I will soon explain how this is relevant to Recession Economics.
Obama has done something very good for me. His presence in the White House made me realize that I must do everything I can to assert my 2nd amendment right. The threat that he and his party represent has really motivated me to take some drastic initiatives that I have been putting off of a long time.
The first step was to legally purchase guns and ammunition before any legislature is enacted by the Democrats to infringe on the 2nd amendment. Upon purchasing guns and ammunition I realized that I now needed a place to store and shoot these weapons. In the last few months this has moved me to buy a considerable piece of property and begin construction. This is the point at which I am thankful that we are in a recession. The property is costing me half of what it would have two years ago. It is also relevant that gun and ammunition sales have been booming since Obama took office as people try to head off an future restrictions. This is probably the reason why they have not attempted to enact gun control legislation. They are afraid of cutting off their only good leg.
Sure enough, we can expect that before the next election they will make an attempt to pass gun control legislation. If for no other reason then to spite the other side. A republican Filibuster is our only hope. House Speaker Nancy Pelosi says she only wants to have guns registered. We know from experience in Britain and Australia that this is the first step to confiscation. The governments there first took an accounting of who had guns and later moved to confiscate them. The right to bare arms is no different then the right to free speech. Once you start picking away at the Bill of Rights there is no end. The Bill of Rights does not set apart the 2nd amendment from the other amendments in any way and give it a lesser value. All those rights are the peoples rights.
We can see evidence of this in Britain which is further along down this path... and it is the same path. First they banned handgun ownership... Then they banned long-gun ownership... Then they banned swords... Then they try to ban pointed kitchen knives... Now they plan on banning the PINT. Yes, the drinking glass because apparently people have been using this to assault one another. The point is obvious, if people want to hurt each other they will use stick and stones if they have to. Will democrats ban sticks and stones too?
Someone anonymously said:
"I think the root cause of the problem here is hands. Anything that can be held in one's hand can be a weapon.
Outlaw hands. Problem solved."
I guess the Democrats have their work cut out for them.
Tuesday, October 27, 2009
Wednesday, September 16, 2009
I can't wait until everyone's unemplyment benefits run out!
The most ridicules thing about recessions is how hard it is to hire people. You would think it would be easy with so many people out of work. Why would they come work for me when unemployment is giving them $400 a week to stay home and go to the beach all summer. My own girlfriend is out of work and has no intention of looking for a job until her unemployment runs out.
It is possible to persuade people to work if you offer a premium salary. The people who would normally get $10 /hr, now want $17/hr to work.
As soon as unemployment benefits run out, which we should start to see around December 2009, people will start going back to work for $10 and hour. The increase in labor productivity will sustain the recovery. I just hope that the government does not interfere and extend unemployment benefits. The longer unemployment runs, the longer it will take to get the economy back on track.
BTW, my opinion of the recovery so far is that it has only been fueled by inflationary money printing. Not that I would have done anything different. The world wide effect of the engineered recession has caused other governments to print even more money then the the US. Economics is relative, you only have to do better then everyone else.
You all know the story of the two brothers and the tiger right... A tiger is chasing two brothers and one stops to put on a pair of sneakers. The other brother asks, "Do you really think the sneakers are going to help you outrun the tiger?". His brother answers, " I don't need to outrun the tiger. I only need to outrun YOU".
It is possible to persuade people to work if you offer a premium salary. The people who would normally get $10 /hr, now want $17/hr to work.
As soon as unemployment benefits run out, which we should start to see around December 2009, people will start going back to work for $10 and hour. The increase in labor productivity will sustain the recovery. I just hope that the government does not interfere and extend unemployment benefits. The longer unemployment runs, the longer it will take to get the economy back on track.
BTW, my opinion of the recovery so far is that it has only been fueled by inflationary money printing. Not that I would have done anything different. The world wide effect of the engineered recession has caused other governments to print even more money then the the US. Economics is relative, you only have to do better then everyone else.
You all know the story of the two brothers and the tiger right... A tiger is chasing two brothers and one stops to put on a pair of sneakers. The other brother asks, "Do you really think the sneakers are going to help you outrun the tiger?". His brother answers, " I don't need to outrun the tiger. I only need to outrun YOU".
Thursday, May 28, 2009
Oil Prices and Euro Up
Looking that the price of oil today at $65 per barrel and the Euro at 1.39, I am seeing a clear indication that the dollar is weakening. The only cause for this would be a flood of US dollars over the last few months added to circulation. This is a clear sign to me that the current Obama administration is following in the same steps of his predecessors Bush Jr and Clinton. We can expect a similar pattern of a booming economy by the next election and recession two to three years after that. The Dollar will continue to be the means by which we tighten and loosen the economy.
Monday, March 16, 2009
Immigration Economics
This county was built on cheap labor. For that matter, every great civilization was built on cheap labor. For this country is was a struggle between slave labor and cheap immigrant labor. Immigrant labor won out but at the same time we realized at some point that there is a limit to how many people we want flooding into this country. The alternative was to export the work. A brilliant solution. The problem now is what about those jobs which can not be exported due to the fact that they are local based. The solution for that has been to turn a blind eye to deportation laws as the immigrants come in.
