http://online.wsj.com/article_email/SB10001424052702303714704576383954208546170-lMyQjAxMTAxMDIwNzEyNDcyWj.html
http://online.wsj.com/article_email/SB10001424052702303936704576399963725691264-lMyQjAxMTAxMDIwNzEyNDcyWj.html
***************
"Specifically, a more realistic appraisal of both globalization and regulation suggests a path to greater prosperity that involves more market integration as well as limited and targeted market regulation." (Pankaj Ghemawat,"World 3.0," 2011)
***************
Call me old fashioned, but I'd like to have a spare tire for my car. I don't think that's asking too much. Even if we have OnStar, or some other "help you" service from car companies, it helps to have them come and change the tire by putting your "spare" on and you get the flat fixed when you can. Simple stuff but very helpful, especially when you're traveling.
Historically, our auto companies have had to deal with fleet mpg standards (Corporate Average Fuel Economy or CAFE) mandated by the government. So, I found out in the mid-90s when driving 800 miles from Dallas, that the folks from OnStar knew exactly where I was and came to change my flat within 10 minutes. What they put on my car was a "doughnut" which is about as useful as the edible version (for anybody that doesn't know what that is: it's a small tire that's not to be driven over 40/60 miles per hour and for not more than 50/100 miles). So, I said to the OnStar person, "How does this get me to Dallas at an average speed of 70/80 miles per hour?" he said "Good point!" and OnStar opened a car dealership after closing time and they put a real tire on my car. That service was not, and is not, available to everybody.
Let's get back to today: the Department of Transportation is floating a 62 mpg standard for 2025, more than double the current 27.5 mpg standard. Over the last 24 hours, "compromise" numbers like 56 mpg as a goal to get to between 2017 and 2025 have been floated. According to well respected researchers, the new CAFE mileage standards will add about $10,000 to the cost of a car.
So, GM has now announced that several versions of its Chevy Cruze would no longer have spare tires. Wait, it gets better: those "spareless" vehicles will carry "vehicle-powered sealant repair kits." Really.
Besides, everybody drives with the new "run-flat" tires, right? Everybody has tire pressure monitors, right? Everybody has roadside assistance systems, right?
We're from the government and we're here to help.
While we're on the subject of inept and intrusive government regulation, how about the NLRB (and, of course, who knows who they are: lets just say they're another government regulator and they're "here to help."). The National Labor Relations Act of 1935 granted sweeping legal privileges to organized labor, including the right to represent all workers in a unionized shop, etc. At the time, it was right to do because workers who struck were being beaten and replaced.
Let's segue to today: the NLRB (which enforces the 1935 Act) has told Boeing that it is being charged with illegal actions "inherently destructive of the rights guaranteed employees" because (wait for it...) Boeing decided to open a new production line for its 787 Dreamliner in North Charleston, South Carolina instead of at their facility in Everett, Washington.
Boeing has spent $1 billion dollars on this new facility and hired 1,000 workers because it thought it had the right to do that. Boeing has not shut down it's existing Dreamliner production line in Washington. South Carolina is additive. Boeing hasn't fired a single production line employee in Washington or shifted a single piece of union work out of state, nor does it plan to.
Richard Branson on labor relations at Boeing's Washington plant (2008): "... if union leaders and management can't get their act together to avoid strikes, we're not going to come back here again." Another segue: the Paris Air Show this past week - Boeing was soundly beaten by a wide margin in commercial aircraft orders by a competitor that is "subsidized" by multiple European countries (Airbus).
We're from the government and we're here to help!
Tuesday, June 28, 2011
Friday, June 17, 2011
Regulation & Job Creation
http://online.wsj.com/article_email/SB10001424052702304778304576377910368783474-lMyQjAxMTAxMDEwMzExNDMyWj.html
***************
"The true spirit of conversation consists in building on another person's observation, not overturning it." (Edward Bulwer-Lytton)
***************
On average, the 54 economists in the current Wall Street Journal survey (published 6/13) expect the economy to add 2.2 million jobs over the next 12 months. That's the good news.
The problem with that projection is that there are 125,000 new entrants into the workforce every month (high school grads, college grads, etc.) and that's a minimum figure. Some estimates run as high as 150,000 new entrants per month. Let's take the low number. Over one year, there will be 1,500,000 new entrants into the U.S. workforce. So, that leaves the 2.2 million jobs created number only 700,000 positive relative to others looking for work. There are currently 14 million people unemployed.
Those same economists are estimating that the current unemployment rate will drop from 9.1% now to 8.2% in June of 2012. Based on what? That's a rhetorical question.
Within the survey itself, 21 economists said that the biggest risk of a "double-dip" recession was a slowdown in hiring. So, if the economists are even slightly off in the job projections cited above (which are, essentially a "push" anyway), we're there. Oh, and housing is doing what?
The consensus of the WSJ economists is that there will be a GDP "bounce-back" in the second half of 2011. Based on what? Again, a rhetorical question.
According to Lawrence Summers (Washington Post, 6/12/11), the United Sates is now half way to a lost economic decade: from the first quarter of 2006 to the first quarter of 2011, the U.S. economy's growth rate averaged less than 1% per year. During that time, the share of the population working has fallen from 63.1 to 58.4 percent, reducing the number of those with jobs by 10 million. According to Summers, "Huge numbers of new college graduates are moving back in with their parents this month because they have no job or means of support."
