Politics and Religion don't mix.
That's a truism spoken for years by many observers. The reality, however, is that it doesn't stop many aspiring leaders from trying to do just that -- play on religious biases for political advantage.
Religious leaders whose churches are the target of discrimination and bias, however, are often the first to endorse separation of church and state. Members of the dominant group see no problem -- not to say hypocrisy -- in demanding that their beliefs form the core of political and governmental activity.
When Al Smith ran for President, and during John F. Kennedy's campaign, dire warnings were sounded that the Pope and his Roman Catholic minions would descend on Washington to run the government. Yet Fundamentalist Protestant groups still see no problem or conflict with their continuing demands that principles central to their religious teachings be incorporated into civil law.
This includes such things as gay marriage and homosexuality as a "lifestyle choice," and a sinful perversion.
Here's a question: Given the extent of bias, bigotry, discrimination and raw violence against gay people, why would anyone choose that as a "lifestyle"?
Friday, May 31, 2013
Thursday, May 30, 2013
Federalizing the EU
A confederation of independent-minded (if not imperious) states does not work. It did not work in America after 1776. It was overturned by a new Constitution in 1789, and later tested by a great Civil War.
But the federal system endures in America, despite challenges by those who hold to supremacy of individual states. In Europe, 27 nations have joined together to try to forge a more perfect union, but the movement is hobbled by nationalist sentiments that may well fracture an already fragile European Union.
French-German suspicions, as well as leftover British attitudes from an imperial age, could stall any moves toward a stronger union. Similarly, devotion in some parts of America toward "states' rights" interferes with efforts by the federal government in Washington to coordinate social benefits.
Granted, the U.S. has the advantage of a recognized common language, as well as the convenience of a common currency and a centralized judiciary with sovereignty over the several individual states.
Europe has been moving slowly in a federal direction, gradually overcoming opposition by fiercely nationalistic figures such as Charles de Gaulle and Margaret Thatcher. In addition, there is French suspicion of German industriousness, British dislike of losing its own currency, and resentment among smaller nations of being told what to do and how to do it.
Sound familiar? It should, because many similar arguments (except for language and currency) are expressed by ultra-conservatives and Tea Party activists in America.
So which in Europe will succeed? Federalism, with a strong centralized government, or Intergovernmentalism, which recognizes the sovereignty of member nation-states?
In America, it took a Civil War to solidify allegiance to one nation, indivisible. Europe is still a collection of nations, each with its own culture, language and allegiance.
Many wars have already been fought over which shall be dominant.
But the federal system endures in America, despite challenges by those who hold to supremacy of individual states. In Europe, 27 nations have joined together to try to forge a more perfect union, but the movement is hobbled by nationalist sentiments that may well fracture an already fragile European Union.
French-German suspicions, as well as leftover British attitudes from an imperial age, could stall any moves toward a stronger union. Similarly, devotion in some parts of America toward "states' rights" interferes with efforts by the federal government in Washington to coordinate social benefits.
Granted, the U.S. has the advantage of a recognized common language, as well as the convenience of a common currency and a centralized judiciary with sovereignty over the several individual states.
Europe has been moving slowly in a federal direction, gradually overcoming opposition by fiercely nationalistic figures such as Charles de Gaulle and Margaret Thatcher. In addition, there is French suspicion of German industriousness, British dislike of losing its own currency, and resentment among smaller nations of being told what to do and how to do it.
Sound familiar? It should, because many similar arguments (except for language and currency) are expressed by ultra-conservatives and Tea Party activists in America.
So which in Europe will succeed? Federalism, with a strong centralized government, or Intergovernmentalism, which recognizes the sovereignty of member nation-states?
In America, it took a Civil War to solidify allegiance to one nation, indivisible. Europe is still a collection of nations, each with its own culture, language and allegiance.
Many wars have already been fought over which shall be dominant.
GDP Holding
For all its troubles, the U.S. has so far evaded the severity of the economic malaise affecting Europe.
While the European Union has posted six straight quarters of negative GDP data, the U.S. kept its first quarter 2013 growth rate, according to revised figures released today by the government. A second look at the first three months of this year showed GDP growing at 2.5 percent, compared to 2.4 percent posted earlier. In the fourth quarter of 2012, the growth rate was 0.4 percent.
The question now is, will expansion hold?
The U.S. is the world's largest producer of goods and services -- the definition of Gross National Product -- but not all of it is sold domestically. If overseas markets collapse, they can drag down the U.S. economy, and American producers will have to cut production as exports diminish. Either that, or they'll have to trim domestic prices to make up the difference in sales.
At the same time, they could face competition from overseas suppliers, who will also cut prices to maintain sales.
So two fiscal quarters of economic growth is good news, but if the rest of the world continues its downward trend, the spiral may engulf the U.S. as well.
While the European Union has posted six straight quarters of negative GDP data, the U.S. kept its first quarter 2013 growth rate, according to revised figures released today by the government. A second look at the first three months of this year showed GDP growing at 2.5 percent, compared to 2.4 percent posted earlier. In the fourth quarter of 2012, the growth rate was 0.4 percent.
The question now is, will expansion hold?
The U.S. is the world's largest producer of goods and services -- the definition of Gross National Product -- but not all of it is sold domestically. If overseas markets collapse, they can drag down the U.S. economy, and American producers will have to cut production as exports diminish. Either that, or they'll have to trim domestic prices to make up the difference in sales.
At the same time, they could face competition from overseas suppliers, who will also cut prices to maintain sales.
So two fiscal quarters of economic growth is good news, but if the rest of the world continues its downward trend, the spiral may engulf the U.S. as well.
Tuesday, May 28, 2013
Politics and Government
Government is about getting something done. Politics is about getting elected.
One way to get elected and/or re-elected is to make the other candidate lose. And the way to do that is to prevent the incumbent from getting anything done, even if it's something that your side has already proposed and endorsed. You certainly don't want the opposition to gain credit for getting anything done, especially if it's something that you want credit for.
So to a large extent, that explains the situation in Washington. Whatever one side suggests or proposes, the other side says, "We're against it, it's un-American and will destroy the economy and everything loyal Americans stand for."
Consequently, nothing gets done.
One way to get elected and/or re-elected is to make the other candidate lose. And the way to do that is to prevent the incumbent from getting anything done, even if it's something that your side has already proposed and endorsed. You certainly don't want the opposition to gain credit for getting anything done, especially if it's something that you want credit for.
So to a large extent, that explains the situation in Washington. Whatever one side suggests or proposes, the other side says, "We're against it, it's un-American and will destroy the economy and everything loyal Americans stand for."
Consequently, nothing gets done.
Apple Bites
Some taxing thoughts from our Dublin correspondent:
There has been a lot of news recently involving Ireland and claims that it is a tax haven that encourages tax evasion. I find it curious that American lawmakers are complaining about American companies taking advantage of a loophole in American laws and trying to blame another country. One must remember that American lawmakers are hugely influenced by the lobbyists that are employed by those same American companies.
Let's look at some of the issues.
Apple executive Tim Cook acknowledged that the company set up some subsidiary companies in Ireland and do not pay tax in the U.S. on the profits of those companies. In fact, Apple do not pay tax anywhere on the profits of those companies.
There are a few issues here. The Irish tax laws state that the corporate tax is liable at 12.5% on profits made on trading within Ireland. Another corporate tax rate of 25% applies to profits made on investments. The fact that Apple set up these subsidiary companies is in total conformity with US law. Apple are using a loophole in U.S. law to get around paying the much higher US corporate tax rate. The loophole is in U.S. law and not in the laws of Ireland.
Tim Cook claimed that a special tax rate of 2% for Apple was negotiated with the Irish government and tax authorities. This is strongly repudiated by the Irish government and Irish tax authorities. Whom do you believe, the politician or the businessman?
A number of years ago the Irish tax laws were changed to promote advances in innovation by making the income from patents tax free for a number of years. A number of businesses have been able to benefit from this and generally these businesses reinvest the profits in further research and development. These concessions are available to anyone
who has a patent and doing business in Ireland.
Some non-Irish companies have transferred (sold) Intellectual Property Rights to their Irish subsidiaries in order to avail of these benefits. Apple, Microsoft, Google, and Yahoo are only some of the companies that have done this. Perhaps these transfers should not be allowed, but that is a matter for the countries in which the parent company operates. If that were to happen I believe the laws restricting these transfers would be struck down as unreasonable restraint of trade.
Ireland have been under pressure to increase its tax rate from countries that have much higher corporate tax rates. The bigger problem in defining corporate tax rate is the income that may be exempt from taxation. For example, France has a nominal corporate tax rate in excess of 30%, but they readily admit that the effective tax rate is closer to 8 %. The nominal tax rate for Ireland is 12.5% and the effective tax rate is about 11.9%.