This is all well and good. Quiet honestly any citizen that finds himself competing with immigrant labor needs to go back to school or learn some technical skills. High school dropouts will not find sympathy with me. The problem starts when we start talking about legalizing the immigrants here. The problem with this is that while the immigrants are illegal they are not going to schools and competing for high paying jobs. Once you legalize them they will not be satisfied cleaning bathrooms for $3.50 per hour. They will want the jobs that pay $15 per hour. There presence in that market will bring down the market wage of those jobs to $10 per hour.
I feel that the best answer here is status quo. Keep exporting the low wage paying jobs so that people in those foreign countries can stay home and work. Keep the illegals that are here illegal so that they are not eligible for benefits and can not compete for higher level jobs.
As the low skill jobs are exported, perhaps the illegals that are here will go back home. Perhaps the highschool dropouts that we have here will emigrate to other countries for low wage paying work.
This is all well and good. Quiet honestly any citizen that finds himself competing with immigrant labor needs to go back to school or learn some technical skills. High school dropouts will not find sympathy with me. The problem starts when we start talking about legalizing the immigrants here. The problem with this is that while the immigrants are illegal they are not going to schools and competing for high paying jobs. Once you legalize them they will not be satisfied cleaning bathrooms for $3.50 per hour. They will want the jobs that pay $15 per hour. There presence in that market will bring down the market wage of those jobs to $10 per hour.
I feel that the best answer here is status quo. Keep exporting the low wage paying jobs so that people in those foreign countries can stay home and work. Keep the illegals that are here illegal so that they are not eligible for benefits and can not compete for higher level jobs.
As the low skill jobs are exported, perhaps the illegals that are here will go back home. Perhaps the highschool dropouts that we have here will emigrate to other countries for low wage paying work.
War through Recession.
Lets face it. The primary reason why the the United States has emerged as a supper power is because it was the victor in WWI and WWII. The primary reason why it benefited so much is because it fought the wars on distant shores. Fighting wars on other peoples land is key to not destroying your own land. That much is hard to argue with.
I have long viewed the Korean War, the Vietnam war and the Russian war in Afghanistan as part of the same conflict that started in Berlin at the end of WWII. Both the US and USSR made the wise assessment that rather then risk direct conflict is would be better to wear each other down by financing anyone that was willing to fight on their behalf. The Russians and Chinese financed Koreans. When the Korean conflict came to a stalemate, it moved to Vietnam. When Vietnam conflict came to a stalemate, it moved to Afghanistan where USSR was finally worn down. Worn down but not destroyed.
With that in mind when you see conflicts around the world today you have to ask yourself who is working on behalf of which power. The main players in the world today are the US, Russia and China. The European Union is a junior player too and nothing more then a front for a German/French alliance. The Germans have used cunning to try to move back up the ladder. They can't raise their own armies because of the US presence in their land so they are trying to manipulate other European members to do their bidding by financing them. I see the Iraq war as a play to drive a wedge between France/Germany and the other European Union members. The US was successfully able to buy off the other EU members and drive a "wedge" in the Union. This wedge prevented the EU form agreeing to a constitution. The introduction of England into the EU and attempts to get Turkey in too have have acted as destabilizing forces in the EU in favor of closer ties to the US.
So we have four powers all struggling for power. The US, Russia, China, and the EU. For the moment as Russia flexes its muscles the EU has largely returned its support to the US. Russia and China seem independent of each other.
It is a safe bet to say that any conflicts around the world that involve smaller nations, directly tie back to this conflict between the main powers. We say we are fighting terrorists in Iraq and Afghanistan, but what do you suppose would happen if all the terrorists in these two countries were killed? Russia and China would finance a new bread of terrorists somewhere else. This is not unlike the financing and support that the US is giving to some of the ex-USSR breakaway states. These are our people working against the Russians. Same goes with India, Pakistan and Tibet on China's boarder. These are our potential terrorist to China.
So what do we do now. Do we still need troops in Afghanistan and Iraq through a recession. Well that is sort of like asking do we still need police in LA and NYC though a recession. So what if you live in the suburbs? If you don't fight those gangs in the inner cities, eventually they will get to your suburbs. There are people paid world wide to make trouble for the US. These people have a job to do and will do it. The question is if they will do it in some far away place or if they will do it inside the US borders. I believe that the US is practicing a very wise policy of keeping as many conflicts as possible outside of its boarders.
What about all the US soldiers that are dieing? What about all the cops that are dying every month in NYC, Detroit, LA. Its a dirty job but someone has to do it. These are the people best trained and equipped to do the job.
Where does this fit into Recession Economics. You just have to suck it up and pay the bill. Unless you support cutting back on cops and firemen, it makes no sense to be cutting back on worldwide security either.
I have long viewed the Korean War, the Vietnam war and the Russian war in Afghanistan as part of the same conflict that started in Berlin at the end of WWII. Both the US and USSR made the wise assessment that rather then risk direct conflict is would be better to wear each other down by financing anyone that was willing to fight on their behalf. The Russians and Chinese financed Koreans. When the Korean conflict came to a stalemate, it moved to Vietnam. When Vietnam conflict came to a stalemate, it moved to Afghanistan where USSR was finally worn down. Worn down but not destroyed.