Summers states quite simply that, "It is false economy to defer infrastructure maintenance and replacement when 10-year interest rates are below 3 percent and construction unemployment approaches 20% ... Recent presidential directives regarding relaxation of inappropriate regulatory burdens should be rigorously implemented ..." He makes other recommendations as well and he's right about all of them. For me to say that Summers is right is difficult because he is so lacking in humility. But this is no time to indulge in personalities.
I'd like to close by building on Summers' reference to "relaxation of inappropriate regulatory burdens" and relate it to a WSJ Editorial Board article 6/13/11 entitled (quite appropriately) "The EPA's War on Jobs" (subtitle: "Coal is from Earth, Lisa Jackson is from mercury.").
As I've referenced in a prior post, Jeff Immelt's Presidential Jobs Council has made some recommendations on lifting hiring and strengthening the economy. Unfortunately, the EPA does not seem to have heard the message.
The EPA is currently conducting a campaign against coal-fired power and one of its most destructive weapons is a pending regulation to limit mercury and other hazardous air pollutants like dioxins or acid gases that power plants emit. The 946 page rule mandates that utilities install "maximum achievable control technology" under the Clean Air Act - it is the most expensive rule in the agency's history.
The rule has numerous errors including an overstatement of U.S. mercury emissions by a factor of 1,000!
It gets better: according to the EPA's own numbers, every dollar in direct benefits costs $1,847. The reason is that electric generation (including coal) results in negligible quantities of air pollutants like mercury. And, mercury is on the decline: in 2005, the entire U.S. coal output emitted 26% less than the EPA predicted.
The real goal of the EPA rule is to shut down fossil fuel electric power in the name of CLIMATE CHANGE. The consensus estimate in the private sector is that the utility rule will force the retirement of 60 0f the country's current 340 gigawatts of coal-fired capacity. If this happens, reliability downgrades will hit the South and Midwest where coal energy is concentrated.
So, what will that cost in jobs? 50,000 jobs will be lost directly and another 200,000 down the supply chain. Per the WSJ: "Astonishingly, EPA Administrator Lisa Jackson claimed in March that the utility rule is 'expected to create jobs' because 'it will increase demand for pollution control technology' and 'new workers' will be needed for that. In other words, the government should harm an industry and force it to ruin working assets so maybe other people can clean up the mess."
Again, from the WSJ: "Such theories help explain why the economic recovery and job creation are far weaker than they ought to be, but the good news is that even many Democrats are beginning to push back against the EPA's willful damage."
Is it not true that China is building one new coal-fired power plant per week? Let's give China credit for spending more on "clean energy" than any other country in the world, but they need power (and jobs) and they're pragmatic about it so they're building the coal fired plants now.
What are we doing? We're regulating.
W
***************
"The true spirit of conversation consists in building on another person's observation, not overturning it." (Edward Bulwer-Lytton)
***************
On average, the 54 economists in the current Wall Street Journal survey (published 6/13) expect the economy to add 2.2 million jobs over the next 12 months. That's the good news.
The problem with that projection is that there are 125,000 new entrants into the workforce every month (high school grads, college grads, etc.) and that's a minimum figure. Some estimates run as high as 150,000 new entrants per month. Let's take the low number. Over one year, there will be 1,500,000 new entrants into the U.S. workforce. So, that leaves the 2.2 million jobs created number only 700,000 positive relative to others looking for work. There are currently 14 million people unemployed.
Those same economists are estimating that the current unemployment rate will drop from 9.1% now to 8.2% in June of 2012. Based on what? That's a rhetorical question.
Within the survey itself, 21 economists said that the biggest risk of a "double-dip" recession was a slowdown in hiring. So, if the economists are even slightly off in the job projections cited above (which are, essentially a "push" anyway), we're there. Oh, and housing is doing what?
The consensus of the WSJ economists is that there will be a GDP "bounce-back" in the second half of 2011. Based on what? Again, a rhetorical question.
According to Lawrence Summers (Washington Post, 6/12/11), the United Sates is now half way to a lost economic decade: from the first quarter of 2006 to the first quarter of 2011, the U.S. economy's growth rate averaged less than 1% per year. During that time, the share of the population working has fallen from 63.1 to 58.4 percent, reducing the number of those with jobs by 10 million. According to Summers, "Huge numbers of new college graduates are moving back in with their parents this month because they have no job or means of support."
Summers states quite simply that, "It is false economy to defer infrastructure maintenance and replacement when 10-year interest rates are below 3 percent and construction unemployment approaches 20% ... Recent presidential directives regarding relaxation of inappropriate regulatory burdens should be rigorously implemented ..." He makes other recommendations as well and he's right about all of them. For me to say that Summers is right is difficult because he is so lacking in humility. But this is no time to indulge in personalities.
I'd like to close by building on Summers' reference to "relaxation of inappropriate regulatory burdens" and relate it to a WSJ Editorial Board article 6/13/11 entitled (quite appropriately) "The EPA's War on Jobs" (subtitle: "Coal is from Earth, Lisa Jackson is from mercury.").
