World Tries to Buck Up Dollar
http://online.wsj.com/article/SB125798819587744477.html?mod=djemITP#articleTabs%3Darticle
If foreign central banks buy dollars to protect their trade, that shouldn't matter if the US had its own economy in shape - which it doesn't.
As Milton Friedman said so many years ago – “eventually they have to do something with those dollars”.
It is lucky for the US that those dollars are there since we are borrowing so much and saving so little as a country.
The US has had the choice of cutting back spending and it has chosen, as have so many state and unions, to just try and spend even more. It would strike one as the height of idiocy if done as a family budget - why is it so different if done by government?
As when a family gets in debt, they either use Chapter 13 and restructure and try to repay most of the debt or they do Chapter 7 and wipe the debt away.
Since it is relatively unlikely that the US (although maybe not all of the states) will try not to do Chapter 7, the longer we keep up the spending (i.e. Nancy and her health bill), the harder it will be. The actually spendable part of the (family/government) budget will be less and less and the amount going to repaying past debts will be larger.
So far the US is just spending like no tomorrow and cutting back nothing.
If one thinks about the Obama administration's union-directed goal of a weak dollar to try and retain manufacturing (read: union) jobs with high wages and benefits, one immediately thinks of California and New York where the states are in financial duress with jobs leaving the states and wondering - "do each of these states have their own currency?".
Of course, the answer is "no".
What liberal spenders can't seem to understand is that government is spending too much and the incentives for business and job creation in the US are too weak. High taxes, high healthcare costs, etc. all militate against job creation.
Last nights news shows were replete with discussions of not just a "jobless recovery", but also about how companies don't want to hire any employees. That's the shocker - minimal to no added employment.
This ought to be a wakeup call to the administration and Pelosi and her pals. But, of course nothing is said.
Senator Warner nailed it in the last few days when he stated to the press that the government is trying its health bill because it knows it can't afford the current medicare and medicaid programs and doesn't want to confront the fact. So, it wants to take away the chance of young people to buy homes and pay off their student loans so its social spending can remain unconstrained. This is unconscionable - unless, of course, you're a free spending liberal who look to take from every worker to provide for non-workers.
It appears as though the pit of unemployment and economic stagnation and decline is steepening ever more quickly as the administration seems to have no handle on turning around programs that not only don't work, but have been signaling their failure through both Democratic and Republican administrations.
Thursday, November 12, 2009
Wednesday, November 11, 2009
Back to Basics - Supply and Demand
The Fannie Mae Dice Roll Continues
http://online.wsj.com/article/SB10001424052748704402404574527440083580698.html?mod=djemITP
Part of what should scare the lenders to the US is that the forces of supply and demand, saving and borrowing are being so enormously distorted.
The unemployment rate may be one of the flags evidencing what is going on, while the low interest rates at which the Treasury can borrow seem more like the delusion of constantly rising housing prices.
A question could be at what point of decline and at what level of misery, the US will decide to take a different tack than the one its on? Certainly there are states that are further down the road of economic dislocation and economic misery.
Yesterday's paper stated that New York State income tax receipts were down by 1/3rd. At the same time, the legislature didn't want to cut social consumption spending. So, like the families also highlighted yesterday that run through their severance and savings, the US is using up its capital stock and borrowing capacity - not to fund job creation or economic growth, but to support current consumption.
When and how will the debts be paid?
http://online.wsj.com/article/SB10001424052748704402404574527440083580698.html?mod=djemITP
Part of what should scare the lenders to the US is that the forces of supply and demand, saving and borrowing are being so enormously distorted.
The unemployment rate may be one of the flags evidencing what is going on, while the low interest rates at which the Treasury can borrow seem more like the delusion of constantly rising housing prices.
A question could be at what point of decline and at what level of misery, the US will decide to take a different tack than the one its on? Certainly there are states that are further down the road of economic dislocation and economic misery.
Yesterday's paper stated that New York State income tax receipts were down by 1/3rd. At the same time, the legislature didn't want to cut social consumption spending. So, like the families also highlighted yesterday that run through their severance and savings, the US is using up its capital stock and borrowing capacity - not to fund job creation or economic growth, but to support current consumption.