With that in mind when you see conflicts around the world today you have to ask yourself who is working on behalf of which power. The main players in the world today are the US, Russia and China. The European Union is a junior player too and nothing more then a front for a German/French alliance. The Germans have used cunning to try to move back up the ladder. They can't raise their own armies because of the US presence in their land so they are trying to manipulate other European members to do their bidding by financing them. I see the Iraq war as a play to drive a wedge between France/Germany and the other European Union members. The US was successfully able to buy off the other EU members and drive a "wedge" in the Union. This wedge prevented the EU form agreeing to a constitution. The introduction of England into the EU and attempts to get Turkey in too have have acted as destabilizing forces in the EU in favor of closer ties to the US.
So we have four powers all struggling for power. The US, Russia, China, and the EU. For the moment as Russia flexes its muscles the EU has largely returned its support to the US. Russia and China seem independent of each other.
It is a safe bet to say that any conflicts around the world that involve smaller nations, directly tie back to this conflict between the main powers. We say we are fighting terrorists in Iraq and Afghanistan, but what do you suppose would happen if all the terrorists in these two countries were killed? Russia and China would finance a new bread of terrorists somewhere else. This is not unlike the financing and support that the US is giving to some of the ex-USSR breakaway states. These are our people working against the Russians. Same goes with India, Pakistan and Tibet on China's boarder. These are our potential terrorist to China.
So what do we do now. Do we still need troops in Afghanistan and Iraq through a recession. Well that is sort of like asking do we still need police in LA and NYC though a recession. So what if you live in the suburbs? If you don't fight those gangs in the inner cities, eventually they will get to your suburbs. There are people paid world wide to make trouble for the US. These people have a job to do and will do it. The question is if they will do it in some far away place or if they will do it inside the US borders. I believe that the US is practicing a very wise policy of keeping as many conflicts as possible outside of its boarders.
What about all the US soldiers that are dieing? What about all the cops that are dying every month in NYC, Detroit, LA. Its a dirty job but someone has to do it. These are the people best trained and equipped to do the job.
Where does this fit into Recession Economics. You just have to suck it up and pay the bill. Unless you support cutting back on cops and firemen, it makes no sense to be cutting back on worldwide security either.
What trade deficit ?
Does anybody really believe that the United States would champion an open trade policy if it was not to our favor?
I think the obvious answer to this question is NO. Starting from that basis it should be easy to see where all the pieces fit. It is so easy to manipulate the trade deficit numbers that it almost makes no real sense. The only thing that it is good for is as a marker from year to year. Even at that it is only so good as a marker so long as currency exchange rates, markups and technology stay the same. Change any of these factors and the numbers don't mean anything. The United States has supposedly been running a trade deficit from 1976. Does it make any sense that something so bad could be going on for 33 years through ups and downs in the economy? Who are the countries with the positive trade deficits all these years and why have they not supplanted the US as a superpower?
Now that I have you thinking, lets consider how the trade deficit is compiled. Let us consider how these imports are valued. Generally they are valued at cost. Not their fair value and definitely not at what it would cost to build these goods domestically. If you valued these goods at what it would cost to build them domestically I believe that you would find the trade deficit in the favor of the United States. Also consider the types of goods we import vs those we export. We seem to import more finished goods and export more raw goods and pop culture. Put another way, let us forget that we are trading these goods for money and let us pretend we are using a barter system. We are bringing in cars, electronics, steel, oil, cloths and we are trading out beef, wheat, corn, manure, Elvis and Madona. When you simplify this down to a bartering system I think the US is making out very well in the trade. It so happens that the accounting system we use in man made and imperfect. It was never designed to deal with such large scale variations in currency, markup and technology. So why not correct the system to account for this? Why would we want the rest of world to know that they are loosing out by trading with us.
I think the obvious answer to this question is NO. Starting from that basis it should be easy to see where all the pieces fit. It is so easy to manipulate the trade deficit numbers that it almost makes no real sense. The only thing that it is good for is as a marker from year to year. Even at that it is only so good as a marker so long as currency exchange rates, markups and technology stay the same. Change any of these factors and the numbers don't mean anything. The United States has supposedly been running a trade deficit from 1976. Does it make any sense that something so bad could be going on for 33 years through ups and downs in the economy? Who are the countries with the positive trade deficits all these years and why have they not supplanted the US as a superpower?
Now that I have you thinking, lets consider how the trade deficit is compiled. Let us consider how these imports are valued. Generally they are valued at cost. Not their fair value and definitely not at what it would cost to build these goods domestically. If you valued these goods at what it would cost to build them domestically I believe that you would find the trade deficit in the favor of the United States. Also consider the types of goods we import vs those we export. We seem to import more finished goods and export more raw goods and pop culture. Put another way, let us forget that we are trading these goods for money and let us pretend we are using a barter system. We are bringing in cars, electronics, steel, oil, cloths and we are trading out beef, wheat, corn, manure, Elvis and Madona. When you simplify this down to a bartering system I think the US is making out very well in the trade. It so happens that the accounting system we use in man made and imperfect. It was never designed to deal with such large scale variations in currency, markup and technology. So why not correct the system to account for this? Why would we want the rest of world to know that they are loosing out by trading with us.
Friday, March 13, 2009
Do you Believe in the Recession?
Question:Is the recession real? Is it real enough for you?