As I've referenced in a prior post, Jeff Immelt's Presidential Jobs Council has made some recommendations on lifting hiring and strengthening the economy. Unfortunately, the EPA does not seem to have heard the message.
The EPA is currently conducting a campaign against coal-fired power and one of its most destructive weapons is a pending regulation to limit mercury and other hazardous air pollutants like dioxins or acid gases that power plants emit. The 946 page rule mandates that utilities install "maximum achievable control technology" under the Clean Air Act - it is the most expensive rule in the agency's history.
The rule has numerous errors including an overstatement of U.S. mercury emissions by a factor of 1,000!
It gets better: according to the EPA's own numbers, every dollar in direct benefits costs $1,847. The reason is that electric generation (including coal) results in negligible quantities of air pollutants like mercury. And, mercury is on the decline: in 2005, the entire U.S. coal output emitted 26% less than the EPA predicted.
The real goal of the EPA rule is to shut down fossil fuel electric power in the name of CLIMATE CHANGE. The consensus estimate in the private sector is that the utility rule will force the retirement of 60 0f the country's current 340 gigawatts of coal-fired capacity. If this happens, reliability downgrades will hit the South and Midwest where coal energy is concentrated.
So, what will that cost in jobs? 50,000 jobs will be lost directly and another 200,000 down the supply chain. Per the WSJ: "Astonishingly, EPA Administrator Lisa Jackson claimed in March that the utility rule is 'expected to create jobs' because 'it will increase demand for pollution control technology' and 'new workers' will be needed for that. In other words, the government should harm an industry and force it to ruin working assets so maybe other people can clean up the mess."
Again, from the WSJ: "Such theories help explain why the economic recovery and job creation are far weaker than they ought to be, but the good news is that even many Democrats are beginning to push back against the EPA's willful damage."
Is it not true that China is building one new coal-fired power plant per week? Let's give China credit for spending more on "clean energy" than any other country in the world, but they need power (and jobs) and they're pragmatic about it so they're building the coal fired plants now.
What are we doing? We're regulating.
W
New Wall Street Layoffs
http://dealbook.nytimes.com/2011/06/16/as-profits-wane-wall-street-braces-for-new-layoffs/?emc=eta1
***************
"Successful leaders make the right move at the right moment with the right motive." (John C. Maxwell)
***************
Since the "profits" on Wall Street are not as big as they were before the crisis and potential regulations (Dodd-Frank) appear problematic, several firms are planning major expense reductions this summer.
Goldman Sachs (by most accounts, Wall Street's most profitable firm) has concluded it needs to cut 10%, or $1 billion, of non-compensation expenses over the next 12 months. According to some sources, Goldman is "certain" to shrink headcount over the next few months.
Bank of America will be cutting staff from its securities division and Credit Suisse from its investment banking unit.
Regulation has caused some banks to exit some businesses like proprietary trading.
The last significant industry-wide job cuts were in early 2009 - Goldman cut its workforce by 9% then. They have not added back since. So, further cuts would simply continue to reduce their overall staff from pre-2009 levels.
All of this relates to Return on Equity measures that have shrunk substantially from 2005 levels: 8.2% in 2010, down from 17.5% in 2005.
Overall, from a U.S. "jobs" perspective, this sector isn't going in the right direction. Message to Jeff Immelt...
***************
"Successful leaders make the right move at the right moment with the right motive." (John C. Maxwell)
***************
Since the "profits" on Wall Street are not as big as they were before the crisis and potential regulations (Dodd-Frank) appear problematic, several firms are planning major expense reductions this summer.
Goldman Sachs (by most accounts, Wall Street's most profitable firm) has concluded it needs to cut 10%, or $1 billion, of non-compensation expenses over the next 12 months. According to some sources, Goldman is "certain" to shrink headcount over the next few months.
Bank of America will be cutting staff from its securities division and Credit Suisse from its investment banking unit.
Regulation has caused some banks to exit some businesses like proprietary trading.
The last significant industry-wide job cuts were in early 2009 - Goldman cut its workforce by 9% then. They have not added back since. So, further cuts would simply continue to reduce their overall staff from pre-2009 levels.
All of this relates to Return on Equity measures that have shrunk substantially from 2005 levels: 8.2% in 2010, down from 17.5% in 2005.
Overall, from a U.S. "jobs" perspective, this sector isn't going in the right direction. Message to Jeff Immelt...
Wednesday, June 15, 2011
Small Business Slowdown
http://www.nytimes.com/2011/06/15/business/15jobs.html?emc=eta1
http://online.wsj.com/article_email/SB10001424052702304259304576380323311523538-lMyQjAxMTAxMDEwMzExNDMyWj.html
***************
"Start where people are before you try to take them to where you want them to go." (Jim Rohn)
***************
According to a new report released Tuesday by the National Federation of Independent Business (a trade group that regularly surveys its membership of small businesses across America), May showed the worst hiring prospects in 8 months. This is the group of businesses where half of the private sector workforce is located and the group that many feel must be the hiring leader in any "recovery."
This is the first "recovery" in which, seven quarters in, there have been zero gains in aggregate wages and salaries.
The Business Roundtable CEO (roughly, the Top 200 companies) Economic Outlook survey, also released on Tuesday, found that the number of large companies that expected to grow their American workforces over the next 6 months far outnumbers those that anticipate shrinkage. So, what does this tell us?
