Economic Populist Commentary

Economic commentary by a pro-capitalist, economic populist. Demand-Side Economic theory. Consists of author's economic views. Questions & comments appreciated. Dissenting views are VERY welcome and encouraged. Main "agenda" is crafting and advocacy of a "populist" economic agenda. A secondary goal is prevention of an economic Armageddon. Encouraging open discussion of US economy.

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Location: Southern California, California, United States

The author is a physician by profession, and a "student economist" by necessity. The current status of our economy necessitates the latter. The intent of this blog is to explain and discuss economics in layman terms. It is designed to promote thought and discussion. It is written by a layman. Comments and critiques of these theories and letters are welcome and ENCOURAGED. Dissenting comments are also WELCOME! They form the basis for discussion.

Sunday, November 05, 2006

ECONOMY UPDATES







ECONOMIC ARMAGEDDON ?


Faith-based economy or
Fate-based Armageddon?


Several well-known economists believe the US will likely experience a sharp economic downturn in the near future. Among these economists are Steven Roach of Morgan Stanley and Paul Krugman of MIT. Add to this list economist Joseph Stiglitz, Nobel prize winner and Columbia University economics professor. Stiglitz describes our situation in his January 1, 2005 article from the Guardian - "This can't go on forever - so it won't." The link is http://www.guardian.co.uk/print/0,3858,5094396-108079,00.html

Several economists believe the cause of the Great Depression in the 1930's was a demand-side failure. Among them again, is MIT economist, Paul Krugman, who also writes for the New York Times. In 1999, Krugman wrote the book Return of Depression Economics. In this book he describes how 8 modern world economies suffered severe declines, most during a period of less than 3 years. Krugman believes these were due mainly to demand-side failure (i.e., due to insufficient consumer spending.) Among the victims were Japan and Korea. Krugman describes their inability to change course until it was too late. Krugman also notes the drift of U.S. economic policy away from the demand side toward the supply side over the last 2 decades. The same shift preceded the Great Depression of the 1930's. Are we heading there again?

Krugman may well be able to predict the future. He's done so in the past. His books reveal an uncanny ability to predict future economic events. Krugman suggested in 1999 that an economic downturn, like those experienced by other world economies, could happen here. In 2001, it did happen here.

Krugman recently suggested that a recurrence of another economic downturn is not a question of "if," it's a question of "when." He was right before. Will he be right again? With a president unable to change course, in spite of obvious policy failures, the chances of Krugman's predictions coming true are even greater. In my opinion, they're almost guaranteed. An economic Armageddon seems more likely by the day.

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BUSH Job Approval Rating

Image hosted by Photobucket.com

Here's a link to the above poll from MSNBC:
http://www.msnbc.msn.com/id/10562904#survey


In a the most recent January 2006 Zogby poll, 52% thought Bush should be impeached. Below is a copy of the Zogby poll commentary.

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BUSH JOB APPROVAL RATING (Standard "Scientific" Polls)


9/24/06 - - - -- 42% Approve - - - - - - - 55% Disapprove
from CNN
http://www.pollingreport.com/BushJob.htm

9/19/06 - - - -- 45% Approve - - - - - - - 52% Disapprove
from L.A. Times/Bloomberg
http://www.pollingreport.com/BushJob.htm

9/19/06 - - - -- 37% Approve - - - - - - - 56% Disapprove
from CBS/New York Times
http://www.pollingreport.com/BushJob.htm

9/13/06 - - - -- 39% Approve - - - - - - - 60% Disapprove
from AP-Ipsos
http://www.pollingreport.com/BushJob.htm

9/11/06 - - - -- 42% Approve - - - - - - - 53% Disapprove
from NBC/Wall Street Journal
http://www.pollingreport.com/BushJob.htm

9/10/06 - - - -- 37% Approve - - - - - - - 53% Disapprove
from Pew
http://www.pollingreport.com/BushJob.htm

8/25/06 - - - -- 36% Approve - - - - - - - 56% Disapprove
from Newsweek
http://www.pollingreport.com/BushJob.htm

8/21/06 - - - -- 36% Approve - - - - - - - 57% Disapprove
from CBS/New York Times
http://www.pollingreport.com/BushJob.htm

8/20/06 - - - -- 42% Approve - - - - - - - 57% Disapprove
from CNN
http://www.pollingreport.com/BushJob.htm

8/13/06 - - - -- 36% Approve - - - - - - - 57% Disapprove
from CBS
http://www.pollingreport.com/BushJob.htm

8/13/06 - - - -- 37% Approve - - - - - - - 54% Disapprove
from Pew
http://www.pollingreport.com/BushJob.htm

8/06/06 - - - -- 40% Approve - - - - - - - 58% Disapprove
from ABC/Washington Post
http://www.pollingreport.com/BushJob.htm

8/03/06 - - - -- 40% Approve - - - - - - - 59% Disapprove
from CNN poll
http://www.pollingreport.com/BushJob.htm

8/01/06 - - - -- 40% Approve - - - - - - - 58% Disapprove
from LA Times/Bloomberg poll
http://www.pollingreport.com/BushJob.htm

7/25/06 - - - -- 36% Approve - - - - - - - 55% Disapprove
from CBS/New York Times poll
http://www.pollingreport.com/BushJob.htm

7/24/06 - - - -- 39% Approve - - - - - - - 56% Disapprove
from AP-Ipsos poll
http://www.pollingreport.com/BushJob.htm

7/12/06 - - - -- 36% Approve - - - - - - - 63% Disapprove
from NBC/Wall Street Journal poll
http://www.pollingreport.com/BushJob.htm

6/29/06 - - - - 35% Approve - - - - - - - 59% Disapprove
from Time magazine poll
http://www.pollingreport.com/BushJob.htm

6/27/06 - - - - 41% Approve - - - - - - - 50% Disapprove
from L.A. Times/Bloomberg poll
http://www.pollingreport.com/BushJob.htm

6/25/06 - - - - 37% Approve - - - - - - - 60% Disapprove
from USA Today/Gallop poll
http://www.pollingreport.com/BushJob.htm


6/25/06 - - - - 38% Approve - - - - - - - 60% Disapprove
from ABC/Washington Post poll
http://www.pollingreport.com/BushJob.htm

6/19/06 - - - - 36% Approve - - - - - - - 54% Disapprove
from Pew poll
http://www.pollingreport.com/BushJob.htm

6/15/06 - - - - 37% Approve - - - - - - - 53% Disapprove
from CNN poll
http://www.pollingreport.com/BushJob.htm

6/12/06 - - - - 37% Approve - - - - - - - 58% Disapprove
from NBC/Wall Street Journal
http://www.pollingreport.com/BushJob.htm

6/11/06 - - - - 33% Approve - - - - - - - 60% Disapprove
from CBS poll
http://www.pollingreport.com/BushJob.htm

6/11/06 - - - - 37% Approve - - - - - - - 58% Disapprove
from USA Today/Gallop
http://www.pollingreport.com/BushJob.htm

6/07/06 - - - - 35% Approve - - - - - - - 63% Disapprove
from AP-Ipsos poll
http://www.pollingreport.com/BushJob.htm

6/04/06 - - - - 36% Approve - - - - - - - 57% Disapprove
from USA Today/Gallop poll
http://www.pollingreport.com/BushJob.htm

5/30/06 - - - - 35% Approve - - - - - - - 58% Disapprove
from Quinnipiac poll
http://www.pollingreport.com/BushJob.htm

5/15/06 - - - - 33% Approve - - - - - - - 65% Disapprove
from ABC/Washington Post poll
http://www.pollingreport.com/BushJob.htm

5/12/06 - - - - 35% Approve - - - - - - - 59% Disapprove
from Newsweek poll
http://www.pollingreport.com/BushJob.htm

5/08/06 - - - - 29% Positive -- - - - - - - 71% Negative
from Wall Steet Journal/Harris poll
http://biz.yahoo.com/prnews/060512/nyf066.html?.v=51

5/08/06 - - - - 31% Approve - - - - - - - 63% Disapprove
from CBS/New York Times poll
http://www.pollingreport.com/BushJob.htm

5/07/06 - - - - 34% Approve - - - - - - - 58% Disapprove
from CNN poll
http://www.pollingreport.com/BushJob.htm

5/07/06 - - - - 31% Approve - - - - - - - 65% Disapprove
from USA Today/Gallop poll
http://www.pollingreport.com/BushJob.htm