Sales tax in Europe is called VAT (value added tax) and Ireland has a VAT rate of 23% (near the upper end of VAT rates in Europe) while some other countries have rates as low as 10% to 12%. Sales over the Internet are taxed at the location where the seller is based, not the buyer. As a result, companies that operate Internet sales are usually more profitable in low VAT rate countries and not high VAT rate countries like Ireland. Ireland has been fairly successful in recent years in attracting foreign companies into Ireland, The low corporate tax rate is one element of the attractiveness of Ireland, but other things are a well educated workforce, being located in the EU, English being the most widely used language in the country, the availability of speakers of other languages, good telecommunications networks, the availability of new factories and offices, and access to international trade routes by air or ship.
Each country of the European Union makes a contribution to the EU based on the GDP of the country. The corporate tax system in Ireland generally excludes profits for exports. GDP does include exports in the calculation. It is estimated that Ireland is paying an extra 100 million euros annually for the export driven part of the economy, the part of the economy that has not been taxed.
So maybe the Apple logo should be redesigned, to show a green apple with a smaller bite.
There has been a lot of news recently involving Ireland and claims that it is a tax haven that encourages tax evasion. I find it curious that American lawmakers are complaining about American companies taking advantage of a loophole in American laws and trying to blame another country. One must remember that American lawmakers are hugely influenced by the lobbyists that are employed by those same American companies.
Let's look at some of the issues.
Apple executive Tim Cook acknowledged that the company set up some subsidiary companies in Ireland and do not pay tax in the U.S. on the profits of those companies. In fact, Apple do not pay tax anywhere on the profits of those companies.
There are a few issues here. The Irish tax laws state that the corporate tax is liable at 12.5% on profits made on trading within Ireland. Another corporate tax rate of 25% applies to profits made on investments. The fact that Apple set up these subsidiary companies is in total conformity with US law. Apple are using a loophole in U.S. law to get around paying the much higher US corporate tax rate. The loophole is in U.S. law and not in the laws of Ireland.
Tim Cook claimed that a special tax rate of 2% for Apple was negotiated with the Irish government and tax authorities. This is strongly repudiated by the Irish government and Irish tax authorities. Whom do you believe, the politician or the businessman?
A number of years ago the Irish tax laws were changed to promote advances in innovation by making the income from patents tax free for a number of years. A number of businesses have been able to benefit from this and generally these businesses reinvest the profits in further research and development. These concessions are available to anyone
who has a patent and doing business in Ireland.
Some non-Irish companies have transferred (sold) Intellectual Property Rights to their Irish subsidiaries in order to avail of these benefits. Apple, Microsoft, Google, and Yahoo are only some of the companies that have done this. Perhaps these transfers should not be allowed, but that is a matter for the countries in which the parent company operates. If that were to happen I believe the laws restricting these transfers would be struck down as unreasonable restraint of trade.
Ireland have been under pressure to increase its tax rate from countries that have much higher corporate tax rates. The bigger problem in defining corporate tax rate is the income that may be exempt from taxation. For example, France has a nominal corporate tax rate in excess of 30%, but they readily admit that the effective tax rate is closer to 8 %. The nominal tax rate for Ireland is 12.5% and the effective tax rate is about 11.9%.
Sales tax in Europe is called VAT (value added tax) and Ireland has a VAT rate of 23% (near the upper end of VAT rates in Europe) while some other countries have rates as low as 10% to 12%. Sales over the Internet are taxed at the location where the seller is based, not the buyer. As a result, companies that operate Internet sales are usually more profitable in low VAT rate countries and not high VAT rate countries like Ireland. Ireland has been fairly successful in recent years in attracting foreign companies into Ireland, The low corporate tax rate is one element of the attractiveness of Ireland, but other things are a well educated workforce, being located in the EU, English being the most widely used language in the country, the availability of speakers of other languages, good telecommunications networks, the availability of new factories and offices, and access to international trade routes by air or ship.
Each country of the European Union makes a contribution to the EU based on the GDP of the country. The corporate tax system in Ireland generally excludes profits for exports. GDP does include exports in the calculation. It is estimated that Ireland is paying an extra 100 million euros annually for the export driven part of the economy, the part of the economy that has not been taxed.
So maybe the Apple logo should be redesigned, to show a green apple with a smaller bite.
Foxy Bankers
News item: Banking lobbyists help Congress write new legislation to improve bank regulation. The New York Times reports that many parts of the proposed law are taken verbatim from lobbyist documents.
The explanation, of course, is that the industry representatives are "just helping," since they know more about the intricacies of the financial industry than the average politician. That's probably true. It's also true that clowns know more about the circus industry than the average politician. But we don't elect clowns to run the government.
Or do we?
Meanwhile, the fox is guarding the henhouse, so us chickens need not fear getting plucked.
The explanation, of course, is that the industry representatives are "just helping," since they know more about the intricacies of the financial industry than the average politician. That's probably true. It's also true that clowns know more about the circus industry than the average politician. But we don't elect clowns to run the government.
Or do we?
Meanwhile, the fox is guarding the henhouse, so us chickens need not fear getting plucked.
Monday, May 27, 2013
Irony and Coincidence
Coincidence is not Irony.
The fact of one event following another is not in itself ironic. Nor is the fact of two events occurring at the same time. Quite often, they are coincidences and nothing more -- by chance, two events occur, related or unrelated.
Moreover, a standard college freshman English composition list of terms defines irony as "a contrast of some sort."
An irony, however, is a contrast of a specific sort, namely, when one expects one event but something different happens. The key here is expectation.
Example: When an arch-conservative, outspoken Tea Party activist opponent of additional taxes votes for a bill that increases government revenue through higher taxes, that's ironic, because we would have expected the delegate to vote against anything that brings higher taxes.
Similarly, when a gun lobby activist acts to strengthen laws against multiple purchases of firearms, that's ironic, because gun lobbyists are typically against stiff controls. And some are opposed to controls of any kind.
The fact of one event following another is not in itself ironic. Nor is the fact of two events occurring at the same time. Quite often, they are coincidences and nothing more -- by chance, two events occur, related or unrelated.
Moreover, a standard college freshman English composition list of terms defines irony as "a contrast of some sort."
An irony, however, is a contrast of a specific sort, namely, when one expects one event but something different happens. The key here is expectation.
Example: When an arch-conservative, outspoken Tea Party activist opponent of additional taxes votes for a bill that increases government revenue through higher taxes, that's ironic, because we would have expected the delegate to vote against anything that brings higher taxes.
Similarly, when a gun lobby activist acts to strengthen laws against multiple purchases of firearms, that's ironic, because gun lobbyists are typically against stiff controls. And some are opposed to controls of any kind.
Thought and Proof
When Truth Be Strange, Fiction Becomes Truth.
People seldom seek strong evidence for what they already believe to be true. This relieves them of the need to think for themselves. It's much easier when others do your knowing for you.
Beware! That way danger lies.
It was sad to hear a religious teacher say to her students: "For those who believe, no proof is necessary. For those who do not, no proof is possible."
Perhaps it is not possible to prove the existence (or non-existence) of God. That does not absolve us from the moral duty to try to understand as much as we can about the workings of Creation.
We were created with minds and the ability to think. We have an obligation to use both.
People seldom seek strong evidence for what they already believe to be true. This relieves them of the need to think for themselves. It's much easier when others do your knowing for you.
Beware! That way danger lies.
It was sad to hear a religious teacher say to her students: "For those who believe, no proof is necessary. For those who do not, no proof is possible."
Perhaps it is not possible to prove the existence (or non-existence) of God. That does not absolve us from the moral duty to try to understand as much as we can about the workings of Creation.
We were created with minds and the ability to think. We have an obligation to use both.
Wednesday, May 22, 2013
House of Cards
The plan works like this: First, a bank lends money for someone to buy a house (a mortgage). Historically, the lender would keep the note while the borrower pays it off. But then someone got the idea that if a larger institution bought the mortgage, the bank would have fresh money to make more loans, while still collecting payments from the first borrower, taking a cut and passing on the rest to the larger institution.
Step Two: The larger institution now has a stream of money coming in from many sources, so it can "package" the mortgages and sell new notes to investors, using the expected income stream as a base. (It's like a manufacturer using the expected money stream from future sales as a base, and selling shares in the company to investors. The difference is that with home loans, the product -- a house -- has already been sold.)
Step Three: Now, the system can market new notes based on income from the first notes. The income stream is now a river, with many tributaries -- individual mortgages.
Step Four: Financial firms -- being Masters of the Universe, after all -- gather the cash flow from various tributaries into new income streams, each marketing investment notes in a stream so investors can drink from the stream before it reaches the river.