Cathrine Rampell recites that this is, as one economist puts it, a "tale of two recoveries."
My thoughts on all of this are that, as I've said many times before, "capital" ultimately gets spent. At least in large companies, capital can only be held up so long and then it gets spent. For the smaller companies, their plight is not "exclusive" of large company spending. Many of them are the recipients of direct or indirect capital spending from the larger companies.
What's interesting (and sad) is that the economy is producing as much as it was before the downturn, but with 7 million fewer jobs (per Catherine Rampell in an earlier "Economix" post). So, business spending on employees has grown 2% since the recovery began but business spending on equipment and software has gone up 26%. A capital rebound that sharp and a labor rebound that slow have been recorded only once before: after the 1982 recession.
Structurally, equipment prices have been dropping either directly or through tax incentives that subsidize capital investments. So, capital has gotten much cheaper relative to labor.
Corporate profits (large companies) are at all time highs and companies are continuing to hoard cash. Many of the companies that are considering hiring say that they're scared off by the uncertain future costs of health care and other benefits.
Austan Goolsbee, chairman of the President's Council of Economic Advisers, takes the position (along with several other economists) that the relative prices of labor and capital are not the real problem: the biggest hurdle is that companies are loath to invest at all because economic growth is so slow. That's a position that's hard to argue against.
Jeff Immelt, who is chairman and CEO of GE and chairman of the President's Jobs and Competitiveness Council, weighed in this week in a Wall Street Journal article where he highlighted the work the council has been doing since he was appointed 90 days ago. His group has analyzed which actions are critical to accelerating job growth in high-potential sectors, while also addressing areas of concentrated unemployment. He lists "fast-action" steps that could create 1 million jobs in specific industries:
(1) Train workers for today's open jobs. There are more than 2 million open jobs in the U.S., in part because employers can't find workers with the advanced manufacturing skills they need.
(2) Streamline permitting. Cut red tape so job-creating construction and infrastructure projects can move forward.
(3) Facilitate small-business loans. Small Business Administration loans need to be made easier to get.
(4) Put construction workers back to work. More than 2 million construction workers don't have work. Making commercial buildings more energy efficient, for example, has tremendous positive potential.
The Jobs Council will deliver recommendations on more strategic questions (like ways to encourage foreign direct investment in the U.S.) in September.
I've mentioned in prior posts that Immelt, as CEO of GE over the last ten plus years, has presided over a loss of roughly 100,000 jobs in that company. Because of that, I'm not a big fan. Also because of that, he knows why he did what he did and is busy leading the charge on what to do about stemming the flow of jobs and investment elsewhere. I support that.
http://online.wsj.com/article_email/SB10001424052702304259304576380323311523538-lMyQjAxMTAxMDEwMzExNDMyWj.html
***************
"Start where people are before you try to take them to where you want them to go." (Jim Rohn)
***************
According to a new report released Tuesday by the National Federation of Independent Business (a trade group that regularly surveys its membership of small businesses across America), May showed the worst hiring prospects in 8 months. This is the group of businesses where half of the private sector workforce is located and the group that many feel must be the hiring leader in any "recovery."
This is the first "recovery" in which, seven quarters in, there have been zero gains in aggregate wages and salaries.
The Business Roundtable CEO (roughly, the Top 200 companies) Economic Outlook survey, also released on Tuesday, found that the number of large companies that expected to grow their American workforces over the next 6 months far outnumbers those that anticipate shrinkage. So, what does this tell us?
Cathrine Rampell recites that this is, as one economist puts it, a "tale of two recoveries."
My thoughts on all of this are that, as I've said many times before, "capital" ultimately gets spent. At least in large companies, capital can only be held up so long and then it gets spent. For the smaller companies, their plight is not "exclusive" of large company spending. Many of them are the recipients of direct or indirect capital spending from the larger companies.
What's interesting (and sad) is that the economy is producing as much as it was before the downturn, but with 7 million fewer jobs (per Catherine Rampell in an earlier "Economix" post). So, business spending on employees has grown 2% since the recovery began but business spending on equipment and software has gone up 26%. A capital rebound that sharp and a labor rebound that slow have been recorded only once before: after the 1982 recession.
Structurally, equipment prices have been dropping either directly or through tax incentives that subsidize capital investments. So, capital has gotten much cheaper relative to labor.
Corporate profits (large companies) are at all time highs and companies are continuing to hoard cash. Many of the companies that are considering hiring say that they're scared off by the uncertain future costs of health care and other benefits.
Austan Goolsbee, chairman of the President's Council of Economic Advisers, takes the position (along with several other economists) that the relative prices of labor and capital are not the real problem: the biggest hurdle is that companies are loath to invest at all because economic growth is so slow. That's a position that's hard to argue against.
Jeff Immelt, who is chairman and CEO of GE and chairman of the President's Jobs and Competitiveness Council, weighed in this week in a Wall Street Journal article where he highlighted the work the council has been doing since he was appointed 90 days ago. His group has analyzed which actions are critical to accelerating job growth in high-potential sectors, while also addressing areas of concentrated unemployment. He lists "fast-action" steps that could create 1 million jobs in specific industries:
(1) Train workers for today's open jobs. There are more than 2 million open jobs in the U.S., in part because employers can't find workers with the advanced manufacturing skills they need.