4/23/06 - - - - 32% Approve - - - - - - - 60% Disapprove
from CNN poll
http://www.pollingreport.com/BushJob.htm

4/16/06 - - - - 35% Approve - - - - - - - 55% Disapprove
from Pew Research poll
http://www.pollingreport.com/BushJob.htm

4/13/06 - - - - 36% Approve - - - - - - - 59% Disapprove
from Gallop poll
http://www.pollingreport.com/BushJob.htm

3/30/06 - - - -37% Approve - - - - - - - -57% Disapprove
from Time poll
http://www.pollingreport.com/BushJob.htm

3/17/06 - - - - 36% Approve - - - - - - - 58% Disapprove
from Newsweek poll
http://www.pollingreport.com/BushJob.htm

3/13/06 - - - - 34% Approve - - - - - - - 57% Disapprove
from NBC/Wall Street Journal poll
http://www.pollingreport.com/BushJob.htm

3/12/06 - - - - 34% Approve - - - - - - - 57% Disapprove
from CBS poll
http://www.pollingreport.com/BushJob.htm

3/12/06 - - - - 33% Approve - - - - - - - 59% Disapprove
from Pew poll
http://www.pollingreport.com/BushJob.htm

3/08/06 - - - - 37% Approve - - - - - - - 60% Disapprove
from AP-Ipsos poll
http://www.pollingreport.com/BushJob.htm

2/26/06 - - - - 34% Approve - - - - - - - 59% Disapprove
from CBS poll
http://www.pollingreport.com/BushJob.htm

2/21/06 - - - - 38% Approve - - - - - - - 58% Disapprove
from American Research Group poll
http://www.pollingreport.com/BushJob.htm

2/12/06 - - - - 39% Approve - - - - - - - 56% Disapprove
from CNN/USA Today/Gallop poll
http://www.pollingreport.com/BushJob.htm

2/08/06 - - - - 40% Approve - - - - - - - 57% Disapprove
from AP-Ipsos poll
http://www.pollingreport.com/BushJob.htm

2/05/06 - - - - 40% Approve - - - - - - - 52% Disapprove
from Pew Research poll
http://www.pollingreport.com/BushJob.htm

1/29/06 - - - - 39% Approve - - - - - - - 54% Disapprove
from NBC-Wall Street Journal poll
http://www.pollingreport.com/BushJob.htm

1/25/06 - - - - 43% Approve - - - - - - - 54% Disapprove
from CBS/New York Times poll
http://www.pollingreport.com/BushJob.htm


for comparison, here are some of President Clinton's last Job Approval Ratings.


Clinton's Job Approval Ratings:
1/15/01 - - 66% Approve - - - - - - - 31% Disapprove
from NBC/Wall Street Journal Poll
http://www.pollingreport.com/clinton-.htm

1/11/01 - - 64% Approve - - - - - - - 33% Disapprove
from CNN/Time Poll
http://www.pollingreport.com/clinton-.htm

12/11/00 - 68% Approve - - - - - - - 28% Disapprove
from, CBS News Poll
http://www.pollingreport.com/clinton-.htm









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Economy Status: 5/2/05

GDP Changes from Briefing.com
(The blue numbers represent the latest "revisions" as of 11-27-05, as per "Briefing.com.")

....................................2005..........2004.........2004.......2004........2004.......2003
Category.....................Q1............Q4.............Q3..........Q2..........Q1..........Q4
GDP.............................3.8%........3.8%..........4.0..........3.3...........4.5..........4.2
GDP revisions:...........................3.3%.........................................4.2
..Inventories
..(change)...............$80.2B......$45.8B.......$34.5......$61.1......$40.0.......$8.6
..GDP Final Sales.......3.0%........3.4%...........5.0..........2.5..........3.3.........3.7
....PCE..........................3.5%........4.2%...........5.1..........1.6..........4.1.........3.6
......Durables...............0.0%........3.9%..........17.2........-0.3..........2.2.......23.9
......Nondurables .......4.9%........5.9%............4.7..........0.1..........6.7.........5.1
......Services................3.6%........3.4%............3.0..........2.7..........3.3.........2.8
....Nonresidential
....Investment.............4.7%.......14.5%..........13.0.......12.5.........4.2........11.0
......Structures............-2.6%.........2.1%..........-1.1.........6.9........-7.6..........7.9
......Equipmnt
......&Software.............6.9%.......18.4%.........17.5.......14.2.........8.0.......12.0
....Residential Inv.......5.7%.........3.4%............1.6.......16.5.........5.0.........9.6
....Imp/Exp change
....Net Exports.........-$42.0B.....-$37.9B.........-$2.9...-$30.2....-$22.0....-$19.0
......Exports...................7.0%..........3.2%...........6.0.........7.3.........7.3........17.5
......Imports.................14.7%........11.4%...........4.6.......12.6.......10.6........17.1
....Government.............0.6%..........0.9%...........0.7.........2.2.........2.5..........1.6
GDP Price Index..........3.2%..........2.3%...........1.4.........3.2.........2.8..........1.6
After-tax corp
profits...........................na..............na.............-5.3..........1.6-.........1.1........11.2

Information source:
http://www.briefing.com/Silver/Calendars/EconomicReleases/gdp.htm


REAL Unemployment Rate, January 2005: 7.2%

REAL Unemployment Rate, January 2001: 4.2%

The above mentioned unemployment rate manipulation is described further below. Another description of the Bush administration's deliberate underestimation of the unemployment rate can also be found in Scott Lilly's article from the Center for American Progress: http://www.americanprogress.org/site/pp.asp?c=biJRJ8OVF&b=403577&printmode=1
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ECONOMY ASSESSMENT:





Definite slowdown in economic growth from 3rd quarter 2004 to 4th quarter, with GDP growth decreasing from 4.0% to 3.1%. Actual GDP growth is much less than 4.5% prediction from late 2004. It's also much less than the 4.0% predicted by market analysts in mid-January of 2005. Worse still, the GDP change understates the actual change. Final GDP sales growth dropped from 5.0% in 3rd quarter 2004, to 2.7% in the 4th quarter. This indicates a smaller increase in actual product sales from the 3rd to 4th quarters. It also implies increasing surplus production. Increasing inventories and decreasing sales will further reduce labor demand, causing further stagnation of wages and new hiring. Increasing trade deficits and interest rate increases will further reduce domestic product sales, which further exacerbate wage decreases and hiring slowdowns. Large-scale loss of jobs to overseas outsourcing is expected to greatly increase.






The job picture is not encouraging. According to the Dept. of Labor, payroll jobs increased 133,000 in December 2004 (revised downward from the original, deliberately overstated 157,000.) January's 146,000 number is not encouraging. It is much less than initial estimate of 215,000 stated by the administration and market spin doctors. Most analysts state labor force growth is 150,000 per month, which means we need to create 150,000 jobs per month to break even. Thus the job deficit over the last 2 months is 21,000 less than necessary to keep up with labor force growth. This will put further downward pressure on wages.

Economic growth is slowing much faster than financial analysts predicted in late 2004. All evidence suggests this decline will continue unabated. The employment situation appears gloomy. The "real" unemployment rate has increased from 4.2% to 7.2%. The number of private sector jobs is less than it was in January of 2001. The US population has increased 12 million in that time. In spite of market and administration hype, the economy is on the decline. There are no positive trends.

The latest unemployment statistics are deliberate, numerical deceptions. Using the workforce participation rate used in January of 2001, the current unemployment rate is actually 7.2%, not 5.2% as deceptively stated by the Bush administration. More on this deliberate miscalculation below.