Answer: Have you changed your spending habits? Do you you respect the dollar yet?
If you have not read my first post "Thank God for the Recession", nothing else in this blog will make sense to you. The premise described there is the government loves to cheat economics by printing money. This fuels economic booms. This also causes inflation that must at some point be corrected by taking money out of the economy. The removal of this money causes recessions. It increases the value of the dollar and restores long term confidence in the Dollar.
We have heard of people speak in the past of the Fed engineering a "soft landing". The concept of a soft landing is that the Fed slows down the economy by tightening the money supply just enough to cause strengthen the dollar without the drama of corporate bankruptcies and layoffs. Its a fantasy.
The "soft landing" can simply not work because it does not scare anyone. The problem with economic booms is that people loose respect for the dollar and spend it like its just the paper that it really is. People only respect what they fear. For people to respect the dollar they must fear that their supply of dollars will be cut off. You can not have this shift in psychology unless you have companies laying off people by the thousands and corporations going bankrupt. Anything less then this and everyone will assume that this is just a minor bump in the road... a correction to shake out weakness in the market. In order for a recession to work and increase the dollar's value significantly, people must be CONVINCED that they are in a real recession. A recession is not convincing unless people believe that it has the potential to become outright depression. Only then will they tighten their belts and save their pennies. I still see people leaving pennies behind at the cash registers. Perhaps this recession in not yet convincing enough.
Answer: Have you changed your spending habits? Do you you respect the dollar yet?
If you have not read my first post "Thank God for the Recession", nothing else in this blog will make sense to you. The premise described there is the government loves to cheat economics by printing money. This fuels economic booms. This also causes inflation that must at some point be corrected by taking money out of the economy. The removal of this money causes recessions. It increases the value of the dollar and restores long term confidence in the Dollar.
We have heard of people speak in the past of the Fed engineering a "soft landing". The concept of a soft landing is that the Fed slows down the economy by tightening the money supply just enough to cause strengthen the dollar without the drama of corporate bankruptcies and layoffs. Its a fantasy.
The "soft landing" can simply not work because it does not scare anyone. The problem with economic booms is that people loose respect for the dollar and spend it like its just the paper that it really is. People only respect what they fear. For people to respect the dollar they must fear that their supply of dollars will be cut off. You can not have this shift in psychology unless you have companies laying off people by the thousands and corporations going bankrupt. Anything less then this and everyone will assume that this is just a minor bump in the road... a correction to shake out weakness in the market. In order for a recession to work and increase the dollar's value significantly, people must be CONVINCED that they are in a real recession. A recession is not convincing unless people believe that it has the potential to become outright depression. Only then will they tighten their belts and save their pennies. I still see people leaving pennies behind at the cash registers. Perhaps this recession in not yet convincing enough.
Thursday, March 12, 2009
Going Green, Cutting Taxes, Growing the Economy
We can do it all.
YES WE CAN.
It's time for a solutions. How can we get this economy moving forward again. The first thing is that President Obama needs to stop threatening those who have the ability to create jobs with more taxes. I have already discussed in a prior post how his proposed tax increases on rich people will yield less tax revenue because they will simply not participate in the economy; or structure their transactions is such a way that they are not taxable or not visible.
Step one for Obama is to gain the support of the rich with a tax friendly policy. Try asking them what they would like to contribute. He will probably get more tax revenues with that approach.
Step two for Obama is to look at how Bush Jr got out of the last recession. From what I recall he offered immediate deductions for capital purchases. It worked.
Step three for Obama is to take Bush Jr's plan green. Offer a full deduction in the first year for any environmentally friendly equipment purchased by businesses. In the case of vehicles, 100% deduction in the first year for 100% alternate fuel trucks, buses and cars. Hybrid vehicles will be deducted over two years.
This policy can be extended to individuals as well to motivate them to dump their cars for new alternate fuel ones. It does not even matter if 100% alternate fuel vehicles don't exist yet. Manufacturers will scramble to make them. That effort will move the economy alone. If they can't figure it out, their loss.
Home owners should get full tax deductions for installing solar panels and wind-turbines to power water heaters, lights and battery reserves. Led Bulbs bulbs should also be deductible.
Such a tax policy would have the effect of seriously effecting our energy policy and stimulating the economy at the same time. It would also win over the rich people that President Obama has been alienating and get them to participate in this economy.
What I am suggesting here is tax deductions for Green equipment and vehicles yet to be designed. This is moving ahead of the curve. I am less interested in giving deductions for the hybrids that we have have now, but more interested in offering deductions for the 100% alternate fuel machines that can be produced six months from now and then twelve months from then. Money can be paid in advance and deductions paid in the year paid. Employers will start hiring to fill the backlog of orders created.
The 900 billion stimulus is a one time shot in arm. It is not going to generate new jobs. Whoever can get their hands on that money is going to hoard it. My plan is designed to make real changes and create productive jobs that will mean something. Paying one crew to dig a ditch and then another crew to fill that ditch, creates jobs but is not sustainable nor productive growth.
YES WE CAN.
It's time for a solutions. How can we get this economy moving forward again. The first thing is that President Obama needs to stop threatening those who have the ability to create jobs with more taxes. I have already discussed in a prior post how his proposed tax increases on rich people will yield less tax revenue because they will simply not participate in the economy; or structure their transactions is such a way that they are not taxable or not visible.