(2) Streamline permitting. Cut red tape so job-creating construction and infrastructure projects can move forward.
(3) Facilitate small-business loans. Small Business Administration loans need to be made easier to get.
(4) Put construction workers back to work. More than 2 million construction workers don't have work. Making commercial buildings more energy efficient, for example, has tremendous positive potential.
The Jobs Council will deliver recommendations on more strategic questions (like ways to encourage foreign direct investment in the U.S.) in September.
I've mentioned in prior posts that Immelt, as CEO of GE over the last ten plus years, has presided over a loss of roughly 100,000 jobs in that company. Because of that, I'm not a big fan. Also because of that, he knows why he did what he did and is busy leading the charge on what to do about stemming the flow of jobs and investment elsewhere. I support that.
Friday, June 10, 2011
The Pain Caucus
http://www.nytimes.com/2011/06/10/opinion/10krugman.html?hp#
***************
"It's not what you tell your players that counts. It's what they hear." (Red Auerbach)
***************
Many times I find my vocabulary enhanced by reading the opinions that Paul Krugman has. In this case, the "Pain Caucus" is: the group that advocates doing nothing to help the unemployed. The argument against helping is framed in terms of economic risks: do anything to create jobs and interest rates will soar, runaway inflation will break out, and so on. Of course interest rates are at historic lows. Inflation (even including oil and food) is still low.
Krugman feels the "Pain Caucus" members can be defined as "rentiers:" these are people/institutions who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else's expense.
So, we know who the bad guys are.
Krugman has concluded that the latest economic data have dashed any hope of a quick end to America's job drought, which has already gone on so long that the average unemployed American has been out of work for almost 40 weeks. I couldn't agree more.
Krugman is often associated with the "left." Or, being a "Democrat." (OMG!) Way back when the worldwide financial crisis started, Krugman and Warren Buffet together said that the U.S. government was not spending enough money to properly restore the economy (jobs, institutions, infrastructure, etc.). So, does that make Warren Buffet a "Democrat?" Incidentally, Buffet may be a Democrat but that's not the point. Both Krugman and Buffet are Americans with sophisticated opinions about the economy. I believe they were right about the under investment in restoring the economy. Buffet put his money where his mouth was at the time by spending at least $5 B on G.E. and and another $5B on Goldman. I seem to recall that Goldman felt much in need of that money at the time.
So, today we have what both Krugman and Buffet anticipated: stagnation. As Krugman says, the only real beneficiaries of the Pain Caucus policies (aside from the Chinese government) are the rentiers: bankers and wealthy individuals with lots of bonds in their portfolios: "And that explains why creditor interests bulk so large in policy; not only is this the class that makes big campaign contributions, it's the class that has personal access to policy makers - many of whom go to work for these people when they exit government through the revolving door."
Krugman's conclusion is that "creditor-friendly" policies are crippling the economy. He's right.
This situation reminds me of Citigroup spending $19 million dollars on "lobbying" (2008? I'm not sure I remember the year) during that worst of the financial crisis after the U.S. government had lent them $45 billion in taxpayer money for their "survival." And, speaking of lobbying, where does the Dodd-Frank legislation stand now? I don't hear a lot of good things.
***************
"It's not what you tell your players that counts. It's what they hear." (Red Auerbach)
***************
Many times I find my vocabulary enhanced by reading the opinions that Paul Krugman has. In this case, the "Pain Caucus" is: the group that advocates doing nothing to help the unemployed. The argument against helping is framed in terms of economic risks: do anything to create jobs and interest rates will soar, runaway inflation will break out, and so on. Of course interest rates are at historic lows. Inflation (even including oil and food) is still low.
Krugman feels the "Pain Caucus" members can be defined as "rentiers:" these are people/institutions who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else's expense.
So, we know who the bad guys are.
Krugman has concluded that the latest economic data have dashed any hope of a quick end to America's job drought, which has already gone on so long that the average unemployed American has been out of work for almost 40 weeks. I couldn't agree more.
Krugman is often associated with the "left." Or, being a "Democrat." (OMG!) Way back when the worldwide financial crisis started, Krugman and Warren Buffet together said that the U.S. government was not spending enough money to properly restore the economy (jobs, institutions, infrastructure, etc.). So, does that make Warren Buffet a "Democrat?" Incidentally, Buffet may be a Democrat but that's not the point. Both Krugman and Buffet are Americans with sophisticated opinions about the economy. I believe they were right about the under investment in restoring the economy. Buffet put his money where his mouth was at the time by spending at least $5 B on G.E. and and another $5B on Goldman. I seem to recall that Goldman felt much in need of that money at the time.
So, today we have what both Krugman and Buffet anticipated: stagnation. As Krugman says, the only real beneficiaries of the Pain Caucus policies (aside from the Chinese government) are the rentiers: bankers and wealthy individuals with lots of bonds in their portfolios: "And that explains why creditor interests bulk so large in policy; not only is this the class that makes big campaign contributions, it's the class that has personal access to policy makers - many of whom go to work for these people when they exit government through the revolving door."
Krugman's conclusion is that "creditor-friendly" policies are crippling the economy. He's right.
