GORING THE SACRED OX: Unemployment Rate Falls to 9.5% as Report Shows 125,000 Jobs Lost in June - WSJ.com
Is the real question what will happen in November (or really January) or is it will the Republicans either not have a sufficient majority or the political will to tackle entitlements.
The idea of all these 'entitlements' is like a cancer. It has infected Europe and many in the United States (led of course by unions, the Democrats, etc.).
At some point, as with Greece, the balloon does burst.
At that point, the country either has to print to survive or go down hill.
Scary evidence of how really bad the anti-business attitudes and out-of-whack policies are in the US was a report this week on Bloomberg that venture capital companies in Silicon Valley are now funding entrepreneurs who are outsourcing (i.e. out of the US) a lot of fundamental research and product development.
The cost structure in the US needs major work. One of the ways in which this could be done is by making it cost-wise more feasible to do business in the US. The only way this would seem to be able to be done (is not by raising the yuan, but) is by cutting out the taxes and other costs for entitlements that drive up the cost of labor in the US.
To do this, a lot of oxes will have to be gored.
Saturday, July 3, 2010
Friday, July 2, 2010
Unemployment Rate Falls to 9.5% as Report Shows 125,000 Jobs Lost in June - WSJ.com
FUNNY MATH: Unemployment Rate Falls to 9.5% as Report Shows 125,000 Jobs Lost in June - WSJ.com
What hits one right away in this article (not the reporter's problem) is the lack of a logical relationship between the net 'loss' of jobs (-125,000) yet a 'drop' in the unemployment rate (from 9.7% to 9.5%).
Not that one wants to say that the government statisticians are purposely lying. No, maybe they aren't.
But, since the math doesn't make sense in the two reports, one does wonder what else isn't reflecting what people see and feel about the economy and job market?
There were two schools of thought when the economy saw housing price increases rapidly outstrip income gains. Most thought everything was OK and their was nothing amiss.
Today, people seem to feel there is no problem with government borrowing all the money there is out there and, rather than restricting entitlements, letting them just blow out of the water. Yet, none of this produces jobs and huge numbers of people (including the current administration) see no correlation between government taking money out of the private sector and the private sector not creating jobs.
One's eyebrows do raise at this ability to ignore the obvious!
What hits one right away in this article (not the reporter's problem) is the lack of a logical relationship between the net 'loss' of jobs (-125,000) yet a 'drop' in the unemployment rate (from 9.7% to 9.5%).
Not that one wants to say that the government statisticians are purposely lying. No, maybe they aren't.
But, since the math doesn't make sense in the two reports, one does wonder what else isn't reflecting what people see and feel about the economy and job market?
There were two schools of thought when the economy saw housing price increases rapidly outstrip income gains. Most thought everything was OK and their was nothing amiss.
Today, people seem to feel there is no problem with government borrowing all the money there is out there and, rather than restricting entitlements, letting them just blow out of the water. Yet, none of this produces jobs and huge numbers of people (including the current administration) see no correlation between government taking money out of the private sector and the private sector not creating jobs.
One's eyebrows do raise at this ability to ignore the obvious!
Wednesday, June 30, 2010
Gold vs. Goldilocks - WSJ.com
Gold vs. Goldilocks - WSJ.com
In terms of interest rates, it's worth looking at some of the clear signs of a shortage of cash.
Here in Europe that was seen in the ECB's concerns about repayments on its lending facility.
But, it is also rampant in a recent UCB report on business conditions in Portugal where it points out that a shortage of lending capacity (i.e. not enough funds) is limiting businesses ability to expand and in fact the cancellation of some programs. It sees credit constraint throughout the local economy.
I haven't seen such reports for other parts of the world but clearly this is a common problem. Eventually, the government has crowded out the private sector where jobs are created.
And, what is government doing with this money? It's social consumption, social consumption and social consumption. People feel 'entitled' and government provides.
This will not easily be brought under control. These are fiscal policies akin to drinking and drug problems.
In terms of interest rates, it's worth looking at some of the clear signs of a shortage of cash.
Here in Europe that was seen in the ECB's concerns about repayments on its lending facility.
But, it is also rampant in a recent UCB report on business conditions in Portugal where it points out that a shortage of lending capacity (i.e. not enough funds) is limiting businesses ability to expand and in fact the cancellation of some programs. It sees credit constraint throughout the local economy.
I haven't seen such reports for other parts of the world but clearly this is a common problem. Eventually, the government has crowded out the private sector where jobs are created.