Step one for Obama is to gain the support of the rich with a tax friendly policy. Try asking them what they would like to contribute. He will probably get more tax revenues with that approach.
Step two for Obama is to look at how Bush Jr got out of the last recession. From what I recall he offered immediate deductions for capital purchases. It worked.
Step three for Obama is to take Bush Jr's plan green. Offer a full deduction in the first year for any environmentally friendly equipment purchased by businesses. In the case of vehicles, 100% deduction in the first year for 100% alternate fuel trucks, buses and cars. Hybrid vehicles will be deducted over two years.
This policy can be extended to individuals as well to motivate them to dump their cars for new alternate fuel ones. It does not even matter if 100% alternate fuel vehicles don't exist yet. Manufacturers will scramble to make them. That effort will move the economy alone. If they can't figure it out, their loss.
Home owners should get full tax deductions for installing solar panels and wind-turbines to power water heaters, lights and battery reserves. Led Bulbs bulbs should also be deductible.
Such a tax policy would have the effect of seriously effecting our energy policy and stimulating the economy at the same time. It would also win over the rich people that President Obama has been alienating and get them to participate in this economy.
What I am suggesting here is tax deductions for Green equipment and vehicles yet to be designed. This is moving ahead of the curve. I am less interested in giving deductions for the hybrids that we have have now, but more interested in offering deductions for the 100% alternate fuel machines that can be produced six months from now and then twelve months from then. Money can be paid in advance and deductions paid in the year paid. Employers will start hiring to fill the backlog of orders created.
The 900 billion stimulus is a one time shot in arm. It is not going to generate new jobs. Whoever can get their hands on that money is going to hoard it. My plan is designed to make real changes and create productive jobs that will mean something. Paying one crew to dig a ditch and then another crew to fill that ditch, creates jobs but is not sustainable nor productive growth.
Bernanke - Fed Boss
Inflation Watchdog
That is what being Chairman of Fed is all about. Keeping the dollar stable. The fact is that national debt means nothing when you can print your own money. The US government can pay for anything anytime it wants without answering to anyone. When it has its own currency it can do that. Its just paper. The one problem that the government does have is that the more it prints, the less valuable it becomes as people catch on. Believe me people do catch on. Not only that, but they anticipate it and try to raise prices ahead of inflation. Everyone knows that prices are always going up... except in a recession of course. Recessions are inflation busters.
The Fed has one job, to control inflation. It has a lot of means at its disposal. The most public being adjusting interest rates. That is just so easy to understand that everyone focuses on it. The fed states the Fed Funds Rate clearly. Just as public but less easy to track are they buying and selling of treasury bills. What is less publicized is how much money the Fed makes available to the govt and to banks to loan out. Does it even matter as long as the dollars value is stable. I think not. If the govt can print money to pay its debts without devaluing my saving, that is truly wonderful. It is an economic miracle of modern economics. When the dollars starts to fall, the Fed has a job to do... protect the value of my cash savings.
As watchdog the Fed is usually at odds with the president and congress who would prefer a very loose money supply. The patten I believe I am seeing is that Fed Chairmen are very tightassed in their fist few years until they get comfortable with the people in Washington.
Greenspan was so tightassed that he cost George Bust Sr his reelection when he tightened the purse strings in his reelection year. Greenspan was far more relaxed with Bill Clinton and very Relaxed with George Bush Jr. No doubt Greenspan was able to justify a very loose policies while we had two wars going on. That is the purpose of having paper money not backed by anything. You can finance your own wars.
Bernake came in at the end of the Bush Jr years and not doubt felt subordinate to him. However with a new president in town Bernake must now feel like a free man. Free to be the Great Inflation Watchdog we has always wanted to be. I feel sorry for Obama in this respect. I don't think he will get much sympathy from Bernake who who most likely wants to play the role of the Great Inflation Buster.
That is what being Chairman of Fed is all about. Keeping the dollar stable. The fact is that national debt means nothing when you can print your own money. The US government can pay for anything anytime it wants without answering to anyone. When it has its own currency it can do that. Its just paper. The one problem that the government does have is that the more it prints, the less valuable it becomes as people catch on. Believe me people do catch on. Not only that, but they anticipate it and try to raise prices ahead of inflation. Everyone knows that prices are always going up... except in a recession of course. Recessions are inflation busters.
The Fed has one job, to control inflation. It has a lot of means at its disposal. The most public being adjusting interest rates. That is just so easy to understand that everyone focuses on it. The fed states the Fed Funds Rate clearly. Just as public but less easy to track are they buying and selling of treasury bills. What is less publicized is how much money the Fed makes available to the govt and to banks to loan out. Does it even matter as long as the dollars value is stable. I think not. If the govt can print money to pay its debts without devaluing my saving, that is truly wonderful. It is an economic miracle of modern economics. When the dollars starts to fall, the Fed has a job to do... protect the value of my cash savings.
As watchdog the Fed is usually at odds with the president and congress who would prefer a very loose money supply. The patten I believe I am seeing is that Fed Chairmen are very tightassed in their fist few years until they get comfortable with the people in Washington.
