http://www.nytimes.com/2013/04/22/opinion/krugman-the-jobless-trap.html?src=ISMR_AP_LO_MST_FB
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"Most people evaluate events in their lives according to how they will be personally affected. Leaders think within a broader context." (John C. Maxwell)
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Krugman is still on his "DEBT" perspective. He sees what we've done to respond to the worldwide financial crisis as "...a monstrously failed response to economic depression." He calls it "debt hysteria" and defines it as "fear that unless we slash spending we'll turn into Greece any day now."
But, about the real danger, he is 100% correct: "the corrosive effect, social and economic, of persistent high unemployment. And, even as the case for debt hysteria is collapsing, our worst fears about the damage from long-term unemployment are being confirmed."
He adds: "Five years after the crisis, unemployment remains elevated, with almost 12 million Americans out of work ... with 4.6 million unemployed for more than 6 months." And, the sad news here is that potential employers assume that something must be wrong with people who can't find a job, even if the real reason is simply "the terrible economy."
According to studies, a rising number of job openings does nothing to reduce the numbers of the long-term unemployed. According to Krugman, we are creating a permanent class of jobless Americans.
Krugman: "Our exaggerated fear of debt is, in short, creating a slow-motion catastrophe." And we continue to make it worse by spending less and creating more unemployment. Oh, and let's not spend government money on badly needed road repair and other important infrastructure projects that would fix things that need to be fixed and create employment (on a 1/1.5 dollar spend ratio).
Krugman is right.
Tuesday, April 23, 2013
787 Battery Approval
http://www.nytimes.com/2013/04/24/business/safety-board-examines-787-battery-approval.html?ref=business
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"Each time another person in the organization embraces the vision and passes it on, it's like giving the vision 'fresh legs." (John C. Maxwell)
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The National (Safety) Transportation Board opened a two day hearing on Tuesday to determine how 5 years of work by Boeing and the Federal Aviation Administration resulted in the approval of a lithium-ion battery for the Boeing 787 that could catch fire.
The board is looking at whether Boeing underestimated the risks involved with the new technology and how well regulators can evaluate new technologies when technical innovation is moving quickly, making it difficult for government regulators to keep up.
The FAA last week approved Boeing's plans to fix the plane's batteries. So, while the 787s could soon be flying again, investigators in the U.S. and Japan have not yet figured out "why" the batteries overheated in the first place.
I know there is a lot at stake financially but I'd want to know "why" those batteries were burning before I flew on that plane again.
***************
"Each time another person in the organization embraces the vision and passes it on, it's like giving the vision 'fresh legs." (John C. Maxwell)
***************
The National (Safety) Transportation Board opened a two day hearing on Tuesday to determine how 5 years of work by Boeing and the Federal Aviation Administration resulted in the approval of a lithium-ion battery for the Boeing 787 that could catch fire.
The board is looking at whether Boeing underestimated the risks involved with the new technology and how well regulators can evaluate new technologies when technical innovation is moving quickly, making it difficult for government regulators to keep up.
The FAA last week approved Boeing's plans to fix the plane's batteries. So, while the 787s could soon be flying again, investigators in the U.S. and Japan have not yet figured out "why" the batteries overheated in the first place.
I know there is a lot at stake financially but I'd want to know "why" those batteries were burning before I flew on that plane again.
Friday, April 19, 2013
The Excel Depression
http://www.nytimes.com/2013/04/19/opinion/krugman-the-excel-depression.html?hp
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"You've got to think about the 'big things' while you're doing small things, so that all the small things go in the right direction." (Alvin Toffler)
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"The story so far: At the beginning of 2010, two Harvard economists, Carmen Reinhart and Kenneth Rogoff, circulated a paper, "Growth in a Time of Debt," that purported to identify a critical "threshold," a tipping point, for government indebtedness. Once debt exceeds 90% of gross domestic product (GDP), they claimed, economic growth drops off sharply."
According to Krugman, their paper achieved an almost "sacred status" amongst self-proclaimed guardians of fiscal responsibility.
Unfortunately (or fortunately), their claim could not be substantiated by other economists using the same approach to the data analyzed. Nobody could prove that 90% was the tipping point for reversion to slow GDP growth!
Finally, researchers at the University of Massachusetts looked at the original spread sheet that Rogoff and Reinhart used and the mystery was solved: "First, they (Rogoff & Reinhart) omitted some data; second, they used unusual and highly questionable statistical procedures; and finally, yes, they made an Excel coding error." So, as Krugman points out, if you correct for some of these errors, there is some correlation between high debt and slow growth, with no indication of which is causing which, and no sign of that 90% "threshold."
Krugman sees the Reinhart-Rogoff fiasco in a broader context: "the obviously intense desire of policy makers, politicians and pundits across the western world to turn their backs on the unemployed and instead use the economic crisis as an excuse to slash social programs."
I see it as somewhat worse than that - it's an indictment of "economics" as a profession. Why can't that profession make up its mind whether spending into a "depression" (Krugman's term for what we were and "are" in) is the right or wrong thing to do. They can't even agree on that.