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UNEMPLOYMENT RATE DISTORTION:

Unemployment is calculated through the unreliable household survey. The unemployment rate % has also been deliberately manipulated by reducing the labor force "participation" rate. By doing this, the real unemployment rate is reduced by 2%. Unemployment numbers are calculated by taking the estimated total labor force number, multiplied by labor force participation rate. The percentage of the total "participating" labor force not employed is the unemployment rate. Obviously, these numbers can be easily manipulated by falsely understating the total number of workers in the labor force. More insidiously, however, they can be altered by falsely reducing the labor force participation rate. This has been done since the beginning of the Bush plutocracy. The actual labor force participation rates can be found at the Dept. of Labor site under labor force participation rates at the following link: http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LNS11300000

Below are the labor force participation rate % from the bls site:

Year---Jan---Feb---Mar--Apr--May--Jun---Jul----Aug---Sep-- Oct---Nov--Dec

1998 -67.1 -67.1- 67.1 -67.0 -67.0 -67.0 -67.0 -67.0 -67.2 -67.2 -67.1 -67.2

1999 -67.2 -67.2 -67.0 -67.1 -67.1 -67.1- 67.1- 67.0- 67.0- 67.0- 67.1 -67.1

2000 -67.3 -67.3 -67.3 -67.3 -67.1 -67.1 -66.9 -66.9 -66.9 -66.8 -66.9 -67.0

2001 -67.2 -67.1 -67.2 -66.9 -66.7 -66.7 -66.8 -66.5 -66.8 -66.7 -66.7 -66.7

2002 -66.4 -66.7 -66.6 -66.7 -66.7 -66.6 -66.5 -66.6 -66.7 -66.6 -66.4 -66.3

2003 -66.4 -66.3 -66.2 -66.4 -66.3 -66.5 -66.2 -66.1 -66.1 -66.1 -66.2 -66.0

2004 -66.1 -65.9 -65.9 -65.9 -65.9 -66.0 -66.2 -66.0 -65.9 -66.0 -66.1 -66.0

2005 -65.8 -65.8 -65.8

(Note the difference in participation rate from January 2001 to March 2005)

Here's how the unemployment rate can be altered by the "participation rate." For example, if the total available labor force is 140,000,000, it would be multiplied by the current participation rate of 65.8%. This would give a participating labor force of 92,120,000 workers. A 5.2% unemployment rate means that 87,330,000 are employed, while 4,790,000 are unemployed. If the same total labor force is multiplied by a 67.2% participation rate (the rate used in January, 2001,) the participating labor force is 94,080,000. If the same number are employed as before, 87,330,000, the number of unemployed is 6,750,000. (Again, this is just an example based on an arbitrary labor force of 140,000,000. The actual number of unemployed workers was 8 million at the end of February, 2005.) Based on these numbers, this gives an unemployment rate of 7.2%, instead of 5.2%. So the current unemployment rate would actually be 7.2%, if the 67.2% labor force participation rate of January of 2001 was used. The Bush administration has lowered the unemployment rate by arbitrarily altering the labor force participation rate. They have greatly increased unemployment. In this example, they have simply removed 2 million unemployed workers from the unemployment roles by numerical chicanery. When Bush took office, the unemployment rate was 4.2% (using a 67.2% participation rate.) Unemployment is currently 7.2%, using the same labor force participation rate used in January, 2001.

_____________________________________

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WAGES: (as of May 2006)

Wages, when adusted for inflation, have decreased over the last 2 years. From November 2003 to through May 2006, "real" hourly wages have decreased 1.9%. Since the end of January 2005 through May 2006, inflation-adjusted hourly wages have decreased 1.0% ( from $8.23/hour in January 2005 to $8.15/hour in May 2006) For the year 2006, real hourly wages have decreased 0.6% as of May 2006. Again, these are inflation-adjusted wages calculated by the Bureau of Labor Statistics. Below is a graph and a chart of wage changes in "real" inflation-adjusted 1982 dollars going through November of 2005Image hosted by Photobucket.com

UPDATE: 4-8-07

Below are hourly and weekly wages thru February 2007:








Below are links to the BLS charts of hourly and weekly wage changes:

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CES0500000049

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CES0500000051

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12/17/05 Update:

The downward trend in real weekly wages has accelerated over the last 2 years. Since January of 2004, real weekly wages have declined 1.4%. Below is a graph from the United States Bureau of Labor Statistics:

Image hosted by Photobucket.com

Weekly wages are important because they are a better indicator of the amount of wage income consumers have to spend on goods, services, and other expenses.

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RECESSION ALERT!

The Recession Alarm was officiallysounded. It has since been rescinded by altering the initial statistics posted. Another case of "revisionist" history. According to Briefing.com, "The recession alarms go off when the cumulative 6 month decline [in Leading Indicators] exceeds 1.0% amid a string of 3 or more consecutive monthly declines..." "With a 5th consecutive decline and a cumulative 6-month decline exceeding -1.0% the index suggests an economic contraction..." There has actually been a 6 month decline of -1.4%. Note: economic "contraction" = RECESSION. It is of interest to note, however, that Briefing.com initially called this a "false alarm." That's what financial experts always claim, when their own criteria result in a negative finding. (There must be some reason our criteria led to an incorrect conclusion, because we just don't want to accept it. And we don't want the public to accept it, either, because they'll stop spending and investing. Later they simply changed the numbers so that they could claim there never was a recession alarm in the first place. ) It's nice to know our financial "experts" are completely unemcumbered by any sense of truth or honesty. The link for the Leading Indicators is at: http://www.briefing.com/GeneralContent/Active/PrintPage/PrintPage.aspx?PageId=217




Update: 11/27/05
It now appears that the 3rd quarter 2004 GDP has been revised downward to 3.6 % which is what it was initially reported as like it in January of 2005. (By June 2005 it had been upwardly, and incorrectly, revised to 3.8%. Apparently they just "honestly" overestimated in June.)

Below are the graphs of the GDP previously reported, which were posted by "Briefing.com." The 1st is from January 2005, the 2nd is from June 2005, and the 3rd is from 11-27-05. Again, not the difference in the 4th quarter 2004 GDP. It has been revised back down to the previously reported 3.6% number.



1-28-05
Image hosted by Photobucket.com




6-29-05
Image hosted by Photobucket.com



11-27-05
Image hosted by Photobucket.com

Also of interest is that the 4th quarter GDP from 2003 has also been downwardly revised. Up through June of 2005, it had been listed as being over 4%. Now it has also been revised downward to 3.8%.

It's simply amazing how the Bush propagandists continue claiming a GDP growth rate of 4%. There hasn't been a quarterly GDP growth rate of 4% since the 3rd quarter of 2004, and only 2 since the 3rd quarter of 2003. Yet again the Bush-ites maintain that the economy is "strong, and getting stronger," with a GDP growth rate of "around 4%." We truly have a "faith-based" economy that depends on distortions and "faith" , not "facts."


Precious Metal 1-Year Increase:

Image hosted by Photobucket.com

The "GFMS" index is a composite price index of aluminum, copper, lead, nickel, tin and zinc. Below is the GFMS composite, followed by the individual indexes. 4 of the 5 indexes have increased significantly over the last year, in line with the increases noted in gold, silver, platinum, and palladium.

Non-Precious Metal 1-Year Increase:

Image hosted by Photobucket.com


For a more interactive format, see the EconomicPopulistForum

112 Comments:

Blogger PsycheCin said...

I have read virtually all of the posts and comments on this blog. I find Mike's views entirely logical and his predictions somewhat frightening. Coming from a literary background, I tend to look for "universal truths." My reading has convinced me that although generations have their ups and downs, society tends to muddle on.

I still believe this, but honestly, Mike's posts make me think of the kind of corruption of the powerful that brought down ancient civilizations like Rome. One universal truth is that "power corrupts, and absolute power corrupts absolutely." If we continue to allow the rich, in their pursuit of excessive wealth and power, to strip us of the right to work for a living wage, this nation will cease to be the land of opportunity we were raised to cherish and protect.

I'm a registered republican. I believe Capitalism is a superior system which rewards hard work and risk. But the policies of the Bush administration pit the rich against the poor, encouraging the rich to profit at the expense of the poor. There are better ways to govern. I think Mike has some exceptional insight into the direction our economy is heading. Ultimately, even the rich will suffer if we don't revise our tax structure and reprioritize our policies.

I know this all sounds very general. My point is simply to encourage Mike's readers to take a careful look at his ideas. He has some excellent ideas for change. If enough of us start listening to people like him, maybe we can even impact "stay the course" Bush, as Mike would say.

9:07 PM  
Blogger unlawflcombatnt said...

PsycheCin,

Thank your for you letter. I'm certainly trying to elicit concern, if not frighten readers about the state of our economy. Many believe excessive optimism led to the crashes of both 1929 and 2001. Blind optimism caused overinvestment and excessive credit spending both times. The fact that job recovery has been slower than in any other post-recession period is also of concern. So I think a little fright might be warranted. The excessive optimism about our current economy seems unwarranted and dangerous.

At the current time the increasing investment is not being matched by increased consumer income. Consumer spending is being tenuously maintained. The spending gap between production and consumer income is being filled in by borrowing. With the planned increases in the Federal Reserve rate, this gap will eventually become unfillable.