This situation reminds me of Citigroup spending $19 million dollars on "lobbying" (2008? I'm not sure I remember the year) during that worst of the financial crisis after the U.S. government had lent them $45 billion in taxpayer money for their "survival." And, speaking of lobbying, where does the Dodd-Frank legislation stand now? I don't hear a lot of good things.
Wednesday, June 8, 2011
Light Bulbs
http://online.wsj.com/article_email/SB10001424052748704662604576202770757822548-lMyQjAxMTAxMDAwODEwNDgyWj.html
***************
"There is no such thing as a worthless conversation, provided you know what to listen for." (James Nathan Miller)
***************
According to today's Wall Street Journal (WSJ), as of 1/1/12 Washington will effectively ban the sale of conventional 100 watt incandescent light bulbs. Instead we will be required to buy compact fluorescent lights (CFLs). According to the WSJ, "The greens in the Obama Administration assert that the new light bulbs are good for the lumpen bourgeoisie because they will cut electricity use and save the average household $50 per year." Just conjecture here, but what would the average household save if we eliminated the EPA? Is this another, "Hi, we're the government, and we're here to help?"
But wait, it gets better. Aside from the fact that CFLs are not as bright as regular bulbs, fluorescent lights carry their own environmental risks: they contain small amounts of mercury and other toxic chemicals. The EPA website contains 3 pages of consumer directions on what to do if you break a CFL bulb in your home.
The WSJ asks an interesting question: if CFL bulbs are so clearly superior, why does the government have to force people to buy them? Classic economic theory says the better product (at a competitive price) wins anyway.
Did the Department of Energy really say outlawing incandescent bulbs will "empower consumers with lighting choices?" What choices?
***************
"There is no such thing as a worthless conversation, provided you know what to listen for." (James Nathan Miller)
***************
According to today's Wall Street Journal (WSJ), as of 1/1/12 Washington will effectively ban the sale of conventional 100 watt incandescent light bulbs. Instead we will be required to buy compact fluorescent lights (CFLs). According to the WSJ, "The greens in the Obama Administration assert that the new light bulbs are good for the lumpen bourgeoisie because they will cut electricity use and save the average household $50 per year." Just conjecture here, but what would the average household save if we eliminated the EPA? Is this another, "Hi, we're the government, and we're here to help?"
But wait, it gets better. Aside from the fact that CFLs are not as bright as regular bulbs, fluorescent lights carry their own environmental risks: they contain small amounts of mercury and other toxic chemicals. The EPA website contains 3 pages of consumer directions on what to do if you break a CFL bulb in your home.
The WSJ asks an interesting question: if CFL bulbs are so clearly superior, why does the government have to force people to buy them? Classic economic theory says the better product (at a competitive price) wins anyway.
Did the Department of Energy really say outlawing incandescent bulbs will "empower consumers with lighting choices?" What choices?
Monday, June 6, 2011
China, Patents & U.S. Jobs
http://online.wsj.com/article/SB10001424052702304066504576341834146711972.html?mod=WSJ_Opinion_LEFTTopOpinion
***************
"Teams share the credit for victories and the blame for losses. This fosters genuine humility and authentic community. Individuals take credit and blame alone. This fosters pride and sometimes a sense of failure." (John C. Maxwell quoting C. G. Wilkes)
***************
According to Matthew Slaughter, there's a new report that suggests better intellectual property protection by Beijing could create 2.1 million American jobs. Does anybody disagree that this is possible? Was it the CEO of Microsoft that was over in China sometime within the last month complaining again about the piracy issue?
Slaughter points out that two years into "recovery" (this is a recovery?), America's labor market remains extremely fragile. Unemployment is at 9.1% (officially) and 24 million Americans are unemployed or underemployed. Here's a stat that Slaughter throws out which is incredible: the 108.9 million private-sector U.S. jobs today is the same number we had "12 YEARS AGO!"
According to a new U.S. government report ("China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy," produced by the International Trade Commission (ITC) , one policy change would get 2.1 million jobs added to U.S. private sector employment: get China to protect intellectual-property rights of American companies.
The ITC surveyed 5,000 plus U.S. companies in high-tech, publishing, and software to gauge the incidence and extent of infringement in China. Based upon their estimates and projections, U.S. IP-intensive firms lost somewhere between $48.2 and $90.5 billion from foregone sales, royalties and license fees in 2009. What's so hard about dealing with this? Are we so worried about low prices at Wall-Mart?
Even the senior free trade intellectuals (like former Federal Reserve Vice Chairman Alan S. Blinder) have tempered their positions on "free trade": like maybe totally free trade is not so optimal. So, let's point out to China (we do have a functioning state department, do we not?) what's in it for them if they help us "police" this issue: the innovation they're looking for in their new 5 Year Plan gets a boost within China because their own "inventors" will be "protected." That's the "carrot." The stick is: we put tariffs (amounting to what our companies are losing) on China's imports. This will hurt China's economy right away because some U.S. companies have already learned how to manufacture goods cheaper elsewhere in Asia. In addition, China's labor economy is "fragile" and any loss of manufacturing export demand will immediately increase unemployment which is a significant concern already to China's ruling elite.