When and how will the debts be paid?
Monday, November 9, 2009
Nutritious Food for the Economy
U.S., Europe Differ in Approach to Getting Back on Growth Track
http://online.wsj.com/article/SB125772042679937143.html?mod=djemITP#articleTabs%3Darticle
In a response to the above article someone writes:
WSJ: "So this crisis offers a rare case study in how governments should respond to maintain potential growth. If the recession turns out to have been brutal but not seismic in terms of forcing a major adjustment, then Germany's focus on maintaining labor supply may be right. If, however, the fallout means new industries drive growth, then allowing resources to be reallocated while cushioning the effects on demand -- the U.S. response -- will be validated."
The weakness of the US position is that new industries are not being created with the extra profits from productivity gains. Instead they are being reinvested overseas. As a result, we will suffer a deterioration of labor skills and depressed consumer spending from having so many people out of work.
What's missing?
The commenter is correct about the reinvesting overseas but it would be good to better nail the problem.
Business invests as do individuals to get a return on their investment. They also invest to produce products that can sell at a given price point (think "economic utility"). Thus, it makes no sense to invest (say in the US) to produce a product that will have to sell for say $1,000 when the product could be produced offshore (by this business or a competitor) to sell for $800 or $400.
(If the product isn't made offshore, then a competitor will make it and the US producer will go out of business. This was clearly seen in the GM case where they couldn't produce small cars profitably in the US, etc.).
Thus, what's the choice?
1) It's as simple as looking at the production equation, looking at the variables and tuning them up with fiscal policies that promote capital formation, labor qualifications, technological innovation.
Production Cost = Labor Costs + Capital Costs + Raw Materials Costs
What we have with Pelosi and Obama is an administration that is driving up all three of these costs: the falling dollar raising material costs.
Whether a Democrat, Republican or Independent, Americans should be concerned that policies are being put in place and debts increased that negatively impact the ability to bring jobs back to America by overspending and spending too much on consumption.
One can't blame industry any more than one can blame a mother for trying to feed her children nutrition food. What you can blame is a government that deprives the mother of the raw ingredients to make nutritious food.
http://online.wsj.com/article/SB125772042679937143.html?mod=djemITP#articleTabs%3Darticle
In a response to the above article someone writes:
WSJ: "So this crisis offers a rare case study in how governments should respond to maintain potential growth. If the recession turns out to have been brutal but not seismic in terms of forcing a major adjustment, then Germany's focus on maintaining labor supply may be right. If, however, the fallout means new industries drive growth, then allowing resources to be reallocated while cushioning the effects on demand -- the U.S. response -- will be validated."
The weakness of the US position is that new industries are not being created with the extra profits from productivity gains. Instead they are being reinvested overseas. As a result, we will suffer a deterioration of labor skills and depressed consumer spending from having so many people out of work.
What's missing?
The commenter is correct about the reinvesting overseas but it would be good to better nail the problem.
Business invests as do individuals to get a return on their investment. They also invest to produce products that can sell at a given price point (think "economic utility"). Thus, it makes no sense to invest (say in the US) to produce a product that will have to sell for say $1,000 when the product could be produced offshore (by this business or a competitor) to sell for $800 or $400.
(If the product isn't made offshore, then a competitor will make it and the US producer will go out of business. This was clearly seen in the GM case where they couldn't produce small cars profitably in the US, etc.).
Thus, what's the choice?
1) It's as simple as looking at the production equation, looking at the variables and tuning them up with fiscal policies that promote capital formation, labor qualifications, technological innovation.
Production Cost = Labor Costs + Capital Costs + Raw Materials Costs
What we have with Pelosi and Obama is an administration that is driving up all three of these costs: the falling dollar raising material costs.
Whether a Democrat, Republican or Independent, Americans should be concerned that policies are being put in place and debts increased that negatively impact the ability to bring jobs back to America by overspending and spending too much on consumption.
One can't blame industry any more than one can blame a mother for trying to feed her children nutrition food. What you can blame is a government that deprives the mother of the raw ingredients to make nutritious food.
