http://online.wsj.com/article/SB10001424052970203893404577100861639601898.html?mod=WSJ_Opinion_LEADTop
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"A good idea can become a great idea when it is given focus time." (John C. Maxwell)
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The WSJ points out today that the congressional debate about whether the "tax holiday" will continue (yawn) has just gotten more interesting: House Republicans are putting a policy rider in the payroll tax bill which would force a decision on the Keystone XL pipeline within 60 days.
This is their response to President Obama's "decision" to delay a decision until after the general election next year (probably 2013) as to whether to approve (the pipeline).
This is a decision that sat for three years in the Secretary of State's office and was finally approved with 59 provisos (like burying the pipe 4' under the ground) all of which Keystone agreed to. Keystone is a private company in Canada: could we be getting oil from a better (or closer) place? Who are we worried about, Al Gore?
According to most experts, this is the most shovel-ready project in America and the TransCanada company (Keystone's parent) has already made plans to buy the steel pipe to carry crude oil from Canada thru the U.S. to the Gulf of Mexico. This pipeline will create jobs. That's why even the Teamsters support it!
But, as the WSJ so aptly points out, "Mr. Obama's green financiers see the pipeline as a conveyer of evil carbon."
Again, the WSJ: "To give Mr. Obama a spinal implant, the House passed a provision that would give TransCanada a permit to start building in 60 days if the President does nothing. He can still kill the pipeline if he objects. But at least Hamlet of Pennsylvania Avenue would have to make up his mind."
The Keystone codicil is now being negotiated in the Senate where at least eight Democrats have said publicly they hope the project goes forward.
I would agree with those who say that Mr. Obama is probably not willing to see the payroll tax holiday die in the name of stopping a pipeline that will create more jobs.
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On a much less noticed subject, but important to those of us who live in North Texas, another provision passed by the House would give companies 5 years to comply with the EPA's onerous "boiler rule." That rule would impose vast costs on industries that burn oil or coal, such as manufacturers and utilities.
Here in North Texas, it would cost less to shut down a coal-fired power plant (some claim) than to comply with the new rules. My first problem with that is that the people in charge of the power grid warn us that we could lose power in peak load times/days. But, isn't that just when we need the power. So, we'll shut down some power plants: what will that do? Does it take a rocket scientist to answer that question?
My second problem with that is, oh well, China and India: they are building 4 coal-fired power plants per week!!! So, we're going to cause unemployment (and power shortages) in North Texas because of some possibly polluted air that we might be sending to Louisiana? So, what are we doing about China and India?
There are answers here: the U.S. has found major supplies of gas here and elsewhere. That makes gas cheaper. Provide government tax incentives to convert coal plants to gas. Save jobs, improve productivity - do something smart.
Senator Susan Collins (R. Maine) introduced a bill in July telling the EPA to repropose the "boiler rule" in less costly form. That bill has 40 co-sponsors. Maybe there's some "hope."
Friday, December 16, 2011
Wednesday, December 14, 2011
The Sustainable Capitalism Manifesto
http://online.wsj.com/article/SB10001424052970203430404577092682864215896.html?mod=WSJ_Opinion_LEADTop
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"When failure isn't an option, nothing serves a person better than strategic thinking." (John C. Maxwell)
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It's so nice to have Al Gore back. This time we have the "Sustainable Capitalism Manifesto!" This, of course, is how businesses can "embrace" environmental, social and governmental metrics. And, we can do all this at once! This must be how you win a Nobel!
I can't wait for Al's next movie!
But first Al has to show us why we need this thinking: we have "disruptive threats" facing the planet. Those would be climate change (somebody tell Al the the climate has been changing for the last 20,000 years and that it has actually "cooled" for the better part of the first ten years of the 21st century, but I digress), water scarcity, poverty, disease, growing income inequality, urbanization, massive economic volatility and more.
Al has the answers for all this: "sustainable capitalism." You see, this is "...a framework that seeks to maximize long-term economic value by reforming markets to address real needs while integrating environmental, social and governance (ESG) metrics throughout the decision-making process." All I need is another acronym to try to remember. Fortunately, I don't need to remember this one.
According to Al, this concept transcends borders, industries, asset classes and stakeholders. That's one way to look at it. Another would be great companies do the right thing about environment anyway. What a concept!
Al recommends 5 key actions companies should take (I recommend just one: don't pay any attention to Al). The first of those "actions" is to evaluate "stranded assets." Of course, this concept requires a definition: those (assets) whose value would dramatically change, either positively or negatively, when large externalities are taken into account - for example, attributing a reasonable price to carbon or water. I'm sure that current GAAP accounting rules would cover that, just as they did for Enron's creative efforts. Perhaps Al could sell this approach in China where their equivalent of U.S. GAAP accounting is "CRAAP" accounting (really!). Based on some of China's business practices, there might be flexibility there. But, I think Al would have trouble with the fact that, between China and India, they're building 4 coal-fired power plants per week.
I'd explain the rest of the "5 key actions" but I don't want to waste time (the article is attached). Unfortunately, I have to agree with one of Al's recommendations: "End the default practice of issuing quarterly earnings reports." We should all be in this for long term value creation and he's right about that.
I'm anxiously waiting for Al's next big pronouncement.
***************
"When failure isn't an option, nothing serves a person better than strategic thinking." (John C. Maxwell)
***************
It's so nice to have Al Gore back. This time we have the "Sustainable Capitalism Manifesto!" This, of course, is how businesses can "embrace" environmental, social and governmental metrics. And, we can do all this at once! This must be how you win a Nobel!
I can't wait for Al's next movie!
But first Al has to show us why we need this thinking: we have "disruptive threats" facing the planet. Those would be climate change (somebody tell Al the the climate has been changing for the last 20,000 years and that it has actually "cooled" for the better part of the first ten years of the 21st century, but I digress), water scarcity, poverty, disease, growing income inequality, urbanization, massive economic volatility and more.
Al has the answers for all this: "sustainable capitalism." You see, this is "...a framework that seeks to maximize long-term economic value by reforming markets to address real needs while integrating environmental, social and governance (ESG) metrics throughout the decision-making process." All I need is another acronym to try to remember. Fortunately, I don't need to remember this one.
According to Al, this concept transcends borders, industries, asset classes and stakeholders. That's one way to look at it. Another would be great companies do the right thing about environment anyway. What a concept!
Al recommends 5 key actions companies should take (I recommend just one: don't pay any attention to Al). The first of those "actions" is to evaluate "stranded assets." Of course, this concept requires a definition: those (assets) whose value would dramatically change, either positively or negatively, when large externalities are taken into account - for example, attributing a reasonable price to carbon or water. I'm sure that current GAAP accounting rules would cover that, just as they did for Enron's creative efforts. Perhaps Al could sell this approach in China where their equivalent of U.S. GAAP accounting is "CRAAP" accounting (really!). Based on some of China's business practices, there might be flexibility there. But, I think Al would have trouble with the fact that, between China and India, they're building 4 coal-fired power plants per week.
I'd explain the rest of the "5 key actions" but I don't want to waste time (the article is attached). Unfortunately, I have to agree with one of Al's recommendations: "End the default practice of issuing quarterly earnings reports." We should all be in this for long term value creation and he's right about that.
I'm anxiously waiting for Al's next big pronouncement.
Tuesday, December 13, 2011
Global Warming Wash Out
http://online.wsj.com/article/SB10001424052970203518404577094081344492356.html?grcc=3613e2dde038d8c460e062470151dc46Z3&mod=WSJ_hps_sections_opinion
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"When you reflect, you are able to put an experience into perspective." (John C. Maxwell)
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The subtitle to today's WSJ editorial on "global warming" is: "The Kyoto Protocol can now be ignored for another 5 years." As global warming conferences go, the one that ended Sunday in Durban, South Africa was "...by common consensus..." a wash out.
What emerged from the meeting was an agreement to extend the Protocol (never ratified by the U.S.) to 2017. Russia and Japan have said they'll ignore the extension. Yesterday, Canada said it is quitting Kyoto entirely.
The WSJ editors interpret the latest activities post-Durban as creating an extended agreement that Europe has made with itself.
The Durban meeting produced promises from China, the U.S. and India to "develop a new protocol, another legal instrument or agreed outcome with legal force" by 2015, and to implement that by 2020. Rich countries are supposed to provide poor ones with $100 billion a year as of 2020 for climate mitigation. But Durban offered few details as to how that fund might be collected or disbursed.
Seriously.
I wouldn't hold my breath for the U.S. to fork over any portion of that $100 billion when the clock strikes 2020. Besides, what does that fix?
I'm guessing that what the U.N. was looking for in those meetings was a strong deal to cut carbon emissions. Assuming that such a deal could occur, Bjorn Lomborg points out that a 50% cut in emissions below 1990 levels by 2050 - an extremely unrealistic scenario - would produce a difference in temperature of 0.2 degrees Fahrenheit by 2050.
Enough with the math and carbon capping. Lomborg points out that we can begin to fix carbon emissions smartly thru technological innovation. His perspective: adaption is the key.
According to Exxon's energy outlook, coal use will begin to drop by 2025 (in the developing countries where it is most used), and hybrid vehicles will move from the margins of the market to the mainstream (40% market share) sometime after 2030. Overall fuel efficiency will grow from 27 miles per gallon in 2010 to 48 mpg in 2040. This will lead to a flattening of fuel demand in passenger cars despite a doubling of the fleet to 1.6 billion by 2040.
It would appear that reasonable future projections of energy use have more potential impact than any carbon capping approach which most countries can't agree on anyway.
While I'm sure Al Gore can shed some light on all of this, I won't bet a Nobel on it.
***************
"When you reflect, you are able to put an experience into perspective." (John C. Maxwell)
***************
The subtitle to today's WSJ editorial on "global warming" is: "The Kyoto Protocol can now be ignored for another 5 years." As global warming conferences go, the one that ended Sunday in Durban, South Africa was "...by common consensus..." a wash out.
What emerged from the meeting was an agreement to extend the Protocol (never ratified by the U.S.) to 2017. Russia and Japan have said they'll ignore the extension. Yesterday, Canada said it is quitting Kyoto entirely.
The WSJ editors interpret the latest activities post-Durban as creating an extended agreement that Europe has made with itself.
The Durban meeting produced promises from China, the U.S. and India to "develop a new protocol, another legal instrument or agreed outcome with legal force" by 2015, and to implement that by 2020. Rich countries are supposed to provide poor ones with $100 billion a year as of 2020 for climate mitigation. But Durban offered few details as to how that fund might be collected or disbursed.
Seriously.
I wouldn't hold my breath for the U.S. to fork over any portion of that $100 billion when the clock strikes 2020. Besides, what does that fix?
I'm guessing that what the U.N. was looking for in those meetings was a strong deal to cut carbon emissions. Assuming that such a deal could occur, Bjorn Lomborg points out that a 50% cut in emissions below 1990 levels by 2050 - an extremely unrealistic scenario - would produce a difference in temperature of 0.2 degrees Fahrenheit by 2050.
Enough with the math and carbon capping. Lomborg points out that we can begin to fix carbon emissions smartly thru technological innovation. His perspective: adaption is the key.
According to Exxon's energy outlook, coal use will begin to drop by 2025 (in the developing countries where it is most used), and hybrid vehicles will move from the margins of the market to the mainstream (40% market share) sometime after 2030. Overall fuel efficiency will grow from 27 miles per gallon in 2010 to 48 mpg in 2040. This will lead to a flattening of fuel demand in passenger cars despite a doubling of the fleet to 1.6 billion by 2040.
It would appear that reasonable future projections of energy use have more potential impact than any carbon capping approach which most countries can't agree on anyway.
While I'm sure Al Gore can shed some light on all of this, I won't bet a Nobel on it.
Monday, December 12, 2011
2011 Global Energy Forecast
http://online.wsj.com/article/SB10001424052970203501304577084594165136990.html?KEYWORDS=Exxon+Declares+Gas+King
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"What we are is God's gift to us. What we become is our gift to God." (Eleanore Powell)
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Exxon puts together an energy forecast each year that is very closely watched. There are several reasons for this but the most important one is that they are usually right. When you're spending $25 billion per year for oil/gas exploration and related needs, you have to have a good batting average.
When all the security analysts were predicting in 2009 that Exxon needed to buy another oil company in order to shore up their oil reserve "replacement rate" (a critical indicator that security analysts watch closely), they bought a gas company (XTO: a natural-gas business costing them $25 billion) in 2010, much to the surprise of the "experts."
This year's forecast came out last week and it indicates that global energy demand will grow about 30% by 2040 as the world population climbs from 7 billion to 9 billion people.
The forecast goes on to indicate that coal use will continue to grow thru 2025 primarily in developing nations such as China, India and the African continent (because economic growth is the fastest there). But, for the first time in history, coal use will start to drop after that date because of growing demand for fuels that produce fewer greenhouse gases and a decline in China's population expected after 2030.
One of the headline projections from Exxon's forecast is that (again, by 2040) oil imports from OPEC nations will be reduced to nearly 1 million barrels per day (or, as the report has been characterized: OPEC oil imports to the U.S. will "...nearly vanish.").
The report goes on to predict that hybrid vehicles will move from the margins of the market to the mainstream by 2040: basically from 1% today to 40% in 2040.
Last, the forecast predicts that, in spite of a "doubling" of the worldwide fleet of passenger cars to 1.6 billion in 2040, fuel demand will flatten because average mileage will grow from 27 mpg today to 48 mpg by the end of the period.
There's some good news here and that's refreshing.
***************
"What we are is God's gift to us. What we become is our gift to God." (Eleanore Powell)
***************
Exxon puts together an energy forecast each year that is very closely watched. There are several reasons for this but the most important one is that they are usually right. When you're spending $25 billion per year for oil/gas exploration and related needs, you have to have a good batting average.
When all the security analysts were predicting in 2009 that Exxon needed to buy another oil company in order to shore up their oil reserve "replacement rate" (a critical indicator that security analysts watch closely), they bought a gas company (XTO: a natural-gas business costing them $25 billion) in 2010, much to the surprise of the "experts."
This year's forecast came out last week and it indicates that global energy demand will grow about 30% by 2040 as the world population climbs from 7 billion to 9 billion people.
The forecast goes on to indicate that coal use will continue to grow thru 2025 primarily in developing nations such as China, India and the African continent (because economic growth is the fastest there). But, for the first time in history, coal use will start to drop after that date because of growing demand for fuels that produce fewer greenhouse gases and a decline in China's population expected after 2030.
One of the headline projections from Exxon's forecast is that (again, by 2040) oil imports from OPEC nations will be reduced to nearly 1 million barrels per day (or, as the report has been characterized: OPEC oil imports to the U.S. will "...nearly vanish.").
The report goes on to predict that hybrid vehicles will move from the margins of the market to the mainstream by 2040: basically from 1% today to 40% in 2040.
Last, the forecast predicts that, in spite of a "doubling" of the worldwide fleet of passenger cars to 1.6 billion in 2040, fuel demand will flatten because average mileage will grow from 27 mpg today to 48 mpg by the end of the period.
There's some good news here and that's refreshing.
Saturday, December 3, 2011
8.6% Unemployment
http://www.nytimes.com/2011/12/03/business/economy/us-adds-120000-jobs-unemployment-drops-to-8-6.html?nl=todaysheadlines&emc=tha2
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"It is very dangerous to go into eternity with possibilities which one has oneself prevented from becoming realities. A possibility is a hint from God. One must follow it." (Soren Kierkegaard)
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I want to contain my enthusiasm about the .4% drop in the new unemployment report. It's nice that it went down (from 9%) and not up but that's about it. Show me some big time capital spending from the Top 500 here in the U.S. on projects "in" the U.S., and maybe I'll start to get excited.
The short answer to why the rate dropped is that 300,000 plus people stopped looking for a job. That's not a real good reason for excitement about why an unemployment rate drops.
Then there's the upbeat 120,000 jobs were created (last month) data. All that does is barely keep up with monthly new entrants into the workforce (usually 125,000 to 135,000).
Usually, these data are revised at least twice after they are initially reported so the good news could, indeed, be revised right out, but we'll see.
I'm thinking as I post this about, "Do these economists really have any idea what they're evaluating?" Back a few years ago, I was struck by an interview with Dr. James K. Galbraith (yes, he is the son of a very famous father), a very prominent member of the faculty at the Lyndon B. Johnson School (University of Texas), who said that, of the 15,000 or so professional economists in the U.S., maybe 10 or 12 predicted the worldwide financial crisis (I can think of only one: Nouriel Roubini).
The Bureau of Labor Statistics "U-6" unemployment rate is a much broader category and covers people who have given up looking for a job, are working part-time but want full-time employment, etc. The U-6 dropped .6% last month. That is much more significant and, if it doesn't get "revised" out of existence this month, could mean something. It has been 16.5%. It's now 15.6%.
The reason for that new number (15.6%) is the "big drop" last month in the "number of people working part-time and would prefer full-time work" category. That's an awkward name for a category but it's got an important reason for its drop: that new lower number could reflect people having their hours increased or part-time workers moving on to full-time work.
If this trend continues in the U-6 unemployment rate, it's significant.
Floyd Norris pointed out in the NY Times this week, "As it is, there are many who reacted to the job numbers as Michael Darda of MKM Partners did this morning (12/2):
'While the economic data have been better of late, we remain concerned that we are seeing a bounce back from a series of supply shocks earlier in the year that may not be sustained against the foliage [is that an economic term?] of tighter financial conditions, a deep recession in Europe and a sharp slowdown in China and emerging market countries [too many "ands"]."