While I wouldn't want to overburden our state department, it might also be good to point out to China that we're in this worldwide economy thing together. I was going to read Henry Kissinger's new book (is it called "China"?) but then I read a review of what he wrote and an interview with him about what he wrote and I decided not to waste the money. Kissinger opened up China to the U.S. which was good for both countries but our policies TOWARD China are no more sophisticated today than they were then. My impression of Kissenger is that he embodies this concept of "realpolitik" which is basically that you deal with who's there (whoever's running a country) and get the most out of the relationship that you can. That's pragmatic but I'm not sure it's as sophisticated as it needed to be today. Perhaps Kissinger didn't and doesn't care.
But, enough about Kissinger. Slaughter has hit on something good and it's information that our own government has produced. Let's use it!
(As Slaughter accurately points out, "China may be on the rise, but the U.S. retains a comparative advantage in knowledge-intensive activities, thanks to such strengths as outstanding universities and a culture of risk-taking." So the real "tariff" China has already put on the U.S. is the stealing of ideas that have been turned into intellectual property which is the same thing as stealing jobs.)
*****************
Did I see a report recently that no U.S. sitting President has ever been re-elected with an unemployment rate higher than 7.2%? (except, perhaps, for FDR)
***************
"Teams share the credit for victories and the blame for losses. This fosters genuine humility and authentic community. Individuals take credit and blame alone. This fosters pride and sometimes a sense of failure." (John C. Maxwell quoting C. G. Wilkes)
***************
According to Matthew Slaughter, there's a new report that suggests better intellectual property protection by Beijing could create 2.1 million American jobs. Does anybody disagree that this is possible? Was it the CEO of Microsoft that was over in China sometime within the last month complaining again about the piracy issue?
Slaughter points out that two years into "recovery" (this is a recovery?), America's labor market remains extremely fragile. Unemployment is at 9.1% (officially) and 24 million Americans are unemployed or underemployed. Here's a stat that Slaughter throws out which is incredible: the 108.9 million private-sector U.S. jobs today is the same number we had "12 YEARS AGO!"
According to a new U.S. government report ("China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy," produced by the International Trade Commission (ITC) , one policy change would get 2.1 million jobs added to U.S. private sector employment: get China to protect intellectual-property rights of American companies.
The ITC surveyed 5,000 plus U.S. companies in high-tech, publishing, and software to gauge the incidence and extent of infringement in China. Based upon their estimates and projections, U.S. IP-intensive firms lost somewhere between $48.2 and $90.5 billion from foregone sales, royalties and license fees in 2009. What's so hard about dealing with this? Are we so worried about low prices at Wall-Mart?
Even the senior free trade intellectuals (like former Federal Reserve Vice Chairman Alan S. Blinder) have tempered their positions on "free trade": like maybe totally free trade is not so optimal. So, let's point out to China (we do have a functioning state department, do we not?) what's in it for them if they help us "police" this issue: the innovation they're looking for in their new 5 Year Plan gets a boost within China because their own "inventors" will be "protected." That's the "carrot." The stick is: we put tariffs (amounting to what our companies are losing) on China's imports. This will hurt China's economy right away because some U.S. companies have already learned how to manufacture goods cheaper elsewhere in Asia. In addition, China's labor economy is "fragile" and any loss of manufacturing export demand will immediately increase unemployment which is a significant concern already to China's ruling elite.
While I wouldn't want to overburden our state department, it might also be good to point out to China that we're in this worldwide economy thing together. I was going to read Henry Kissinger's new book (is it called "China"?) but then I read a review of what he wrote and an interview with him about what he wrote and I decided not to waste the money. Kissinger opened up China to the U.S. which was good for both countries but our policies TOWARD China are no more sophisticated today than they were then. My impression of Kissenger is that he embodies this concept of "realpolitik" which is basically that you deal with who's there (whoever's running a country) and get the most out of the relationship that you can. That's pragmatic but I'm not sure it's as sophisticated as it needed to be today. Perhaps Kissinger didn't and doesn't care.
But, enough about Kissinger. Slaughter has hit on something good and it's information that our own government has produced. Let's use it!
(As Slaughter accurately points out, "China may be on the rise, but the U.S. retains a comparative advantage in knowledge-intensive activities, thanks to such strengths as outstanding universities and a culture of risk-taking." So the real "tariff" China has already put on the U.S. is the stealing of ideas that have been turned into intellectual property which is the same thing as stealing jobs.)
*****************
Did I see a report recently that no U.S. sitting President has ever been re-elected with an unemployment rate higher than 7.2%? (except, perhaps, for FDR)
Wednesday, June 1, 2011
Krugman On Jobs
http://www.nytimes.com/2011/05/30/opinion/30krugman.html?emc=eta1
http://www.nytimes.com/2011/06/02/business/02markets.html?emc=eta1
***************
"There are no problems we cannot solve together, and very few that we can solve by ourselves." (Lyndon Johnson)
***************
This morning's drop in the Dow has been attributed to today's ADP Employer Services report that the private sector created 38,000 jobs in May, a number substantially below the 175,000 jobs that had been expected by most economists. This is the lowest number since Semptember, 2010.
This makes Paul Krugman's May 29 NY Times post even more timely. He made the point that a strange thing has happened on both sides of the Atlantic: a consensus has emerged among the movers and shakers that nothing can or should be done about jobs.