Saturday, November 7, 2009
More on Life in a Nancy Pelosi World
(below is a link to an article in the Wall Street Journal highlighting some of Pelosi's healthcare plan proposals - it will make you gasp unless you're poor and a member of a minority.)
http://online.wsj.com/article/SB20001424052748704795604574519671055918380.html?mod=djemITP#articleTabs%3Darticle
What the Pelosi Health-Care Bill Really Says, November 7, 2009
So, what are the bets on unemployment numbers and real wage gains in the US?
Oh yes, and one of my other favorite numbers is, "How many extra years will it take a young person in the US to afford a house equivalent to that afforded by parents both 20 and 40 years ago?"
Those who win under the Democrats are those who are "underpriviledged". Those who lose are those who'd rather work, get educated and live a healthy lifestyle.
It's hard to believe the dollar is holding up as well as it is and that interest rates aren't already approaching double digits. And inflation Latin America style here we come!
http://online.wsj.com/article/SB20001424052748704795604574519671055918380.html?mod=djemITP#articleTabs%3Darticle
What the Pelosi Health-Care Bill Really Says, November 7, 2009
So, what are the bets on unemployment numbers and real wage gains in the US?
Oh yes, and one of my other favorite numbers is, "How many extra years will it take a young person in the US to afford a house equivalent to that afforded by parents both 20 and 40 years ago?"
Those who win under the Democrats are those who are "underpriviledged". Those who lose are those who'd rather work, get educated and live a healthy lifestyle.
It's hard to believe the dollar is holding up as well as it is and that interest rates aren't already approaching double digits. And inflation Latin America style here we come!
Nancy's Thin Air
It's astounding how the Congress seems to ignore the logic that if we are in an economic environment where we need to have a more educated, capital intensive economy to provide good jobs and that there will be people who won't be able or won't want to move into this economy, that we need to be saving money rather than spending it.
And, we need the brightest, most entrepreneurial people to be supported in job and business creation - not taxed to death.
Meanwhile, Nancy Pelosi keeps thinking we can raise taxes, borrow more money and give more benefits than society can afford (of course she thinks society can afford it and that jobs will come out of thin air - one has to emphasize 'thin' because so little is left to the private economy to create jobs after Nancy's taken her taxes out).
And, we need the brightest, most entrepreneurial people to be supported in job and business creation - not taxed to death.
Meanwhile, Nancy Pelosi keeps thinking we can raise taxes, borrow more money and give more benefits than society can afford (of course she thinks society can afford it and that jobs will come out of thin air - one has to emphasize 'thin' because so little is left to the private economy to create jobs after Nancy's taken her taxes out).
Friday, November 6, 2009
Voter Choices - Mullahs or Spendthrifts
Sadly, the voters aren't really given a choice: would they like to have America restore a competitive labor market or not?
Rather, their choice has been do they want Republican mullahs in power who are concerned about abortions and gay lifestyles; or, do they want Democrats who are socially liberal and will give away the store and pile on the benefits with the unions and the UAW as their economic model.
One look at how great wealth has been allowed by the Communists in China to be created in private hands, should give an indication of the fact that America is taking too much from its workers through taxation and not leaving enough for the worker to spend as they see fit. Thus, the whole labor/production relationship is distorted.
Why do you think it is that the government doesn't want a worker to get a paycheck showing all of the payments the employer has to make on their behalf? Instead of that $600 net out of $1,000, it would more likely read the same net out of at least double that amount of gross pay.
If we want to bring jobs back to America, we need to make it affordable to hire Americans. It's all well and good to tax ourselves for this social cause and that; but, after a while the funds run out. We're taxing ourselves for current consumption and not investment in the future. We can deal with these facts in lots of ways.
The current approach seems to be another trillion dollars for added health consumption with a general lowering of the quality and availability of care a repressed conclusion. And, meanwhile, the U-6 jobless rate is 17% (close to one out of five Americans can't find work or enough work).
Oh yeah, current policies seem to be working swell!
And, let's keep on allowing Obama and Pelosi to put up red herrings. Ah well.....