So far, so good. Packaging the mortgages was good, since it enabled local banks and mortgage lenders to make new loans without waiting for the old ones to be paid off.
Why not, then, package the packages , thus spreading the risk even further, and enabling still more mortgages?
Great idea. And as long as the housing market booms and people keep buying houses and they keep up with the payments, everything is fine. As everyone knows, housing values always go up, and people always keep up with their payments.
(There may have been a couple of times in the distant past when a few of one or the other stopped, briefly, but those days are long gone, never to return.)
All we need to do, said the bankers, is to keep signing up buyers and issuing mortgages, and everybody's happy. And if anyone sounds what they think is a warning, we'll just give our products new names, so that means they're not really the same thing anymore. Plus, if we separate the risky loans from the not-so-risky ones, that will make the whole structure safer. Besides, only the really risky ones could possibly default, and the others will still be healthy.
In any case, just like any other business, we have to sell product so our people can earn more commissions. After all, that's what we're here for, right? To sell product.
It's naive to think we only make mortgage loans to serve a public need. We have needs, too. Besides, with government guarantees, there won't be a problem if a few defaults happen. The whole system can't collapse. Not that it will, there's little chance of that. But even if by some weird, remote, wild and crazy chance of widespread default, the government can bail us out, since the system is vital to our national survival.
Not only that, but the bonuses to our sales agents and supervising executives will stay in place.
Step Two: The larger institution now has a stream of money coming in from many sources, so it can "package" the mortgages and sell new notes to investors, using the expected income stream as a base. (It's like a manufacturer using the expected money stream from future sales as a base, and selling shares in the company to investors. The difference is that with home loans, the product -- a house -- has already been sold.)
Step Three: Now, the system can market new notes based on income from the first notes. The income stream is now a river, with many tributaries -- individual mortgages.
Step Four: Financial firms -- being Masters of the Universe, after all -- gather the cash flow from various tributaries into new income streams, each marketing investment notes in a stream so investors can drink from the stream before it reaches the river.
So far, so good. Packaging the mortgages was good, since it enabled local banks and mortgage lenders to make new loans without waiting for the old ones to be paid off.
Why not, then, package the packages , thus spreading the risk even further, and enabling still more mortgages?
Great idea. And as long as the housing market booms and people keep buying houses and they keep up with the payments, everything is fine. As everyone knows, housing values always go up, and people always keep up with their payments.
(There may have been a couple of times in the distant past when a few of one or the other stopped, briefly, but those days are long gone, never to return.)
All we need to do, said the bankers, is to keep signing up buyers and issuing mortgages, and everybody's happy. And if anyone sounds what they think is a warning, we'll just give our products new names, so that means they're not really the same thing anymore. Plus, if we separate the risky loans from the not-so-risky ones, that will make the whole structure safer. Besides, only the really risky ones could possibly default, and the others will still be healthy.
In any case, just like any other business, we have to sell product so our people can earn more commissions. After all, that's what we're here for, right? To sell product.
It's naive to think we only make mortgage loans to serve a public need. We have needs, too. Besides, with government guarantees, there won't be a problem if a few defaults happen. The whole system can't collapse. Not that it will, there's little chance of that. But even if by some weird, remote, wild and crazy chance of widespread default, the government can bail us out, since the system is vital to our national survival.
Not only that, but the bonuses to our sales agents and supervising executives will stay in place.
Monday, May 20, 2013
Guidelines for Writers
Ten tips for news writers:
1/ Once is an accident, twice is a coincidence, three times is a pattern.
2/ Look for patterns.
3/ Explain it to your mother-in-law. But don't talk down to her; she's not dumb.
4/ Take note of what's happening today, remember what happened yesterday (last month, last year, etc.), and connect them.
5/ Any news story can be told in 500 words or less. Headline writers do it in five.
6/ Longer isn't always better; it's just longer.
7/ The story hasn't been written that can't be cut.
8/ "If you can't explain it to a seven-year-old, you don't understand it yourself." -- Albert Einstein.
9/ News stories are called stories because they are just that.
10/ Tell me a story.
1/ Once is an accident, twice is a coincidence, three times is a pattern.
2/ Look for patterns.
3/ Explain it to your mother-in-law. But don't talk down to her; she's not dumb.
4/ Take note of what's happening today, remember what happened yesterday (last month, last year, etc.), and connect them.
5/ Any news story can be told in 500 words or less. Headline writers do it in five.
6/ Longer isn't always better; it's just longer.
7/ The story hasn't been written that can't be cut.
8/ "If you can't explain it to a seven-year-old, you don't understand it yourself." -- Albert Einstein.
9/ News stories are called stories because they are just that.
10/ Tell me a story.
Money Supply vs Money Demand
The basic premise of Economics 101 is the Law of Supply and Demand, and once you've got that locked into your brain, you're well on your way. And when it comes to money, the same principles apply, although most of us have a harder time thinking of money as a commodity.
Just as demand drives up prices of goods, it also drives up interest rates (the cost of money), while a plentiful supply of money can keep down cost (interest rates) and encourage investment, whether in industrial equipment or in buying a house.
But while supply currently is good (think quantitative easing), demand is slack, as people don't use it (recession). And this is reflected in historically low interest rates. Home loans can be had at 4 percent or less, U.S. government bonds pay only 0.25 percent, and bank savings accounts even less -- 0.8 percent.
So the inherent message from the financial sector is, we don't want your money, we're awash in cash as it is, nobody's borrowing from us. You should go spend your money, and help the economy recover.
Good advice, unless you're unemployed and broke.
Just as demand drives up prices of goods, it also drives up interest rates (the cost of money), while a plentiful supply of money can keep down cost (interest rates) and encourage investment, whether in industrial equipment or in buying a house.
But while supply currently is good (think quantitative easing), demand is slack, as people don't use it (recession). And this is reflected in historically low interest rates. Home loans can be had at 4 percent or less, U.S. government bonds pay only 0.25 percent, and bank savings accounts even less -- 0.8 percent.
So the inherent message from the financial sector is, we don't want your money, we're awash in cash as it is, nobody's borrowing from us. You should go spend your money, and help the economy recover.
Good advice, unless you're unemployed and broke.
Saturday, May 18, 2013
Strategic Messaging
To propagate a message is to spread propaganda.
It's hard to see eye to eye when you're looking in different directions.
"As long as you stand by your principles, compromise is not a dirty word." -- NJ Gov. Chris Christie re-election campaign ad.
Election season is upon us, and it's useful to remember that while the approach may differ and the words sound better, the goal and purpose of the message have not changed. America's economic problems have not gone away. And while they have receded a bit, unless both Republicans and Democrats work together, the recession now roiling in Europe will send a second Great Recession wave across the Atlantic.
Consider: A job fair designed especially for ex-offenders had to be canceled because three thousand people -- triple the expected number -- showed up in Philadelphia and police were called to maintain order. There were no problems, except that the sponsors were overwhelmed by the turnout of those seeking work.
In Europe, recession has become official for the 27-nation Union, as output fell in the first quarter, following an earlier decline in the fourth quarter of 2012. The euro zone has shown negative growth numbers for a full year. The standard measure is that two consecutive fiscal quarters with negative numbers constitutes a recession. In the euro area, GDP was off by 0.2 percent, and 0.1 percent for the entire EU grouping. And while U.S. GDP rose by 0.6 percent in the first three months of 2013, that was a bare improvement over the 0.1 percent in the prior quarter.
Also in Europe, the statistical agency of the European Union reported that construction was down, inflation was a minimal 1.2 percent, producer prices were down throughout the 27 nation EU and retail trade was off in the 17 countries that use the common currency of the euro.
In Britain, "the economic recovery remains weak and uneven," the Bank of England reported
So while Europe is stumbling and the U.S. is wobbling, politicians in Washington are still playing the blame game, with Republicans insisting all America's issues are the President's fault, even as they refuse to compromise, listen to alternatives or even budge from their preconceived notion that austerity is the answer, regardless of the question.
They "stay on message," as the saying goes, and while the strategy may vary and the wording differs, the goal is the same: Unfettered, free-market capitalism with no government intervention is the be-all and end-all of economic Truth.
When the Great Storm of 2012 struck the East Coast, New Jersey Gov. Chris Christie, a Republican, and President Barack Obama, a Democrat, showed they could work together for the greater good of rebuilding the Jersey Shore.
It's time to extend that spirit of cooperation to a national level.
It's hard to see eye to eye when you're looking in different directions.
"As long as you stand by your principles, compromise is not a dirty word." -- NJ Gov. Chris Christie re-election campaign ad.