If I'm reading the "foliage" right, something good could be happening.
***************
"It is very dangerous to go into eternity with possibilities which one has oneself prevented from becoming realities. A possibility is a hint from God. One must follow it." (Soren Kierkegaard)
***************
I want to contain my enthusiasm about the .4% drop in the new unemployment report. It's nice that it went down (from 9%) and not up but that's about it. Show me some big time capital spending from the Top 500 here in the U.S. on projects "in" the U.S., and maybe I'll start to get excited.
The short answer to why the rate dropped is that 300,000 plus people stopped looking for a job. That's not a real good reason for excitement about why an unemployment rate drops.
Then there's the upbeat 120,000 jobs were created (last month) data. All that does is barely keep up with monthly new entrants into the workforce (usually 125,000 to 135,000).
Usually, these data are revised at least twice after they are initially reported so the good news could, indeed, be revised right out, but we'll see.
I'm thinking as I post this about, "Do these economists really have any idea what they're evaluating?" Back a few years ago, I was struck by an interview with Dr. James K. Galbraith (yes, he is the son of a very famous father), a very prominent member of the faculty at the Lyndon B. Johnson School (University of Texas), who said that, of the 15,000 or so professional economists in the U.S., maybe 10 or 12 predicted the worldwide financial crisis (I can think of only one: Nouriel Roubini).
The Bureau of Labor Statistics "U-6" unemployment rate is a much broader category and covers people who have given up looking for a job, are working part-time but want full-time employment, etc. The U-6 dropped .6% last month. That is much more significant and, if it doesn't get "revised" out of existence this month, could mean something. It has been 16.5%. It's now 15.6%.
The reason for that new number (15.6%) is the "big drop" last month in the "number of people working part-time and would prefer full-time work" category. That's an awkward name for a category but it's got an important reason for its drop: that new lower number could reflect people having their hours increased or part-time workers moving on to full-time work.
If this trend continues in the U-6 unemployment rate, it's significant.
Floyd Norris pointed out in the NY Times this week, "As it is, there are many who reacted to the job numbers as Michael Darda of MKM Partners did this morning (12/2):
'While the economic data have been better of late, we remain concerned that we are seeing a bounce back from a series of supply shocks earlier in the year that may not be sustained against the foliage [is that an economic term?] of tighter financial conditions, a deep recession in Europe and a sharp slowdown in China and emerging market countries [too many "ands"]."
If I'm reading the "foliage" right, something good could be happening.
Wednesday, November 30, 2011
Facebook's Pressure to IPO
http://dealbook.nytimes.com/2011/11/29/facebook-may-be-forced-to-go-public-amid-market-gloom/?emc=eta1
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"It isn't what people think that is important, but the reason they think what they think." (Eugene Ionesco)
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As the folks at "DealBook" pointed out today, Facebook my have to IPO in April, 2012 whether the IPO market is good by then or not.
Two major events are causing this.
Long-time employees have been exercising their options and selling their shares in large quantities on private markets. New shareholders count toward the 500 investor threshold that the SEC uses for requiring public reporting of key data.
In addition, the January deal where Facebook arranged to sell $1.5 billion in shares through Goldman Sachs to new investors has pushed the SEC to see an implication that a vehicle created to sell to multiple investors but only count as "one" investment unit of the 500 SEC limit stretches credulity. Still Facebook is required only to begin reporting and filing information with the SEC at the end of April. The company is not legally required to go public and list shares at that time. Of course, if a company is going to be subject to much of the regulation that comes with being public, they might as well go ahead with an IPO and get the full benefits of being public.
In 2004, Google had the same problem.
Facebook should go public early next year but those who see their valuation potential at $100 billion might be disappointed.
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"It isn't what people think that is important, but the reason they think what they think." (Eugene Ionesco)
***************
As the folks at "DealBook" pointed out today, Facebook my have to IPO in April, 2012 whether the IPO market is good by then or not.
Two major events are causing this.
Long-time employees have been exercising their options and selling their shares in large quantities on private markets. New shareholders count toward the 500 investor threshold that the SEC uses for requiring public reporting of key data.
In addition, the January deal where Facebook arranged to sell $1.5 billion in shares through Goldman Sachs to new investors has pushed the SEC to see an implication that a vehicle created to sell to multiple investors but only count as "one" investment unit of the 500 SEC limit stretches credulity. Still Facebook is required only to begin reporting and filing information with the SEC at the end of April. The company is not legally required to go public and list shares at that time. Of course, if a company is going to be subject to much of the regulation that comes with being public, they might as well go ahead with an IPO and get the full benefits of being public.
In 2004, Google had the same problem.
Facebook should go public early next year but those who see their valuation potential at $100 billion might be disappointed.
Saturday, November 19, 2011
Positive Indicators
http://jubakpicks.com/2011/11/18/economists-raise-forecasts-for-fourth-quarter-u-s-growth-and-heres-why/?utm_source=Jubak+Alert&utm_medium=email&utm_campaign=41b21cfbf6-RSS_EMAIL_CAMPAIGN
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"We throw all our attention on the utterly idle question whether A has done as well as B, when the only question is whether A has done as well as he could." (William Graham Sumner)
***************
Speaking of "potential," it's nice to see somebody as good as Jim Jubak writing about positive economic indicators.
Jubak's perspective is that economists continue to increase their projections for U.S. economic growth in the fourth quarter of 2011 despite the euro debt crisis. He refers to the Conference Board's Index of Leading Economic Indicators which climbed 0.9% in October. That's the biggest jump since February.
JPMorgan Chase has raised its forecast for 4th quarter U.S. growth to 3% (from 2.5%).
Actual data on building permits was much stronger than forecast at 10.8% versus the 1.5% predicted.
So, Jubak asks, why is U.S. economic growth accelerating when the EuroZone is in a crisis that is pointing to a recession in 2012? According to Jubak, it largely has to do with U.S. exports. While places like Germany export 41% of GDP, the U.S. exports 11% of GDP. As everybody knows, the U.S. economy depends on the U.S. consumer.
And, even if this is a short term thing, it's good news.
What would be good long term is to do something about the home building overhang created by the worldwide financial crisis. I'm so glad that Tim Geithner decided to save Citigroup (a monstrosity that by it's very make-up begged to be taken apart) even though he was outvoted on the president's economic council (a "vote" which included president Obama). The money that saved the banks could have been targeted at saving mortgages and tightened up a market that included multiple home buying speculators (destroy the houses if they're empty and unsold); reduce the principle in mortgages that existed in markets that cratered; engage experts in the housing area (Shiller, perhaps) to talk about "where" to spend the wasted Citigroup money. When the housing market comes back, "home equity" comes back. When home equity comes back, consumer spending comes back.
(Just a quick aside on Citigroup: we, the taxpayers, bail them out and with millions of dollars of the bail out money, Citigroup pays "lobbyists" to work on striking down any new laws that would limit their freedom to do what they do. Really.)
Now, as to 2012, just tell me how many cars are going to be sold (the auto companies project each month) for the year. Then tell me the rate of sale of previously owned homes on a percentage basis, projected. Then tell me the projected unemployment rate for 2012 (the standard, currently 9% rate often quoted and the "real", or U6 rate, roughly 16.5% right now). Give me approximations and I'll tell you what the economy is going to do.
Since I see no sign that anything is going to happen beyond the short term euphoria that Jim Jubak and I share, I could easily see another 4 or 5 years of slow or no growth in the U.S. economy. By that time, Tim Geithner will be "presiding" as vice chairman of Citi and pontificating about important banking issues.
***************
"We throw all our attention on the utterly idle question whether A has done as well as B, when the only question is whether A has done as well as he could." (William Graham Sumner)
***************
Speaking of "potential," it's nice to see somebody as good as Jim Jubak writing about positive economic indicators.
Jubak's perspective is that economists continue to increase their projections for U.S. economic growth in the fourth quarter of 2011 despite the euro debt crisis. He refers to the Conference Board's Index of Leading Economic Indicators which climbed 0.9% in October. That's the biggest jump since February.
JPMorgan Chase has raised its forecast for 4th quarter U.S. growth to 3% (from 2.5%).
Actual data on building permits was much stronger than forecast at 10.8% versus the 1.5% predicted.
So, Jubak asks, why is U.S. economic growth accelerating when the EuroZone is in a crisis that is pointing to a recession in 2012? According to Jubak, it largely has to do with U.S. exports. While places like Germany export 41% of GDP, the U.S. exports 11% of GDP. As everybody knows, the U.S. economy depends on the U.S. consumer.
And, even if this is a short term thing, it's good news.
What would be good long term is to do something about the home building overhang created by the worldwide financial crisis. I'm so glad that Tim Geithner decided to save Citigroup (a monstrosity that by it's very make-up begged to be taken apart) even though he was outvoted on the president's economic council (a "vote" which included president Obama). The money that saved the banks could have been targeted at saving mortgages and tightened up a market that included multiple home buying speculators (destroy the houses if they're empty and unsold); reduce the principle in mortgages that existed in markets that cratered; engage experts in the housing area (Shiller, perhaps) to talk about "where" to spend the wasted Citigroup money. When the housing market comes back, "home equity" comes back. When home equity comes back, consumer spending comes back.
(Just a quick aside on Citigroup: we, the taxpayers, bail them out and with millions of dollars of the bail out money, Citigroup pays "lobbyists" to work on striking down any new laws that would limit their freedom to do what they do. Really.)
Now, as to 2012, just tell me how many cars are going to be sold (the auto companies project each month) for the year. Then tell me the rate of sale of previously owned homes on a percentage basis, projected. Then tell me the projected unemployment rate for 2012 (the standard, currently 9% rate often quoted and the "real", or U6 rate, roughly 16.5% right now). Give me approximations and I'll tell you what the economy is going to do.
Since I see no sign that anything is going to happen beyond the short term euphoria that Jim Jubak and I share, I could easily see another 4 or 5 years of slow or no growth in the U.S. economy. By that time, Tim Geithner will be "presiding" as vice chairman of Citi and pontificating about important banking issues.
Friday, November 18, 2011
The Keystone XL Pipeline
http://online.wsj.com/article/SB10001424052970204323904577040430486060086.ht
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"You will never change your life until you change something you do daily. The secret of your success is found in your daily routine." (John C. Maxwell from William Tansey)
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There are two very interesting articles in the WSJ today. One is by Peggy Noonan on the seriousness of a president (or presidential candidate). The other is by Daniel Henninger on the president abandoning labor (by delaying the Keystone XL pipeline). The Henninger article is attached (although, with the WSJ, I never know whether their ace "member policy" is going to limit the reader's view - I'm a "member" but the articles I attach from them are sometimes not complete because they are capitalists, or incompetent).
The Henninger article refers to president Obama's decision to delay building the Keystone XL pipeline as an abandonment of private labor. It's interesting that the state department delayed a decision on the new pipeline for three years and then, only after Keystone agreed to 59 modifications to their plan, agreed to support it. I believe that the president has delayed the pipeline decision to 2013 (year end? I don't really know).
In any case, the promise of blue collar jobs (Henninger names numbers/others name other numbers) is now out the window for two reasons: first, the jobs will at least not be there for another 18 months, and two, they probably will not be there at all because no private company is going to wait on such ridiculous delays. All Keystone has to do is direct the oil to Canada's west coast and sell it to China. To quote Henninger: "Meanwhile the American president shores up his environmental base in Hollywood and on campus. Perhaps our blue-collar workforce should consider emigrating to Canada."
What happened to our quest for more energy independence, or less dependence on unfriendly foreign sources? At 171 billion barrels (roughly) of oil reserves, Canada now ranks up there with Saudi Arabia. And, of course, Canada is right here and is (or was) friendly.
So, blue collar jobs (those that would be building the pipeline and, of course, the significant number of indirect jobs that would be created by that spending) are not important to president Obama. And, adding to our oil supplies is not important to the president. Then, it must be "votes." That's it, "votes." But here I must suggest that a responsible president would not be thinking about a second term and it appears that president Obama is. If so, has he looked at the Republican contenders? Enough said.
So, we have the wrong decision there. Peggy Noonan, who is really writing today about Herman Cain, starts off with a wonderful digression on Steve Jobs talking to Walter Isaacson about president Obama. Jobs starts with a theory of decline of American businesses (basically, once a company becomes a great success because of a great product(s), they then begin to value "salesmen" because they need to defend market share, and the decline starts). And, the theory applies to our "politics"because we've elevated "salesmen," people good in the room, facile creatures with good people skills - above people who love the product, the product in this case being good government.
Quoting Peggy Noonan: "You might say that the rise of Barack Obama was the triumph of a certain sort of salesman. He didn't know the product, but he was good at selling an image of the product ... Jobs supported him but was frustrated by him. He met with the president last year and urged him to move forward on visas for foreign students who earned an engineering degree in the U.S. Mr. Obama blandly replied that this was covered in his comprehensive immigration bill which Republicans were holding up. Jobs: 'The president is very smart, but he kept explaining to us reasons why things can't get done.' He does that a lot. Nothing is ever shovel ready with him. But leaders tell us how things will get done, how we can move forward. They can tease a small element out of a large bill, and get it passed."
I'm sure that Peggy Noonan was thinking about Lyndon Johnson or Ronald Reagan who could both do that very thing.
But, what we have here is a president looking to buy votes on an issue that calls into question even his own political judgement: does he really think the Republican party is going to put forth a candidate who can beat him? And, does he really think he can save some of the Hollywood support who (like Jobs was) are already disillusioned?
As Daniel Yergin has pointed out in his new book ("The Quest"), the U.S. has gone from importing roughly two-thirds of it's oil 30 years ago to about 50% now thru all sorts of positive programs. And, the largest source of U.S. imports now is Canada, a far less hostile provider that didn't even exist (as a major oil producer) 30 years ago.
This is a business school blog and I don't like to talk about politics but when a president intervenes in an oil situation to the detriment of supply, it helps no one. Three years and 59 changes to the new pipeline from Canada, and it still can't get approved?
Really?
***************
"You will never change your life until you change something you do daily. The secret of your success is found in your daily routine." (John C. Maxwell from William Tansey)
***************
There are two very interesting articles in the WSJ today. One is by Peggy Noonan on the seriousness of a president (or presidential candidate). The other is by Daniel Henninger on the president abandoning labor (by delaying the Keystone XL pipeline). The Henninger article is attached (although, with the WSJ, I never know whether their ace "member policy" is going to limit the reader's view - I'm a "member" but the articles I attach from them are sometimes not complete because they are capitalists, or incompetent).
The Henninger article refers to president Obama's decision to delay building the Keystone XL pipeline as an abandonment of private labor. It's interesting that the state department delayed a decision on the new pipeline for three years and then, only after Keystone agreed to 59 modifications to their plan, agreed to support it. I believe that the president has delayed the pipeline decision to 2013 (year end? I don't really know).
In any case, the promise of blue collar jobs (Henninger names numbers/others name other numbers) is now out the window for two reasons: first, the jobs will at least not be there for another 18 months, and two, they probably will not be there at all because no private company is going to wait on such ridiculous delays. All Keystone has to do is direct the oil to Canada's west coast and sell it to China. To quote Henninger: "Meanwhile the American president shores up his environmental base in Hollywood and on campus. Perhaps our blue-collar workforce should consider emigrating to Canada."
What happened to our quest for more energy independence, or less dependence on unfriendly foreign sources? At 171 billion barrels (roughly) of oil reserves, Canada now ranks up there with Saudi Arabia. And, of course, Canada is right here and is (or was) friendly.
So, blue collar jobs (those that would be building the pipeline and, of course, the significant number of indirect jobs that would be created by that spending) are not important to president Obama. And, adding to our oil supplies is not important to the president. Then, it must be "votes." That's it, "votes." But here I must suggest that a responsible president would not be thinking about a second term and it appears that president Obama is. If so, has he looked at the Republican contenders? Enough said.
So, we have the wrong decision there. Peggy Noonan, who is really writing today about Herman Cain, starts off with a wonderful digression on Steve Jobs talking to Walter Isaacson about president Obama. Jobs starts with a theory of decline of American businesses (basically, once a company becomes a great success because of a great product(s), they then begin to value "salesmen" because they need to defend market share, and the decline starts). And, the theory applies to our "politics"because we've elevated "salesmen," people good in the room, facile creatures with good people skills - above people who love the product, the product in this case being good government.
Quoting Peggy Noonan: "You might say that the rise of Barack Obama was the triumph of a certain sort of salesman. He didn't know the product, but he was good at selling an image of the product ... Jobs supported him but was frustrated by him. He met with the president last year and urged him to move forward on visas for foreign students who earned an engineering degree in the U.S. Mr. Obama blandly replied that this was covered in his comprehensive immigration bill which Republicans were holding up. Jobs: 'The president is very smart, but he kept explaining to us reasons why things can't get done.' He does that a lot. Nothing is ever shovel ready with him. But leaders tell us how things will get done, how we can move forward. They can tease a small element out of a large bill, and get it passed."
I'm sure that Peggy Noonan was thinking about Lyndon Johnson or Ronald Reagan who could both do that very thing.
But, what we have here is a president looking to buy votes on an issue that calls into question even his own political judgement: does he really think the Republican party is going to put forth a candidate who can beat him? And, does he really think he can save some of the Hollywood support who (like Jobs was) are already disillusioned?
As Daniel Yergin has pointed out in his new book ("The Quest"), the U.S. has gone from importing roughly two-thirds of it's oil 30 years ago to about 50% now thru all sorts of positive programs. And, the largest source of U.S. imports now is Canada, a far less hostile provider that didn't even exist (as a major oil producer) 30 years ago.