Though the Fed Rate has increased from 1% to 2.5% since June 30, 2004, mortgage rates have decreased. In southern California, the average 30-yr. fixed-rate mortgage rate was 5.70% on July 14. This was with a prime rate of 1.25%. On January 26, 2005, the 30-yr. fixed-rate mortgage rate was 5.363%. The prime rate was 2.25% at this time. So interest rates have continued to drop, in spite of increases in the Fed rate. Obviously, this won't continue indefinitely as Fed rates continue to rise.

When consumer interest rates do rise, the gap between income and spending will not be fillable by borrowing. Adjustable-rate mortgage homeowners will have higher monthly home payments, decreasing spendable income. Borrowed money from home equity loans will also decrease, as the market value of homes will decrease with increased rates. So consumer spending will decline. And so will our economy. When this will happen, and how fast the decline will be, is uncertain.

So far, the Republican majority has made no honest attempt to fix ANY economic problems. They have just blindly implemented policies, with no regard to solving problems. They've successfully convinced many Americans that their policies were designed to solve our economic problems.

When policies don't work, they have multiple excuses and distortions. "Clinton caused the recession." "The Democrats caused it by their high taxes." "9/11 caused the recession." "The recession would be worse if we hadn't taken action." "Our economy is the best in American history." "The Democrats are just talking down the economy." "Deficits don't matter."

The list goes on and on. The economy is not doing well. We have a president who refuses to acknowledge ANY mistakes or policy errors. Apparently he believes his own propaganda. He's convinced that all of his policies have been successful. In reality, he's had only one success - his fraudulent victory in the Ohio Presidential vote.

He won't change his course. Even if we're about to run off a cliff. Our only hope is that it takes more than 4 years to reach the cliff. Or that the fall doesn't kill us.

I like your analogy to Rome. I hope we don't go down that path. I share your views on the benefits of capitalism. I hope it's excesses don't destroy it, the way Rome's excesses destroyed it. I'm gratified to find another Republican who sees the danger ahead. I hope more will. There may still be hope. Let's move back to a "fact-based" economy, instead of a "faith-based" economy.

Mike

http://www.unlawflcombatnt.blogspot.com/

11:13 PM  
Blogger AnonymousIsAWoman said...

Great job, Mike. This was an insightful analysis of the economic situation right now. Especially the difference between "demand side" and "supply side" economic theories.

I am particularly struck by the wisdom of the analysis of the importance of aggregate demand.

You also rightly pointed out the failure of tax cuts aimed at the affluent to truly stimulate the economy. This was an issue both times that Congress approved the Bush tax cuts and several of the Democratic presidential candidates, during the primaries, especially Gephart, tried to point out that the wealthy, when given a tax break will either put it into savings or investment, hence, it would not give the necessary stimulation to the economy.

Tax cuts targeted at middle and lower income groups do encourage greater consumer spending, which would obviously stimulate the economy.

That said, there is not enough saving in this country. Americans save at a far, far lower rate than most other industrial countries. The increasing debt, both the national deficit and individual debt, are ultimately not sustainable. This is also something that Paul Krugman points out frequently.

You are also right about interest rates and mortgage rates. The housing bubble is also not sustainable.

I hate to be one of the "dismal scientists" here, but I agree with the gloomy picture that economists like Krugman and you are painting.

Thanks, again, for the excellent analysis.

12:57 PM  
Blogger unlawflcombatnt said...

To AnonymousIsAWoman:

Thank you for reading my blog. I greatly appreciate your comments.

I am even more appreciative of your comments on "aggregate demand" and "demand-side" economic theory. Those were THE major points of my entire blog. It makes me feel that my time was well spent in writing about these issues.

I don't think many extremely smart people even consider the concept of Aggregate Demand. And it is extremely important. If production exceeds aggregate demand, it has absolutely 0 value.

I think the best summary comment I can make is this:

THE TOTAL MARKET VALUE OF ALL GOODS IS DETERMINED BY THE TOTAL AMOUNT OF DOLLARS AVAILABLE TO PURCHASE THEM.

If aggregate demand is measured in dollars, it is the sum total of spendable consumer dollars. As you alluded to, borrowed money is becoming an increasingly higher portion of those spendable dollars. Consumer spending cannot be sustained this way indefinitely. If consumer income continues to fall, we're going to have a major economic downturn, if not an outright collapse.

The housing/home refinancing loan bubble is right on the edge of bursting. Median home values decreased 5% in February. New home sales have also decreased significantly over the last 2 months. In southern California, mortgage interest rates have dropped from 5.7% in July to 5.26% in the beginning of March, 2005. This is in spite of a 1.5% increase in interest rates since June of 2004. The inverse direction of these changes implies one thing about the housing market. The banks are having trouble making enough home loans. The demand for those loans cannot be maintained unless the cost of those loans is decreased. The DEMAND for homes is reflected by the decrease in mortgage interest rates. If the demand for homes goes down, so does the value. Which means home equity is decreasing. The home equity loan source of consumer spending is starting to dry up. Which will decrease aggregate consumer demand in dollars. It will cause consumer spending to decline.

The Bush administration and his "alternate reality" economists claim we're prospering, but the banking industry knows better. They can't survive on the Bush/Mankiw/Snow "Economic Axis of Evil" propaganda. They have to deal with the real world. They adjust their interest rates because they MUST deal with the truth. And the truth is that the housing market is starting to decline. And it may be heading for a cliff.

Thanks again for writing.

Mike

http://www.unlawflcombatnt.blogspot.com/

3:49 PM  
Blogger John said...

I have to take some issue with your manipulation of the numbers here, just as a start. I've already posted my disagreement a few months ago with you on the 'aggregate demand collapse' you are predicting.

First, you seem to be sticking with the initial report on 2004Q4 GDP, which has now been revised twice, first up to 4.0% then back down to 3.8%.

Your focus on final sales is puzzling, especially given your propensity to emphasize demand side factors. 2004Q4 marked the third consecutive quarter of double-digit increase in non-residential investment, including an astounding 18.4% annualized increase in equipment/software investment.

Businesses are expanding and investing in equipment here in the United States. Someone has to run this equipment.

Which gets me to your stunningly partisan depiction of the employment situation. I say stunningly because you seem to rationally thing most of your economic theories through, even if you spin your results at times. This one was the most blatant that I have seen.

Fixing labor force participation at a level seen as a direct result of the dot-com boom does not make sense. First, most of the decline in labor force participation down to more historical levels can be found to a decrease in participation in younger workers. For example, from January of 2001 to March of 2005, labor force participation among those 16 to 19 years old dropped from 51.7% to 44.0% (up from 43.2% in February). This accounts for over 70% of the drop in labor force participation. I doubt you'd argue that it is bad for our economy for younger people to forego entering the work force at age 16 in order to continue educational opportunities? This is precisely what occured in the late 90s, though, as companies had problems finding workers due to the irrational dot-com boom, and were recruiting younger and younger workers. (source on numbers, bls.gov)

The unemployment rate remains the best barometer for measuring labor force activity. There are completely rational reasons for choosing not to be a part of the work force. Education certainly is one of them, and as we've seen most of the decline in labor force participation is due to a drop in participation amongst workers age 16-19.

Perhaps a more honest way to look at the labor market is to look at the number who are underemployed. The BLS gives these statistics as well. (in fact, the BLS breaks things down any way you'd like them. The BLS is part of the Bush administration, so be careful when you say that numbers have been intentionally manipulated by the Bush administration... it makes you sound like a partisan hack).

At any rate, looking at the total of unemployed, looking for work, and the total of unemployed who would like to work but have given up worknig ("discouraged workers") as a percentage of thet total population of employed, unemployed, and discouraged workers gives a different picture. The "underemployment" rate currently is 5.5% (rather than 5.2%), and was 4.4% in 2001 when Bush took office. This number peaked at 6.6% and has been steadily declining. It remains above the 4.4% number in 2001, but far below the peak and well in line with what any rational economist would consider "full employment".

6:32 PM  
Blogger unlawflcombatnt said...

John,

Thank you for posting. You've given me plenty to comment on. Needless to say, I completely disagree with most of what you said. However, I've spent most of the day posting letters on other boards, trying to dispel Republican economic mythology. I will say that my not correcting previous economic statistics is nonsense. Unlike you Republicans, I've posted extensive links to my information. So you can easily update the information yourself.