Greenspan was so tightassed that he cost George Bust Sr his reelection when he tightened the purse strings in his reelection year. Greenspan was far more relaxed with Bill Clinton and very Relaxed with George Bush Jr. No doubt Greenspan was able to justify a very loose policies while we had two wars going on. That is the purpose of having paper money not backed by anything. You can finance your own wars.
Bernake came in at the end of the Bush Jr years and not doubt felt subordinate to him. However with a new president in town Bernake must now feel like a free man. Free to be the Great Inflation Watchdog we has always wanted to be. I feel sorry for Obama in this respect. I don't think he will get much sympathy from Bernake who who most likely wants to play the role of the Great Inflation Buster.
GM must DIE !
This ties back to my fist post. Infact everything related to this recession ties back to my first post about how necessary the recession is to the health of the economy.
Companies world wide are giving themselves an enema to clean themselves out by laying off the least productive workers. Least productive being relative to how much work is produced vs how much is being paid. I discussed in my first post how laying off workers and hiring cheaper strengthens the dollar. These layoff's amount to employee swaps to bring down labor cost.
The problem with GM is that it has a bad case of constipation. It can not fire costly union workers and rehire cheaper labor because of its union contracts. It is a complete economic abnormality for GM to be paying $70 an hour to assembly workers. At best, assembly workers should be getting $25 to $30 per hour. If they want to make more, they need to go to college and get professional degrees. The cost of these overpaid assembly workers is passed down and results in highly overpriced cars at their various classes.
There is no other solution. GM must file for bankruptcy reorganization and start over with its labor contracts. I can assure you there is no way I am going to buy a GM car knowing how overpaid its workers are. I have to assume their cars are overpriced too without even looking at them.
Let us compare GM to Citigroup. Citigroup is indeed worth saving. They are not unionized so its workers get what they are worth. You have tellers making $10 an hour and finance managers making $300 an hour. If productivity falls they can fire employees at a fingers snap. Citigroup has indeed fired tens of thousands of employees at all levels and returned a profit in the first quarter of 2009. I expect no less from GM.
Companies world wide are giving themselves an enema to clean themselves out by laying off the least productive workers. Least productive being relative to how much work is produced vs how much is being paid. I discussed in my first post how laying off workers and hiring cheaper strengthens the dollar. These layoff's amount to employee swaps to bring down labor cost.
The problem with GM is that it has a bad case of constipation. It can not fire costly union workers and rehire cheaper labor because of its union contracts. It is a complete economic abnormality for GM to be paying $70 an hour to assembly workers. At best, assembly workers should be getting $25 to $30 per hour. If they want to make more, they need to go to college and get professional degrees. The cost of these overpaid assembly workers is passed down and results in highly overpriced cars at their various classes.
There is no other solution. GM must file for bankruptcy reorganization and start over with its labor contracts. I can assure you there is no way I am going to buy a GM car knowing how overpaid its workers are. I have to assume their cars are overpriced too without even looking at them.
Let us compare GM to Citigroup. Citigroup is indeed worth saving. They are not unionized so its workers get what they are worth. You have tellers making $10 an hour and finance managers making $300 an hour. If productivity falls they can fire employees at a fingers snap. Citigroup has indeed fired tens of thousands of employees at all levels and returned a profit in the first quarter of 2009. I expect no less from GM.
The Dollar gets its Respect Due!
So now what? Where is the economic rebound?
In my last post I discussed why we needed this recession to fix the dollar. The dollar is now a lot stronger vs commodities. Where is the rebound?
The problem is that this economy is a very big boat. Its hard to turn it on a dime. I believe that the republican plan was to have a nice little recession at the end of 2007 and turn it around in 2008 just before the elections. I believed that they learned that that its not so easy to steer a ship so big that you can't even see its bow in the horizon. I believe it took much longer then they anticipated to slow down the economy. They were looking for that "soft landing". The economy was still going full speed into July of 2008. To slow an economy this big you have to put the engines in full reverse. To the dismay of the Republicans, the economy slowed down and went into reverse on the eve of the 2008 elections. They should have started the recession a few months earlier and slammed the brakes rather then look for a soft landing.
If the Republican's had won the election the recovery would not have been a problem. It would have came within six months. The problem is that now you have a new administration in place with no ties to the old and no idea how or why we are where we are.
The biggest mistake I see President Obama making is that he is really pissing off the upper classes with his talk of raising taxes on them. I don't think he realized that once you get past the upper middle class, taxes are indeed voluntary. Rich people have many options in how they will participate in the economy. They are not wage-workers who get a W2 at the end of the year and take that gross number and write it into their form 1040. They get to pick and choose what is going to appear on the W2's, K1's, 1099's... etc. They have money flowing in and out of the country like water. There are in fact more US dollars outside this country then inside.
The people that President Obama is now irritating pay accountants like me to put whatever numbers they want on their tax forms. Beyond that... they don't even have to work. They can wait out President Obama 4 or 8 years. They can just keep their money inactive and out of play in this economy. Does President Obama think that his petty 900 billion will really have any impact in the face of hundreds of trillions that the upper classes control? The stock market has dropped over 27% since Obama took office int Jan 09 from Dow 9,000 to Dow 6,500. The only reason the stock market as a whole falls is because people are converting their stocks into cash. Cash that is not invested or spend is dead money. Dead money keeps an economy in a state of recession.