This is a business school blog and I don't like to talk about politics but when a president intervenes in an oil situation to the detriment of supply, it helps no one. Three years and 59 changes to the new pipeline from Canada, and it still can't get approved?
Really?
Saturday, November 12, 2011
$100 Oil
http://www.nytimes.com/2011/10/28/business/global/shell-earnings-double-in-third-quarter.html?scp=4&sq=Oil%20Prices&st=Search
***************
"More gold has been mined from the thoughts of men than has ever been taken from the earth." (Napoleon Hill)
***************
As of Friday evening, oil was at a little over $99 per barrel (Brent Crude @ $114 plus). In the past, my thoughts were always about the negative side of prices hitting triple digits per barrel but now I'm reading continually about oil prices going back up because there is "confidence" that
something will be worked out in Europe (and I hope that's true). Or, we're avoiding a "double-dip" recession here in the U.S. (meanwhile, we never got out of the first recession!).
So, if I understand this, oil prices are going back up because "confidence" is going back up. Now it used to be that oil prices went up on a supply/demand basis. So, any potential or actual "shortage" caused prices to rise. Some "Peak Oil" advocate proving a point about potential oil shortages might spike the price. Heavy demand increases from a country like China, same thing. War in the Middle East, same thing.
Here's a thought: speculators are bidding the price of oil per barrel up because they're betting demand won't be interrupted by any issues, at least in the short term. In Nymex Oil Contract Trading (1,000 barrels per contract), the average number of contract trades before reaching a producer or consumer is "50." That's right, 50 trades before the oil reaches its destination.
Let's talk about oil use rates. According to OPEC, the final worldwide oil use rates for 2008 thru 2010 were: 86 million bpd (barrels per day), 83.5 million bpd, and 85.59 million bpd. OPEC projects 86.64 million bpd for year end 2011. This doesn't look to me like a "run on the bank."
Yet, we are approaching $100 per barrel.
Some oil analysts feel that gasoline will hit $4 at the pump by spring. Those same analysts believe that $100 per barrel oil is a key milestone, usually indicating that the economy can afford to pay those prices.
So, "happy days are here again" because oil prices are about to hit $100 per barrel? This just as Libya is coming back on line with, perhaps, 700,000 barrels per day by year end on their way back up to 1.3 to 1.6 million bpd at their max production. Libya has a somewhat disproportionate impact on oil because their light sweet crude is valued for its minimum refining costs.
Somebody wake me when oil hits $150 per barrel and we're all still positive about it.
***************
"More gold has been mined from the thoughts of men than has ever been taken from the earth." (Napoleon Hill)
***************
As of Friday evening, oil was at a little over $99 per barrel (Brent Crude @ $114 plus). In the past, my thoughts were always about the negative side of prices hitting triple digits per barrel but now I'm reading continually about oil prices going back up because there is "confidence" that
something will be worked out in Europe (and I hope that's true). Or, we're avoiding a "double-dip" recession here in the U.S. (meanwhile, we never got out of the first recession!).
So, if I understand this, oil prices are going back up because "confidence" is going back up. Now it used to be that oil prices went up on a supply/demand basis. So, any potential or actual "shortage" caused prices to rise. Some "Peak Oil" advocate proving a point about potential oil shortages might spike the price. Heavy demand increases from a country like China, same thing. War in the Middle East, same thing.
Here's a thought: speculators are bidding the price of oil per barrel up because they're betting demand won't be interrupted by any issues, at least in the short term. In Nymex Oil Contract Trading (1,000 barrels per contract), the average number of contract trades before reaching a producer or consumer is "50." That's right, 50 trades before the oil reaches its destination.
Let's talk about oil use rates. According to OPEC, the final worldwide oil use rates for 2008 thru 2010 were: 86 million bpd (barrels per day), 83.5 million bpd, and 85.59 million bpd. OPEC projects 86.64 million bpd for year end 2011. This doesn't look to me like a "run on the bank."
Yet, we are approaching $100 per barrel.
Some oil analysts feel that gasoline will hit $4 at the pump by spring. Those same analysts believe that $100 per barrel oil is a key milestone, usually indicating that the economy can afford to pay those prices.
So, "happy days are here again" because oil prices are about to hit $100 per barrel? This just as Libya is coming back on line with, perhaps, 700,000 barrels per day by year end on their way back up to 1.3 to 1.6 million bpd at their max production. Libya has a somewhat disproportionate impact on oil because their light sweet crude is valued for its minimum refining costs.
Somebody wake me when oil hits $150 per barrel and we're all still positive about it.
Friday, November 11, 2011
"Poor Economics"
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2871#.Tr1mMAI2Dow.email
***************
"Vision begins with one person, but it is only accomplished by many people." (John C. Maxwell)
***************
The K@W interview with the authors of "Poor Economics" provides an insight into the kinds of things that can work to raise people out of poverty around the world. Their book has just been named the 2011 Financial Times Goldman Sachs Business Book of the Year. The authors are baffled about how a book about finding and thinking of ways to end global poverty gets a business award. I'm not.
The interesting central point of their book is that there isn't a single answer to alleviating poverty. There is no single action that is going to solve the problem of poverty. However; there are some crucial steps. Educating children is one of them. Health care for the poor is another.
So, for example, if a child doesn't learn to read or acquire basic math skills by age 13 or 14, then the entire effort is worthless.
"Poverty" itself has different definitions depending of the country or the goals for alleviating it. The Indian Planning Commission has set the poverty line at 65 cents a day. But, versus Purchasing Power Parity, that number becomes $1.72. However; measuring poverty financially is not what's important to the authors - fixing poverty is. What works is what the authors want to find and chronicle.
Overall, the "three villains" of efforts to eradicate poverty are: ideology, ignorance and inertia. And the three problem interfaces are the expert, the aid worker and the local policy maker. In India, there are many good NGOs doing excellent work. So, some things work and some things don't.
The "Poverty Action Lab" that the authors founded in 2003, focuses on what works. Right now, researchers are engaged in 240 experiments across 40 countries.
Interestingly, the authors point out that slowing growth in the West is a huge problem for growing countries like India, China, Bangladesh and Pakistan which rely on servicing those markets.
It looks like an interesting book. It was certainly an interesting interview.
***************
"Vision begins with one person, but it is only accomplished by many people." (John C. Maxwell)
***************
The K@W interview with the authors of "Poor Economics" provides an insight into the kinds of things that can work to raise people out of poverty around the world. Their book has just been named the 2011 Financial Times Goldman Sachs Business Book of the Year. The authors are baffled about how a book about finding and thinking of ways to end global poverty gets a business award. I'm not.
The interesting central point of their book is that there isn't a single answer to alleviating poverty. There is no single action that is going to solve the problem of poverty. However; there are some crucial steps. Educating children is one of them. Health care for the poor is another.
So, for example, if a child doesn't learn to read or acquire basic math skills by age 13 or 14, then the entire effort is worthless.
"Poverty" itself has different definitions depending of the country or the goals for alleviating it. The Indian Planning Commission has set the poverty line at 65 cents a day. But, versus Purchasing Power Parity, that number becomes $1.72. However; measuring poverty financially is not what's important to the authors - fixing poverty is. What works is what the authors want to find and chronicle.
Overall, the "three villains" of efforts to eradicate poverty are: ideology, ignorance and inertia. And the three problem interfaces are the expert, the aid worker and the local policy maker. In India, there are many good NGOs doing excellent work. So, some things work and some things don't.
The "Poverty Action Lab" that the authors founded in 2003, focuses on what works. Right now, researchers are engaged in 240 experiments across 40 countries.
Interestingly, the authors point out that slowing growth in the West is a huge problem for growing countries like India, China, Bangladesh and Pakistan which rely on servicing those markets.
It looks like an interesting book. It was certainly an interesting interview.
Krugman On Solar
http://www.nytimes.com/2011/11/07/opinion/krugman-here-comes-solar-energy.html?hp
***************
"We cannot hold a torch to light another's path without brightening our own." (Ben Sweetland)
***************
Paul Krugman put in a plug this week for solar power. I think he's early.
But, before we get to solar, I want to make sure I reference his digression into hydraulic fracturing (fracking): injecting high-pressure fluid into rocks deep underground which, of course, releases fossil fuels. Here's what Krugman says we know fracking does: it produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater; and heavy trucking required for fracking inflicts major damage on roads. To Krugman, no industry should be held harmless from its impacts on the environment and the nation's infrastructure.
OK. But here's the thing: Daniel Yergin, who is a Pulitzer Prize winning author on the oil industry and a member of the Secretary of Energy's commission which will report on shale production to President Obama, takes the position that "best practices" and a caring approach to the environment can mitigate many of the concerns currently expressed. According to Yergin, shale gas is now 30% of U.S. natural gas production.
Krugman's overall point, though, is that "solar" is closer than we think and much "cleaner." Krugman, the economist, accurately points out that the Solyndra failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn't keep up with the competition (here, I would add that, while I'm no expert, the China "competition" is highly subsidized). He also points out that there appears to be a developing solar version of "Moore's Law" where prices are dropping at a rate of 7% per year.
At this point, Krugman begins to compare the costs of solar with coal. But, later on at his blog site, he makes some qualifications to his euphoria. This is good because people like Dr. Michio Kaku, a theoretical physicist, and author of the long awaited 2011 book "Physics of the Future" (which, among other components, involved interviews with 16 Nobel Prize winners on the science of the future) has observed that solar cells are not efficient (with efficiency hovering at around 15%). For example, right now one might be able to supply the electrical needs of the United States by covering the entire state of Arizona with solar cells.
Daniel Yergin's committee reported to President Obama yesterday that government and industry aren't moving quickly enough to mitigate the environmental impact of shale gas drilling and production. The committee also faulted the Environmental Protection Agency for not including scrutiny of methane emissions by drillers in a proposed set of rules covering air pollution by the oil and gas industry. This report was a "draft" of the final report which will be produced in November but it's a "heads up" call for the overall energy debate.
So Krugman has some points about what he doesn't like but he needs to temper his euphoria about what he does like.
Interestingly, Dr. Kaku points out that while Europe has been the leader over the last few decades in wind technology, the U.S. has overtaken Europe in generating electricity from wind. Texas alone produces 8 billion watts from wind power. If the Texas plan continues, the state will produce 50 billion watts of electrical power from wind, more than enough to satisfy the state's 24 million people. Just like other sources, wind power faces its own limitations: intermittentcy, loss of power in transmission, and battery storage to name a few.
Yergin ties all this up neatly in his new book ("The Quest") when he refers to wind and solar: they are still small when measured against the scale of the power business. They still need to demonstrate that they can provide large-scale reliable electricity competitively. By 2030, hydrocarbons will still be 75 to 80 percent of what's used to generate electricity.
But things can change. Again Yergin: the largest source of U.S. oil imports is a resource that did not even exist on a commercial basis in the 1970s - Canadian oil sands.
We'll see.
***************
"We cannot hold a torch to light another's path without brightening our own." (Ben Sweetland)
***************
Paul Krugman put in a plug this week for solar power. I think he's early.
But, before we get to solar, I want to make sure I reference his digression into hydraulic fracturing (fracking): injecting high-pressure fluid into rocks deep underground which, of course, releases fossil fuels. Here's what Krugman says we know fracking does: it produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater; and heavy trucking required for fracking inflicts major damage on roads. To Krugman, no industry should be held harmless from its impacts on the environment and the nation's infrastructure.
OK. But here's the thing: Daniel Yergin, who is a Pulitzer Prize winning author on the oil industry and a member of the Secretary of Energy's commission which will report on shale production to President Obama, takes the position that "best practices" and a caring approach to the environment can mitigate many of the concerns currently expressed. According to Yergin, shale gas is now 30% of U.S. natural gas production.
Krugman's overall point, though, is that "solar" is closer than we think and much "cleaner." Krugman, the economist, accurately points out that the Solyndra failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn't keep up with the competition (here, I would add that, while I'm no expert, the China "competition" is highly subsidized). He also points out that there appears to be a developing solar version of "Moore's Law" where prices are dropping at a rate of 7% per year.
At this point, Krugman begins to compare the costs of solar with coal. But, later on at his blog site, he makes some qualifications to his euphoria. This is good because people like Dr. Michio Kaku, a theoretical physicist, and author of the long awaited 2011 book "Physics of the Future" (which, among other components, involved interviews with 16 Nobel Prize winners on the science of the future) has observed that solar cells are not efficient (with efficiency hovering at around 15%). For example, right now one might be able to supply the electrical needs of the United States by covering the entire state of Arizona with solar cells.
Daniel Yergin's committee reported to President Obama yesterday that government and industry aren't moving quickly enough to mitigate the environmental impact of shale gas drilling and production. The committee also faulted the Environmental Protection Agency for not including scrutiny of methane emissions by drillers in a proposed set of rules covering air pollution by the oil and gas industry. This report was a "draft" of the final report which will be produced in November but it's a "heads up" call for the overall energy debate.
So Krugman has some points about what he doesn't like but he needs to temper his euphoria about what he does like.
Interestingly, Dr. Kaku points out that while Europe has been the leader over the last few decades in wind technology, the U.S. has overtaken Europe in generating electricity from wind. Texas alone produces 8 billion watts from wind power. If the Texas plan continues, the state will produce 50 billion watts of electrical power from wind, more than enough to satisfy the state's 24 million people. Just like other sources, wind power faces its own limitations: intermittentcy, loss of power in transmission, and battery storage to name a few.
Yergin ties all this up neatly in his new book ("The Quest") when he refers to wind and solar: they are still small when measured against the scale of the power business. They still need to demonstrate that they can provide large-scale reliable electricity competitively. By 2030, hydrocarbons will still be 75 to 80 percent of what's used to generate electricity.
But things can change. Again Yergin: the largest source of U.S. oil imports is a resource that did not even exist on a commercial basis in the 1970s - Canadian oil sands.
We'll see.
China's Real Estate Shaky?
http://www.nytimes.com/2011/11/11/business/global/government-policies-cool-china-real-estate-boom.html
****************
"Most people are more satisfied with old problems then committed to finding new solutions" (John C. Maxwell)
***************
There are people who have predicted that China's real estate "bubble" will burst and with it, the Chinese economy.
Whether that's true or not, the New York Times report this week that ads have grown on the Internet for unfinished apartments at up to 28% off the price at which developers were selling them a few months ago, is worthy of note. China's government wants to deflate the bubble without causing a crash and has implemented policies like pushing up interest rates and setting limits on bank lending that will slow inflation and inhibit speculators' efforts to borrow money.
As the Times points out, Premier Wen Jiabao said Sunday that the government had no intention of letting up on these policies until prices fall to a more reasonable level.
Economists at Barclays Capital suggested in a research note on Tuesday that the Chinese government might start reversing policies if the fall in real estate prices reaches 20%.
We'll see.
****************
"Most people are more satisfied with old problems then committed to finding new solutions" (John C. Maxwell)
***************
There are people who have predicted that China's real estate "bubble" will burst and with it, the Chinese economy.
Whether that's true or not, the New York Times report this week that ads have grown on the Internet for unfinished apartments at up to 28% off the price at which developers were selling them a few months ago, is worthy of note. China's government wants to deflate the bubble without causing a crash and has implemented policies like pushing up interest rates and setting limits on bank lending that will slow inflation and inhibit speculators' efforts to borrow money.
As the Times points out, Premier Wen Jiabao said Sunday that the government had no intention of letting up on these policies until prices fall to a more reasonable level.
Economists at Barclays Capital suggested in a research note on Tuesday that the Chinese government might start reversing policies if the fall in real estate prices reaches 20%.
We'll see.
Friday, October 28, 2011
Positive Economic News
http://www.nytimes.com/2011/10/28/business/economy/us-economy-shows-modest-growth.html?_r=1&nl=todaysheadlines&emc=tha2
***************
"It ain't brilliant, but at least it's heading in the right direction." (Ian Shepherdson - Economist - on U.S. economic growth in the most recent quarter)
***************
It's always nice to hear positive economic news: any GDP growth news that cites a movement from 1.3% last quarter to 2.5% (3rd quarter initial) is good news.
Consumers spending more (for whatever the reason) on health care and utilities is much needed. Business investing more is the key to future growth. In the case of business spending, the software part worries me because that's often a substitute for re-employing people or doing the same job with fewer workers. That makes Larry Ellison happy but not the rest of the economy. Businesses spending more on vehicles (part of the current growth) is capital spending which is good, period.
As Ian Shepherdson, chief United States economist for High Frequency Economics, says "I want to see 4%, but given that people were talking about a new recession, I'll take 2.5 or 3." Then, there's the sobering perspective that this level of growth does nothing to reduce unemployment.
Real income is declining, housing prices are stalled and home sales in September were down for the third consecutive month. Personal disposable income (adjusted for inflation) fell 1.7% in the third quarter, its biggest drop since the third quarter of 2009.
So, we need to hear from "Dr. Doom" about this. Nouriel Roubini, chairman and co-founder of Roubini Global Economics, said he expects that the new 3rd quarter growth estimate will be revised downward to 1%. There goes Dr. Doom. He's always bursting the bubble of "hope."
Whatever the interpretation of the "data" implies, it doesn't appear to be "negative" GDP growth. That's something positive.
***************
"It ain't brilliant, but at least it's heading in the right direction." (Ian Shepherdson - Economist - on U.S. economic growth in the most recent quarter)
***************
It's always nice to hear positive economic news: any GDP growth news that cites a movement from 1.3% last quarter to 2.5% (3rd quarter initial) is good news.
