Archive for Economics
A Snow Job
Posted by: | CommentsWhite house economic advisor Larry Summers stated in an interview with CNBC that the recent blizzards probably distorted the unemployment numbers due to be released on Friday morning. According to Summers, the mountain of accumulated snow halted construction projects and also temporarily closed many stores plus restaurants.
The White House reasoning quickly melts in the face of economic logic. Businesses make hiring or firing decisions based on the benefit that an employee brings to the table versus their cost. No doubt the weather kept people from eating out or shopping for a few days. But the dress that was not bought on Saturday because of the weather more than likely will be purchased after the roads have been plowed. The lobster whose life was saved by little snowflakes on Friday night will be boiled a week later for a delayed celebration.
The fact is that construction has hemorrhaged jobs for over a year. In a report authored by the Bureau of Labor Statistics and released at the beginning of February, the construction industry shed another 75,000 jobs, which was about the average monthly loss for the preceding 12 months. Currently, one out of four unemployed people came from construction. Read More→
Knight to c2
Posted by: | CommentsIn chess a fork occurs when a piece moves into a position where it can simultaneously attack two or more opposing pieces. The knight, which can move in an L shaped pattern and four different directions, is the piece most commonly used to execute this type of attack. A fork usually results in the opposing player losing a major piece. High caliber players often take care to avoid moves that could leave an opening for two quality pieces like a Queen and a Bishop to be attacked at the same time.
In his aggression to flood the economy with fiat money and lower key interest rates to zero, Ben Bernanke may have moved his monetary pieces and the economy into a vulnerable position. The Federal Reserve faces two problems. While lower rates did little to boost an economy already flooded in debt, they did help chase money toward the stock market where indices have bounced approximately 60% from the lows made almost a year ago.
A dramatically inflated money supply creates the very real danger of rapid price increases across the economic landscape. At its very worse, inflation can destroy the currency as illustrated historically by the experience of the Weimar Republic. The Producer Price Index, which showed an annualized rise of 16%, sounded an alarm to put the brakes on the monetary printing presses.
The likely result of pulling back on the monetary reins will be much higher interest rates and siphoning money out of the stock market. On the other hand, if the Federal Reserve continues on its present course, then the odds of a currency crisis increase with each passing day.
It looks like Bernake is sure to lose a piece. He has to be careful not to put the country into checkmate.
Another Flawed Keynesian Approach
Posted by: | CommentsWith the help of five Republicans in the US Senate, it appears the hurdle has been cleared for some form of a jobs bill to pass approval in Congress. Perhaps I am mistaken, but Congress already passed and the president signed a $750 billion spending bill to get people back to work. What is different about raiding an empty treasury of billions more this time to create jobs?
Architects of the legislation point to the tax credits available to businesses that increase their headcount. One idea is to give employers a tax-credit up to $5000 for each additional person hired. At first glance this may seem like a logical incentive. But as my economic students learn, two sides exist to transaction.
The tax credit will only reduce the marginal cost of a new employee for the first year. After the initial year the cost of the new hire will balloon by at least the amount of the tax credit. As any student passing a Principles of Economic realizes, cost is just one factor in the employment equation. The other side of the coin takes into account the revenue benefit that an employee brings to the table. Firms will retain or hire individuals as long as their additional benefit exceeds their additional cost. Without a significant pick up in demand, many firms will pass on expanding their payrolls.
Small business owners point to another flaw of the proposal in that tax-credits are realized at the end of the year. The cost of a new hire drains cash flow in the meantime. As one owner stated, cash flow is at the heart of staying in business. My creditors may not wait for the federal government to reimburse me.
It looks like another lesson in failed Keynesian economics.
Never-Ending Government Lies About Markets
Posted by: | CommentsThe purpose of government is for those who run it to plunder those who do not. Throughout history, governments have used violence, intimidation, coercion, and mass murder to enforce this system. But governments’ first line of “defense” is always a blizzard of lies about its own alleged benevolence, altruism, heroism, and greatness, along with equally big lies about the “evils” of the civil society, especially the free market.
Quote of the Day
Posted by: | Comments“If you are an economist and did not see this coming, you should seriously reconsider the value of your education and maybe do something with a tangible value to society, like picking vegetables.”
Should People Just Ignore Economists?
Dollar Being Recalled!
Posted by: | Comments
Click Video to Play
Quote of the Week
Posted by: | CommentsWithout the ability to forcibly take the wealth of others through the political process, many would be relegated to a lifestyle reflective of their talents, intellect and motivation. For a majority such a change would mean living with less.
Henry Patrick – April 19, 2009
Leadership and Tea
Posted by: | CommentsI went to a Tea Party meeting yesterday to observe and chat with a few folks. I spoke with many people I did not know, and I ended up actually speaking to the whole crowd after prompted by many with whom I spoke to on the sidelines. I mainly talked with many folks from truck drivers, retired veterans, moms, small business owners and iterated about a familiar theme that is near and dear to me, small businesses and their impact on this great nation we live in. I have on many occasions proudly proclaimed that it will be entrepreneurial spirit, not government intrusion that will revive our economy. This folks is the heart of small businesses. Small business employs over 75 per cent of the United States workforce. Anything that harms them in my opinion, harms America.
I did not speak and simply say it was the current administration that overtaxed. I reminded them that it is the Washington politicians of both stripes that are reaching into our wallets. This has not been something that just happened. It has been incrementally occurring for over the last 95 years. It may be a battle between the parties, but for most of us it’s Government overreaching their bounds and getting involved in issues that are not ever discussed in the constitution and using that to fund their own constituencies for one reason or another. It is done by politicians to get re-elected and to have power. Ive seen right through this for many years. The second oldest profession is being a politician and I actually think there’s not much difference between the first and second.
Now there is a line between what constitutes being a leader and being a politician. A leader by definition has to serve their followers and constituencies. I suppose a politician can do that. But one thing that is sorely missed in all of this is what their motive is. If the motive of a leader or politician is to be in charge, make the organization or government run smoothly, make a profit, build a respected company or department, get elected, and to win that might sound good. But to truly define leadership we need to completely understand one thing, motive. How was it the person got into a position where they could be called a leader by the definition used above? Did they inherit it? Was it simply appointed to them? Was it funded by interest groups? If it wasnt earned on the merit of truly serving others then I would hesitate at calling them a leader and the definition of a leader is not who promised the most. If it was arrived by taking from someone and giving to another, it also is not leadership.
A leaders motivation is not how far they have advanced their position or power, but how far they have advanced others. Thats the bottom line. If a person takes away from someone intentionally, they are not a leader. A leader strives to add value to others. The value you add to others is teaching them skills, providing opportunity, giving them insight and perspective, and having faith in them. I know this may sound like a politician but the difference lies with their motivation. You can add value to others by not having to take resources from others to give them. A real leader provides inspiration, values, strength, solutions, character, and does not waver in them. There may be politicians whose motives are those of a true leader, but I find it rare to find one. Remember, a true leaders motivation is not to advance their own position or power, but to advance others.
The Great Governor Perry
Posted by: | CommentsQuote Of The Day
Posted by: | Comments“The governments alone are responsible for the spread of the superstitious awe with which the common man looks upon every bit of paper upon which the treasury or agencies which it controls have printed the magical words legal tender.” – LVM
Could it happen here?
Posted by: | CommentsArgentina’s Economic Collapse – Part 1 of 12