Rather, their choice has been do they want Republican mullahs in power who are concerned about abortions and gay lifestyles; or, do they want Democrats who are socially liberal and will give away the store and pile on the benefits with the unions and the UAW as their economic model.
One look at how great wealth has been allowed by the Communists in China to be created in private hands, should give an indication of the fact that America is taking too much from its workers through taxation and not leaving enough for the worker to spend as they see fit. Thus, the whole labor/production relationship is distorted.
Why do you think it is that the government doesn't want a worker to get a paycheck showing all of the payments the employer has to make on their behalf? Instead of that $600 net out of $1,000, it would more likely read the same net out of at least double that amount of gross pay.
If we want to bring jobs back to America, we need to make it affordable to hire Americans. It's all well and good to tax ourselves for this social cause and that; but, after a while the funds run out. We're taxing ourselves for current consumption and not investment in the future. We can deal with these facts in lots of ways.
The current approach seems to be another trillion dollars for added health consumption with a general lowering of the quality and availability of care a repressed conclusion. And, meanwhile, the U-6 jobless rate is 17% (close to one out of five Americans can't find work or enough work).
Oh yeah, current policies seem to be working swell!
And, let's keep on allowing Obama and Pelosi to put up red herrings. Ah well.....
Useless Canards and the Jobless Recovery
Facing Facts on the 'Jobless' Recovery
http://online.wsj.com/article/SB125746080945231961.html?mod=djemITP#articleTabs%3Darticle
• Some say that Jobless recoveries are the residue of the expansion of globalization. That each recovery is worse than the last one. That endless mergers and labor arbitrage will leave the US with a few big transnational corporations owned largely by foreign investors.
But why does this appear to be happening? Are we really looking in the right places?
Almost everyone receiving them likes government services that come at what appears to be little or no cost. No one really contemplates where this generosity is coming from.
Americans need to realize that there is NO FREE LUNCH.
Retirement at age 50 costs something. Almost free and limitless healthcare costs something.
The bottom line is all this generosity (which is tax or borrowing supported) is costing the US economic vitality and jobs.
We are hurting ourselves and refuse to see it.
• Some people even go so far as to cough up the old canard that no more wealth can be created so dividing up what exists is all that can be done.
One look at the wealth being created in China should dispel this canard for good. So should one look at companies like Google – or, even turning on the internet or getting in your car.
Yes, certain things aren’t around anymore; but, in the aggregate, the total amount of wealth and the better quality of life produced by the creative destruction of capitalism is growing and can grow – unless, that is, capital and the ability of capital to create wealth is compromised.
And, this compromising of capital’s ability to create wealth is exactly what has been happening in America – and, the seat of this destruction sits in Congress and the White House, with unions and with government.
http://online.wsj.com/article/SB125746080945231961.html?mod=djemITP#articleTabs%3Darticle
• Some say that Jobless recoveries are the residue of the expansion of globalization. That each recovery is worse than the last one. That endless mergers and labor arbitrage will leave the US with a few big transnational corporations owned largely by foreign investors.
But why does this appear to be happening? Are we really looking in the right places?
Almost everyone receiving them likes government services that come at what appears to be little or no cost. No one really contemplates where this generosity is coming from.
Americans need to realize that there is NO FREE LUNCH.
Retirement at age 50 costs something. Almost free and limitless healthcare costs something.
The bottom line is all this generosity (which is tax or borrowing supported) is costing the US economic vitality and jobs.
We are hurting ourselves and refuse to see it.
• Some people even go so far as to cough up the old canard that no more wealth can be created so dividing up what exists is all that can be done.
One look at the wealth being created in China should dispel this canard for good. So should one look at companies like Google – or, even turning on the internet or getting in your car.
Yes, certain things aren’t around anymore; but, in the aggregate, the total amount of wealth and the better quality of life produced by the creative destruction of capitalism is growing and can grow – unless, that is, capital and the ability of capital to create wealth is compromised.
And, this compromising of capital’s ability to create wealth is exactly what has been happening in America – and, the seat of this destruction sits in Congress and the White House, with unions and with government.
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