Consumers spending more (for whatever the reason) on health care and utilities is much needed. Business investing more is the key to future growth. In the case of business spending, the software part worries me because that's often a substitute for re-employing people or doing the same job with fewer workers. That makes Larry Ellison happy but not the rest of the economy. Businesses spending more on vehicles (part of the current growth) is capital spending which is good, period.
As Ian Shepherdson, chief United States economist for High Frequency Economics, says "I want to see 4%, but given that people were talking about a new recession, I'll take 2.5 or 3." Then, there's the sobering perspective that this level of growth does nothing to reduce unemployment.
Real income is declining, housing prices are stalled and home sales in September were down for the third consecutive month. Personal disposable income (adjusted for inflation) fell 1.7% in the third quarter, its biggest drop since the third quarter of 2009.
So, we need to hear from "Dr. Doom" about this. Nouriel Roubini, chairman and co-founder of Roubini Global Economics, said he expects that the new 3rd quarter growth estimate will be revised downward to 1%. There goes Dr. Doom. He's always bursting the bubble of "hope."
Whatever the interpretation of the "data" implies, it doesn't appear to be "negative" GDP growth. That's something positive.
Friday, October 21, 2011
Globalization Losers and Infrastructure Winners
http://www.nytimes.com/2011/10/16/opinion/sunday/lets-admit-it-globalization-has-losers.html?emc=eta1
http://economix.blogs.nytimes.com/2011/10/21/the-infrastructure-two-fer-jobs-now-and-future-growth/?emc=eta1
***************
"The immature mind hops from one thing to another; the mature mind seeks to follow through." (Harry A. Overstreet)
***************
Steven Rattner, who was the lead auto adviser to the Secretary of the Treasury when GM and Chrysler went thru bankruptcy, writes about the fact that globalization has it's losers and we need to face up to "who they are" and "where they are." He now joins Alan S. Blinder (former vice chairman of the Federal Reserve and a professor of economics at Princeton) who has been saying for years that we face a dramatic loss of jobs in what I would call the "globalization sectors" of the U.S. economy.
Both Rattner and Blinder are free trade proponents but realize that winners in free trade (created by low-priced imported goods) are producing losers. Rattner's experience with the manufacturing sector, as the head of President Obama's Auto Task Force, produced his General Motors auto perspective: a typical GM worker costs the company $56 per hour, which includes benefits. In Mexico, a worker costs the company $7 per hour; in China, $4.50 an hour, and in India $1 per hour. So, while GM doesn't (yet) achieve United States-level productivity in China and India, its Mexican plants are today at least as efficient as those in the U.S.
So, GM has responded with what Rattner describes as inarguable logic: while reducing its U.S. hourly work force to 50,000 from 89,000 over the last 5 years, it's Mexican head count has risen.
The United Auto Workers (UAW) have responded to this situation by negotiating lower hiring rates ($14 per hour) with lower benefits. Volkswagon's new plant in Chattanooga, Tenn., adds 2,000 jobs but all with a starting pay of $14.50 per hour. As Rattner so accurately points out, $30,000 is "hardly the American dream of great middle class jobs."
Rattner again: "In these troubled times, any jobs are surely welcome. But, we need to reverse the decline in incomes, and this requires a more thoughtful approach than the pervasive, politically attractive happy talk (my "caps" here) NOSTALGICALLY CENTERED ON RESTORING LOST MANUFACTURING JOBS."
So, with the role of manufacturing in the U.S. economy down over the last 50 years from 32% to 9%, Rattner's position is that we need to acknowledge that and move on. As he says, "...retreating into protectionism would turn a win-lose into a lose-lose." Germany concentrates on a strength (sophisticated machine tools) - we should too.
Overall, America's strength (besides defense and aviation) lies in service industries with high intellectual content: education, entertainment, digital media and (uh oh) financial services. Rattner is giving us suggestions - we should act on them.
So, should Washington jump in and do more (as it did with Solyndra, the failed solar energy company that wasted $535 million)? No. Washington can't even pick winning business sectors, let alone companies. Washington needs to spend it's capital where the need is more obvious - like INFRASTRUCTURE! The Kauffman Foundation, which focuses on entrepreneurship, has identified other possible solutions, including providing visas for entrepreneurs, etc.
Laura D'Andrea Tyson, who is a business professor at the Haas School of Business (UC, Berkeley) and was chairwoman of the Council of Economic Advisers under Bill Clinton, feels very strongly about infrastructure investment. Here, she joins Mark Zandi, an economists at the center of the most powerful suggestions on what to do when the U.S. was (and we could say: "still is") in the middle of the worldwide financial crisis (Zandi continues to be a "voice" in the sense that both political parties want to know what he thinks). Zandi has spoken of the multiples of spending from infrastructure that will create other jobs.
According to Tyson, the Jobs Act, which proposes about $90 billion in infrastructure spending as part of a $450 billion package of tax cuts and spending, would create about 2 million jobs. The President's Council On Jobs and Competitiveness (of which Dr. Tyson is a member) sees infrastructure investment as a "twofer" that creates jobs in the near term and promotes competitiveness and productivity in the long term. But, more than that, our bridges and roads are old and in need of repair. It's nice to know about the "multiples," but the work needs to be done anyway! The American Society of Civil Engineers indicates a 5-year gap of more than $1.1 trillion between the amount needed for maintenance and improvements of the U.S. infrastructure and the amount of public funds available for such investment.
Using Moodys and Congressional Budget Office data, $1 billion of infrastructure spending generates about a $1.6 billion increase in GDP. On a jobs ratio basis, $1 billion of government infrastructure spending creates 4,000 to 18,000 jobs.
Obviously, there have to be monitors on infrastructure spending - too often local governments spend infrastructure money on new roads and bridges instead of older roads and bridges in need of repair.
Regardless, spending on infrastructure is needed and will create jobs. How can any politician be against that?
http://economix.blogs.nytimes.com/2011/10/21/the-infrastructure-two-fer-jobs-now-and-future-growth/?emc=eta1
***************
"The immature mind hops from one thing to another; the mature mind seeks to follow through." (Harry A. Overstreet)
***************
Steven Rattner, who was the lead auto adviser to the Secretary of the Treasury when GM and Chrysler went thru bankruptcy, writes about the fact that globalization has it's losers and we need to face up to "who they are" and "where they are." He now joins Alan S. Blinder (former vice chairman of the Federal Reserve and a professor of economics at Princeton) who has been saying for years that we face a dramatic loss of jobs in what I would call the "globalization sectors" of the U.S. economy.
Both Rattner and Blinder are free trade proponents but realize that winners in free trade (created by low-priced imported goods) are producing losers. Rattner's experience with the manufacturing sector, as the head of President Obama's Auto Task Force, produced his General Motors auto perspective: a typical GM worker costs the company $56 per hour, which includes benefits. In Mexico, a worker costs the company $7 per hour; in China, $4.50 an hour, and in India $1 per hour. So, while GM doesn't (yet) achieve United States-level productivity in China and India, its Mexican plants are today at least as efficient as those in the U.S.
So, GM has responded with what Rattner describes as inarguable logic: while reducing its U.S. hourly work force to 50,000 from 89,000 over the last 5 years, it's Mexican head count has risen.
The United Auto Workers (UAW) have responded to this situation by negotiating lower hiring rates ($14 per hour) with lower benefits. Volkswagon's new plant in Chattanooga, Tenn., adds 2,000 jobs but all with a starting pay of $14.50 per hour. As Rattner so accurately points out, $30,000 is "hardly the American dream of great middle class jobs."
Rattner again: "In these troubled times, any jobs are surely welcome. But, we need to reverse the decline in incomes, and this requires a more thoughtful approach than the pervasive, politically attractive happy talk (my "caps" here) NOSTALGICALLY CENTERED ON RESTORING LOST MANUFACTURING JOBS."
So, with the role of manufacturing in the U.S. economy down over the last 50 years from 32% to 9%, Rattner's position is that we need to acknowledge that and move on. As he says, "...retreating into protectionism would turn a win-lose into a lose-lose." Germany concentrates on a strength (sophisticated machine tools) - we should too.
Overall, America's strength (besides defense and aviation) lies in service industries with high intellectual content: education, entertainment, digital media and (uh oh) financial services. Rattner is giving us suggestions - we should act on them.
So, should Washington jump in and do more (as it did with Solyndra, the failed solar energy company that wasted $535 million)? No. Washington can't even pick winning business sectors, let alone companies. Washington needs to spend it's capital where the need is more obvious - like INFRASTRUCTURE! The Kauffman Foundation, which focuses on entrepreneurship, has identified other possible solutions, including providing visas for entrepreneurs, etc.
Laura D'Andrea Tyson, who is a business professor at the Haas School of Business (UC, Berkeley) and was chairwoman of the Council of Economic Advisers under Bill Clinton, feels very strongly about infrastructure investment. Here, she joins Mark Zandi, an economists at the center of the most powerful suggestions on what to do when the U.S. was (and we could say: "still is") in the middle of the worldwide financial crisis (Zandi continues to be a "voice" in the sense that both political parties want to know what he thinks). Zandi has spoken of the multiples of spending from infrastructure that will create other jobs.
According to Tyson, the Jobs Act, which proposes about $90 billion in infrastructure spending as part of a $450 billion package of tax cuts and spending, would create about 2 million jobs. The President's Council On Jobs and Competitiveness (of which Dr. Tyson is a member) sees infrastructure investment as a "twofer" that creates jobs in the near term and promotes competitiveness and productivity in the long term. But, more than that, our bridges and roads are old and in need of repair. It's nice to know about the "multiples," but the work needs to be done anyway! The American Society of Civil Engineers indicates a 5-year gap of more than $1.1 trillion between the amount needed for maintenance and improvements of the U.S. infrastructure and the amount of public funds available for such investment.
Using Moodys and Congressional Budget Office data, $1 billion of infrastructure spending generates about a $1.6 billion increase in GDP. On a jobs ratio basis, $1 billion of government infrastructure spending creates 4,000 to 18,000 jobs.
Obviously, there have to be monitors on infrastructure spending - too often local governments spend infrastructure money on new roads and bridges instead of older roads and bridges in need of repair.
Regardless, spending on infrastructure is needed and will create jobs. How can any politician be against that?
Wednesday, October 12, 2011
Free Trade
http://economix.blogs.nytimes.com/2011/10/12/whose-jobs-are-at-risk-in-free-trade/?emc=eta1
http://www.nytimes.com/2011/10/13/business/trade-bills-near-final-chapter.html?emc=eta1
***************
"To be able to concentrate for a considerable time is essential to difficult achievement." (Bertrand Russell)
***************
While I know that there is a strong possibility that I am speaking to soon, the NY Times reports that there may be a deal in Congress to approve trade agreements that have been held up because of union objections. Trade agreements with South Korea, Columbia and Panama (as well as a benefits package for workers who lose their jobs to foreign competition) appear to have bi-partisan support.
According to a new report just released by the Joint Economic Committee of Congress ("Nowhere to Go...") which can be reviewed by clicking on the "Economix Blog" attached, the workers most likely to lose their jobs as a result of increased trade are older workers and those without a college education. The most obviously affected industry has traditionally been manufacturing, where workers tend not to have college degrees and an increasing number tend to be 45 or older.
Free trade agreements eliminate tariffs and other policies designed to protect the participating nations. Economists generally predict (well, right there we have a problem) that free trade deals create a larger common market for participants, increasing sales and reducing prices. But, while consumers may benefit from the availability of cheaper foreign goods, American workers (who make up a more costly labor force) often lose jobs as a result of less costly imports.
The modestly projected increase in demand for U.S. goods (from these trade pacts) will come mostly from South Korea which, as the world's 14th largest economy, would join a short list of developed nations that have free trade agreements with the U.S: Australia, Canada, Israel and Singapore.
While I'm sure that American car companies will now be able to sell more cars in South Korea, I worry that jobs will be eliminated in the U.S. textile industry because of increased imports from South Korea.
Free trade is good. Tariffs are not good. But, job eliminations aren't good either.
http://www.nytimes.com/2011/10/13/business/trade-bills-near-final-chapter.html?emc=eta1
***************
"To be able to concentrate for a considerable time is essential to difficult achievement." (Bertrand Russell)
***************
While I know that there is a strong possibility that I am speaking to soon, the NY Times reports that there may be a deal in Congress to approve trade agreements that have been held up because of union objections. Trade agreements with South Korea, Columbia and Panama (as well as a benefits package for workers who lose their jobs to foreign competition) appear to have bi-partisan support.
According to a new report just released by the Joint Economic Committee of Congress ("Nowhere to Go...") which can be reviewed by clicking on the "Economix Blog" attached, the workers most likely to lose their jobs as a result of increased trade are older workers and those without a college education. The most obviously affected industry has traditionally been manufacturing, where workers tend not to have college degrees and an increasing number tend to be 45 or older.
Free trade agreements eliminate tariffs and other policies designed to protect the participating nations. Economists generally predict (well, right there we have a problem) that free trade deals create a larger common market for participants, increasing sales and reducing prices. But, while consumers may benefit from the availability of cheaper foreign goods, American workers (who make up a more costly labor force) often lose jobs as a result of less costly imports.
The modestly projected increase in demand for U.S. goods (from these trade pacts) will come mostly from South Korea which, as the world's 14th largest economy, would join a short list of developed nations that have free trade agreements with the U.S: Australia, Canada, Israel and Singapore.
While I'm sure that American car companies will now be able to sell more cars in South Korea, I worry that jobs will be eliminated in the U.S. textile industry because of increased imports from South Korea.
Free trade is good. Tariffs are not good. But, job eliminations aren't good either.
Monday, October 10, 2011
An Ugly Forecast
http://www.nytimes.com/2011/10/09/your-money/a-recession-forecast-that-has-been-reliable-before.html?src=me&ref=business
***************
"Progress is often just a good idea away." (John C. Maxwell)
***************
I'm always interested in economists whose forecasts have been right over "years." I didn't know there were any. Over the weekend, the NY Times published a story about the Economic Cycle Research Institute (ECRI) which uses leading indicators to predict business cycles.
Relying on a series of proprietary indexes, the institute correctly predicted the beginning and end (I don't agree that it ended and I think most labor economists would side with me but the "technical end" did occur at a date certain time) of the last recession. So, over the last 15 years, it has gotten all of its recession calls right, while issuing no false alarms.
One of my all time favorite quotes is by Paul Samuelson ( an economists whose textbook was the most widely used by generations in college over the last half of the 20th century): "The stock market has called nine of the last five recessions." That's about what I think of forecasting. Or, everybody's all time favorite: the Harvard Economic Society in 1929 declaring that a depression was "outside the range of probability."
Back to the folks who know what they're doing: the folks at the ECRI say that, as bad as the economy has been, it's about to get worse. So, I guess that means the standard BLS unemployment rate statistic (currently 9.1%) goes to double digits. Their prediction for GDP growth is that it goes negative by the first quarter of 2012, "if not sooner." The GDP doesn't have far to go to do that.
The institute's U.S. Leading Diffusion Index has dipped into territory that, with only one exception, would have signaled the recessions of the last 60 years.
And, it gets worse: the ECRI people say more frequent recessions are likely to be the norm in the future.
I hope they're wrong.
***************
"Progress is often just a good idea away." (John C. Maxwell)
***************
I'm always interested in economists whose forecasts have been right over "years." I didn't know there were any. Over the weekend, the NY Times published a story about the Economic Cycle Research Institute (ECRI) which uses leading indicators to predict business cycles.
Relying on a series of proprietary indexes, the institute correctly predicted the beginning and end (I don't agree that it ended and I think most labor economists would side with me but the "technical end" did occur at a date certain time) of the last recession. So, over the last 15 years, it has gotten all of its recession calls right, while issuing no false alarms.
One of my all time favorite quotes is by Paul Samuelson ( an economists whose textbook was the most widely used by generations in college over the last half of the 20th century): "The stock market has called nine of the last five recessions." That's about what I think of forecasting. Or, everybody's all time favorite: the Harvard Economic Society in 1929 declaring that a depression was "outside the range of probability."
Back to the folks who know what they're doing: the folks at the ECRI say that, as bad as the economy has been, it's about to get worse. So, I guess that means the standard BLS unemployment rate statistic (currently 9.1%) goes to double digits. Their prediction for GDP growth is that it goes negative by the first quarter of 2012, "if not sooner." The GDP doesn't have far to go to do that.
The institute's U.S. Leading Diffusion Index has dipped into territory that, with only one exception, would have signaled the recessions of the last 60 years.
And, it gets worse: the ECRI people say more frequent recessions are likely to be the norm in the future.
I hope they're wrong.
Saturday, October 8, 2011
Unemployment & the Economy
http://www.nytimes.com/2011/10/08/business/economy/us-adds-103000-jobs-rate-steady-at-9-1.html?emc=eta1
***************
"Keep your mind off the things you don't want by keeping it on the things you do want." (W. Clement Stone)
***************
Wait, alert the authorities, the economy added jobs last month but not enough to reduce the unemployment rate! What a shock!
For those of us who follow the unemployment rate (or rates) because it is the most important lagging indicator for any economic recovery, we're not surprised. The "official" employment number is that the nation added 103,000 jobs in September. Now, of course, we need to subtract the Verizon employees who were out on strike and have now reported back to work: so, 103 - 45 = 58,000 which, perhaps, might be a more accurate number. Then, of course, we'll have the first revision and then a second revision of the numbers (standard operating procedure for the government) which could raise or lower that number later on.