There is a reason why the nobility traditionally does not pay taxes... they were equally powerful to the King, if not more. President Obama better wake up and smell the coffee. If he wants to see this economy bounce back in his term, he had better court the rich people of this country who create the jobs for the people who voted him into office.
In my last post I discussed why we needed this recession to fix the dollar. The dollar is now a lot stronger vs commodities. Where is the rebound?
The problem is that this economy is a very big boat. Its hard to turn it on a dime. I believe that the republican plan was to have a nice little recession at the end of 2007 and turn it around in 2008 just before the elections. I believed that they learned that that its not so easy to steer a ship so big that you can't even see its bow in the horizon. I believe it took much longer then they anticipated to slow down the economy. They were looking for that "soft landing". The economy was still going full speed into July of 2008. To slow an economy this big you have to put the engines in full reverse. To the dismay of the Republicans, the economy slowed down and went into reverse on the eve of the 2008 elections. They should have started the recession a few months earlier and slammed the brakes rather then look for a soft landing.
If the Republican's had won the election the recovery would not have been a problem. It would have came within six months. The problem is that now you have a new administration in place with no ties to the old and no idea how or why we are where we are.
The biggest mistake I see President Obama making is that he is really pissing off the upper classes with his talk of raising taxes on them. I don't think he realized that once you get past the upper middle class, taxes are indeed voluntary. Rich people have many options in how they will participate in the economy. They are not wage-workers who get a W2 at the end of the year and take that gross number and write it into their form 1040. They get to pick and choose what is going to appear on the W2's, K1's, 1099's... etc. They have money flowing in and out of the country like water. There are in fact more US dollars outside this country then inside.
The people that President Obama is now irritating pay accountants like me to put whatever numbers they want on their tax forms. Beyond that... they don't even have to work. They can wait out President Obama 4 or 8 years. They can just keep their money inactive and out of play in this economy. Does President Obama think that his petty 900 billion will really have any impact in the face of hundreds of trillions that the upper classes control? The stock market has dropped over 27% since Obama took office int Jan 09 from Dow 9,000 to Dow 6,500. The only reason the stock market as a whole falls is because people are converting their stocks into cash. Cash that is not invested or spend is dead money. Dead money keeps an economy in a state of recession.
There is a reason why the nobility traditionally does not pay taxes... they were equally powerful to the King, if not more. President Obama better wake up and smell the coffee. If he wants to see this economy bounce back in his term, he had better court the rich people of this country who create the jobs for the people who voted him into office.
Thank God for the Recession !
Why are we having a recession?
Is it the Disease or the Cure?
It is just a very typical economic cycle. The government has always been apart of the economy, there is no way around that. They participate by taxing, borrowing, spending and controlling the money supply. The United States participates in the global economy as a major player. It has huge impact around the world since the rest of the world does business with the U.S. too.
First thing to realize is that there are more US dollars outside the US then inside the US, so the dollar is a world currency. The US government raises whatever funds it needs through taxing, borrowing, and prints the rest. In the last 7 years the US has managed to pay for two wars while not raising taxes in the US. The only way that would be possible is by printing money. They don't even have to print it, they just give themselves credit in some super-computer. The effect of this is inflation. It is obvious when you look at the commodities charts going back a few years. You will notice a massive spike in 2008. If they allowed the inflation to continue the world would loose confidence in the US dollar. You would then see a real depression like you had in 1929. So the recession is the economic fix. By taking money out of circulation they are deflating the dollar.
Is there anything sinister is all this? That is a matter of opinion. Having 7 good years and then one bad year is a bargain if you ask me. The key is to understanding these patterns and planning your personal finances accordingly. Keep in mind that in the U.S. the money supply is controlled by the Federal Reserve Board Chairman. He is independent. He can do whatever he wants with the money supply as far as making it available to the government to spend, or taking it out of circulation. He is considered by many as the second most powerful man in the world. If the congress or president does no like him, they have to impeach him in the House and then have Senate vote to remove him (just like the President). The Fed Reserve chairman has one job: Fight Inflation.
Here is the economic pattern and how it developed recently...
Geroge Bush SR. has 3 good economic years. In his 4th year the Fed Chairman panics that inflation will weaken dollar and raises interest rates causing a recession in 1992 . The American people do not reelect him because of the economy. These proves to any future president that Americans have very short term memory.
Bill Clinton takes office. He has 7 strong economic years. He can't legally run for a third term. By "coincidence" we have a recession in his final year. The money that was fueling the Dot Com boom has dried up.
George Bush Jr. takes office. It is rumored that his father has a meeting with the Fed Chairman and asked him not to screw his son like he himself was screwed in 1992. We get 7 strong economic years. He can't legally run for a third term. Now in the 8th year the Fed Reserve does its job of bringing inflation under control.
It is a safe bet to say that we will have 6 or 7 strong economic years with Obama and then have another recession.
As far as Financial inappropriateness at the banks, I don't think so. They got use to a pattern of being able to go the government and borrow any money they wanted, then that was shut off. I think the reason the government was so quick to bail them out is because they set up a pattern with the banks and then changed it.
