg but the Captain assured everyone there was not problem, so lifeboats weren't launched.

There are those who, as union leaders and followers, had no problem with the bleeding of GM (UAW) or the failure to teach children (40% of Washington's public school students were recently reported to not graduate from high school). Thus, they don't see a problem.

The administration and the Democratic congress clearly don't believe a problem really exists either. They are paying lip service and would like to have more jobs, but don't have the ability to see what the problem is. Red herrings are ever present.

Somehow it seems very similar to religion which relies on faith with or without results.

Those who see the travails a head are giving lots of warning. In a way, it's not unlike perhaps the survivors in the movie 2012. Even seeing what lies ahead doesn't guarantee survival.

Pelosi, the Cheshire Cat

The Worst Bill Ever
Epic new spending and taxes, pricier insurance, rationed care, dishonest accounting: The Pelosi health bill has it all.

http://online.wsj.com/article/SB10001424052748703399204574505423751140690.html#articleTabs%3Dcomments

Pelosiland is like the world of the Cheshire Cat - a world of make believe - except of course for unemployment.

Clearly Congress was oblivious to the housing bubble because they fought so hard to turn a blind eye to Fannie and Freddie's role in all of it, etc.

And, from the reports on companies listing (or, one should say "not" listing) on American stock exchanges, and of course the well-noted planned high taxes on business owners, it just perplexes one where the Democrats expect jobs to come from?

Maybe they are confident the US will be happy with the French model of overstaffed government-owned enterprises? And, maybe their actions with respect to GM and Chrysler give a clear indication of this - although Obama foreswears the opposite? Are these really puzzles?

It sure feels good to have low or no cost healthcare! Just like retirement at age 50, etc.

I know lots of people who retired in the last ten years who are beginning to have concerns about the next 20 to 40.

Even though consumer sentiment is weak, my guess would be that most people are like members of the UAW - they are in for the immediate grabbing of benefits with apparent total ignorance of the long-term impact of such taking.

Maybe money can be endlessly bestowed on the US economy by the Federal Reserve and foreign central banks trying to preserve the relative value of their currency, but nothing goes on forever.

There was a rude wakeup call to housing prices not having only one direction. But that was only part of the economy. Now, we're dealing with the dollar itself. Can we say - let's hope not Zimbabwe.

Is there a Mystery

The Dollar as the Common Denominator

Stocks, Currency See Close Relationship; 'The Sheep Effect'
http://online.wsj.com/article/SB125710221903421357.html?mod=djemTEW#articleTabs%3Dcomments

Let's take the three basic forces - (1) people tend to extrapolate from the recent past; (2) the US gov't is running an outsized take of US GDP and this in the past has always portended a slowdown of the real economy; (3) there is an outsize effort to try to obfuscate the overindeptedness of the consumer and the economy, and the overspending of government; (4) there are lots of specific governmental policies that militate against employment, etc.

Thus, while Shiller was on CNN saying that the human factor made economics difficult, the above factors all lead in one direction.

Admiittedly the timing and the resiliency of the existing economy are questionable; but, the direction is clear.

The US doesn't want to address spending too much on social spending and the economy can't ever recover with the government taking the amount of it that it is - that is, until a very sorry bottom or policy change takes place.

Thus, the value of a few US assets may be sustainable; but, otherwise, the US is at the top of the pyramid and the value of its assets and currency will be falling.

It's as simple as the farmer who can save and plant 10% of his/her past crop vs. the farmer that can save only 6-8% or the farmer that can plant 12%. Thus US is the 6-8%. 10% is needed for equilibrium and over 10% there's growth.

Sadly, the Obama admnistration (not unlike the UAW and other unions) believe current consumption trumps all. So they take from what needs to be saved and reinvested. Perhaps this is wrong. But, the situation with GM and the current healthcare proposals would say the opposite! Who knows, maybe there's a fairy who can wave its magic wand and produce abundance out of squandering?