What this all means is this: "we" never recovered from the worldwide financial crisis. The economists (and I use that term advisedly) will tell us that two consecutive quarters of negative GDP growth constitutes a recession, so they officially declared an end to the U.S. recession in June, 2009 (don't hold me to that date exactly - I just have no plans to look it up) where that criteria must have reversed. Today, there is consensus amongst most economists (this may be a "first") that the U.S. economy is running at stall speed: GDP growth at 1% or less. So, some of these economists are predicting a return to recession (that would be the recession that we never got out of).
Most economists see 125,000 to 135,000 jobs created per month in the U.S. economy as what's necessary to keep up with population growth. The unemployment report was actually encouraging to some economists (those who are being treated for depression) who had predicted a "net loss" of jobs for September.
There are 14 million people counted as unemployed in the United States today. An additional 9.3 million are working part time and would rather work full time. And 2.5 million have simply given up looking for a job. So, roughly 26 million, or 16.5% of working-age Americans want full-time work and can't find it.
Is there any good news? Well, yes there is: the temporary help industry added 20,000 jobs. For years, temporary help has been an early positive sign with the economy because it's the first thing that happens when employers are ramping up but don't want to hire (or hire back) permanent employees yet. The average workweek also lengthened slightly and wages went up slightly.
Government jobs, usually a plus in the past, went down 34,000: mainly from local governments which laid off teachers and other school employees. State and local governments have cut more than 500,000 jobs since June, 2009 (when "economists" declared an end to the recession).
Until the Top 500 CEOs start spending the more than $2.2 trillion in cash (an all time record) they have sitting on their books for capital projects (which will, in turn, cause spending by the next 500 in size and also small businesses), nothing will improve for years. In addition, "the gang that couldn't shoot straight" (aka, our people in Washington) needs to go big for infrastructure spending (something the U.S. actually needs) which will add, by some measures, $1.5 dollars to local economies for every 1$ spent (that's a Mark Zandi perspective).
If I'm a student, I major in petroleum engineering. Or, I major in civil engineering but not software engineering. If I'm in business school, I get an accounting degree, MS in same and a CPA (with Sarbanes, that's a job for life). If I have other interests and I'm getting a BA, I go to graduate school while the economy continues to suck (an economic term). If it's law school, I become a divorce lawyer and NOT a tax lawyer. Why(?), because, as Alan S. Blinder says, tax law can be done overseas, divorce law requires everybody being here. The division in the "globalized" world is no longer skilled vs unskilled in terms of where the work gets done, it's "what skill" and where can it most effectively be done?
My hope is that the U.S. economy will improve. "When" is the question.
***************
"Keep your mind off the things you don't want by keeping it on the things you do want." (W. Clement Stone)
***************
Wait, alert the authorities, the economy added jobs last month but not enough to reduce the unemployment rate! What a shock!
For those of us who follow the unemployment rate (or rates) because it is the most important lagging indicator for any economic recovery, we're not surprised. The "official" employment number is that the nation added 103,000 jobs in September. Now, of course, we need to subtract the Verizon employees who were out on strike and have now reported back to work: so, 103 - 45 = 58,000 which, perhaps, might be a more accurate number. Then, of course, we'll have the first revision and then a second revision of the numbers (standard operating procedure for the government) which could raise or lower that number later on.
What this all means is this: "we" never recovered from the worldwide financial crisis. The economists (and I use that term advisedly) will tell us that two consecutive quarters of negative GDP growth constitutes a recession, so they officially declared an end to the U.S. recession in June, 2009 (don't hold me to that date exactly - I just have no plans to look it up) where that criteria must have reversed. Today, there is consensus amongst most economists (this may be a "first") that the U.S. economy is running at stall speed: GDP growth at 1% or less. So, some of these economists are predicting a return to recession (that would be the recession that we never got out of).
Most economists see 125,000 to 135,000 jobs created per month in the U.S. economy as what's necessary to keep up with population growth. The unemployment report was actually encouraging to some economists (those who are being treated for depression) who had predicted a "net loss" of jobs for September.
There are 14 million people counted as unemployed in the United States today. An additional 9.3 million are working part time and would rather work full time. And 2.5 million have simply given up looking for a job. So, roughly 26 million, or 16.5% of working-age Americans want full-time work and can't find it.
Is there any good news? Well, yes there is: the temporary help industry added 20,000 jobs. For years, temporary help has been an early positive sign with the economy because it's the first thing that happens when employers are ramping up but don't want to hire (or hire back) permanent employees yet. The average workweek also lengthened slightly and wages went up slightly.
Government jobs, usually a plus in the past, went down 34,000: mainly from local governments which laid off teachers and other school employees. State and local governments have cut more than 500,000 jobs since June, 2009 (when "economists" declared an end to the recession).
Until the Top 500 CEOs start spending the more than $2.2 trillion in cash (an all time record) they have sitting on their books for capital projects (which will, in turn, cause spending by the next 500 in size and also small businesses), nothing will improve for years. In addition, "the gang that couldn't shoot straight" (aka, our people in Washington) needs to go big for infrastructure spending (something the U.S. actually needs) which will add, by some measures, $1.5 dollars to local economies for every 1$ spent (that's a Mark Zandi perspective).
If I'm a student, I major in petroleum engineering. Or, I major in civil engineering but not software engineering. If I'm in business school, I get an accounting degree, MS in same and a CPA (with Sarbanes, that's a job for life). If I have other interests and I'm getting a BA, I go to graduate school while the economy continues to suck (an economic term). If it's law school, I become a divorce lawyer and NOT a tax lawyer. Why(?), because, as Alan S. Blinder says, tax law can be done overseas, divorce law requires everybody being here. The division in the "globalized" world is no longer skilled vs unskilled in terms of where the work gets done, it's "what skill" and where can it most effectively be done?
My hope is that the U.S. economy will improve. "When" is the question.
Friday, October 7, 2011
A Weary Cynicism
http://www.nytimes.com/2011/10/07/opinion/krugman-confronting-the-malefactors.html
***************
"Originality is the art of concealing your source." (Thomas Edison)
***************
Paul Krugman's post yesterday reminded me of why I like to read him. His perspective on the "Wall Street Protests" is that the protesters are completely right about "why" they are protesting. He says a "weary cynicism" (a belief that justice will never be served) has taken over much of our political debate.
I have no interest in the political debate here but I will comment on the economy and business. Krugman's description of how "... outrageous the story of our economic woes really is" is a classic which he describes as a play in three acts: in the first act, bankers took advantage of deregulation to run wild (and pay themselves princely sums), inflating huge bubbles through reckless lending. Act two: the bubbles burst, but bankers were bailed out by taxpayers, with remarkably few strings attached. And, in the third act, bankers showed their gratitude by turning on the people who had saved them, throwing their support behind politicians who promised to keep their taxes low and dismantle the weak regulations that were being proposed after the crisis.
And I quote, "Bear in mind, too, that experience has made it painfully clear that men in suits not only don't have any monopoly on wisdom, they have very little wisdom to offer. When talking heads on, say, CNBC mock the protesters as unserious, remember how many serious people assured us there was no housing bubble, that Alan Greenspan was an oracle and that budget deficits would send interest rates soaring."
And I quote, "But Democrats are being given what amounts to a second chance. The Obama administration squandered a lot of potential good will early on by adopting banker-friendly policies that failed to deliver economic recovery even as bankers repaid the favor by turning on the President. Now, however, Mr. Obama's party has a chance for a do-over. All it has to do is take these protests as seriously as they deserve to be taken."
And, if the protests goad some politicians into doing what they should have been doing all along (as Krugman so accurately points out), Occupy Wall Street will have been a smashing success.
And, all that's nice. I have a definition of "freedom" that I've always liked: "freedom" means we can do whatever we like (within the law and ethical bounds) unless it impinges on the freedom of others. If I want to use a bridge the "protesters" are blocking, they aren't free to do that. I don't care what they're protesting - that doesn't mean they get to shrink my freedoms.
Ron Suskind has a new book that was reviewed by Joe Nocera in the New York Times over the weekend: "Confidence Men." It's about what has gone on thus far in the Obama administration. Nocera points out that Suskind makes a persuasive case that Obama's inability to manage his own White House is a critical reason the administration has struggled to devise coherent economic policies. Of course, first and foremost, he brought in the wrong people - my favorite is Lawrence (don't call me "Larry") Summers, who stint as Harvard's president was one of the all time great disasters (women everywhere should read about it), is first among those. One of the worst among the many stories Nocera recounts is that, when there was a rare "almost" consensus among Obama's economic advisers (and I use that term loosely) that winding down Citigroup would be the right thing to do (here Obama actually made a decision to agree to do it), Treasury Secretary Tim Geithner simply waited the situation out and didn't do it. Dwight Eisenhower would have fired him - Obama did nothing.
I have a "weary cynicism" and it has a lot to do with electing the wrong people, appointing the wrong people, an economics profession that had no idea a worldwide financial crisis was coming (except, of course, for "Dr. Doom") and has no idea what to do to get the worldwide economy going again.
Somebody wake me when the unemployment rate is back down to 5%.
***************
"Originality is the art of concealing your source." (Thomas Edison)
***************
Paul Krugman's post yesterday reminded me of why I like to read him. His perspective on the "Wall Street Protests" is that the protesters are completely right about "why" they are protesting. He says a "weary cynicism" (a belief that justice will never be served) has taken over much of our political debate.
I have no interest in the political debate here but I will comment on the economy and business. Krugman's description of how "... outrageous the story of our economic woes really is" is a classic which he describes as a play in three acts: in the first act, bankers took advantage of deregulation to run wild (and pay themselves princely sums), inflating huge bubbles through reckless lending. Act two: the bubbles burst, but bankers were bailed out by taxpayers, with remarkably few strings attached. And, in the third act, bankers showed their gratitude by turning on the people who had saved them, throwing their support behind politicians who promised to keep their taxes low and dismantle the weak regulations that were being proposed after the crisis.
And I quote, "Bear in mind, too, that experience has made it painfully clear that men in suits not only don't have any monopoly on wisdom, they have very little wisdom to offer. When talking heads on, say, CNBC mock the protesters as unserious, remember how many serious people assured us there was no housing bubble, that Alan Greenspan was an oracle and that budget deficits would send interest rates soaring."
And I quote, "But Democrats are being given what amounts to a second chance. The Obama administration squandered a lot of potential good will early on by adopting banker-friendly policies that failed to deliver economic recovery even as bankers repaid the favor by turning on the President. Now, however, Mr. Obama's party has a chance for a do-over. All it has to do is take these protests as seriously as they deserve to be taken."
And, if the protests goad some politicians into doing what they should have been doing all along (as Krugman so accurately points out), Occupy Wall Street will have been a smashing success.
And, all that's nice. I have a definition of "freedom" that I've always liked: "freedom" means we can do whatever we like (within the law and ethical bounds) unless it impinges on the freedom of others. If I want to use a bridge the "protesters" are blocking, they aren't free to do that. I don't care what they're protesting - that doesn't mean they get to shrink my freedoms.
Ron Suskind has a new book that was reviewed by Joe Nocera in the New York Times over the weekend: "Confidence Men." It's about what has gone on thus far in the Obama administration. Nocera points out that Suskind makes a persuasive case that Obama's inability to manage his own White House is a critical reason the administration has struggled to devise coherent economic policies. Of course, first and foremost, he brought in the wrong people - my favorite is Lawrence (don't call me "Larry") Summers, who stint as Harvard's president was one of the all time great disasters (women everywhere should read about it), is first among those. One of the worst among the many stories Nocera recounts is that, when there was a rare "almost" consensus among Obama's economic advisers (and I use that term loosely) that winding down Citigroup would be the right thing to do (here Obama actually made a decision to agree to do it), Treasury Secretary Tim Geithner simply waited the situation out and didn't do it. Dwight Eisenhower would have fired him - Obama did nothing.
I have a "weary cynicism" and it has a lot to do with electing the wrong people, appointing the wrong people, an economics profession that had no idea a worldwide financial crisis was coming (except, of course, for "Dr. Doom") and has no idea what to do to get the worldwide economy going again.
Somebody wake me when the unemployment rate is back down to 5%.
Wednesday, September 28, 2011
Health Care Insurance Premiums
http://www.nytimes.com/2011/09/28/business/28insure.html?hp
***************
"There is no more noble occupation in the world than to assist another human being - to help someone succeed." (Alan Loy McGinnis)
***************
In a study released yesterday by the Kaiser Family Foundation, the data showed the average annual premium for health insurance through an employer reached $15,073 in 2011 - 9% higher than the previous year.
Not to belabor the obvious but higher premiums are inappropriate for a time when unemployment is high and the GDP growth rate is at stall speed. Businesses cite the cost of coverage as a factor in decisions not to hire. The cost of family coverage has doubled since 2001 - wages have increased 34%.
The charts supporting the data from the Kaiser study show annualized inflation at 2% and wages (for those who are still employed) up 3%. Matching this up with a 9% increase in health care premiums makes no sense. Worker premiums have gone up 131% over the last 10 years. Employer contributions have gone up 113% over that same period.
I like to separate guesses from facts so here goes: the facts are that health care and health care-related fields are a good place to land a job because it's hard to see anything but profit margins continuing to go up. I think I'm on pretty solid ground there (so Aetna, and other companies like them should be secure places to work). But, from a management point of view, where's the challenge to get better or to make the work environment better for your staff when raising premiums covers your profit margins (and any of your mistakes). My guess is that it's like running a casino - the management always wins.
My suggestion: correlate premiums to the prior year's inflation rate - then see how well the management does.
The Kaiser foundation estimates that one to two percentage points of the premiums this year are related to provisions of the new health care law already in effect: like coverage for children up to 26 years old and for prevention services like mammograms. Really? I'm sorry, what is health care insurance for?
What's interesting from an economic point of view is that the "insurers" (and I use that term advisedly) are raising rates at a time when many people are putting off going to the doctor in order to avoid co-payments and higher deductibles. And the defense from the "insurers" is: higher premiums need to be charged because their costs would rebound once the economy recovered. Do I need to comment on that?
Stay healthy.
***************
"There is no more noble occupation in the world than to assist another human being - to help someone succeed." (Alan Loy McGinnis)
***************
In a study released yesterday by the Kaiser Family Foundation, the data showed the average annual premium for health insurance through an employer reached $15,073 in 2011 - 9% higher than the previous year.
Not to belabor the obvious but higher premiums are inappropriate for a time when unemployment is high and the GDP growth rate is at stall speed. Businesses cite the cost of coverage as a factor in decisions not to hire. The cost of family coverage has doubled since 2001 - wages have increased 34%.
The charts supporting the data from the Kaiser study show annualized inflation at 2% and wages (for those who are still employed) up 3%. Matching this up with a 9% increase in health care premiums makes no sense. Worker premiums have gone up 131% over the last 10 years. Employer contributions have gone up 113% over that same period.
I like to separate guesses from facts so here goes: the facts are that health care and health care-related fields are a good place to land a job because it's hard to see anything but profit margins continuing to go up. I think I'm on pretty solid ground there (so Aetna, and other companies like them should be secure places to work). But, from a management point of view, where's the challenge to get better or to make the work environment better for your staff when raising premiums covers your profit margins (and any of your mistakes). My guess is that it's like running a casino - the management always wins.
My suggestion: correlate premiums to the prior year's inflation rate - then see how well the management does.
The Kaiser foundation estimates that one to two percentage points of the premiums this year are related to provisions of the new health care law already in effect: like coverage for children up to 26 years old and for prevention services like mammograms. Really? I'm sorry, what is health care insurance for?
What's interesting from an economic point of view is that the "insurers" (and I use that term advisedly) are raising rates at a time when many people are putting off going to the doctor in order to avoid co-payments and higher deductibles. And the defense from the "insurers" is: higher premiums need to be charged because their costs would rebound once the economy recovered. Do I need to comment on that?
Stay healthy.
Monday, September 26, 2011
Clean Air Standards 3
http://online.wsj.com/article/SB10001424053111904194604576582814196136594.html?mod=WSJ_Opinion_AboveLEFTTop
***************
"To do well at a few things, give up many things." (John C. Maxwell)
***************
According to today's wsj.com, the EPA claim that critics of its campaign to remake U.S. electricity are "partisans" is wrong. It turns out that the "critics" include other regulators and even some in the Obama Administration. According to a "trove" of documents uncovered by Congressional investigators these internal critics think the EPA is undermining the security and reliability of the U.S. electric power supply.
According to Alaska Republican Lisa Murkowski, there's a major question about what will happen when as much as 8% of U.S. electrical generating capacity is taken off the grid because of an unprecedented set of rules (from the EPA) that will cause coal-fired capacity to shut down.
That 8% number comes from the Federal Energy Regulatory Commission (FERC) which since 2005 has been charged with ensuring that lights stay on. One undated memo specifies multiple weaknesses in EPA reliability modeling.
I could go on but I'll leave us with this: yesterday's review by Fareed Zakaria of Daniel Yergin's new book (The Quest), mentioned that China and India combined are building 4 new coal-fired plants per week. So, wait for it, we're going to succumb to our "Don Quixote-like" regulators and risk black outs so that "we" can make absolutely no difference in the massive increase in coal-fired releases into the atmosphere from China and India.
Who are these people?
***************
"To do well at a few things, give up many things." (John C. Maxwell)
***************
According to today's wsj.com, the EPA claim that critics of its campaign to remake U.S. electricity are "partisans" is wrong. It turns out that the "critics" include other regulators and even some in the Obama Administration. According to a "trove" of documents uncovered by Congressional investigators these internal critics think the EPA is undermining the security and reliability of the U.S. electric power supply.