Election season is upon us, and it's useful to remember that while the approach may differ and the words sound better, the goal and purpose of the message have not changed. America's economic problems have not gone away. And while they have receded a bit, unless both Republicans and Democrats work together, the recession now roiling in Europe will send a second Great Recession wave across the Atlantic.
Consider: A job fair designed especially for ex-offenders had to be canceled because three thousand people -- triple the expected number -- showed up in Philadelphia and police were called to maintain order. There were no problems, except that the sponsors were overwhelmed by the turnout of those seeking work.
In Europe, recession has become official for the 27-nation Union, as output fell in the first quarter, following an earlier decline in the fourth quarter of 2012. The euro zone has shown negative growth numbers for a full year. The standard measure is that two consecutive fiscal quarters with negative numbers constitutes a recession. In the euro area, GDP was off by 0.2 percent, and 0.1 percent for the entire EU grouping. And while U.S. GDP rose by 0.6 percent in the first three months of 2013, that was a bare improvement over the 0.1 percent in the prior quarter.
Also in Europe, the statistical agency of the European Union reported that construction was down, inflation was a minimal 1.2 percent, producer prices were down throughout the 27 nation EU and retail trade was off in the 17 countries that use the common currency of the euro.
In Britain, "the economic recovery remains weak and uneven," the Bank of England reported
So while Europe is stumbling and the U.S. is wobbling, politicians in Washington are still playing the blame game, with Republicans insisting all America's issues are the President's fault, even as they refuse to compromise, listen to alternatives or even budge from their preconceived notion that austerity is the answer, regardless of the question.
They "stay on message," as the saying goes, and while the strategy may vary and the wording differs, the goal is the same: Unfettered, free-market capitalism with no government intervention is the be-all and end-all of economic Truth.
When the Great Storm of 2012 struck the East Coast, New Jersey Gov. Chris Christie, a Republican, and President Barack Obama, a Democrat, showed they could work together for the greater good of rebuilding the Jersey Shore.
It's time to extend that spirit of cooperation to a national level.
Thursday, May 16, 2013
Isolationism
A little history from our Dublin correspondent.
I am not sure why the UK signed up for the EU in the first place. They were so used to being the head of an empire that they really only see themselves in that position. They still lament the loss of what they see as the "greatest empire the world has ever seen." That was a comment from a UK commentator on the BBC recently. I for one thought the Roman empire, the Mogul Empire, and the empire built by Alexander the Great could also lay claim to that title.
The right wing United Kingdom Independence Party (UKIP) wants England for the English, without realizing the English are a homogeneous people or without defining what it is to be English. Britain was invaded over the centuries by the Angles, Saxons, Jutes, Romans, Normans, Vikings and Danes, all of whom did their best to suppress the native Celtic tribes.
More recently, as Britain expanded its empire, the citizens of those imperial nations could live in England as a right. As a result, there are millions of Indians, Irish, Pakistanis, Nigerians, Jamaicans, etc all living in England and have been for many generations. Even the leader of UKIP has a French surname. I think the Indians and Pakistanis, etc are not great supporters of UKIP. While UKIP may be doing well in certain localities, those areas are probably not ethnically mixed, and UKIP will need a wider mandate to get into a leadership position.
If you saw the opening ceremonies of the 2012 London Olympics you would have found out that if it were not for England there would have been no Industrial Revolution, the world wide web would not exist, and computers would not have been invented. A few years ago they even laid claim to
time starting in England; that claim was based on GMT, or Greenwich Mean Time, where the 24 time zones begin.
Quite honestly, the rest of Europe is probably weary of hearing them and their silly claims.
Now, here's some additional information about "foreigners":
As for dominating science and the Industrial Revolution, here are a few claims for the Scots: James Watt, steam engine; Thomas Newcomen, who improved it; Alexander Graham Bell, hearing aid and telephone; Alexander Fleming, penicillin, John Loudon McAdam, roadbuilder with macadam paving; mackintosh raincoats; James Simpson, Edinburgh physician, first to use anesthetics in surgery; Joseph Lister, professor of surgery in Glasgow (Listerine antisepsis); Cyrus McCormick, reaper; David Dunbar Buick, overhead combustion valves for autos (yes, that Buick); John Boyd Dunlop, pneumatic tires; Andrew Meikle, grain flailing machines, and many others.
Not to mention golf, whisky and bagpipes, three of the greatest contributions to western culture.
Also, here's a nod to Adam Smith, the Scot who founded the modern concept of economics.
So in many ways, the campaign of the UK Independence Party echoes many strategies used by the America Firsters, the Know Nothings of the 19th Century, and contemporary activists who demand that America's southern boundary be fenced off to keep out immigrants. They forget that America was founded and populated by immigrants every generation, including some who crossed into the country illegally. That last includes Henry Ford's ancestor, who came from Ireland to Canada, then walked across the unfenced border into the U.S.
Discrimination and bigotry against those deemed "different" is not limited to England today, much less America or any other country. They vary in intensity and subtlety, but they are there.
In America, it's useful to keep in mind that Spanish is not and never has been a "foreign" language, since Spanish-speakers sailed to North America many decades before the first English speakers arrived.
And finally, as for England for the English, where would Manchester United's championship football team be without Sir Alex Ferguson, the team's longtime coach?
I am not sure why the UK signed up for the EU in the first place. They were so used to being the head of an empire that they really only see themselves in that position. They still lament the loss of what they see as the "greatest empire the world has ever seen." That was a comment from a UK commentator on the BBC recently. I for one thought the Roman empire, the Mogul Empire, and the empire built by Alexander the Great could also lay claim to that title.
The right wing United Kingdom Independence Party (UKIP) wants England for the English, without realizing the English are a homogeneous people or without defining what it is to be English. Britain was invaded over the centuries by the Angles, Saxons, Jutes, Romans, Normans, Vikings and Danes, all of whom did their best to suppress the native Celtic tribes.
More recently, as Britain expanded its empire, the citizens of those imperial nations could live in England as a right. As a result, there are millions of Indians, Irish, Pakistanis, Nigerians, Jamaicans, etc all living in England and have been for many generations. Even the leader of UKIP has a French surname. I think the Indians and Pakistanis, etc are not great supporters of UKIP. While UKIP may be doing well in certain localities, those areas are probably not ethnically mixed, and UKIP will need a wider mandate to get into a leadership position.
If you saw the opening ceremonies of the 2012 London Olympics you would have found out that if it were not for England there would have been no Industrial Revolution, the world wide web would not exist, and computers would not have been invented. A few years ago they even laid claim to
time starting in England; that claim was based on GMT, or Greenwich Mean Time, where the 24 time zones begin.
Quite honestly, the rest of Europe is probably weary of hearing them and their silly claims.
Now, here's some additional information about "foreigners":
As for dominating science and the Industrial Revolution, here are a few claims for the Scots: James Watt, steam engine; Thomas Newcomen, who improved it; Alexander Graham Bell, hearing aid and telephone; Alexander Fleming, penicillin, John Loudon McAdam, roadbuilder with macadam paving; mackintosh raincoats; James Simpson, Edinburgh physician, first to use anesthetics in surgery; Joseph Lister, professor of surgery in Glasgow (Listerine antisepsis); Cyrus McCormick, reaper; David Dunbar Buick, overhead combustion valves for autos (yes, that Buick); John Boyd Dunlop, pneumatic tires; Andrew Meikle, grain flailing machines, and many others.
Not to mention golf, whisky and bagpipes, three of the greatest contributions to western culture.
Also, here's a nod to Adam Smith, the Scot who founded the modern concept of economics.
So in many ways, the campaign of the UK Independence Party echoes many strategies used by the America Firsters, the Know Nothings of the 19th Century, and contemporary activists who demand that America's southern boundary be fenced off to keep out immigrants. They forget that America was founded and populated by immigrants every generation, including some who crossed into the country illegally. That last includes Henry Ford's ancestor, who came from Ireland to Canada, then walked across the unfenced border into the U.S.
Discrimination and bigotry against those deemed "different" is not limited to England today, much less America or any other country. They vary in intensity and subtlety, but they are there.
In America, it's useful to keep in mind that Spanish is not and never has been a "foreign" language, since Spanish-speakers sailed to North America many decades before the first English speakers arrived.
And finally, as for England for the English, where would Manchester United's championship football team be without Sir Alex Ferguson, the team's longtime coach?
Wednesday, May 15, 2013
Are we there yet?
Industrial production in America is effectively stalled, and regulators don't have the tools needed to deal with crisis in what has become a global financial system, according to information this week from the Federal Reserve Board.
Industries operated at 77.8 percent of capacity in April, the Fed reported, only one-tenth of a percentage point above a year ago, and 2.4 points below its long-run average. Over the past 40 years, the figure bottomed out at 66.9 percent in 2009, as the Great Recession got under way, and has risen only slowly since then.