The bottom line is that the recession is the fix on inflation. No one ever really knows what the Fed is doing with the money supply. What we do know is that prices are always going up. Money is like any other asset. The more you print, the less it's worth. There is a reason why real estate is always going up. It is hard to create more land, yet the population is always increasing. If more money was not printed, it would appreciate in value too. If this was the case we would see a constant decrease in prices. The fact that money has been steadily decreasing in value means that the Fed is always printing more.
The unfortunate fact is that the only way to give respect back to the currency is to reduce its availability. In this current recession this has occurred by the Fed not making money available to the banks to lend. The way this trickles down into the broader economy is that cash poor business has to tighten its belt and conserve its cash reserves. To do this they lay off people. The layoff's are nothing more then then a resetting of the dollar. These same business that lay off will rehire with a few months. The new hires will replace old workers at less then 75%. These new workers will have a much tighter spending budget. Presto! Respect to the dollar has been restored. Is it necessary for the working people to suffer like this? Yes, it is. These boom and bust cycles keep people honest. Honest in a sense that they will respect the dollar.
Regardless how long this recession lasts the United States will emerge strong. That is because they have the foresight to allow recessions to happen in a somewhat controlled manor when their currency begins to loose value. There are many counter example around the world. Governments that print money continually so that their currencies are worth 1,000 units to a US dollar or even 1,000,000 units to a US dollar.
Is it the Disease or the Cure?
It is just a very typical economic cycle. The government has always been apart of the economy, there is no way around that. They participate by taxing, borrowing, spending and controlling the money supply. The United States participates in the global economy as a major player. It has huge impact around the world since the rest of the world does business with the U.S. too.
First thing to realize is that there are more US dollars outside the US then inside the US, so the dollar is a world currency. The US government raises whatever funds it needs through taxing, borrowing, and prints the rest. In the last 7 years the US has managed to pay for two wars while not raising taxes in the US. The only way that would be possible is by printing money. They don't even have to print it, they just give themselves credit in some super-computer. The effect of this is inflation. It is obvious when you look at the commodities charts going back a few years. You will notice a massive spike in 2008. If they allowed the inflation to continue the world would loose confidence in the US dollar. You would then see a real depression like you had in 1929. So the recession is the economic fix. By taking money out of circulation they are deflating the dollar.
Is there anything sinister is all this? That is a matter of opinion. Having 7 good years and then one bad year is a bargain if you ask me. The key is to understanding these patterns and planning your personal finances accordingly. Keep in mind that in the U.S. the money supply is controlled by the Federal Reserve Board Chairman. He is independent. He can do whatever he wants with the money supply as far as making it available to the government to spend, or taking it out of circulation. He is considered by many as the second most powerful man in the world. If the congress or president does no like him, they have to impeach him in the House and then have Senate vote to remove him (just like the President). The Fed Reserve chairman has one job: Fight Inflation.
Here is the economic pattern and how it developed recently...
Geroge Bush SR. has 3 good economic years. In his 4th year the Fed Chairman panics that inflation will weaken dollar and raises interest rates causing a recession in 1992 . The American people do not reelect him because of the economy. These proves to any future president that Americans have very short term memory.
Bill Clinton takes office. He has 7 strong economic years. He can't legally run for a third term. By "coincidence" we have a recession in his final year. The money that was fueling the Dot Com boom has dried up.
George Bush Jr. takes office. It is rumored that his father has a meeting with the Fed Chairman and asked him not to screw his son like he himself was screwed in 1992. We get 7 strong economic years. He can't legally run for a third term. Now in the 8th year the Fed Reserve does its job of bringing inflation under control.
It is a safe bet to say that we will have 6 or 7 strong economic years with Obama and then have another recession.
As far as Financial inappropriateness at the banks, I don't think so. They got use to a pattern of being able to go the government and borrow any money they wanted, then that was shut off. I think the reason the government was so quick to bail them out is because they set up a pattern with the banks and then changed it.
The bottom line is that the recession is the fix on inflation. No one ever really knows what the Fed is doing with the money supply. What we do know is that prices are always going up. Money is like any other asset. The more you print, the less it's worth. There is a reason why real estate is always going up. It is hard to create more land, yet the population is always increasing. If more money was not printed, it would appreciate in value too. If this was the case we would see a constant decrease in prices. The fact that money has been steadily decreasing in value means that the Fed is always printing more.
The unfortunate fact is that the only way to give respect back to the currency is to reduce its availability. In this current recession this has occurred by the Fed not making money available to the banks to lend. The way this trickles down into the broader economy is that cash poor business has to tighten its belt and conserve its cash reserves. To do this they lay off people. The layoff's are nothing more then then a resetting of the dollar. These same business that lay off will rehire with a few months. The new hires will replace old workers at less then 75%. These new workers will have a much tighter spending budget. Presto! Respect to the dollar has been restored. Is it necessary for the working people to suffer like this? Yes, it is. These boom and bust cycles keep people honest. Honest in a sense that they will respect the dollar.
Regardless how long this recession lasts the United States will emerge strong. That is because they have the foresight to allow recessions to happen in a somewhat controlled manor when their currency begins to loose value. There are many counter example around the world. Governments that print money continually so that their currencies are worth 1,000 units to a US dollar or even 1,000,000 units to a US dollar.
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