According to Alaska Republican Lisa Murkowski, there's a major question about what will happen when as much as 8% of U.S. electrical generating capacity is taken off the grid because of an unprecedented set of rules (from the EPA) that will cause coal-fired capacity to shut down.
That 8% number comes from the Federal Energy Regulatory Commission (FERC) which since 2005 has been charged with ensuring that lights stay on. One undated memo specifies multiple weaknesses in EPA reliability modeling.
I could go on but I'll leave us with this: yesterday's review by Fareed Zakaria of Daniel Yergin's new book (The Quest), mentioned that China and India combined are building 4 new coal-fired plants per week. So, wait for it, we're going to succumb to our "Don Quixote-like" regulators and risk black outs so that "we" can make absolutely no difference in the massive increase in coal-fired releases into the atmosphere from China and India.
Who are these people?
Wednesday, September 14, 2011
The Lost Decade
http://www.nytimes.com/2011/09/14/us/14census.html?_r=1&nl=todaysheadlines&emc=tha2
***************
"If you can't write your idea on the back of my business card, you don't have a clear idea." (David Belasco)
***************
Today's Times produced an article based on data released by the Census Bureau yesterday on the number of Americans living below the poverty line: 46.2 million people. This is the highest number in the 52 years the bureau has been publishing figures on it.
Thus, it should not surprise that median household incomes fell last year to levels last seen in 1997. According to Lawrence Katz at Harvard, this is the first time since the Great Depression that median household income, adjusted for inflation, had not risen over such a long period: "This is truly a lost decade. We think of America as a place where every generation is doing better, but we're looking at a period when the median family is in worse shape than it was in the late 1990s."
The two tables which are part of the article are an excellent depiction of the downward spiral. The median household income chart shows the current level (adjusted to 2010 dollars) at $49,445 versus 1999 at $53,252 (with recessions shaded). The percentage of people living below poverty chart shows 15.1% today which is identical to the 15.1% in 1993.
While it is sometimes difficult to set aside politics in circumstances such as these, there are those politicians and economists whose positions are beginning to change in favor of short term spending at the federal level. For them, the concept of "infrastructure spending" is beginning to have an appeal.
Last year, about 48 million people ages 18 to 64 did not work even one week out of the year.
According to Timothy Smeeding (Directorof the Institute for Research On Poverty @ the U of Wisconsin, Madison), "We're risking a new underclass of young, less educated adults, mainly men, who can't support their children and form families because they are jobless."
Last year, about 16.4 million children lived in poverty (22% of the U.S. population).
Is there a higher priority than doing something about this?
***************
"If you can't write your idea on the back of my business card, you don't have a clear idea." (David Belasco)
***************
Today's Times produced an article based on data released by the Census Bureau yesterday on the number of Americans living below the poverty line: 46.2 million people. This is the highest number in the 52 years the bureau has been publishing figures on it.
Thus, it should not surprise that median household incomes fell last year to levels last seen in 1997. According to Lawrence Katz at Harvard, this is the first time since the Great Depression that median household income, adjusted for inflation, had not risen over such a long period: "This is truly a lost decade. We think of America as a place where every generation is doing better, but we're looking at a period when the median family is in worse shape than it was in the late 1990s."
The two tables which are part of the article are an excellent depiction of the downward spiral. The median household income chart shows the current level (adjusted to 2010 dollars) at $49,445 versus 1999 at $53,252 (with recessions shaded). The percentage of people living below poverty chart shows 15.1% today which is identical to the 15.1% in 1993.
While it is sometimes difficult to set aside politics in circumstances such as these, there are those politicians and economists whose positions are beginning to change in favor of short term spending at the federal level. For them, the concept of "infrastructure spending" is beginning to have an appeal.
Last year, about 48 million people ages 18 to 64 did not work even one week out of the year.
According to Timothy Smeeding (Directorof the Institute for Research On Poverty @ the U of Wisconsin, Madison), "We're risking a new underclass of young, less educated adults, mainly men, who can't support their children and form families because they are jobless."
Last year, about 16.4 million children lived in poverty (22% of the U.S. population).
Is there a higher priority than doing something about this?
Sunday, September 11, 2011
The President's Jobs Proposal
http://online.wsj.com/article_email/SB10001424053111904103404576560940420785126-lMyQjAxMTAxMDEwMDExNDAyWj.html?mod=wsj_share_email
***************
"Steve Jobs' legacy, like Henry Ford's, is very much a new, wider, richer, more opportunity-filled world for the common man." (John Steele Gordon)
***************
I've attached a current article from the Wall Street Journal on the new proposals aimed at helping with the job situation. It includes a chart ("Weighing Prospects") that summarizes some of the reactions from economists.
Mark Zandi, at Moody's Analytics, wrote a brilliant book that was literally contemporary to the worldwide financial crisis as it was occuring: one of my students, at the time, asked to use it as part of her thesis. He is, as well, one of the few contemporary economists that have advised both parties in Congress (this, of course, does not mean that they take his advice).
Moody's suggests that full enactment of the proposals will boost GDP growth by 2 percentage points next year. This would add 1.9 million jobs and shave a percentage point off the unemployment rate (currently at 9.1%, with the BLS U6 rate - which includes those who would like to work, but have given up, or are working part time - at 16%/17%). One of Zandi's more relavent perspectives that, again, both major political parties quote, is what I call the flow thru ratio: what does a dollar spent into the economy do for employment? According to Zandi, a dollar spent on an "employee" tax holiday generates $1.25 toward GDP. That same dollar toward an "employer" tax cut generates $1.04 for every dollar spent.
Back to the "Weighing Prospects" chart, I can't resist commenting on the inclusion of the BOA Merrill opinion. This, as BOA is trying to figure out whether they are going to lay off 40,000 employees in the near term. This from an organization that bought Merrill Lynch (was there any value there, were they forced into that purchase?). This from an organization so incompetent that they couldn't wait to buy Countrywide days before Countrywide was going over a cliff.
Last point: both Paul Krugman and Warren Buffet said that the U.S. efforts at "stimulus" in reaction to the worldwide financial crisis would not be enough. They were right. They usually are.
***************
"Steve Jobs' legacy, like Henry Ford's, is very much a new, wider, richer, more opportunity-filled world for the common man." (John Steele Gordon)
***************
I've attached a current article from the Wall Street Journal on the new proposals aimed at helping with the job situation. It includes a chart ("Weighing Prospects") that summarizes some of the reactions from economists.
Mark Zandi, at Moody's Analytics, wrote a brilliant book that was literally contemporary to the worldwide financial crisis as it was occuring: one of my students, at the time, asked to use it as part of her thesis. He is, as well, one of the few contemporary economists that have advised both parties in Congress (this, of course, does not mean that they take his advice).
Moody's suggests that full enactment of the proposals will boost GDP growth by 2 percentage points next year. This would add 1.9 million jobs and shave a percentage point off the unemployment rate (currently at 9.1%, with the BLS U6 rate - which includes those who would like to work, but have given up, or are working part time - at 16%/17%). One of Zandi's more relavent perspectives that, again, both major political parties quote, is what I call the flow thru ratio: what does a dollar spent into the economy do for employment? According to Zandi, a dollar spent on an "employee" tax holiday generates $1.25 toward GDP. That same dollar toward an "employer" tax cut generates $1.04 for every dollar spent.
Back to the "Weighing Prospects" chart, I can't resist commenting on the inclusion of the BOA Merrill opinion. This, as BOA is trying to figure out whether they are going to lay off 40,000 employees in the near term. This from an organization that bought Merrill Lynch (was there any value there, were they forced into that purchase?). This from an organization so incompetent that they couldn't wait to buy Countrywide days before Countrywide was going over a cliff.
Last point: both Paul Krugman and Warren Buffet said that the U.S. efforts at "stimulus" in reaction to the worldwide financial crisis would not be enough. They were right. They usually are.
Saturday, September 3, 2011
Zero Job Growth
http://www.nytimes.com/2011/09/03/business/economy/united-states-showed-no-job-growth-in-august.html?_r=1&nl=todaysheadlines&emc=tha2
***************
"The hero is the one with ideas." (Jack Welch)
***************
So August has presented us with zero job growth. There was an estimate this morning that roughly 400,000 state and local government jobs had been lost over the past year.
The White House said yesterday that it expected the 9.1% unemployment rate to stay that high thru at least 2012.
President Obama is expected to propose tax incentives to promote hiring and infrastructure spending. He's also expected to renew the payroll tax cut and extend unemployment benefits.
According to one economist, we have the same number of jobs in the U.S. that we had in January, 2000. Or, to use Fareed Zakaria's analogy, the U.S. GDP is at the same level as it was in 2007 and there are 6 million less jobs.
An economic statistic that is very closely watched by many economists is the percentage of working-age adults who are employed. As of August, that number is 58.2% which is the lowest number since 1983.
Yesterday, in Cernobbio, Italy, Nouriel Roubini (aka "Dr. Doom" because he forecast the worldwide financial crisis well before it happened) indicated that the advanced economies had reached a stall speed of around 1% annual growth. Roubini went on to say that governments and central banks, which have already made multitrillion dollar stimulus moves had no more "bullets."
There are some other facts here. Zakaria has pointed out on more than one occasion that Top 500 CEOs have all time record levels of "cash" on their books and have indicated to him that they will not spend it on capital projects in the U.S. until the tax and regulatory environment is clear. Is this rocket science?
I could go on.
***************
"The hero is the one with ideas." (Jack Welch)
***************
So August has presented us with zero job growth. There was an estimate this morning that roughly 400,000 state and local government jobs had been lost over the past year.
The White House said yesterday that it expected the 9.1% unemployment rate to stay that high thru at least 2012.
President Obama is expected to propose tax incentives to promote hiring and infrastructure spending. He's also expected to renew the payroll tax cut and extend unemployment benefits.
According to one economist, we have the same number of jobs in the U.S. that we had in January, 2000. Or, to use Fareed Zakaria's analogy, the U.S. GDP is at the same level as it was in 2007 and there are 6 million less jobs.
An economic statistic that is very closely watched by many economists is the percentage of working-age adults who are employed. As of August, that number is 58.2% which is the lowest number since 1983.
Yesterday, in Cernobbio, Italy, Nouriel Roubini (aka "Dr. Doom" because he forecast the worldwide financial crisis well before it happened) indicated that the advanced economies had reached a stall speed of around 1% annual growth. Roubini went on to say that governments and central banks, which have already made multitrillion dollar stimulus moves had no more "bullets."
There are some other facts here. Zakaria has pointed out on more than one occasion that Top 500 CEOs have all time record levels of "cash" on their books and have indicated to him that they will not spend it on capital projects in the U.S. until the tax and regulatory environment is clear. Is this rocket science?
I could go on.
Clean Air Standards 2
http://www.nytimes.com/2011/09/03/science/earth/03air.html?_r=1&nl=todaysheadlines&emc=tha2
***************
"Before it can be solved, a problem must be clearly defined." (William Feather)
***************
I've attached today's adventure with the gang that couldn't shoot straight. President Obama has asked Lisa Jackson to back off (because jobs are more important) an EPA ozone standard rule process. Lisa Jackson said something unintelligible about "her legacy." I guess whether people have jobs or not is secondary to her legacy. I guess it's all about "her."
In the meantime, here in Texas, the head of Texas' electric grid operator said new federal regulations on coal plant pollution could boost electricity prices by around 10%. Texas coal plants have 6 months to comply with new regulations on pollution.
The 10% number was surfaced at a news conference organized by the National Association of Manufacturers and held @ the Texas Instruments campus here in Richardson. Since the coal plants would have difficulty meeting the EPA standards in time, current estimates indicate that between 2% and 8% of coal plant capacity will have to shut down. Basically, the rule requires Texas coal plants to reduce sulfur dioxide and nitrogen dioxide emissions by January.
Senator John Cornyn, who was at the news conference, said he'd prefer that President Obama nuke the rule, as he did an EPA ozone standard rule process on Friday. He challenged President Obama to "place a moratorium on new rules and regulations until unemployment comes down."
While the head of the Texas Commission on Environmental Quality hasn't yet filed a formal request with the EPA for a delay (or a supplemental process), that will be considered. He said suing the EPA is also an option.
Frankly, after what the President did yesterday, probably a phone call from Senator Cornyn to President Obama would cover it. Let's see, jobs in Texas versus Lisa Jackson's legacy - I'm guessing JOBS would be more important.
***************
"Before it can be solved, a problem must be clearly defined." (William Feather)
***************
I've attached today's adventure with the gang that couldn't shoot straight. President Obama has asked Lisa Jackson to back off (because jobs are more important) an EPA ozone standard rule process. Lisa Jackson said something unintelligible about "her legacy." I guess whether people have jobs or not is secondary to her legacy. I guess it's all about "her."
In the meantime, here in Texas, the head of Texas' electric grid operator said new federal regulations on coal plant pollution could boost electricity prices by around 10%. Texas coal plants have 6 months to comply with new regulations on pollution.
The 10% number was surfaced at a news conference organized by the National Association of Manufacturers and held @ the Texas Instruments campus here in Richardson. Since the coal plants would have difficulty meeting the EPA standards in time, current estimates indicate that between 2% and 8% of coal plant capacity will have to shut down. Basically, the rule requires Texas coal plants to reduce sulfur dioxide and nitrogen dioxide emissions by January.
Senator John Cornyn, who was at the news conference, said he'd prefer that President Obama nuke the rule, as he did an EPA ozone standard rule process on Friday. He challenged President Obama to "place a moratorium on new rules and regulations until unemployment comes down."
While the head of the Texas Commission on Environmental Quality hasn't yet filed a formal request with the EPA for a delay (or a supplemental process), that will be considered. He said suing the EPA is also an option.
Frankly, after what the President did yesterday, probably a phone call from Senator Cornyn to President Obama would cover it. Let's see, jobs in Texas versus Lisa Jackson's legacy - I'm guessing JOBS would be more important.
Friday, September 2, 2011
Clean Air Standards
http://money.cnn.com/2011/09/02/news/economy/regulations/index.h
***************
"Men occasionally stumble over the truth but most pick themselves up and hurry off as if nothing had happened." (Winston Churchill)
***************
I've attached an article out today on the President backing off "tough" clean air regulation. Obviously, we all want clean air but the jobs situation has pressured the President to stop a planned increase in clean air standards.
What I'd like to see stopped is stupid government. Since I started posting, my perspective has been that this "blog" is about business, economics and/or demographics. But, the actual administration of clean air standards could be a little more sophisticated than it is: why does everything have to be an "either/or"? I have no idea whether the President telling Lisa Jackson to withdraw the draft "Ozone National Ambient Air Quality Standards" has a direct relationship to the fact that Texas coal fired power plants could be shut down over some sort of air quality issue that Lisa Jackson has, but here's the deal: we could have cooperatively set standards nationally and locally to phase out coal fired plants over time while retraining employees and phasing in gas-fired or other alternative power plants so that "we" here in Texas are not faced with potential brown outs or black outs from possible plant shut downs.
Interestingly, within the article, there is an excellent video interview with Harvard economist Ken Rogoff who sides with those of us who said there never was a "recovery" from the recession. If you follow "jobs," nothing's changed. Rogoff prefers to call the worldwide recession that started in December, 2007, as the beginning of a second "Great Contraction" (the first being the Great Depression). In that sense, his position is very similar to Paul Krugman who refers to this current economic situation as a "Lesser Depression." As defined by jobs, the current economic situation has a real unemployment rate of 17% (standard BLS rate of 9.1% plus those who've given up - the BLS pros call that the "U6" unemployment rate), where the Great Depression had a 25% unemployment rate.
Both Rogoff and Krugman advocate infrastructure spending where it is needed NOW (bridges and roads, etc.). Top 500 CEOs and Private Equity gurus have both said that clearer regulatory and tax policy could bring pent up capital and other investment spending back the the U.S. economy.
At least there are ideas out there about what to do. Government needs to proactively participate in that and prime the pump where possible and necessary.
Forgive me if I don't get all teary-eyed over the appointment of Jeff Immelt (GE CEO) as the new "jobs czar" to lead the charge on creating jobs in the U.S. He recently moved one of his operating divisions from the upper Midwest to China. Speaking of China, while they are building a new coal fired power plant every week (at least, that was their pace), they have also been referred to as the world's largest investor in clean energy. Short term, they need power. Long term, they want clean air. What a concept! They're pragmatic.
Short term, we want clean air. Long term, we're unemployed (with brown outs and black outs).
Really?
***************
"Men occasionally stumble over the truth but most pick themselves up and hurry off as if nothing had happened." (Winston Churchill)
***************
I've attached an article out today on the President backing off "tough" clean air regulation. Obviously, we all want clean air but the jobs situation has pressured the President to stop a planned increase in clean air standards.
What I'd like to see stopped is stupid government. Since I started posting, my perspective has been that this "blog" is about business, economics and/or demographics. But, the actual administration of clean air standards could be a little more sophisticated than it is: why does everything have to be an "either/or"? I have no idea whether the President telling Lisa Jackson to withdraw the draft "Ozone National Ambient Air Quality Standards" has a direct relationship to the fact that Texas coal fired power plants could be shut down over some sort of air quality issue that Lisa Jackson has, but here's the deal: we could have cooperatively set standards nationally and locally to phase out coal fired plants over time while retraining employees and phasing in gas-fired or other alternative power plants so that "we" here in Texas are not faced with potential brown outs or black outs from possible plant shut downs.