And, what is government doing with this money? It's social consumption, social consumption and social consumption. People feel 'entitled' and government provides.
This will not easily be brought under control. These are fiscal policies akin to drinking and drug problems.
Tuesday, June 29, 2010
G-20 leaders show only weakness; bond markets rule - WSJ.com
G-20 leaders show only weakness; bond markets rule - WSJ.com
An interesting comment I just read in a report from UBS on Portugal pointed out that a lack of funds in the banking system is inhibiting most of the Portuguese businesses looked at from expanding (read: adding jobs).
So, instead of adding jobs or stimulating growth, the crowding out of private investment by the rapacious sovereigns would appear to be finding acknowledgment in investment reports.
And, gee whiz, it makes sense - unlike the borrow, borrow, borrow of government to support consumption (which, if not met by local businesses, will have to come from China, etc.).
An interesting comment I just read in a report from UBS on Portugal pointed out that a lack of funds in the banking system is inhibiting most of the Portuguese businesses looked at from expanding (read: adding jobs).
So, instead of adding jobs or stimulating growth, the crowding out of private investment by the rapacious sovereigns would appear to be finding acknowledgment in investment reports.
And, gee whiz, it makes sense - unlike the borrow, borrow, borrow of government to support consumption (which, if not met by local businesses, will have to come from China, etc.).
Personal Income Rises, but Spending Is Muted - WSJ.com
THE BASICS: Personal Income Rises, but Spending Is Muted - WSJ.com
It is astounding how many economists (Irwin Kellner at CBS for instance) don't see the importance of having the US turn around its fiscal policies to encourage job creation instead of benefit extensions.
What the Obama and Pelosi administrations (and in fact Bush as well) keep trying to do is to curry favor with those seeking handouts from the government.
This money doesn't fall from trees (yes, perhaps the printing presses of the Fed) but mostly from lenders and taxes.
Those smart enough to create jobs and generate wealth can see the writing on the wall. If we want jobs and wealth creation, then we need policies that support such activities. We don't have them. We have just the opposite.
Economic utility determines our desire for goods at a certain cost. When we make it more expensive to buy goods artificially (think VAT and sales taxes), then the utility of the goods drops and fewer are wanted. (This especially applies to Europe and the Dem's hope to get some cash out of Americans through a VAT tax.)
The Production equation says to add the costs of 'labor', 'capital' and 'raw materials'. So, what does the administration do? It raises the cost of labor in a globally competitive economy.
So each worker needs to be able to produce even more in order for the employer to pay a currently equivalent wage. This means more investment capital just as government borrowing is crowding out private. Taxes on capital and beating up on the banks and hedge funds doesn't help get lower cost capital to businesses either; etc.
(Clearly those who ignored the portents of the housing bubble are equally ignorant of the basic economics at work in the broader economy.)
It is astounding how many economists (Irwin Kellner at CBS for instance) don't see the importance of having the US turn around its fiscal policies to encourage job creation instead of benefit extensions.
What the Obama and Pelosi administrations (and in fact Bush as well) keep trying to do is to curry favor with those seeking handouts from the government.
This money doesn't fall from trees (yes, perhaps the printing presses of the Fed) but mostly from lenders and taxes.
Those smart enough to create jobs and generate wealth can see the writing on the wall. If we want jobs and wealth creation, then we need policies that support such activities. We don't have them. We have just the opposite.
Economic utility determines our desire for goods at a certain cost. When we make it more expensive to buy goods artificially (think VAT and sales taxes), then the utility of the goods drops and fewer are wanted. (This especially applies to Europe and the Dem's hope to get some cash out of Americans through a VAT tax.)
The Production equation says to add the costs of 'labor', 'capital' and 'raw materials'. So, what does the administration do? It raises the cost of labor in a globally competitive economy.
So each worker needs to be able to produce even more in order for the employer to pay a currently equivalent wage. This means more investment capital just as government borrowing is crowding out private. Taxes on capital and beating up on the banks and hedge funds doesn't help get lower cost capital to businesses either; etc.
(Clearly those who ignored the portents of the housing bubble are equally ignorant of the basic economics at work in the broader economy.)