Use of industry capacity topped out at 85.2 percent in 1989, the Fed reported.
Meanwhile, a senior Fed official told Congress that there is no system in place to coordinate efforts to deal with failing international banks.
"The recent financial crisis was unprecedented in its scope and severity," said Michael S. Gibson, director of the Fed's Division of Banking Supervision and Regulation. Moreover, "the crisis made clear that our regulatory framework ... was insufficient, and that governments everywhere had inadequate tools to manage the failure of a systemic financial firm."
There has been some progress, Gibson told a Senate subcommittee hearing on Tuesday (May 15), but there is still no workable system for several governments to work together in winding down failed financial firms with foreign subsidiaries and branches.
So with American industries operating well below capacity, there is no incentive to hire additional workers or to increase their ability to produce more. And as banks with global operations struggle to stay afloat, regulators don't have the ability to work across borders to help them either survive or to help them manage failure.
What does it all mean? Despite what political wishful thinkers may say about economic recovery, we're not there yet.
Industries operated at 77.8 percent of capacity in April, the Fed reported, only one-tenth of a percentage point above a year ago, and 2.4 points below its long-run average. Over the past 40 years, the figure bottomed out at 66.9 percent in 2009, as the Great Recession got under way, and has risen only slowly since then.
Use of industry capacity topped out at 85.2 percent in 1989, the Fed reported.
Meanwhile, a senior Fed official told Congress that there is no system in place to coordinate efforts to deal with failing international banks.
"The recent financial crisis was unprecedented in its scope and severity," said Michael S. Gibson, director of the Fed's Division of Banking Supervision and Regulation. Moreover, "the crisis made clear that our regulatory framework ... was insufficient, and that governments everywhere had inadequate tools to manage the failure of a systemic financial firm."
There has been some progress, Gibson told a Senate subcommittee hearing on Tuesday (May 15), but there is still no workable system for several governments to work together in winding down failed financial firms with foreign subsidiaries and branches.
So with American industries operating well below capacity, there is no incentive to hire additional workers or to increase their ability to produce more. And as banks with global operations struggle to stay afloat, regulators don't have the ability to work across borders to help them either survive or to help them manage failure.
What does it all mean? Despite what political wishful thinkers may say about economic recovery, we're not there yet.
Tuesday, May 14, 2013
Portents
News items:
-- The European Union is in "disrepute across much of Europe," according to a Pew Research report.
-- In the United Kingdom, the right-wing Independence Party, which favors England for the English and wants to restrict immigration, has gained a significant local election victory.
-- In Hungary, there is growing antipathy toward Jews and Roma (gypsies).
-- In Germany, Turkish immigrants continue to face discrimination.
-- Scotland may opt out of the EU and the euro as it moves toward independence from England.
-- France is facing recession.
The "prolonged economic crisis" in Europe, says the Pew report, is "pulling European public opinion apart," with the southern members -- Spain, Italy and Greece -- "becoming ever more estranged" from the rest.
All of this is reflected in a public opinion poll, released Monday (May 13), showing a favorability drop of 15 percentage points in just one year, from 60 percent approval of the EU in 2012 to 45 percent in 2013.
In addition, there is growing suspicion -- if not fear -- of German dominance of what started as the European Economic Community and has grown over the years to developing tendencies toward banking and political union.
So the question becomes: Can the union stand the stress?
Our Dublin correspondent reports that "the bigger economies still have the belief that they can throw their weight around," preventing smaller nations such as Ireland offering tax breaks to corporations that relocate. And with their greater flexibility, the smaller nations will be better able to deal with change, since they are already used to conforming to requirements of larger European banking systems.
In the meantime, the UK is not going to join the euro zone and may even leave the EU. Scotland may withdraw from the UK and there have been calls within Scotland for the formation of a common Sterling area.
All in all, the portents are not good, as recessionary forces roll through Europe and threaten to untie the bonds that brought large measures of economic union throughout much of the continent.
Such turmoil may even bring a return of isolationist sentiments to America. It wouldn't be the first time that some folk thought they could rely on the wide waves of the Atlantic Ocean to insulate America from European problems.
-- The European Union is in "disrepute across much of Europe," according to a Pew Research report.
-- In the United Kingdom, the right-wing Independence Party, which favors England for the English and wants to restrict immigration, has gained a significant local election victory.
-- In Hungary, there is growing antipathy toward Jews and Roma (gypsies).
-- In Germany, Turkish immigrants continue to face discrimination.
-- Scotland may opt out of the EU and the euro as it moves toward independence from England.
-- France is facing recession.
The "prolonged economic crisis" in Europe, says the Pew report, is "pulling European public opinion apart," with the southern members -- Spain, Italy and Greece -- "becoming ever more estranged" from the rest.
All of this is reflected in a public opinion poll, released Monday (May 13), showing a favorability drop of 15 percentage points in just one year, from 60 percent approval of the EU in 2012 to 45 percent in 2013.
In addition, there is growing suspicion -- if not fear -- of German dominance of what started as the European Economic Community and has grown over the years to developing tendencies toward banking and political union.
So the question becomes: Can the union stand the stress?
Our Dublin correspondent reports that "the bigger economies still have the belief that they can throw their weight around," preventing smaller nations such as Ireland offering tax breaks to corporations that relocate. And with their greater flexibility, the smaller nations will be better able to deal with change, since they are already used to conforming to requirements of larger European banking systems.
In the meantime, the UK is not going to join the euro zone and may even leave the EU. Scotland may withdraw from the UK and there have been calls within Scotland for the formation of a common Sterling area.
All in all, the portents are not good, as recessionary forces roll through Europe and threaten to untie the bonds that brought large measures of economic union throughout much of the continent.
Such turmoil may even bring a return of isolationist sentiments to America. It wouldn't be the first time that some folk thought they could rely on the wide waves of the Atlantic Ocean to insulate America from European problems.
Monday, May 13, 2013
Standalone Economy
As economies in other nations decline, U.S. export sales will suffer, and producers will have to find new markets or lower their prices -- domestic and international -- to make up for lost sales.
Moreover, even if international trade collapses, the American economy will be bruised, but not to the extent some predict. Big as it is, however, America no longer has a standalone economy. Fruit and vegetable markets, for instance, are international, and money moves through financial channels with Internet speed.
So if (or when) the euro falls, the U.S. dollar will strengthen its role as a safe haven for investors and the super-wealthy. Meanwhile, a drop in gold prices may be a sign that the Big Bucks Crew see an economic turnaround in the offing, so they are willing to put their money into growth projects
Moreover, even if international trade collapses, the American economy will be bruised, but not to the extent some predict. Big as it is, however, America no longer has a standalone economy. Fruit and vegetable markets, for instance, are international, and money moves through financial channels with Internet speed.
So if (or when) the euro falls, the U.S. dollar will strengthen its role as a safe haven for investors and the super-wealthy. Meanwhile, a drop in gold prices may be a sign that the Big Bucks Crew see an economic turnaround in the offing, so they are willing to put their money into growth projects
Saturday, May 11, 2013
Buzzword Bombast
Correlation is not causation
"Growth friendly fiscal consolidation" is the latest euphemism for austerity, and it is only a variation on the Phillips Curve, propounded in 1958 by British economist A.W.H. Phillips. He found "a consistent inverse relationship" between unemployment and wages, and, as noted by Kevin Hoover in the online Concise Encyclopedia of Economics, "when unemployment was high, wages increased slowly; when unemployment was low, wages rose rapidly."
Phillips' observation, while correct, was seized on by others and extended to a more general use, applying the correlation to a more general tradeoff between price inflation and unemployment. Phillips noted that as wages go up, unemployment goes down. Therefore, his followers reasoned, the way to increase employment and the overall economy would be to accelerate inflation.
The flaw in the reasoning, however, is that while the two -- wage inflation and unemployment -- move in opposite directions, that phenomenon cannot be extended to the overall economy. Why? Because there are other factors involved, and correlation does not equal causation.
While it is true that as demand for labor increases, wages tend to rise as employers compete for workers, extending that wage increase as cause for an overall price increase and thus an improving economy is a stretch. That didn't stop some folks from proclaiming that inflation is good for the economy. What they did was to put cause and effect backwards.
In textbook economics, every input and product follows the Law of Supply and Demand, including labor. So when demand for labor rises, firms offer higher wages to attract workers. Conversely, according to the textbook, when demand for labor declines during a recession, wages decline as firms act to cut costs. However, that doesn't happen because wages tend to be "sticky" -- they don't go down in response to lower demand. Union contracts and employer promises are two reasons, and worker refusal is another. In addition, unemployment compensation programs enable workers to wait for job openings with pay scales more in line with their experience and qualifications. Management does have the option, however, of reducing the work force by laying off workers. This is not the same as cutting individual wages.