Your comment about my "manipulating the statistics" is a case of the pot calling the kettle black. The Bush administration has done nothing but manipulate statistics since Bush took office. I clearly laid out how I arrived at the unemployment statistics.

Your suggestion about not fixing the labor force participation rate at the same level is typical of Republicans. You manipulate statistics, and then claim the other side is manipulating statistics. Changing the labor force participation rate to lower the calculated unemployment rate is dishonest and has no justification whatsoever. Your explanation is typical of Republican fantasy economics. There's always some "creative" reason why the statistics need to be calculated differently than they were before. The real reason is to disguise what a miserable job Bush has done with the economy. I've got a bedroom full of these statistics and I've seen how they are manipulated. I could devote an entire blog to exposing the manipulated statistics used by the Bush plutocracy. You can cut and piece together the statistics any way you'd like. We have more people unemployed than we did when Bush took office. The average worker's inflation-adjusted income is also less. Social Security contributions have not kept up with population growth. That's because workers making less than $90,000 are doing worse under Bush.

I'll have to get back to you on your Supply-Side investment stories. I don't agree with them at all. I'll have to get into that later.

Thanks again for writing.

Mike
http://www.unlawflcombatnt.blogspot.com/

5:58 PM  
Blogger John said...

I do not understand how I am being accused of manipulating statistics. I am using the exact same numbers you are, the numbers made available by the nearly entirely unappointed (i.e. civil service) Bureau of Labor Statistics. This is a non-partison sub-agency within the Department of Labor. It is non-partisan in that its economists and other employees are not appointed by any particular administration.

With that said, on to the manipulations of statistics, we'll stick with the labor force participation rate as the example. You have arbitrarily fixed this number at the 67.2% rate it was at in January of 2001. I presume you chose the date as it was when President Bush took office, but it is arbitary nonetheless. I'll also note just for kicks that the rate had peaked and began declining at that point, declining throughout 2001 closer to the level where it is now, even though no reasonable person could suggest that Bush's economic policies had taken effect.

With that said, I stand by my assertion that it is manipulative to arbitrarily fix the labor participation rate at a level where it is artificially high, as it was in January of 2001. Fortunately, the BLS gives us a lot of data to go on. Over time, labor force participation has generally increased (presumably due to more women in the work place), but has also shown cyclical characteristics. For example, 91-92 recession, labor force participation, which had peaked at 66.8% in January of 1990, dropped to 66.0% by the end of 1991. The rate began to slowly climb up again, though it wouldn't reach its pre-recession peak until January of 1995. In 1995, there was an economic slowdown that caused the number to drop again slightly to 66.4%, before steadily rising in the late 1990s during the dot-com boom. It peaked when the dot-com boom peaked, in early 2000 at 67.3%. It then began to slowly fall to a level of around 66% during the recession and wars from 2001-2003.

There is no manipulation here, these are just hard numbers. You can verify them yourself if you choose. Looking at the data going back to 1965, where labor force participation was a much lower 58.6%, we see a slow and steady increase despite cyclical factors. That increase began to slow dramatically in the late 1980s and through the 1990s, with only a small blip during the dot-com boom. In other words, it seems that labor force participation had absorbed the effect of higher participation among women.

The statistics will also show that nearly the entire late 1990s blip in labor force participation was due to increased participation among those aged 16-19. As I noted earlier, the extremely tight job market in the late 90s induced many teenagers into work who otherwise might have pursued their education. There is plenty antecdotal evidence to suggest this, and numerically we can see that labor force participation plummeted among 16-19 year olds after the dot com bubble popped.

The fact is, though, that labor force participation is fluid. It changed over time both due to the dynamics of the workforce and for cyclical reasons. You have chosen to arbitrarily fix the labor force participation rate at (or near) a cyclical peak. That is manipulation. The methodology for computing unemployment has not changed, and never assumed a fixed labor force participation rate.

The BLS did not reduce the participation rate. The methodology for computing the participation rate has remained the same. A survey is taken, and respondents are asked a variety of questions. Among them are whether they are employed, and if not whether they are looking for work. If someone is not employed, but is not looking for work, they are considered not to be in the labor force. College students, stay-at home moms and dads, those who retired early, and those who simply don't want to work are not participating in the labor force.

The numbers suggest that the bulk of the decrease in the labor force is amongst those aged 16-19. While the BLS does not break it down, I would suggest that the rest comes from those aged 20-25. Do some research on the increases in those taking graduate school admissions courses such as the LSAT, GRE and MCAT in the past few years. The LSAT alone has shown double digit increases. More people are going to graduate school than before. A full time law student who is surveyed by the BLS may not be employed, but they are also not looking for work. This means they are not participating in the labor force.

To sum up, these numbers are not manipulated. The Bush administration has not artificially dropped the labor force participation rate, it has dropped for independent reasons. Some of it is cyclical, though it may also be the fact that the late 90s-2000 increase in labor force participation was a blip caused by the dot-com boom.

11:24 PM  
Blogger unlawflcombatnt said...

This comment has been removed by a blog administrator.

7:19 PM  
Blogger unlawflcombatnt said...

John,

Thanks again for your response.

Yes, I still think you are manipulating statistics regarding labor force participation rates. You have conveniently ignored the numbers I have actually posted. The labor force participation rate during Clinton's last 3 years averaged over 67 %. Those numbers are posted on my blog. That's why I posted those years. To show that the Bush administration has artificially lowered the calculated unemployment rate by decreasing the labor force participation rate. These are the most relevant years to our current situation, from 1998 to 2000. It we used the same labor force participation rates that the government used for Bill Clinton, the unemployment rate would be 7.2% to 7.4%. There are no tangible reasons for the participation rate to have dropped under Bush, other than to deceive the public and underestimate Bush's mismanagement of the economy.

Manipulation of the labor force participation rate is obvious. The idea that less people are searching for jobs under Bush is ludicrous. MORE people are looking for jobs, due to decreased family incomes, as well as loss of pension income. More people are not "dropping out" to go back to school. But more people have been layed off. More jobs have been shipped overseas. More profits have gone into paying CEO salaries. Less money has gone into hiring new American workers, though more has gone into building factories in foreign countries. More money had gone into stock market speculation. Less money has gone into paying worker wages and retirement benefits. More people are NOT "dropping out" of the work force, but more people ARE being dropped off payrolls. More people are unemployed. The "real" unemployment rate is much higher than it ever was under Clinton. Bush is the worst president in US history. His administration has manipulated every statistic possible to obscure this.

I have no idea how the 1965 labor force participation rate fits in. Methodoloy for calculating statistics has changed over the years. I think most people would agree that the years of 1998-2000 are more relevant than 1965. Furthermore, you're justifying changes in the rate based on asking a sample population a "series of questions." This is highly subjective, and very subject to manipulation. The household survey you refer to is considered far less reliable than the payroll survey. I've read how it is calculated. You probably have as well. Changing the labor force participation rate from these results is only slightly more reliable than palm reading. The questionable reliability of this survey is the consensus opinion of an overwhelming number of researchers. The questions can be asked differently at different times. In addition, the sample population can be pre-selected, the way many other surveys are.

I'll have to get back to you on the rest of your recent post, as well as the previous post. I definitely want to address the part about "equipment purchase creating jobs."

At present, my attention is being diverted by an Ebay fraud scheme I've been the victim of, along with 48 other Ebayers. This is the same Ebay that Dick Cheney says has created so many "unreported" jobs for our economy. Something he should certainly take pride in -- another crooked corporation. It's a Bush-Cheney specialty.

Mike

http://www.unlawflcombatnt.blogspot.com/

7:23 PM  
Blogger unlawflcombatnt said...

John,

I wanted to address your comment about "someone has to run this equipment."

Jobs are not created because someone has to run the equipment. Just look at the idle production capacity in this country. The fact that a factory has equipment does NOT create jobs for those who run the equipment.

Demand for products the equipment produces DOES create jobs, however. If there is no demand for production, that equipment most certainly WILL remain idle. That equipment "allows" for production only if consumer demand necessitates it. Over investment in capital equipment does not create jobs. If an industry has bought equipment that isn't required to meet current production demands, they certainly aren't going to increase their losses by hiring more workers to make products. They're not going to create jobs to increase production beyond the consumer's demand for that production.