***************
"You've got to think about the 'big things' while you're doing small things, so that all the small things go in the right direction." (Alvin Toffler)
***************
"The story so far: At the beginning of 2010, two Harvard economists, Carmen Reinhart and Kenneth Rogoff, circulated a paper, "Growth in a Time of Debt," that purported to identify a critical "threshold," a tipping point, for government indebtedness. Once debt exceeds 90% of gross domestic product (GDP), they claimed, economic growth drops off sharply."
According to Krugman, their paper achieved an almost "sacred status" amongst self-proclaimed guardians of fiscal responsibility.
Unfortunately (or fortunately), their claim could not be substantiated by other economists using the same approach to the data analyzed. Nobody could prove that 90% was the tipping point for reversion to slow GDP growth!
Finally, researchers at the University of Massachusetts looked at the original spread sheet that Rogoff and Reinhart used and the mystery was solved: "First, they (Rogoff & Reinhart) omitted some data; second, they used unusual and highly questionable statistical procedures; and finally, yes, they made an Excel coding error." So, as Krugman points out, if you correct for some of these errors, there is some correlation between high debt and slow growth, with no indication of which is causing which, and no sign of that 90% "threshold."
Krugman sees the Reinhart-Rogoff fiasco in a broader context: "the obviously intense desire of policy makers, politicians and pundits across the western world to turn their backs on the unemployed and instead use the economic crisis as an excuse to slash social programs."
I see it as somewhat worse than that - it's an indictment of "economics" as a profession. Why can't that profession make up its mind whether spending into a "depression" (Krugman's term for what we were and "are" in) is the right or wrong thing to do. They can't even agree on that.
Friday, April 5, 2013
The Spring Swoon
http://www.nytimes.com/2013/04/06/business/economy/us-adds-only-88000-jobs-jobless-rate-falls-to-7-6.html?hp
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"Progress is often just a good idea away." (John C. Maxwell)
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So "employers" increased their payrolls by 88,000 last month, compared with 268,000 in February based on Labor Department data released today. This is the slowest pace since last June and half of what economists expected. But, then again, we're talking about "economists."
The "Spring Swoon:" this is what economists have started calling a drop in employment at this time of year since it is the third consecutive year that it has happened.
According to Steve Blitz (director and chief economist at ITG Investment Research), this data underscores what their information is indicating: "...a growing but not accelerating economy."
The unemployment rate (which comes from a different survey) dropped down to 7.6% from 7.7% but, as Catherine Rampell says, "...primarily because more people dropped out of the labor force, not because more people got jobs."
The "Labor Force Participation Rate" has not been this low - 63.3% - since 1979. That's 1979! Again, according to Catherine Rampell, 1979 was "...a time when women were less likely to be working." Dropping out has everything to do with discouragement about job prospects in a mediocre economy and that's a major force here.
"Sequestration," a term that only government could come up with, has NOT caused the current weak numbers. Government employment actually "rose" in March. (That's a "net" number since the Post Office did lay off 12,000 people) Sequestration is not expected to play into the overall numbers until September. Weak retail numbers, based on the assumption that consumers are spending less in reaction to the expiration of the payroll tax cut, factored in as expected.
When you look at the mix of jobs that have been lost versus jobs that have been added over the past few years, the majority of jobs lost during the downturn were in the middle range of wages and the majority of those added during the "recovery" (is that what we're in?) have been low paying (per the National Employment Law Project). Not even the same people.
So, I'll believe we're in a "recovery" when the Fed decides to raise interest rates because unemployment is down to 5%. Until then, no.
***************
"Progress is often just a good idea away." (John C. Maxwell)
***************
So "employers" increased their payrolls by 88,000 last month, compared with 268,000 in February based on Labor Department data released today. This is the slowest pace since last June and half of what economists expected. But, then again, we're talking about "economists."
The "Spring Swoon:" this is what economists have started calling a drop in employment at this time of year since it is the third consecutive year that it has happened.
According to Steve Blitz (director and chief economist at ITG Investment Research), this data underscores what their information is indicating: "...a growing but not accelerating economy."
The unemployment rate (which comes from a different survey) dropped down to 7.6% from 7.7% but, as Catherine Rampell says, "...primarily because more people dropped out of the labor force, not because more people got jobs."
The "Labor Force Participation Rate" has not been this low - 63.3% - since 1979. That's 1979! Again, according to Catherine Rampell, 1979 was "...a time when women were less likely to be working." Dropping out has everything to do with discouragement about job prospects in a mediocre economy and that's a major force here.
"Sequestration," a term that only government could come up with, has NOT caused the current weak numbers. Government employment actually "rose" in March. (That's a "net" number since the Post Office did lay off 12,000 people) Sequestration is not expected to play into the overall numbers until September. Weak retail numbers, based on the assumption that consumers are spending less in reaction to the expiration of the payroll tax cut, factored in as expected.
When you look at the mix of jobs that have been lost versus jobs that have been added over the past few years, the majority of jobs lost during the downturn were in the middle range of wages and the majority of those added during the "recovery" (is that what we're in?) have been low paying (per the National Employment Law Project). Not even the same people.