The modern term "fiscal consolidation" is the latest buzzword for cutting costs, and the wishful thinkers have tied it to the term "growth friendly." In their dreams, "growth friendly fiscal consolidation" means this: The government spends less, so the economy grows more.
The Phillips Curve was bent and extrapolated to support a claim that the phenomenon that explains one relationship -- employment and wage inflation -- would also explain the larger issue of overall inflation and economic growth.
It's the anti-stimulus. Spend less and the economy grows more.
But what are the repercussions of government cuts? There is widespread talk of reducing Social Security pensions as a way for the government to save money. However, this means that millions of seniors will be unable to pay rent and may become homeless. In turn, management will lose rent revenue as apartments go empty. As management loses revenue, maintenance personnel are laid off. Lack of income leads to fewer grocery purchases by workers as well as tenants.
The One Percenters won't worry, of course, because their incomes are high enough as to be unaffected, and they will actually benefit from lower prices and the willingness of workers to take new jobs, even at lower pay -- sticky wages notwithstanding.
"Growth friendly fiscal consolidation" is the latest euphemism for austerity, and it is only a variation on the Phillips Curve, propounded in 1958 by British economist A.W.H. Phillips. He found "a consistent inverse relationship" between unemployment and wages, and, as noted by Kevin Hoover in the online Concise Encyclopedia of Economics, "when unemployment was high, wages increased slowly; when unemployment was low, wages rose rapidly."
Phillips' observation, while correct, was seized on by others and extended to a more general use, applying the correlation to a more general tradeoff between price inflation and unemployment. Phillips noted that as wages go up, unemployment goes down. Therefore, his followers reasoned, the way to increase employment and the overall economy would be to accelerate inflation.
The flaw in the reasoning, however, is that while the two -- wage inflation and unemployment -- move in opposite directions, that phenomenon cannot be extended to the overall economy. Why? Because there are other factors involved, and correlation does not equal causation.
While it is true that as demand for labor increases, wages tend to rise as employers compete for workers, extending that wage increase as cause for an overall price increase and thus an improving economy is a stretch. That didn't stop some folks from proclaiming that inflation is good for the economy. What they did was to put cause and effect backwards.
In textbook economics, every input and product follows the Law of Supply and Demand, including labor. So when demand for labor rises, firms offer higher wages to attract workers. Conversely, according to the textbook, when demand for labor declines during a recession, wages decline as firms act to cut costs. However, that doesn't happen because wages tend to be "sticky" -- they don't go down in response to lower demand. Union contracts and employer promises are two reasons, and worker refusal is another. In addition, unemployment compensation programs enable workers to wait for job openings with pay scales more in line with their experience and qualifications. Management does have the option, however, of reducing the work force by laying off workers. This is not the same as cutting individual wages.
The modern term "fiscal consolidation" is the latest buzzword for cutting costs, and the wishful thinkers have tied it to the term "growth friendly." In their dreams, "growth friendly fiscal consolidation" means this: The government spends less, so the economy grows more.
The Phillips Curve was bent and extrapolated to support a claim that the phenomenon that explains one relationship -- employment and wage inflation -- would also explain the larger issue of overall inflation and economic growth.
It's the anti-stimulus. Spend less and the economy grows more.
But what are the repercussions of government cuts? There is widespread talk of reducing Social Security pensions as a way for the government to save money. However, this means that millions of seniors will be unable to pay rent and may become homeless. In turn, management will lose rent revenue as apartments go empty. As management loses revenue, maintenance personnel are laid off. Lack of income leads to fewer grocery purchases by workers as well as tenants.
The One Percenters won't worry, of course, because their incomes are high enough as to be unaffected, and they will actually benefit from lower prices and the willingness of workers to take new jobs, even at lower pay -- sticky wages notwithstanding.
Thursday, May 9, 2013
The Petulance of Privilege
Here's a circular argument for you. The wealthy elite are a better class of people because they are wealthy.
We would like to think that the arrogance of the wealthy would be long gone from a supposedly democratic society.
We would like to think that. But too often, that's not the case, especially with the newly wealthy. It often takes several generations for the arrogance to wear off. In old-money families, young folk grow up with it, so there's little to prove, and they are far easier to get along with. New-money folk aren't used to it yet, so many believe they are owed respect simply because they are wealthy. Old-money folk know that respect must be earned; it cannot be bought.
Members of the Petulant Class believe that their status alone, as members of the wealthy one percent, entitles them to special benefits and special treatment, and they are surprised and insulted when they don't get it.
It's an old attitude, widely prevalent in the 19th Century and personified by those who resented those -- especially union organizers -- who worked for better conditions. Industrialists at the time felt they knew what was right and appropriate, so the workers in the lesser classes should behave themselves and do what they were told.
In the 1930s, similar arguments were made in opposition to unemployment insurance and government-sponsored pensions for retired workers. Union organizers faced often violent opposition to their claims that workers deserved a livable wage and a safe environment.
Unfortunately, that attitude is still found today. It was, and is, an argument based on class and little else. It's an assumption based on this: The wealthy are a better class of people because they are wealthy. And the poor are poor because they deserve to be poor. Some even invoked a divinity to endorse their argument.
It is a supreme arrogance to presume to know what God wants for other people.
We would like to think that the arrogance of the wealthy would be long gone from a supposedly democratic society.
We would like to think that. But too often, that's not the case, especially with the newly wealthy. It often takes several generations for the arrogance to wear off. In old-money families, young folk grow up with it, so there's little to prove, and they are far easier to get along with. New-money folk aren't used to it yet, so many believe they are owed respect simply because they are wealthy. Old-money folk know that respect must be earned; it cannot be bought.
Members of the Petulant Class believe that their status alone, as members of the wealthy one percent, entitles them to special benefits and special treatment, and they are surprised and insulted when they don't get it.
It's an old attitude, widely prevalent in the 19th Century and personified by those who resented those -- especially union organizers -- who worked for better conditions. Industrialists at the time felt they knew what was right and appropriate, so the workers in the lesser classes should behave themselves and do what they were told.
In the 1930s, similar arguments were made in opposition to unemployment insurance and government-sponsored pensions for retired workers. Union organizers faced often violent opposition to their claims that workers deserved a livable wage and a safe environment.
Unfortunately, that attitude is still found today. It was, and is, an argument based on class and little else. It's an assumption based on this: The wealthy are a better class of people because they are wealthy. And the poor are poor because they deserve to be poor. Some even invoked a divinity to endorse their argument.
It is a supreme arrogance to presume to know what God wants for other people.
Ponderings
Idle thoughts for brief moments.
Failure to feed public education starves society.
Gold fever leaves a headache.
He must be brilliant; I didn't understand a word he said.
If you sound like you know what you're talking about, people will assume you do.
Satire to one is sacrilege to another.
Parody to one is blasphemy to another.
Patriotism to one is treason to another.
One country's freedom fighter is another nation's rebel.
No one is immune from criticism.
Never assume.
Trust but verify.
Hypocrisy is the prime human failing.
If you have to ask, the answer is No.
Failure to feed public education starves society.
Gold fever leaves a headache.
He must be brilliant; I didn't understand a word he said.
If you sound like you know what you're talking about, people will assume you do.
Satire to one is sacrilege to another.
Parody to one is blasphemy to another.
Patriotism to one is treason to another.
One country's freedom fighter is another nation's rebel.
No one is immune from criticism.
Never assume.
Trust but verify.
Hypocrisy is the prime human failing.
If you have to ask, the answer is No.
Wednesday, May 8, 2013
Endangered Specie
Unless member nations of the European Union agree to strengthen its banking system, the euro -- and perhaps the entire union -- may fall apart.
An extinct euro, however, won't be the end of the world, but it will open the financial system to some chaos as the various nation-states resume issuing their own currency and re-establish a banking system to accommodate international trade.
One purpose of the European Union in the first place was to take down barriers to interstate trade throughout Europe, but unlike America in 1789, Europe did not set up a strong enough central administration to resolve financial issues.
There's an off chance that may change, however, as officials try again for a unified banking system. Whether that may happen is another story. As it is, troubled banks don't have a central source to go to to help them out, or to prevent them from getting into trouble in the first place.
Given the adversarial history of various nations, it's no surprise that there's a lot of resentment and suspicion toward one nation getting too much influence of the system.
In the U.S., of course, the Founders realized early on that the Articles of Confederation was too loose a system, and the thirteen original states were too competitive with each other. That's why the Constitution was put in place, giving a federal government a stronger role, even as there were restrictions on it. Even so, America had, and still has, a unity of culture and language -- with all its flaws -- lacking in Europe.