Demand for goods and services creates jobs, not investment or equipment. Consumer demand creates demand for workers to fulfill that production demand. Workers are hired when needed for production, and ONLY when needed for production. They are hired ONLY when they will increase a company's profits. Without a need for their production services, worker hiring is a drag on a company's bottom line. Workers aren't hired when their services are not needed, regardless of how much "invesment" capital is available. They are never hired just to run the equipment that a company purchased, unless there is increased demand for production.

Investment is semi-permissive for job growth. However, increasing investment with non-increasing consumer demand creates 0 jobs. Investment may permit hiring of new workers. But it does not necessitate hiring. Furthermore, increased consumer demand, even with constant production, will increase labor demand. Increased demand with constant production increases prices. The increased sale price increases company profits, allowing for the extra money to hire new workers. Thus increased investment isn't even necessary to create new jobs in many cases.

Increased consumer demand always increases labor demand, hiring, and wages. Investment may facilitate hiring, but only if coupled with increased consumer demand.

Mike

http://www.unlawflcombatnt.blogspot.com

2:43 PM  
Blogger unlawflcombatnt said...

John,

I wanted to address your comment about "someone has to run this equipment."

Jobs are not created because someone has to run the equipment. Just look at the idle production capacity in this country. The fact that a factory has equipment does NOT create jobs for those who run the equipment.

Demand for products the equipment produces DOES create jobs, however. If there is no demand for production, that equipment most certainly WILL remain idle. That equipment "allows" for production only if consumer demand necessitates it. Over investment in capital equipment does not create jobs. If an industry has bought equipment that isn't required to meet current production demands, they certainly aren't going to increase their losses by hiring more workers to make products. They're not going to create jobs to increase production beyond the consumer's demand for that production.

Demand for goods and services creates jobs, not investment or equipment. Consumer demand creates demand for workers to fulfill that production demand. Workers are hired when needed for production, and ONLY when needed for production. They are hired ONLY when they will increase a company's profits. Without a need for their production services, worker hiring is a drag on a company's bottom line. Workers aren't hired when their services are not needed, regardless of how much "invesment" capital is available. They are never hired just to run the equipment that a company purchased, unless there is increased demand for production.

Investment is semi-permissive for job growth. However, increasing investment with non-increasing consumer demand creates 0 jobs. Investment may permit hiring of new workers. But it does not necessitate hiring. Furthermore, increased consumer demand, even with constant production, will increase labor demand. Increased demand with constant production increases prices. The increased sale price increases company profits, allowing for the extra money to hire new workers. Thus increased investment isn't even necessary to create new jobs in many cases.

Increased consumer demand always increases labor demand, hiring, and wages. Investment may facilitate hiring, but only if coupled with increased consumer demand.

Mike

http://www.unlawflcombatnt.blogspot.com

2:44 PM  
Anonymous Anonymous said...

Found your site from your Democrats.com post... this message is in response to the 'Free Trade' post on Dem.com; doesn't look like you've posted it here yet.

Before you do, you might want to re-examine some of your analysis in three areas: 1) global wage changes on PPP vs. market vs. trade-weighted exhange rates 2) global wages as a worker's MPL 3) cross-sector wage pressures in a given country (why do haircuts costs so much more in the US than in India) 4) nominal vs. real wages in any given country

I like your approach as a self-described "novice" economist... I'm curious to see where thinking about the above four points will lead you.

9:23 PM  
Blogger unlawflcombatnt said...

Anonymous,

Thank you for your comments. I'd like to answer your questions, but I'll have to spend some more time reviewing some of the monetary exchange concepts you mentioned, as well as the "marginal product of labor." (I'm even more "novice" on monetary issues.)

As you've probably noticed, I try to take an extremely "macro-economic" view of issues. Contemporary economic commentary focuses almost exclusively on "cost" issues, while ignoring "demand" issues. Thus, the importance of Aggregate Demand is always an underlying theme in my posts. (Someone has to buy production, or no one makes a profit.) If money continues to flow away from consumer spending, and towards investment capital, there won't be enough consumer income to buy the products of capital investment. My underlying belief is that we are overinvested, and do NOT need policies that encourage further overinvestment (i.e., Supply-Side concessions). Furthermore, we've maintained consumer demand by increased borrowing, in the face of declining labor income. Demand has been maintained through borrowing off overvalued assets. This is artificially created wealth. Thus, we've maintained consumption with money that only exists on paper. Maintenance of consumer demand in this manner is NOT sustainable. Both liberals and conservatives agree on that point. However, the solution is not to reduce consumption. The solution is to finance more of that consumption with real money, and less with borrowed money.

Decreased "consumption," or consumer spending, will decrease demand for production. Decreased demand for production will reduce labor demand, further decreasing labor & consumer income. In spite of this, it appears that many on the right think consideration of Demand-Side factors is unnecessary. At least, that appears to be an underlying tenet in their economic policies -- a belief in unlimited consumer demand. They are COMPLETELY WRONG on this point. Consumer demand is VERY tenuous at present. As interest rates increase, and "real" consumer income decreases, we face the likelihood of the bursting of the Housing-Debt bubble. This may result in a catastrophic "Demand" failure.

I want to continue to emphasize the possibilty, if not the likelihood, of a major DEMAND failure. It's the kind of event that creates "great depressions." We are currently hurtling down that path, with no signs of a slow-down. We need to "change the course" before it's too late.

Mike (unlawflcombatnt)
http://www.unlawflcombatnt.blogspot.com/

1:49 PM  
Anonymous Anonymous said...

Do you plan to keep posting new entries on your blogspot blog? I notice you have quite a few new ones on Democrats.com, but it doesn't look like there's anything new on blogspot.

10:14 AM  
Blogger unlawflcombatnt said...

Thanks for your comment. Yes, I do plan on posting a lot more on my site. Usually I post versions of what I have previously posted at other websites. I have a lot of letters to post, so I need to try to select the best, or most important ones to post at my site. I have many letters on social security, but that doesn't appear to be the major topic of the day. As a result, I haven't posted any of those yet.

Mike (unlawflcombatnt)

12:26 AM  
Blogger James B. said...

Yes, there were some changes in 1994 which effect the way the unemployment rate is calculated, but they are nowhere near making a 2% difference. A study by the BLS calculated a .079 additive factor, less than 1/20th what you claim.

http://www.bls.gov/ore/pdf/ec950090.pdf

7:25 PM  
Blogger unlawflcombatnt said...

James B,

Thank you for visiting my site. It appears, however, you didn't actually look at the numbers I provided, or go through the calculations I provided. I did look up the 1994 reference you provided, and waded through 48 pages of a completely inapplicable report. The ".079" number, which appears on page 17, has nothing to do with what I've stated here. Labor force "pariticipation rate" is not even mentioned until page 39. That had no application to what I've said either. Even if it did, the article, and the "changes" mentioned, are from 1994. That means they would have already been in effect during the Clinton years that I posted. It would not have resulted in a change between 1997 and 2005, regarding the way labor force participation was calculated.

One of the reasons I spent the time posting the actual numbers from BLS, and the BLS link, was to give readers all of the statistics they needed to understand this, and so they could easily verify those statistics if they wanted. Estimates from people in the BLS, from 1994, are simply WMDs -- "Weapons of Mass Distraction." Your reference appears to be just that, a distraction.

As I previously posted, the Bush Corporatocracy has deliberately distorted the unemployment rate by altering the LABOR FORCE PARTICIPATION RATE. The difference I previously stated actually understates this deception. If the Bush administration uses a labor force participation rate of 65.8%, instead of 67.2%, it converts a 7.6% unemployment rate to a 5.2% unemployment rate. It's a completely dishonest way to alter public statistics to deceive the public.

This deception can be calculated from the numbers I've provided. The math is as follows: If you start with a labor force of 140 million, and use an unemployment rate of 5.2%, and then determine the difference in number of those working between a 67.2% and a 65.8% labor force participation rate, the difference is almost 2 million workers.

To start with, assume that a 5.2% unemployment rate is the same as a 94.8% employment rate. Take the 94.8% employment rate X 140 million workers X 67.2% participation rate = 89.2 million employed workers (89.2 million working out of 94.08 million participating workers.)

Then calculate 94.8% employment rate X 140 million workers X 65.8% participation rate = 87.3 million employed workers (87.3 million employed out 92.1 million participating workers.)

There are nearly 2 million less workers "participating" with the 65.8% participation rate. Yet the number of potential workers is the same. If you plug in the number employed using the 67.2% participation rate (89.2 million) and subtract those actually working using the 65.8% rate, the difference is 6.78 million. If you take 6.78 million unemployed workers, and divide by 89.2 million total participating workers (from the 67.2% participation rate), you come out with a 7.6% unemployment rate.