Interestingly, within the article, there is an excellent video interview with Harvard economist Ken Rogoff who sides with those of us who said there never was a "recovery" from the recession. If you follow "jobs," nothing's changed. Rogoff prefers to call the worldwide recession that started in December, 2007, as the beginning of a second "Great Contraction" (the first being the Great Depression). In that sense, his position is very similar to Paul Krugman who refers to this current economic situation as a "Lesser Depression." As defined by jobs, the current economic situation has a real unemployment rate of 17% (standard BLS rate of 9.1% plus those who've given up - the BLS pros call that the "U6" unemployment rate), where the Great Depression had a 25% unemployment rate.
Both Rogoff and Krugman advocate infrastructure spending where it is needed NOW (bridges and roads, etc.). Top 500 CEOs and Private Equity gurus have both said that clearer regulatory and tax policy could bring pent up capital and other investment spending back the the U.S. economy.
At least there are ideas out there about what to do. Government needs to proactively participate in that and prime the pump where possible and necessary.
Forgive me if I don't get all teary-eyed over the appointment of Jeff Immelt (GE CEO) as the new "jobs czar" to lead the charge on creating jobs in the U.S. He recently moved one of his operating divisions from the upper Midwest to China. Speaking of China, while they are building a new coal fired power plant every week (at least, that was their pace), they have also been referred to as the world's largest investor in clean energy. Short term, they need power. Long term, they want clean air. What a concept! They're pragmatic.
Short term, we want clean air. Long term, we're unemployed (with brown outs and black outs).
Really?
Thursday, August 25, 2011
A China Perspective
http://www.nytimes.com/2011/08/25/world/asia/25china.html?nl=todaysheadlines&emc=tha22
***************
"The joy is in creating, not maintaining." (Vince Lombardi)
***************
A brief note here to say that Steve Jobs is someone that historians will look back on with the same perspective as Henry Ford and Thomas Edison. In spite of his illness, his creativity continued to produce products that benefited us all. My quote for this post was chosen as much for "who" said it as it was for the point it made.
On to China. Today's NY Times has an excellent article on the study published 8/17 by the Eurasia Group on China's new 5 year plan. You can click on the article link provided to read the study.
Its overall conclusion was that Beijing might meet some of the plan goals but "... ultimately, the country's leaders lack the political stomach and sense of the moment to implement a comprehensive and ambitious rebalancing agenda."
It's an interesting dichotomy to read the report and see that China's leaders have defined the problem and are taking steps but knowledgeable observers don't think the plan, or the resolve to implement it, will work.
China has incentives to change it's macroeconomic model: it's economic policies contribute to wasted resources, vast social inequality and a soaring inflation which leaders fear will fuel social instability. So, what are they doing about it? They're putting out a new 5 year plan that says they need to rely less on exports. So, what happened to the $586 billion in stimulus money they spent in 2008? Well, at the same time, they loosened lending by state banks which lent to local governments that borrowed heavily: a rough estimate from Victor Shih at Northwestern University puts the upper end of that debt at $3.1 trillion, or half of China's GDP in 2010. Again "so," while the $586 billion was being spent on roads, trains and entire cities that are not yet occupied, "loans" were given to economic entities with the potential not to perform on those loans.
Thus, overall, there would appear to be a shaky economic model on which the new 5 year plan is based.
Yao Yang, an economist at Peking University interviewed by the Times, said Chinese leaders knew that the domestic economy put too much money in the hands of corporations and the government. Again, so they knew that was wrong but felt they had no choice. Later in that same interview, Mr. Yao said that the aging of China's 1.3 billion people, and the dwindling of its young, cheap labor, "... naturally means more domestic consumption and less exports, therefor going towards a more balanced economy."
This is one way to look at a demographic time bomb. Another would be that China's economy will tank because of an aging population and there is nothing they can do about it.
The Eurasia Group has done an excellent analysis of China's situation but a future economy built on non-performing loans and building empty cities doesn't look like real GDP growth to me.
At whatever point China's economy reaches "stall speed," we'll watch unemployment take off and then what?
***************
"The joy is in creating, not maintaining." (Vince Lombardi)
***************
A brief note here to say that Steve Jobs is someone that historians will look back on with the same perspective as Henry Ford and Thomas Edison. In spite of his illness, his creativity continued to produce products that benefited us all. My quote for this post was chosen as much for "who" said it as it was for the point it made.
On to China. Today's NY Times has an excellent article on the study published 8/17 by the Eurasia Group on China's new 5 year plan. You can click on the article link provided to read the study.
Its overall conclusion was that Beijing might meet some of the plan goals but "... ultimately, the country's leaders lack the political stomach and sense of the moment to implement a comprehensive and ambitious rebalancing agenda."
It's an interesting dichotomy to read the report and see that China's leaders have defined the problem and are taking steps but knowledgeable observers don't think the plan, or the resolve to implement it, will work.
China has incentives to change it's macroeconomic model: it's economic policies contribute to wasted resources, vast social inequality and a soaring inflation which leaders fear will fuel social instability. So, what are they doing about it? They're putting out a new 5 year plan that says they need to rely less on exports. So, what happened to the $586 billion in stimulus money they spent in 2008? Well, at the same time, they loosened lending by state banks which lent to local governments that borrowed heavily: a rough estimate from Victor Shih at Northwestern University puts the upper end of that debt at $3.1 trillion, or half of China's GDP in 2010. Again "so," while the $586 billion was being spent on roads, trains and entire cities that are not yet occupied, "loans" were given to economic entities with the potential not to perform on those loans.
Thus, overall, there would appear to be a shaky economic model on which the new 5 year plan is based.
Yao Yang, an economist at Peking University interviewed by the Times, said Chinese leaders knew that the domestic economy put too much money in the hands of corporations and the government. Again, so they knew that was wrong but felt they had no choice. Later in that same interview, Mr. Yao said that the aging of China's 1.3 billion people, and the dwindling of its young, cheap labor, "... naturally means more domestic consumption and less exports, therefor going towards a more balanced economy."
This is one way to look at a demographic time bomb. Another would be that China's economy will tank because of an aging population and there is nothing they can do about it.
The Eurasia Group has done an excellent analysis of China's situation but a future economy built on non-performing loans and building empty cities doesn't look like real GDP growth to me.
At whatever point China's economy reaches "stall speed," we'll watch unemployment take off and then what?
Thursday, August 11, 2011
Our Future Leaders
http://www.nytimes.com/2011/08/06/opinion/the-decade-of-lost-children.html?emc=eta1
***************
"Every child is an artist. The problem is how to remain an artist once he grows up." (Pablo Picasso)
***************
Last Friday, Charles M. Blow opined in the NY Times that one of the greatest casualties of the Great Recession may well be a decade of lost children. He summarized a report issued last month by the Children's Defense Fund that indicated the impact of the recession on children's well-being has been catastrophic ("The State of America's Children 2011").
The highlights:
* The number of children living in poverty has increased by 4 million since 2000, and the number of children that have fallen into poverty between 2008 and 2009 was the largest single-year increase ever recorded.
* The number of homeless children in public schools increased 41% between the 2006-7 and 2008-9 school years.
* In 2009, an average of 15.6 million children received food stamps monthly, a 65% increase over 10 years.
* A majority of children in all racial groups and 79% or more of black and Hispanic children in public schools cannot read or do math at grade level in fourth, eighth or 12th grades.
* The annual cost of center-based child care for a 4-year-old is more than the annual in-state tuition at a public four-year college in 33 states and the District of Columbia.
Blow's fear was/is that this situation implies a negative future for U.S. economic growth and our place on the world stage. He sees the state budget cuts that are ongoing as undercutting a U.S. economic recovery and undermining efforts to create jobs over the next year.
How can we argue with that?
From a business point of view, where do we get the best employees for tomorrow. We've spent 10 years and how much money in Afghanistan? This century started with a U.S. government surplus, not a deficit.
Spending some money on infrastructure (including schools) will, as any economist will attest, provide a multiple of cash into the community creating jobs and lessening poverty.
I, personally, don't want to see a single child here go hungry or without an education.
***************
"Every child is an artist. The problem is how to remain an artist once he grows up." (Pablo Picasso)
***************
Last Friday, Charles M. Blow opined in the NY Times that one of the greatest casualties of the Great Recession may well be a decade of lost children. He summarized a report issued last month by the Children's Defense Fund that indicated the impact of the recession on children's well-being has been catastrophic ("The State of America's Children 2011").
The highlights:
* The number of children living in poverty has increased by 4 million since 2000, and the number of children that have fallen into poverty between 2008 and 2009 was the largest single-year increase ever recorded.
* The number of homeless children in public schools increased 41% between the 2006-7 and 2008-9 school years.
* In 2009, an average of 15.6 million children received food stamps monthly, a 65% increase over 10 years.
* A majority of children in all racial groups and 79% or more of black and Hispanic children in public schools cannot read or do math at grade level in fourth, eighth or 12th grades.
* The annual cost of center-based child care for a 4-year-old is more than the annual in-state tuition at a public four-year college in 33 states and the District of Columbia.
Blow's fear was/is that this situation implies a negative future for U.S. economic growth and our place on the world stage. He sees the state budget cuts that are ongoing as undercutting a U.S. economic recovery and undermining efforts to create jobs over the next year.
How can we argue with that?
From a business point of view, where do we get the best employees for tomorrow. We've spent 10 years and how much money in Afghanistan? This century started with a U.S. government surplus, not a deficit.
Spending some money on infrastructure (including schools) will, as any economist will attest, provide a multiple of cash into the community creating jobs and lessening poverty.
I, personally, don't want to see a single child here go hungry or without an education.
Monday, August 8, 2011
Economic Incompetence
http://www.nytimes.com/2011/08/05/business/economy/double-dip-recession-may-be-returning.html?emc=eta1
http://www.nytimes.com/2011/08/05/opinion/the-wrong-worries.html?emc=eta1
http://www.nytimes.com/2011/08/08/business/a-second-recession-could-be-much-worse-than-the-first.html?emc=eta1
***************
"The difficulty lies not so much in developing new ideas as in escaping from the old ones." (John Maynard Keynes)
***************
I think I've developed a new term "Economic Incompetence." Hence, the title of this post. The term refers to the combined total of actions taken by the powers that be (government regulators, congress, etc.) since the economic downturn (recession) was declared "retroactively" as having started in December of 2007. The retroactive aspect of it involves the center of all economic thought declaring (I forget the name of the non-partisan agency that declares such things) two quarters into the Great Recession that we were in a recession because economists define recessions as two consecutive quarters of negative economic growth (GDP growth in minus numbers). This, of course, cannot be measured until it's happened - then it is fact. Imagine if you were running a business and you waited for official retroactive confirmation of a recession - what would you do with all those cars you produced that nobody's going to buy?
Somewhere along the line, those same "gurus" declared a "recovery" in June of 2009. Many of us who follow "jobs" didn't see the recovery as declarable: jobs are, and always have been, a lagging indicator. And jobs were reflected in unemployment statistics that were in the 9% plus (standard measurements) to 17% plus (BLS U6 unemployment rate which includes those who have given up) area. Perhaps the gurus saw all time record corporate profits as a positive sign. Unfortunately, those profits were not being turned into capital spending (except in areas that would improve productivity - like enhanced software that would delay or eliminate the need to hire people back) here in the U.S.
Paul Krugman's post last week, just after the Dow dropped 500 points (attached), pointed out that, considering one crucial measure, the ratio of employment to population, we were nowhere:
June 2007 - 63% of adults were employed
June 2009 - 59.4% of adults were employed
June 2011 - 58.2% of adults were employed
Krugman's perspective on this is that we're facing a "terrible reality:" not only are vast numbers of Americans unemployed or underemployed, but for the first time since the Great Depression, many American workers are facing the prospect of very-long-term - maybe permanent - unemployment.
As Floyd Norris pointed out on the same day (attached), if this is the beginning of a new double dip, it will have two things in common with the dual recessions of 1980 and 1981-82: in each case the first recession was caused in large part by a sudden withdrawal of credit from the economy. And, in each case, the second recession began at a time when the usual government policies to fight economic weakness were deemed unavailable. Then, the need to fight inflation ruled out an easier monetary policy. Now, the perceived need to reduce government spending rules out a more accommodating fiscal policy.
Catherine Rampell, of the NY Times "ECONOMIX" blog, has chimed in today (attached) with Krugman and Norris, to point out that in the four years since the recession began, the civilian working age population has grown by about 3%. Given a healthy economy, she estimates that jobs would have grown by about the same amount - instead, the number of jobs has shrunk. Today the economy has 5% fewer jobs - or 6.8 million - than it had before the last recession began: the unemployment rate was 5% then, compared with 9.1% today.
Fareed Zakaria has a somewhat simpler (and easier for me to remember) way of putting this: The U.S. GDP is no larger than it was in December of 2007 but there are 10 million less jobs.
As Rampell puts it, with construction nearly nonexistent and home prices down 24% since December 2007, the country does not have a buffer of housing to fall back on. She goes on to point out that economists refer to the difference between where the economy is and where it could be if it met its economic potential as the "output gap." Menzie Chinn (an economics professor at the University of Wisconsin) has estimated that the economy was about 7% smaller than its potential at the beginning of this year.
Given all of the above, it's difficult to envision a way out of what was described last week as an economy growing at "stall speed" (I think that was 1.8%). I'm not an economist but I have experienced the economy for a long time from the business side of things and I see a kind of collective incompetence which i referred to above as "Economic Incompetence" which has grown out of what I learned in grade school was the virtue of America's foundation: a pluralistic society where everyone was represented in government. The problem we have now (and, I hate to write about politics) is that we have "too many cooks" represented in government, all with their own ideas and all of them looking to gain something politically from outcomes. So, "compromise," which we're all taught is the civilized thing to do, doesn't work out well for the collective population (what better example is there than the "debt ceiling" debate?).
Here's an idea: throw some tax incentives at all those corporations sitting out there on all that "cash" to spend capital money here in the U.S. on infrastructure or infrastructure-related projects that are much needed. I think it was Mark Zandi (who is quoted by both Republicans and Democrats as knowing what he's talking about), chief economist for Moody's Analytics, who said in testimony before congress that infrastructure spending has the highest multiple for job creation.
My hope is that we will come out of this economic malaise soon but it doesn't look like it.
http://www.nytimes.com/2011/08/05/opinion/the-wrong-worries.html?emc=eta1
http://www.nytimes.com/2011/08/08/business/a-second-recession-could-be-much-worse-than-the-first.html?emc=eta1
***************
"The difficulty lies not so much in developing new ideas as in escaping from the old ones." (John Maynard Keynes)
***************
I think I've developed a new term "Economic Incompetence." Hence, the title of this post. The term refers to the combined total of actions taken by the powers that be (government regulators, congress, etc.) since the economic downturn (recession) was declared "retroactively" as having started in December of 2007. The retroactive aspect of it involves the center of all economic thought declaring (I forget the name of the non-partisan agency that declares such things) two quarters into the Great Recession that we were in a recession because economists define recessions as two consecutive quarters of negative economic growth (GDP growth in minus numbers). This, of course, cannot be measured until it's happened - then it is fact. Imagine if you were running a business and you waited for official retroactive confirmation of a recession - what would you do with all those cars you produced that nobody's going to buy?
Somewhere along the line, those same "gurus" declared a "recovery" in June of 2009. Many of us who follow "jobs" didn't see the recovery as declarable: jobs are, and always have been, a lagging indicator. And jobs were reflected in unemployment statistics that were in the 9% plus (standard measurements) to 17% plus (BLS U6 unemployment rate which includes those who have given up) area. Perhaps the gurus saw all time record corporate profits as a positive sign. Unfortunately, those profits were not being turned into capital spending (except in areas that would improve productivity - like enhanced software that would delay or eliminate the need to hire people back) here in the U.S.
Paul Krugman's post last week, just after the Dow dropped 500 points (attached), pointed out that, considering one crucial measure, the ratio of employment to population, we were nowhere:
June 2007 - 63% of adults were employed
June 2009 - 59.4% of adults were employed
June 2011 - 58.2% of adults were employed
Krugman's perspective on this is that we're facing a "terrible reality:" not only are vast numbers of Americans unemployed or underemployed, but for the first time since the Great Depression, many American workers are facing the prospect of very-long-term - maybe permanent - unemployment.
As Floyd Norris pointed out on the same day (attached), if this is the beginning of a new double dip, it will have two things in common with the dual recessions of 1980 and 1981-82: in each case the first recession was caused in large part by a sudden withdrawal of credit from the economy. And, in each case, the second recession began at a time when the usual government policies to fight economic weakness were deemed unavailable. Then, the need to fight inflation ruled out an easier monetary policy. Now, the perceived need to reduce government spending rules out a more accommodating fiscal policy.
Catherine Rampell, of the NY Times "ECONOMIX" blog, has chimed in today (attached) with Krugman and Norris, to point out that in the four years since the recession began, the civilian working age population has grown by about 3%. Given a healthy economy, she estimates that jobs would have grown by about the same amount - instead, the number of jobs has shrunk. Today the economy has 5% fewer jobs - or 6.8 million - than it had before the last recession began: the unemployment rate was 5% then, compared with 9.1% today.
Fareed Zakaria has a somewhat simpler (and easier for me to remember) way of putting this: The U.S. GDP is no larger than it was in December of 2007 but there are 10 million less jobs.
As Rampell puts it, with construction nearly nonexistent and home prices down 24% since December 2007, the country does not have a buffer of housing to fall back on. She goes on to point out that economists refer to the difference between where the economy is and where it could be if it met its economic potential as the "output gap." Menzie Chinn (an economics professor at the University of Wisconsin) has estimated that the economy was about 7% smaller than its potential at the beginning of this year.