Tuesday, June 22, 2010
Cameron Betting on Prosperity From Austerity; Obama Delays - Bloomberg
TAX INCREASES OR SPENDING CUTS TO STIMULATE THE ECONOMY - (RESULTS OF STUDY): Cameron Betting on Prosperity From Austerity; Obama Delays - Bloomberg
"... The key is an emphasis on cutting spending rather than raising taxes, said Goldman Sachs economists Broadbent and Daly in London. Lower spending means consumers and companies don’t fear higher taxes, so demand accelerates. A smaller public sector also helps reduce borrowing costs and makes economies more competitive as fewer government workers lighten labor expenses.
In a study of 44 large fiscal adjustments in 24 advanced economies since 1975, Broadbent and Daly discovered that reducing expenditures by 1 percentage point a year boosted average annual growth by 0.6 percentage point. Raising the ratio of taxes to GDP by the same margin cut growth by an average 0.9 percentage point.
The equity markets of the countries that sliced spending beat those of other advanced nations by 64 percent during a three-year period, and their bond yields fell by more than if budget adjustments had been driven by tax hikes, according to the report...."
"... The key is an emphasis on cutting spending rather than raising taxes, said Goldman Sachs economists Broadbent and Daly in London. Lower spending means consumers and companies don’t fear higher taxes, so demand accelerates. A smaller public sector also helps reduce borrowing costs and makes economies more competitive as fewer government workers lighten labor expenses.
In a study of 44 large fiscal adjustments in 24 advanced economies since 1975, Broadbent and Daly discovered that reducing expenditures by 1 percentage point a year boosted average annual growth by 0.6 percentage point. Raising the ratio of taxes to GDP by the same margin cut growth by an average 0.9 percentage point.
The equity markets of the countries that sliced spending beat those of other advanced nations by 64 percent during a three-year period, and their bond yields fell by more than if budget adjustments had been driven by tax hikes, according to the report...."
Sunday, June 20, 2010
BP Chief on the Hot Spot - Barrons.com
BARBARIANS AT THE GATE - AN ANALOGY TO ANCIENT ROME: BP Chief on the Hot Spot - Barrons.com
Somehow, in reading the first part of this article's cautionary reminders on the vagaries of the government, one is reminded of the fall of Rome. How can this be?
Well, first of all the politicians in Washington have to be seen as the barbarians. After all, they are the ones who want to despoil and take the accumulated wealth of the people (in the analogy, the people of Rome).
So the people of Rome are watching the barbarians around the periphery of the empire.
The barbarians raise taxes here, which is equivalent to capturing territory. However, in the analogy, the loss of jobs and economic capacity are the equivalent of actual land territory (as the barbarians descended into the Empire).
So what historical year are we? Is it the 3rd century AD or are we into the 4th century?
Clearly the equivalent of the Roman army (insightful laws and policies) are being crushed and crippled and reduced in their ability to support the economy (the equivalent of the army); yet, most people seem ignorant of the despoiling occasioned by the barbarians.
So, with barbarians at the gate, what will happen? Randy has given us the low inflation argument.
Stephen W. wrote:
We are in 64 AD. The Battle of the Teutoburg Forest has already taken place and we lost a legion (division) there. We have an arrogant and self-absorbed dictator who fiddles while Rome burns. Soon the scapegoats will be found and fed to the lions. But we still have 400 years ahead of us, so I'm long stocks, including those who drill for oil and natural gas.
Somehow, in reading the first part of this article's cautionary reminders on the vagaries of the government, one is reminded of the fall of Rome. How can this be?
Well, first of all the politicians in Washington have to be seen as the barbarians. After all, they are the ones who want to despoil and take the accumulated wealth of the people (in the analogy, the people of Rome).
So the people of Rome are watching the barbarians around the periphery of the empire.
The barbarians raise taxes here, which is equivalent to capturing territory. However, in the analogy, the loss of jobs and economic capacity are the equivalent of actual land territory (as the barbarians descended into the Empire).
So what historical year are we? Is it the 3rd century AD or are we into the 4th century?
Clearly the equivalent of the Roman army (insightful laws and policies) are being crushed and crippled and reduced in their ability to support the economy (the equivalent of the army); yet, most people seem ignorant of the despoiling occasioned by the barbarians.
So, with barbarians at the gate, what will happen? Randy has given us the low inflation argument.
Stephen W. wrote:
We are in 64 AD. The Battle of the Teutoburg Forest has already taken place and we lost a legion (division) there. We have an arrogant and self-absorbed dictator who fiddles while Rome burns. Soon the scapegoats will be found and fed to the lions. But we still have 400 years ahead of us, so I'm long stocks, including those who drill for oil and natural gas.
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