In other words, today's 5.2% unemployment rate would be 7.6%, if we changed the participation rate from 65.8% to 67.2%. Again, this increase results from the addition of 2 million more workers, who were statistically eliminated from the participating labor force. These workers were simply eliminated from the unemployment rolls by the statistical manipulation of the Bush administration.

unlawflcombatnt

11:32 PM  
Blogger James B. said...

This isn't "statistical manipulation" this is the way that the unemployment rate is calculated. With the exception of some changes in 1994, which is why I posted that BLS report, it has always been done this way. The unemployment rate is calculated by the percentage of people looking for a job as part of the total people in the work force, the participation rate as you mentioned. You can't just pick out a rate from the height of the dotcom boom and arbitrarily proclaim that is the natural state of things. When the economy is doing good the participation rate goes up, when it is in a recession it goes down, it has always been that way. By your same logic I could pick a participation rate out of the 1983 recession, when it was about 64%, and proclaim that we actually have a 2% unemployment rate! If you want to make a historical comparison, then the most accurate way of doing it would be to compare where we are now with the equivilent point of the last economic cycle, which would be around 1994. I have a chart of it on my blog for an unrelated topic.

http://thechiefbrief.blogspot.com/2005/05/fuzzy-math.html

We are down slightly, but not catastrophically, the way the numbers have been picking up recently I would expect it to pretty much follow the same pattern, just not as steeply as during the late 90s bubble.

9:26 AM  
Blogger unlawflcombatnt said...

James,

Yes, it IS statistical manipulation, pure and simple. It is dishonest, and should be a criminal offense for the Bush administration to lie about economic statistics. To arbitrarily change the participation rate to make the current president look better is corrupt. It is typical of Republicans' "alternate reality" thinking. Changing the labor force participation rate is fully, and completely arbitrary. It's based on pure guesswork. I've read extensively on how it is done and it's complete nonsense.

If you want to compare one president with another, you don't just change how you calculate unemployment to suit your needs.

This is just another in the long, dishonest, diatribe about how everything was Clinton's fault, and how poor Georgie boy was just the victim of a "downturn in the business cycle."

Republicans always seem to have some self-serving excuse as to why they have failed so miserably at everything since Bush took office. Falsely lowering the labor force participation rate is just one of the many dishonest moves the Bush administration has used to obscure its complete incompetence and corruption.

You haven't offered ANY legitimate explanation as to why the labor force participation rate should be downwardly revised. That's because there IS no reason. Using a "litany of reasons" as to why people aren't working is ludicrous. You're simply claiming that people who are actually unemployed really aren't unemployed. You're claiming that they aren't really looking for work. The fact is, they ARE looking for work and they ARE unemployed. You've just decided they aren't really looking for work, because it makes the unemployment rate look better. So you've just eliminated them from the number of those unemployed. This is dishonest to the point of being an outright lie. Unfortunately, to Republicans it's not a lie unless you can prove it in a court of law. Since Republicans control EVERY branch of government, including the courts, it's impossible to prove Republican are lying in a court of law. Republican wrongdoing is simply appealed until a favorable court ruling exonerates them of their crimes.

So Bush, and his taxpayer-paid liars, simply alter any statistic they don't like, with complete impunity. The labor force participation rate is a perfect example. The current unemployment rate, using the same "rules" that Clinton had to go by, is 7.6%. IT'S A REPUBLICAN LIE TO SAY ANYTHING DIFFERENT. There is NO reason to change the labor force participation rate. The reasons given for doing so are just a "litany of nonsense."

unlawflcombatnt

1:31 AM  
Blogger James B. said...

This is ridiculous, the BLS isn't altering the participation rate, they are just reporting it. You can't just claim fraud anytime someone reports numbers you don't like. Get out the tinfoil hats.

8:58 AM  
Blogger unlawflcombatnt said...

James,

Yes, I can say they are altering the participation for political gain, and I AM saying they are fraudulently doing so. Furthermore, I will continue to do so.

It is fraudulent to claim 2 million unemployed workers are not unemployed, because you DISHONESTLY claim they are not looking for work. There is no logic or reason for claiming such people aren't participating in the labor force. It's pure politics. And it's pure DISHONESTY.

If you had any logical argument, or any tangible reason to arbitrarily reduce the labor force participation rate, you would have posted it. Instead, you've referred me to a long, twisted reference about how statistical analysis was changed in 1994. This has has NOTHING to do with altering the labor force participation rate between the Clinton administration and the Bush administration.

Claiming people aren't "participating" in the labor force is completely arbitrary on its face. Using exactly the same methods for calculating the unemployment rate that were used during the Clinton presidency would make today's unemployment rate 7.6%. Again, you've just given some phoney explanation about why it should be calculated differently now, instead of the way it was when Clinton was president.

It's being calculated differently simply to make Bush look better, and because the Neo-con Neo-Nazis controlling our government know they can get away with it. They control all branches of government, and all major media outlets. They create their own reality, and take pride in doing so.

They don't control the blogosphere, however. Their crooked, corrupt manipulation of government statistics will continue to be exposed as such. You've made NO argument against what I've said. That's because you have no argument.

unlawflcombatnt

5:29 PM  
Blogger James B. said...

This is idiotic. This is not some type of scheme, it is a survey, they ask people whether they have a job or are looking for a job, that is how they get their results. It is not a political scheme. When the economy is good more people enter the job market. When it is not as good they go and do other things, go back to school, stay home and take care of the kids, retire early, whatever. My dad retired a couple of years ago, his he a hidden unemployment statistic by some evil plot by Bush? No. I am going to grad school in the fall. Is this some type of scheme by Bush to take me out of the labor force? Take off the tinfoil hat and use your brain.

7:46 PM  
Blogger unlawflcombatnt said...

James,

You need to use your brain. Maybe someone should school you in what constitutes scientific thinking and reliable information.

The labor force participation rate is calculated off the HOUSEHOLD survey. When you conduct a relatively small survey, like the household survey you refer to, you are surveying a small number of people. Participants may be completely unrepresentative of the population as a whole. ALL people who use the "household" survey consider it VERY unreliable. If you would use YOUR brain, and look at the monthly statistics BLS puts out for the HOUSEHOLD survey (which I've been doing for 12 months) you'd see how variable, inconsistent, and unbelieveable some of the numbers are. Common sense would also tell you the same thing, if you weren't so blinded by your political ideology. The reason the published monthly employment report doesn't come from this study, is due to it's complete unreliability. It's simply a tool that can be used by the government to claim that things are going better than they are. Again, it is this inaccurate study that the "labor force participation" rate comes from. It is this unreliable study that the Bush administration uses to create a lower unemployment rate than the one that actually exists. The numbers are subject to the same kind of "editing" that Bush used when creating the false WMD claims about Iraq.

You're simply citing a survey using 60,000 people, that have been arbitrarily picked out, and asked them whether they are working, not working, or even looking for a job.

Here are 2 excerpts from the BLS on the difference beetween these studies:

" For example, the confidence interval for the monthly change in total
employment from the HOUSEHOLD survey is on the order of plus or minus
430,000. Suppose the estimate of total employment increases by 100,000
from one month to the next. The 90-percent confidence interval on the
monthly change would range from -330,000 to 530,000 (100,000 +/- 430,000."

" This news release presents statistics from two major surveys, the Current
Population Survey (household survey) and the Current Employment Statistics
survey (establishment survey). The household survey provides the informa-
tion on the labor force, employment, and unemployment that appears in the
A tables, marked HOUSEHOLD DATA. It is a sample survey of about 60,000 house-
holds
conducted by the U.S. Census Bureau for the Bureau of Labor Statistics
(BLS).

The ESTABLISHMENT survey provides the information on the employment,
hours, and earnings of workers on nonfarm payrolls that appears in the
B tables, marked ESTABLISHMENT DATA. This information is collected from
payroll records by BLS in cooperation with state agencies. The sample
includes about 160,000 businesses and government agencies covering ap-
proximately 400,000 individual worksites. The active sample includes
about one-third of all nonfarm payroll workers. The sample is drawn
from a sampling frame of unemployment insurance tax accounts."

Does the HOUSEHOLD SURVEY seem like a real accurate, reliable survey? Are you just going to ASK people if they are looking for work? Is this is really an accurate and reliable way to do a survey?