Krugman quotes the O.E.C.D. (Organization for Economic Cooperation and Development), a think tank which reflects the prevailing opinion of Europe's policy elite, as calling on countries to "go structural" which is code for focusing on long term reforms because there is nothing that can be done for current unemployment. I'm sure Spain, with its current 21% unemployment rate, was heartened by that news.
In the U.S., Krugman doesn't see anybody talking seriously about job creation. He sees the Republicans leaning on their "... ritual calls for tax cuts and deregulation." This, of course, translates in "Republicanese" to jobs because it frees up investment. We're waiting for that to work.
Krugman needs us to realize that private debt is the problem. Since that's the case, there are things we can do. He advocates W.P.A.-type programs for infrastructure investment by putting the unemployed to work repairing roads, etc. He advocates a serious program of mortgage modification, reducing the debts of troubled homeowners. The point is that he advocates "something." And, it should be remembered that when the original worldwide financial crisis hit in December, 2007, both Krugman and Warren Buffet advocated much more spending in the U.S. than the federal government ended up doing with the various bailout programs.
Krugman sees policy makers sinking into a condition of "Learned Helplessness" on the jobs issue: "... the more they fail to do anything about the problem, the more they convince themselves that there's nothing they can do."
According to Nigel Gault, an economist at IHS Global Insight, the GDP growth rate for the U.S. will be less than 3% in the coming quarters, which is better than the first quarter's 1.8% growth rate, but too slow to make a meaningful dent in unemployment. Gault's projections are similar to those of JPMorgan Chase and others. This pattern raises the overall question of long term U.S. GDP growth.
These forecasts are below the official Fed forecasts of 3.1% to 3.3% economic growth in 2011 and 3.5% to 4.5% in 2012. Average private forecast growth rates: 2.9% in 2011 and 3.1% in 2012.
My thought: we need to brace for a long term GDP growth rate that is less than what we're used to and vote out of office anybody that thinks "tax cuts" will solve all our problems. We need to spend more on our aging infrastructure (especially roads and bridges) but stop short of building empty cities as China has. I don't favor either political party but I do favor people who make sense (like Buffet and Krugman). I think that Ben Bernanke learned the lessons of his PhD on the Great Depression and I respect his perspectives. When I see reports that Top 500 companies are spending their pent up capital again, I'll be more optimistic about jobs.
In the meantime, we're drifting.
http://www.nytimes.com/2011/06/02/business/02markets.html?emc=eta1
***************
"There are no problems we cannot solve together, and very few that we can solve by ourselves." (Lyndon Johnson)
***************
This morning's drop in the Dow has been attributed to today's ADP Employer Services report that the private sector created 38,000 jobs in May, a number substantially below the 175,000 jobs that had been expected by most economists. This is the lowest number since Semptember, 2010.
This makes Paul Krugman's May 29 NY Times post even more timely. He made the point that a strange thing has happened on both sides of the Atlantic: a consensus has emerged among the movers and shakers that nothing can or should be done about jobs.
Krugman quotes the O.E.C.D. (Organization for Economic Cooperation and Development), a think tank which reflects the prevailing opinion of Europe's policy elite, as calling on countries to "go structural" which is code for focusing on long term reforms because there is nothing that can be done for current unemployment. I'm sure Spain, with its current 21% unemployment rate, was heartened by that news.
In the U.S., Krugman doesn't see anybody talking seriously about job creation. He sees the Republicans leaning on their "... ritual calls for tax cuts and deregulation." This, of course, translates in "Republicanese" to jobs because it frees up investment. We're waiting for that to work.
Krugman needs us to realize that private debt is the problem. Since that's the case, there are things we can do. He advocates W.P.A.-type programs for infrastructure investment by putting the unemployed to work repairing roads, etc. He advocates a serious program of mortgage modification, reducing the debts of troubled homeowners. The point is that he advocates "something." And, it should be remembered that when the original worldwide financial crisis hit in December, 2007, both Krugman and Warren Buffet advocated much more spending in the U.S. than the federal government ended up doing with the various bailout programs.
Krugman sees policy makers sinking into a condition of "Learned Helplessness" on the jobs issue: "... the more they fail to do anything about the problem, the more they convince themselves that there's nothing they can do."
According to Nigel Gault, an economist at IHS Global Insight, the GDP growth rate for the U.S. will be less than 3% in the coming quarters, which is better than the first quarter's 1.8% growth rate, but too slow to make a meaningful dent in unemployment. Gault's projections are similar to those of JPMorgan Chase and others. This pattern raises the overall question of long term U.S. GDP growth.
These forecasts are below the official Fed forecasts of 3.1% to 3.3% economic growth in 2011 and 3.5% to 4.5% in 2012. Average private forecast growth rates: 2.9% in 2011 and 3.1% in 2012.
My thought: we need to brace for a long term GDP growth rate that is less than what we're used to and vote out of office anybody that thinks "tax cuts" will solve all our problems. We need to spend more on our aging infrastructure (especially roads and bridges) but stop short of building empty cities as China has. I don't favor either political party but I do favor people who make sense (like Buffet and Krugman). I think that Ben Bernanke learned the lessons of his PhD on the Great Depression and I respect his perspectives. When I see reports that Top 500 companies are spending their pent up capital again, I'll be more optimistic about jobs.
In the meantime, we're drifting.
Subscribe to:
Posts (Atom)