Meanwhile, the infighting continues, albeit with some hopeful signals. This week, the New York Times reported that senior officials warned "it would be dangerous to delay moving ahead with a banking union." As it is, not all members follow the same protocol for dealing with failing banks, and there should be a standard procedure for dealing with troubled banks.
Will it happen? Will there be a stronger central government and banking system? Or will old rivalries and suspicions block the dream of a unified Europe?
An extinct euro, however, won't be the end of the world, but it will open the financial system to some chaos as the various nation-states resume issuing their own currency and re-establish a banking system to accommodate international trade.
One purpose of the European Union in the first place was to take down barriers to interstate trade throughout Europe, but unlike America in 1789, Europe did not set up a strong enough central administration to resolve financial issues.
There's an off chance that may change, however, as officials try again for a unified banking system. Whether that may happen is another story. As it is, troubled banks don't have a central source to go to to help them out, or to prevent them from getting into trouble in the first place.
Given the adversarial history of various nations, it's no surprise that there's a lot of resentment and suspicion toward one nation getting too much influence of the system.
In the U.S., of course, the Founders realized early on that the Articles of Confederation was too loose a system, and the thirteen original states were too competitive with each other. That's why the Constitution was put in place, giving a federal government a stronger role, even as there were restrictions on it. Even so, America had, and still has, a unity of culture and language -- with all its flaws -- lacking in Europe.
Meanwhile, the infighting continues, albeit with some hopeful signals. This week, the New York Times reported that senior officials warned "it would be dangerous to delay moving ahead with a banking union." As it is, not all members follow the same protocol for dealing with failing banks, and there should be a standard procedure for dealing with troubled banks.
Will it happen? Will there be a stronger central government and banking system? Or will old rivalries and suspicions block the dream of a unified Europe?
Tuesday, May 7, 2013
Word Games
What's the penalty for advertisers who tout an "authentic reproduction"? Or for those who claim their food product has "real ingredients"?
The first reaction is that there are such things as reproductions that are not authentic, or ingredients that are somehow false.
The latest buzzword calling for "fiscal responsibility" is often a synonym for "skinflint," or those who demand austerity for others, but not for themselves.
Punishment for a wayward liberal: A 24/7 continuous loop of Rush Limbaugh diatribes.
Why did a home-made bomb become an "improvised explosive device"? And what is an "enemy combatant" if not a soldier for the opposition? Answer: To imply that the other side does not deserve the hint of legitimacy that the traditional terms have. For that matter, no one ever did explain what is a "weapon of mass destruction." But it sounds more dangerous than guns and bombs.
Political types "engage in dialogue" rather than talk. It sounds so much more sophisticated.
The first reaction is that there are such things as reproductions that are not authentic, or ingredients that are somehow false.
The latest buzzword calling for "fiscal responsibility" is often a synonym for "skinflint," or those who demand austerity for others, but not for themselves.
Punishment for a wayward liberal: A 24/7 continuous loop of Rush Limbaugh diatribes.
Why did a home-made bomb become an "improvised explosive device"? And what is an "enemy combatant" if not a soldier for the opposition? Answer: To imply that the other side does not deserve the hint of legitimacy that the traditional terms have. For that matter, no one ever did explain what is a "weapon of mass destruction." But it sounds more dangerous than guns and bombs.
Political types "engage in dialogue" rather than talk. It sounds so much more sophisticated.
Monday, May 6, 2013
Austerity vs Supply Side
Supply side economics: If you make it, they will buy.
In your dreams.
"Everybody wants more money, right?" -- TV commercial
It's ironic that austerians fail to see the consequences of cutting demand, even as the doctrinarians preach increased supply.
Supply side economic theory still dominates GOP thinking (if those last two words don't constitute an oxymoron). In a way, supply side theory is behind the Federal Reserve Board's "quantitative easing" policy of increasing the supply of money. Increase the available cash supply to entice borrowers to invest and expand, and to raise their spending.
In turn, as producers make more stuff, consumers buy more stuff.
Except that it's not working. The money supply is increasing, but prices are steady. And it remains a question as to where that extra cash is going. Increased wages? More jobs? Offshore bank accounts for the One Percenters?
So which comes first? Supply or Demand? Chicken or Egg? Put as much stuff on the market as you like, but if no one wants it or can't afford it, there are no sales.
It's one thing to increase the supply of money, but what does that do to increase the demand for money? Sure, everybody wants more money, and in a theoretically perfect world, demand and supply counterbalance each other and, as the textbooks put it, "the market clears."
That may be true in a perfect world at a moment in time, but we don't live in a perfect world and we can't stop time.
Another worry is that inflating the amount of money available results in higher prices. But that's not happening, either, even as the Fed -- in its latest move -- says it add $85 billion a month to the U.S. money supply.
Yet another fear is based on the "rational expectations" theory, which says that people are rational, and assumes that they always act rationally. Second assumption: Everyone has equal access to information that could move a market. Third assumption: Accessible information is complete. Fourth assumption, and perhaps the most heroic of all, is the ceteris paribus assumption, that other things are and remain equal -- that none change while the various parties act rationally on the complete and accurate information that everyone has.
Theoretically, and assuming all premises are correct, no one gains an advantage.
Dream on.
Interest rates are at historic lows and headed downward. Yet companies are not investing in new equipment and expanding production, which would "normally" be the case as they take advantage of cheap borrowing costs. Apple is drowning in cash, yet rather than borrow money to expand, it is borrowing cheap money to pass on to shareholders, rather than dole it out from company cash accounts. Why? They get a better tax break.
It's a variation on the "liquidity trap" described decades ago by economist John Maynard Keynes: People and companies hold onto cash rather than spend it, waiting for prices to go down further, or firms stall investment for expansion, citing low demand.
And so around we go.
In your dreams.
"Everybody wants more money, right?" -- TV commercial
It's ironic that austerians fail to see the consequences of cutting demand, even as the doctrinarians preach increased supply.
Supply side economic theory still dominates GOP thinking (if those last two words don't constitute an oxymoron). In a way, supply side theory is behind the Federal Reserve Board's "quantitative easing" policy of increasing the supply of money. Increase the available cash supply to entice borrowers to invest and expand, and to raise their spending.
In turn, as producers make more stuff, consumers buy more stuff.
Except that it's not working. The money supply is increasing, but prices are steady. And it remains a question as to where that extra cash is going. Increased wages? More jobs? Offshore bank accounts for the One Percenters?
So which comes first? Supply or Demand? Chicken or Egg? Put as much stuff on the market as you like, but if no one wants it or can't afford it, there are no sales.
It's one thing to increase the supply of money, but what does that do to increase the demand for money? Sure, everybody wants more money, and in a theoretically perfect world, demand and supply counterbalance each other and, as the textbooks put it, "the market clears."
That may be true in a perfect world at a moment in time, but we don't live in a perfect world and we can't stop time.
Another worry is that inflating the amount of money available results in higher prices. But that's not happening, either, even as the Fed -- in its latest move -- says it add $85 billion a month to the U.S. money supply.
Yet another fear is based on the "rational expectations" theory, which says that people are rational, and assumes that they always act rationally. Second assumption: Everyone has equal access to information that could move a market. Third assumption: Accessible information is complete. Fourth assumption, and perhaps the most heroic of all, is the ceteris paribus assumption, that other things are and remain equal -- that none change while the various parties act rationally on the complete and accurate information that everyone has.
Theoretically, and assuming all premises are correct, no one gains an advantage.
Dream on.
Interest rates are at historic lows and headed downward. Yet companies are not investing in new equipment and expanding production, which would "normally" be the case as they take advantage of cheap borrowing costs. Apple is drowning in cash, yet rather than borrow money to expand, it is borrowing cheap money to pass on to shareholders, rather than dole it out from company cash accounts. Why? They get a better tax break.
It's a variation on the "liquidity trap" described decades ago by economist John Maynard Keynes: People and companies hold onto cash rather than spend it, waiting for prices to go down further, or firms stall investment for expansion, citing low demand.
And so around we go.
Friday, May 3, 2013
A New Normal?
"Always look on the bright side of life." -- Monty Python
The unemployment rate in the U.S. hardly moved in April, the government said Friday, but media proclaimed it the lowest in five years. Both are true, so take your choice. At 7.5 percent, the rate was down four-tenths of a point from January, when it was 7.9 percent -- a good change from the double-digit rate of a couple of years ago, but how good is it, really, compared to some years when it was below 5 percent?
There was a time when economists said a rate of about 6 percent constituted "full employment" -- whatever that is. But after several years of the rate being below 5 percent, academics began to question just what an "acceptable" rate would be. That is, there will always be some unemployment, as students enter the workforce, or women return to the workforce after children grow to school age, or workers quit to find a better job. All this in addition to the more noteworthy reasons of being laid off or fired.