So, I'll believe we're in a "recovery" when the Fed decides to raise interest rates because unemployment is down to 5%. Until then, no.
Thursday, April 4, 2013
The Continuing Soap Opera @ HP
http://www.nytimes.com/reuters/2013/04/04/business/04reuters-hp-chairman.html?ref=business
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"Advice is seldom welcome, and those who need it most like it the least." (Samuel Johnson)
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Perhaps our "saying" applies to Ray Lane who is giving up his title as Chairman of the Board at HP. Among other things, Lane has come under fire for his role in the "botched," costly acquisition of British software company Autonomy Plc. Lane will remain on HP's board.
Today's announcement comes weeks after Lane, Kleiner Perkins managing partner, narrowly won reelection at HP's annual shareholder's meeting.
According to the NY Times, director and activist Ralph Whitworth will become interim chairman.
Under the "Wait, There's More" category heading, HP says that it is looking for a "non-executive board chairman" to replace Lane. For anyone with any experience at this level, what that means is that Whitworth is looking for a chairperson with no teeth who will be happy to "preside" at board meetings without any real responsibilities. Anybody qualified for that job is not qualified. So they'd fit right in.
But wait, there's more. The position of "lead independent director" is being eliminated. Since Rajiv Gupta was that person, I'm sure he's relieved to find out that he is still on the board and is now chairman of the audit committee.
So what has "The Gang That Couldn't Shoot Straight" accomplished over the past few years? After 3 years of booking net income of between $7 billion and $9 billion, HP suffered an annual loss of $12.65 billion in 2012. The "loss" was caused by the incurring of after tax costs of $20.7 billion, or $10.46 per diluted share, related to the impairment of goodwill and purchased intangible assets, restructuring charges, amortization of purchased intangible assets, charges relating to the wind down of non-strategic businesses, and acquisition-related charges. This is what you say in accounting language when you paid $8 billion too much for "Autonomy."
The problems go back before last year. In the last two years, HP has written off more than $17 billion to account for three acquisitions that didn't turn out so well: technology consulting service EDS, device maker Palm and business software maker Autonomy.
In addition to the recent write-downs, HP has also had to overcome a continuing decline in personal computer sales. Half of HP's revenue comes from two divisions: personal computers and printers. Both are in a long term decline. That's why HP has been trying to change from a hardware company to a software and services company over several years. Poor choices and top management turnover have literally caused them to fail. Plus, they face stiff competition from three companies that already occupy the market space that HP has aspired to: IBM, Oracle and SAP.
Meg Whitman, HP's CEO, recently stated that the new restructuring strategy will pay off in 2014. So, I guess that leaves this year out.
Is it possible to take a great company and mess it up any worse than this?
***************
"Advice is seldom welcome, and those who need it most like it the least." (Samuel Johnson)
***************
Perhaps our "saying" applies to Ray Lane who is giving up his title as Chairman of the Board at HP. Among other things, Lane has come under fire for his role in the "botched," costly acquisition of British software company Autonomy Plc. Lane will remain on HP's board.
Today's announcement comes weeks after Lane, Kleiner Perkins managing partner, narrowly won reelection at HP's annual shareholder's meeting.
According to the NY Times, director and activist Ralph Whitworth will become interim chairman.
Under the "Wait, There's More" category heading, HP says that it is looking for a "non-executive board chairman" to replace Lane. For anyone with any experience at this level, what that means is that Whitworth is looking for a chairperson with no teeth who will be happy to "preside" at board meetings without any real responsibilities. Anybody qualified for that job is not qualified. So they'd fit right in.
But wait, there's more. The position of "lead independent director" is being eliminated. Since Rajiv Gupta was that person, I'm sure he's relieved to find out that he is still on the board and is now chairman of the audit committee.
So what has "The Gang That Couldn't Shoot Straight" accomplished over the past few years? After 3 years of booking net income of between $7 billion and $9 billion, HP suffered an annual loss of $12.65 billion in 2012. The "loss" was caused by the incurring of after tax costs of $20.7 billion, or $10.46 per diluted share, related to the impairment of goodwill and purchased intangible assets, restructuring charges, amortization of purchased intangible assets, charges relating to the wind down of non-strategic businesses, and acquisition-related charges. This is what you say in accounting language when you paid $8 billion too much for "Autonomy."
The problems go back before last year. In the last two years, HP has written off more than $17 billion to account for three acquisitions that didn't turn out so well: technology consulting service EDS, device maker Palm and business software maker Autonomy.
In addition to the recent write-downs, HP has also had to overcome a continuing decline in personal computer sales. Half of HP's revenue comes from two divisions: personal computers and printers. Both are in a long term decline. That's why HP has been trying to change from a hardware company to a software and services company over several years. Poor choices and top management turnover have literally caused them to fail. Plus, they face stiff competition from three companies that already occupy the market space that HP has aspired to: IBM, Oracle and SAP.
Meg Whitman, HP's CEO, recently stated that the new restructuring strategy will pay off in 2014. So, I guess that leaves this year out.
Is it possible to take a great company and mess it up any worse than this?
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