Given all of the above, it's difficult to envision a way out of what was described last week as an economy growing at "stall speed" (I think that was 1.8%). I'm not an economist but I have experienced the economy for a long time from the business side of things and I see a kind of collective incompetence which i referred to above as "Economic Incompetence" which has grown out of what I learned in grade school was the virtue of America's foundation: a pluralistic society where everyone was represented in government. The problem we have now (and, I hate to write about politics) is that we have "too many cooks" represented in government, all with their own ideas and all of them looking to gain something politically from outcomes. So, "compromise," which we're all taught is the civilized thing to do, doesn't work out well for the collective population (what better example is there than the "debt ceiling" debate?).
Here's an idea: throw some tax incentives at all those corporations sitting out there on all that "cash" to spend capital money here in the U.S. on infrastructure or infrastructure-related projects that are much needed. I think it was Mark Zandi (who is quoted by both Republicans and Democrats as knowing what he's talking about), chief economist for Moody's Analytics, who said in testimony before congress that infrastructure spending has the highest multiple for job creation.
My hope is that we will come out of this economic malaise soon but it doesn't look like it.
Wednesday, August 3, 2011
The Cost of Lisa Jackson
http://online.wsj.com/article/SB10001424052702303661904576453893688343246.html?mod=WSJ_Opinion_AboveLEFTTop
***************
"A strategy that doesn't take into account resources is doomed to failure." (John C. Maxwell)
***************
The Wall Street Journal Editorial Board sometimes comes up with a nice, concise approach to federal government agencies running amok. Today's article on the "EPA" does a wonderful job of emphasizing "JOBS." What a concept! Is it possible that the impact of a rule change on employment could begin to be a consideration now? The Train Act is evidently a beginning to the definition of real "costs" of rule changes or implementations.
The status quo is that the EPA can define almost anything as a benefit. But, as the WSJ points out about new EPA rules, "... the EPA rarely considers more tangible economic consequences, like its effects on employment, the price and reliability of energy, or the competitiveness of U.S. companies."
What I like about the WSJ perspective is this: if we have to shut some coal fired power plants down in Texas in the near future because of new EPA rules, and this causes unemployment, power interruptions and higher prices, maybe some of that expense can be included in the kinds of considerations present in the Train Act. Those are real costs. What is needed is some consideration on, for example, retraining those who maybe laid off (is that an expense or a cost that should be considered?). Does the pace of rule enforcement correlate with the pace of unemployment and the possibility of re-employment?
I'll close with the ending quote from the article: "In a recent Joan of Arc interview with the New York Times, Ms. Jackson said that 'The only thing worse than no EPA is an EPA that exists and doesn't do its job.' Try that one on people who don't have a job because of Ms. Jackson's grandiose views."
***************
"A strategy that doesn't take into account resources is doomed to failure." (John C. Maxwell)
***************
The Wall Street Journal Editorial Board sometimes comes up with a nice, concise approach to federal government agencies running amok. Today's article on the "EPA" does a wonderful job of emphasizing "JOBS." What a concept! Is it possible that the impact of a rule change on employment could begin to be a consideration now? The Train Act is evidently a beginning to the definition of real "costs" of rule changes or implementations.
The status quo is that the EPA can define almost anything as a benefit. But, as the WSJ points out about new EPA rules, "... the EPA rarely considers more tangible economic consequences, like its effects on employment, the price and reliability of energy, or the competitiveness of U.S. companies."
What I like about the WSJ perspective is this: if we have to shut some coal fired power plants down in Texas in the near future because of new EPA rules, and this causes unemployment, power interruptions and higher prices, maybe some of that expense can be included in the kinds of considerations present in the Train Act. Those are real costs. What is needed is some consideration on, for example, retraining those who maybe laid off (is that an expense or a cost that should be considered?). Does the pace of rule enforcement correlate with the pace of unemployment and the possibility of re-employment?
I'll close with the ending quote from the article: "In a recent Joan of Arc interview with the New York Times, Ms. Jackson said that 'The only thing worse than no EPA is an EPA that exists and doesn't do its job.' Try that one on people who don't have a job because of Ms. Jackson's grandiose views."
Monday, August 1, 2011
Deficits & Politics
http://www.nytimes.com/2011/08/01/opinion/the-president-surrenders-on-debt-ceiling.html?emc=eta1
http://online.wsj.com/article/SB10001424053111903554904576458413656841844.html?mod=googlenews_wsj
***************
"The one with the plan is the one with the power." (John C. Maxwell)
***************
I always find myself amazed at the selfishness of politicians attacking a major economic problem with sound bites that they feel will give them an advantage.
This blog is not about politics and I try to stay away from that but still ...
Today I've attached Krugman on what's happened and where we're going: "banana republic" anyone? As a companion piece, I've attached a very thoughtful article from a UCLA professor sent to me by one of my all time great former students. Professor Rumelt (the UCLA prof) opines that Krugman has it wrong when he says that government spending on WW II is the only thing that stopped the Great Depression. So, to Professor Rumelt, Krugman is wrong now by consistently pointing out that government spending shortfalls, where the economy could have been helped, are only going to be compounded now by "deficit cuts."
This is an interesting arguement and I'd never seen the figures that Rumelt quotes about WW II. But, whatever the numbers, it does appear that "full employment" (i.e. "Full Employment" = the dreaded 5% unemployed number representing the group that's "unemployable") was achieved by virtue of the fact that 95% of those employment-eligible were "employed" (active army and civilian support occupations, albeit at lower wage levels, were the "adder" to other civilian occupations to make up full employment).
OK. Back to today. We now have a government that, according to another one of my all time great students, spends $23 billion per year on "air conditioning" for our troops in Afghanistan (this according to "NPR"). First of all, our troops need whatever support they need wherever they are, but the $23 billion just makes the point that the U.S. has spent more money than it has on specious war efforts overseas - we don't need to "nation-build" in Afghanistan in order to track down and eliminate terrorists. And, because of the politics of the deficit situation, the troops over there are worried about getting their paychecks. This is ridiculous.
According to Krugman, we will probably have a depressed economy until 2013 (best case). Here, all reducing government spending does is depress the economy even further. So, we're extending a bleak economic situation by making it bleaker.
When Krugman calls something a "catastrophe on multiple levels," I tend to listen. I'm not sure that any of the players in the deficit reduction drama have a Nobel Prize in economics, so I'll go with Krugman's opinion of what's happening and where it's going.
What's next?
http://online.wsj.com/article/SB10001424053111903554904576458413656841844.html?mod=googlenews_wsj
***************
"The one with the plan is the one with the power." (John C. Maxwell)
***************
I always find myself amazed at the selfishness of politicians attacking a major economic problem with sound bites that they feel will give them an advantage.
This blog is not about politics and I try to stay away from that but still ...
Today I've attached Krugman on what's happened and where we're going: "banana republic" anyone? As a companion piece, I've attached a very thoughtful article from a UCLA professor sent to me by one of my all time great former students. Professor Rumelt (the UCLA prof) opines that Krugman has it wrong when he says that government spending on WW II is the only thing that stopped the Great Depression. So, to Professor Rumelt, Krugman is wrong now by consistently pointing out that government spending shortfalls, where the economy could have been helped, are only going to be compounded now by "deficit cuts."
This is an interesting arguement and I'd never seen the figures that Rumelt quotes about WW II. But, whatever the numbers, it does appear that "full employment" (i.e. "Full Employment" = the dreaded 5% unemployed number representing the group that's "unemployable") was achieved by virtue of the fact that 95% of those employment-eligible were "employed" (active army and civilian support occupations, albeit at lower wage levels, were the "adder" to other civilian occupations to make up full employment).
OK. Back to today. We now have a government that, according to another one of my all time great students, spends $23 billion per year on "air conditioning" for our troops in Afghanistan (this according to "NPR"). First of all, our troops need whatever support they need wherever they are, but the $23 billion just makes the point that the U.S. has spent more money than it has on specious war efforts overseas - we don't need to "nation-build" in Afghanistan in order to track down and eliminate terrorists. And, because of the politics of the deficit situation, the troops over there are worried about getting their paychecks. This is ridiculous.
According to Krugman, we will probably have a depressed economy until 2013 (best case). Here, all reducing government spending does is depress the economy even further. So, we're extending a bleak economic situation by making it bleaker.
When Krugman calls something a "catastrophe on multiple levels," I tend to listen. I'm not sure that any of the players in the deficit reduction drama have a Nobel Prize in economics, so I'll go with Krugman's opinion of what's happening and where it's going.
What's next?
Friday, July 29, 2011
New Fuel Economy Standards
http://www.nytimes.com/2011/07/29/business/carmakers-back-strict-new-rules-for-gas-mileage.html?emc=eta1
***************
"You invest yourself in what you believe can succeed." (John C. Maxwell)
***************
President Obama is scheduled today to announce the largest increase in fuel economy rules since the government began regulating consumption of gasoline by cars in the 1970s. The CEOs of Detroit's Big Three are scheduled to be there with the President to show solidarity on the issue.
The increase is from the current 27 miles per gallon (fleet average) to 54.5 miles per gallon by 2025. Getting "agreement" from Detroit has been helped by some give and take from the government: the goals for pick-up trucks (and SUVs) are less restrictive. While the agreement calls for a 5% annual increase in fuel economy for cars from 2017 to 2025, the light-truck category calls for 3.5% per year thru 2021, and then 5% annually for the following 4 years.
Standards that were announced 4 years ago run thru 2016 (36 miles per gallon by then).
In addition, the car companies can earn "credits" for producing battery-powered vehicles, hybrids and alternative-fuel models. While "details" on that aren't available yet, we're going to assume that, if the car companies don't hit the goal of 54.5 mpg by 2025, these credits will help them get there.
As David Cole points out, "The really big part of this is the midpoint review. By then, everybody will have a better understanding of the cost of the technology, particularly the batteries."
All of this doesn't change the physics of auto safety. If I get in an accident, I'd rather be driving an Escalade than a VW Beetle. Especially, if it's those two that hit each other.
And, it's nice to have all the "rah, rah" about us being less foreign oil dependent. If we really care about that, lets develop more of the oil and gas available in North America. We can't even OK a second pipeline from Canada to transport more oil from their huge Alberta oil sands deposits to the U.S. We don't we all sit around the campfire and debate about that while China continues to buy into those same deposits?
Last, somebody get back to me when they can explain how I drive to California from here (Dallas) in a Nissan Leaf (all electric: best range - 100 miles, actual use - more like 80 miles).
Of course, I'm part of a generation that remembers filling up at the pump for 25 cents a gallon!
***************
"You invest yourself in what you believe can succeed." (John C. Maxwell)
***************
President Obama is scheduled today to announce the largest increase in fuel economy rules since the government began regulating consumption of gasoline by cars in the 1970s. The CEOs of Detroit's Big Three are scheduled to be there with the President to show solidarity on the issue.
The increase is from the current 27 miles per gallon (fleet average) to 54.5 miles per gallon by 2025. Getting "agreement" from Detroit has been helped by some give and take from the government: the goals for pick-up trucks (and SUVs) are less restrictive. While the agreement calls for a 5% annual increase in fuel economy for cars from 2017 to 2025, the light-truck category calls for 3.5% per year thru 2021, and then 5% annually for the following 4 years.
Standards that were announced 4 years ago run thru 2016 (36 miles per gallon by then).
In addition, the car companies can earn "credits" for producing battery-powered vehicles, hybrids and alternative-fuel models. While "details" on that aren't available yet, we're going to assume that, if the car companies don't hit the goal of 54.5 mpg by 2025, these credits will help them get there.
As David Cole points out, "The really big part of this is the midpoint review. By then, everybody will have a better understanding of the cost of the technology, particularly the batteries."
All of this doesn't change the physics of auto safety. If I get in an accident, I'd rather be driving an Escalade than a VW Beetle. Especially, if it's those two that hit each other.
And, it's nice to have all the "rah, rah" about us being less foreign oil dependent. If we really care about that, lets develop more of the oil and gas available in North America. We can't even OK a second pipeline from Canada to transport more oil from their huge Alberta oil sands deposits to the U.S. We don't we all sit around the campfire and debate about that while China continues to buy into those same deposits?
Last, somebody get back to me when they can explain how I drive to California from here (Dallas) in a Nissan Leaf (all electric: best range - 100 miles, actual use - more like 80 miles).
Of course, I'm part of a generation that remembers filling up at the pump for 25 cents a gallon!
Monday, July 25, 2011
GE Moves A Division To China
http://online.wsj.com/article_email/SB10001424053111904772304576467873321597208-lMyQjAxMTAxMDIwNTEyNDUyWj.html
***************
"Big thinkers are specialists in creating positive forward-looking, optimistic pictures in their own minds and in the minds of others." (David J. Schwartz)
***************
So, Jeff Immelt is the CEO of GE and the Chairman of the President's Jobs Council. The "Jobs Council" was recently formed to figure out ways to create jobs here in the U.S.
Imagine my confusion upon reading that GE is moving its X-ray business headquarters to China. What a time for establishing GE's first business headquarters in China! GE says it doesn't expect the move to result in any job losses in the U.S. Somebody keep track of that statement.
This comes after GE's January announcement that it would inject much of its civilian avionics business into a 50-50 joint venture based in China.
Last year, GE invested a total of $2 billion in China, $500 million of which was allocated into "customer innovation centers."
Does anybody see an inconsistency between Jeff Immelt's role for the President and his role as CEO of GE?
Seriously.
***************
"Big thinkers are specialists in creating positive forward-looking, optimistic pictures in their own minds and in the minds of others." (David J. Schwartz)
***************
So, Jeff Immelt is the CEO of GE and the Chairman of the President's Jobs Council. The "Jobs Council" was recently formed to figure out ways to create jobs here in the U.S.
Imagine my confusion upon reading that GE is moving its X-ray business headquarters to China. What a time for establishing GE's first business headquarters in China! GE says it doesn't expect the move to result in any job losses in the U.S. Somebody keep track of that statement.
This comes after GE's January announcement that it would inject much of its civilian avionics business into a 50-50 joint venture based in China.
Last year, GE invested a total of $2 billion in China, $500 million of which was allocated into "customer innovation centers."
Does anybody see an inconsistency between Jeff Immelt's role for the President and his role as CEO of GE?
Seriously.
Friday, July 22, 2011
The Lesser Depression
http://www.nytimes.com/2011/07/22/opinion/22krugman.html?emc=eta1
***************
"Reflective thinking turns experience into insight." (John C. Maxwell)
***************
Paul Krugman came up with an exceptional insight in his Times post today: we're in a "Lesser Depression." That's a prolonged era of high unemployment that began with the Great Recession of 2007-2009 and continues to this day, more than 2 years after the recession supposedly ended.
People will want to "politicize" Krugman as a "left thinking liberal" but I don't think of him that way. He's a Nobel Prize winner for what he's done in economics and deservedly so. And additionally, he writes well about the issues of our times in a creative way using words we can all understand. Parenthetically, I respect the Nobel Prize in spite of the fact that it was awarded to Al Gore for attempting to scare all of us and President Obama for what he "might do."
In not addressing what will fix the real economic problems we are facing now, we instead are making the same mistakes that were made in either 1931 or 1937 (you'd think we would have learned something since then). If either current debt negotiation fails, we could be replaying 1931, the global banking collapse that made the Great Depression great. But, if the negotiations succeed, will be set to replay the great mistake of 1937: the premature turn to fiscal contraction that derailed economic recovery and ensured that the Depression would last until World War II finally provided the boost the economy needed. And, let me add that both Krugman and Warren Buffet said at the outset of the Great Recession that the U.S. was NOT spending enough money on the economy to get us out of it. And now, we're debating "contraction" when unemployment is going up!
So, while the European Central Bank seems determined to raise interest rates (these are the same idiots that were bailed out by Ben Bernanke at the outset of the Great Recession when he sent a check for $250 billion to them because he thought they needed it), Krugman quotes an old saying on public policy: "You do not know, my son, with how little wisdom the world is governed."
Need I say more.
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"Reflective thinking turns experience into insight." (John C. Maxwell)
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Paul Krugman came up with an exceptional insight in his Times post today: we're in a "Lesser Depression." That's a prolonged era of high unemployment that began with the Great Recession of 2007-2009 and continues to this day, more than 2 years after the recession supposedly ended.
People will want to "politicize" Krugman as a "left thinking liberal" but I don't think of him that way. He's a Nobel Prize winner for what he's done in economics and deservedly so. And additionally, he writes well about the issues of our times in a creative way using words we can all understand. Parenthetically, I respect the Nobel Prize in spite of the fact that it was awarded to Al Gore for attempting to scare all of us and President Obama for what he "might do."
In not addressing what will fix the real economic problems we are facing now, we instead are making the same mistakes that were made in either 1931 or 1937 (you'd think we would have learned something since then). If either current debt negotiation fails, we could be replaying 1931, the global banking collapse that made the Great Depression great. But, if the negotiations succeed, will be set to replay the great mistake of 1937: the premature turn to fiscal contraction that derailed economic recovery and ensured that the Depression would last until World War II finally provided the boost the economy needed. And, let me add that both Krugman and Warren Buffet said at the outset of the Great Recession that the U.S. was NOT spending enough money on the economy to get us out of it. And now, we're debating "contraction" when unemployment is going up!
So, while the European Central Bank seems determined to raise interest rates (these are the same idiots that were bailed out by Ben Bernanke at the outset of the Great Recession when he sent a check for $250 billion to them because he thought they needed it), Krugman quotes an old saying on public policy: "You do not know, my son, with how little wisdom the world is governed."
Need I say more.
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