But the Bureau of Labor Statistics also reported that the labor force participation rate -- the number of people who actually have jobs -- has barely moved. At 63.3 percent in April, it too was down from the January rate, but by only three-tenths of a point.
So both the participation rate and the unemployment rate are down by less than half a point. Some 63 percent of people of working age actually have jobs, and the unemployment rate is holding fairly steady at about 7.5 percent.
That does not compute, you say? Of course not, because the figures are calculated differently, using different sets of data and different methods. Remember that the unemployment figure does not count students, the sick, prisoners or the military, or people who have given up looking. This number can be dramatic, because being unemployed can be disastrous, not only to individuals and families, but to the overall economy. The labor force participation rate, however, has barely moved from the mid-60 percent for years.
Something that doesn't move, however, does not a news story make.
Meanwhile, the European Central Bank cut its lending rate to 0.5 percent -- its lowest ever -- in an effort to boot the economy. This is still higher than the 0.25 percent the Federal Reserve charges its borrowers.
So there are still some cross winds to cope with as the world economy tries to work its way upstream. The question now becomes, how long will these conditions hold, and is this a new normal?
The unemployment rate in the U.S. hardly moved in April, the government said Friday, but media proclaimed it the lowest in five years. Both are true, so take your choice. At 7.5 percent, the rate was down four-tenths of a point from January, when it was 7.9 percent -- a good change from the double-digit rate of a couple of years ago, but how good is it, really, compared to some years when it was below 5 percent?
There was a time when economists said a rate of about 6 percent constituted "full employment" -- whatever that is. But after several years of the rate being below 5 percent, academics began to question just what an "acceptable" rate would be. That is, there will always be some unemployment, as students enter the workforce, or women return to the workforce after children grow to school age, or workers quit to find a better job. All this in addition to the more noteworthy reasons of being laid off or fired.
But the Bureau of Labor Statistics also reported that the labor force participation rate -- the number of people who actually have jobs -- has barely moved. At 63.3 percent in April, it too was down from the January rate, but by only three-tenths of a point.
So both the participation rate and the unemployment rate are down by less than half a point. Some 63 percent of people of working age actually have jobs, and the unemployment rate is holding fairly steady at about 7.5 percent.
That does not compute, you say? Of course not, because the figures are calculated differently, using different sets of data and different methods. Remember that the unemployment figure does not count students, the sick, prisoners or the military, or people who have given up looking. This number can be dramatic, because being unemployed can be disastrous, not only to individuals and families, but to the overall economy. The labor force participation rate, however, has barely moved from the mid-60 percent for years.
Something that doesn't move, however, does not a news story make.
Meanwhile, the European Central Bank cut its lending rate to 0.5 percent -- its lowest ever -- in an effort to boot the economy. This is still higher than the 0.25 percent the Federal Reserve charges its borrowers.
So there are still some cross winds to cope with as the world economy tries to work its way upstream. The question now becomes, how long will these conditions hold, and is this a new normal?
Wednesday, May 1, 2013
Stunted Growth
"Fiscal policy is restraining economic growth" and there are still "downside risks to the economic outlook," the Federal Reserve Board says, so it will continue pumping some $85 billion a month into the nation's financial system "to support a stronger economic recovery."
The statement, by the Fed's Open Market Committee and released May 1, said its monetary policy should keep interest rates down as the Fed buys up mortgage-backed securities at $40 billion a month, and Treasury securities at $45 billion a month.
The economy "has been expanding at a moderate pace," the Fed said, but not as well as it could because of "fiscal policy." This is a more than subtle hint to the government that increased spending, not austerity, is needed to spur employment, even as the unemployment rate "remains elevated."
For years, policy makers have focused on lowering the unemployment rate, on the assumption that its colleague data point, employment, or actual jobs, would follow. One does not, however, beget the other. Each figure is determined by a different method, so that pushing down on one (the unemployment rate), will not necessarily drive up the other (total employment).
Counting the number of people actually working is a lot easier, as companies submit payroll figures. Calculating the unemployment rate, however, is harder, because it's based on a telephone survey and estimated, using statistical techniques. This figure counts only those ready, willing, able and actively seeking work. The survey does not count students, those in prison, in hospitals or in the military, because they are not considered part of the workforce. Also not included are discouraged workers, or those who are not "actively seeking work."
So the jobless rate calculates the percentage of those available for work and actively seeking work, compared to the total workforce. And since the rate is compiled from separate data sets -- the telephone survey and the estimate of total workers -- it is at best a guesstimate. Nevertheless, the unemployment rate is useful, especially in spotting trends, but it is variable in a monthly survey. It may be a poor set of numbers, but meanwhile, it's the only set we've got, so policy makers have to work with it until something better comes along.
One big theory touted by opponents of government intervention is that government bond sales, or borrowing money to fund projects, will "crowd out" private investment for economic growth.
True enough, as far as it goes. But, as with so many other things, it doesn't always go very far. In theory, competition in the bond market provides a safer haven in government bonds than in private corporations, and often also provides a higher return. So if the government can offer more safety, less risk and higher returns than the private sector, given the choice, bond buyers would surely go to government securities.
During economic downturns, however, investors don't always have that choice, since there are fewer corporate bonds available, and at lower returns. Consequently, government cannot "crowd out" something that isn't there. Rather, government is offering product to satisfy demand, because the normal supply has diminished.
In effect, that's what the Fed is doing now -- buying bonds to put more cash into circulation because private sector investors are not. Buying mortgage-backed securities will free up that cash for more home building, and purchasing Treasury securities will provide the Administration with the cash needed to start projects and kickstart job growth. That's what they mean by fiscal policy "restraining economic growth."
Taken as a whole, it seems the emphasis is changing from simply lowering the unemployment rate and letting job growth take care of itself, to generating more jobs, and this will encourage those out of work to return to looking. And while the jobs numbers are not great, they do provide some information to help guide policy makers in deciding how to help those who need help.
The statement, by the Fed's Open Market Committee and released May 1, said its monetary policy should keep interest rates down as the Fed buys up mortgage-backed securities at $40 billion a month, and Treasury securities at $45 billion a month.
The economy "has been expanding at a moderate pace," the Fed said, but not as well as it could because of "fiscal policy." This is a more than subtle hint to the government that increased spending, not austerity, is needed to spur employment, even as the unemployment rate "remains elevated."
For years, policy makers have focused on lowering the unemployment rate, on the assumption that its colleague data point, employment, or actual jobs, would follow. One does not, however, beget the other. Each figure is determined by a different method, so that pushing down on one (the unemployment rate), will not necessarily drive up the other (total employment).
Counting the number of people actually working is a lot easier, as companies submit payroll figures. Calculating the unemployment rate, however, is harder, because it's based on a telephone survey and estimated, using statistical techniques. This figure counts only those ready, willing, able and actively seeking work. The survey does not count students, those in prison, in hospitals or in the military, because they are not considered part of the workforce. Also not included are discouraged workers, or those who are not "actively seeking work."
So the jobless rate calculates the percentage of those available for work and actively seeking work, compared to the total workforce. And since the rate is compiled from separate data sets -- the telephone survey and the estimate of total workers -- it is at best a guesstimate. Nevertheless, the unemployment rate is useful, especially in spotting trends, but it is variable in a monthly survey. It may be a poor set of numbers, but meanwhile, it's the only set we've got, so policy makers have to work with it until something better comes along.
One big theory touted by opponents of government intervention is that government bond sales, or borrowing money to fund projects, will "crowd out" private investment for economic growth.
True enough, as far as it goes. But, as with so many other things, it doesn't always go very far. In theory, competition in the bond market provides a safer haven in government bonds than in private corporations, and often also provides a higher return. So if the government can offer more safety, less risk and higher returns than the private sector, given the choice, bond buyers would surely go to government securities.
During economic downturns, however, investors don't always have that choice, since there are fewer corporate bonds available, and at lower returns. Consequently, government cannot "crowd out" something that isn't there. Rather, government is offering product to satisfy demand, because the normal supply has diminished.
In effect, that's what the Fed is doing now -- buying bonds to put more cash into circulation because private sector investors are not. Buying mortgage-backed securities will free up that cash for more home building, and purchasing Treasury securities will provide the Administration with the cash needed to start projects and kickstart job growth. That's what they mean by fiscal policy "restraining economic growth."
Taken as a whole, it seems the emphasis is changing from simply lowering the unemployment rate and letting job growth take care of itself, to generating more jobs, and this will encourage those out of work to return to looking. And while the jobs numbers are not great, they do provide some information to help guide policy makers in deciding how to help those who need help.
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