The household survey is simply a nonsensical survey. It means almost nothing, and is subject to so much survey-taker prejudice that it's ridiculous. Also, in case didn't deduce this from the above, everyone who compares the payroll employment survey with the household study considers the payroll study FAR more reliable (except for you and Dick Cheney.)

Clearly the questions can be asked in a prejudicial way, survey participants can be eliminated on a whim, answers can be changed to suit the surveyors special interests, and the results from the survey can be selectively discarded.

The concept of labor participation rate, and the method for determining it, is something that can be easily manipulated by those taking the survey, just like Bush manipulated the intelligence reports to invade Iraq.

You can't simply change a number used to calculate government statistics by a completely biased, subjective survey. Using this survey to change the participation rate is not only inaccurate, it's dishonest. The logic behind making these changes is nonexistant. The motivation behind making this change is dishonesty and corruption.

unlawflcombatnt
http://www.unlawflcombatnt.blogspot.com/

10:35 PM  
Blogger FrisbeeDog said...

Two comments:
1. The BLS labor force participation statistics are fascinating. I notice a dramatic increase in the volatility of the numbers after April, 2001, after 3 years when the numbers changec almost not at all. It would be interesting to see these stats plotted.
2. The comments and your responses are too wordy for my taste. I read several high quality blogs (Daily KOS, Crooked Timber, Body & Soul) and enjoy the comments.

I ended up skipping several entries in this thread, however...

7:51 AM  
Blogger John said...

First time in two decades that GDP Growth has exceeded 3% for 8 consequtive quarters (Clinton couldn't even do that).

Employment rate is 5.1%.

Maybe its time to stop listening to (former Enron advisor) Krugman and join the real reality-based community.

5:55 PM  
Blogger John said...

And of course, that would be UNemployment rate. Just to clarify. My prior notes on the effects of labor force participation (which I believe you have manipulated by 'fixing' at the height of the dot-com boom), remain.

I do admit that some frustrated workers will be rejoining the work force soon, which may force the unemployment rate up a bit, but no more than 5.4%. For the rest of Bush's term, expect the unemployment rate to fluctuate between 4.7 and 5.4 percent. A healthy, strong rate, consistent with a healthy, strong economic growth policy.

5:57 PM  
Blogger unlawflcombatnt said...

Clinton actually did better than Bush EVER did from 1996 through 1998, while running budget SURPLUSES. Meanwhile, Bush has financed this pseudo-economic growth through massive borrowing and overinflated real estate values.

Year over year GDP growth ending Q1 of 2005 has decreased drastically to 3.7% from the 5.0% ending Q1 of 2004. The economy is definitely slowing down.

What's worse, the best indicator of economic growth, the "GDP Final Sales" for 2004 was only 2.8%. The non-inflation adjusted numbers for this can be found at http://research.stlouisfed.org/fred2/data/FINSAL.viewdata

Construction spending has declined 3 months in a row. Residential (home) construction had declined almost 5% in the last 3 months. This can be found at http://www.briefing.com/Silver/Calendars/EconomicReleeases/const.htm

The Chicago PMI fell 0.5% to 53.6% -- the lowest level since September of 2003. The total decline from March 2005's 69.2 to June's 53.6 is -15.6 points. This marks a 22% DECREASE in the last 3 months. Thus Midwest manufacturing has been rapidly declining over the last 3 months. This can be found at http://www.briefing.com/Silver/Calendars/EconomicReleases/chi.htm

The employment component of the Chicago PMI DECLINED a whopping 5.8 points, to 48.9 from May's 54.7. Less than 50% indicates contraction. Thus, the level of manufacturing employment in the Midwest is DECLINING.

The Index of Supply Side Managers, which came out July 1st, increased for the first month in the last year. It had been on a nearly constant decline since January of 2004, when it was 63. Friday's reading was 53.8. This marks a 15% DECREASE since January of 2004.

The employment part of the ISM index was less than 50 for the 2nd month in a row. Again, less than 50% indicates contraction.

The leading indicators index has fallen a cumulative 1% over the last 6 months, including May's -0.5%. April was falsely revised upward from its original -0.2%, to avoid setting off the "recession alarm." This can be found at http://www.briefing.com/Silver/Calendars/EconomicReleases/leader.htm

Real, monthly disposable personal income has actually declined from $8,473 in December to $8,211 for the month of May. This can be found at http://research.stlouisfed.org/fred2/data/DSPIC96.txt (or http://research.stlouisfed.org/fred2/data/DSPIC96.viewdata)

Unemployment, using the same labor force participation rate used during Clinton's presidency, is 7.1% at present.

The projected budget deficit, when not dishonestly subtracting money from payroll taxes, is $780 BILLION for 2005.

The national debt is now $7.7 TRILLION and rising.

We are heading for an Economic Armageddon. Bush is the worst president in U.S. history. His legacy will be to have done more damage to our economy and country than any other president. He has destroyed our economy, our military, and our country's reputation with the rest of the world.

unlawflcombatnt

9:32 PM  
Blogger James B. said...

The projected budget deficit, when not dishonestly subtracting money from payroll taxes, is $780 BILLION for 2005.


You get this from the same place you found a 10% unemployment rate in Japan? You are off by nearly $250 billion. Probably more by the end of the fiscal year as the deficit is decreasing at a significant rate due to increasing tax revenue.

http://www.cbo.gov/showdoc.cfm?index=1944&sequence=0#table5

http://www.finfacts.com/irelandbusinessnews/publish/article_10002188.shtml

9:16 PM  
Blogger unlawflcombatnt said...

James,

No, I did not get them from a completely dishonest source, like the CBO. Their estimates should be published as "science fiction." The fact that the Bush controlled government deceptively understates the budget deficit by stealing money from Social Security is well known.


If you want to know the current HONEST projection for this year, based on the 1st quarter deficit, you can go to one of the many economic calendars.

For the 1st quarter of 2005, the "current account" was -$195 billion. 4 times -$195 billion is
-$780 billion. This information comes from Yahoo's Economic Calendar at: http://biz.yahoo.com/c/ec/200524.html

If you want to know the what the real "deficit" is, you can go to any of the sites that posts current national, or public debt. From one year to the next, you can calculate the difference over the previous 12 months.

On July 1st of 2004, the National Debt was $7.246 trillion. On July 1st of 2005, the National Debt was $7.827 trillion. That leaves a yearly deficit for the previous year of $581 billion. The site is:
http://www.publicdebt.treas.gov/cgi-bin/cgiwrap/~www/opdpen.cgi

unlawflcombatnt

11:42 PM  
Blogger James B. said...

ROTFLMAO You don't figure out the years budget by picking one quarter and multiplying by 4. Income and expenditure vary by quarter. I am glad you are not my accountant.

10:06 AM  
Blogger James B. said...

And BTW "current accounts" refers to the international transfer of capital, not federal spending. If you are going to use bad math, at least get the right numbers.

And Krugman teaches at Princeton now, not MIT.

10:26 AM  
Blogger unlawflcombatnt said...

James,

I HAVE the numbers right. I'm sure you'd hate for me to be your accountant, because I'd use the real numbers and real math, not the fantasy numbers and "creative" math that the Bush administration uses.

You're argument is to use some kind of phoney "projected" numbers, instead of actual, known numbers that have been posted. The NATIONAL DEBT NUMBERS ARE THE WAY TO DETERMINE THE ACTUAL DEFICIT. Bush conveniently robs from Social Security money and then doesn't count the borrowing as part of our deficit. This is completely dishonest and completely wrong. He's simply leaving out some of the actual debt when he makes up the numbers for the budget deficit. If more money is spent than comes in, that's the annual deficit and it contributes that amount to the national debt. You simply want to use some kind of bizarre accounting scheme to claim that the $581 billion increase in national debt is NOT our annual budget deficit. Somehow, right-wing economists, using this new "pseudo-math," can subtract $7.246 trillion from $7.827 trillion and get $420 billion. That's simply ridiculous, but it's how you right-wingers have deceived Americans about the economy, just like your deliberate distortion of the consumer price index.

Just keep telling yourself you're right, even though the facts don't support you. That's the way right-wingers get elected. They just keep repeating lies long enough and loud enough until people start believing them.

They're not fooling me. And I'll do my level best to keep them from fooling everyone else as well.

unlawflcombatnt

4:48 PM  
Blogger John said...

It isn't dishonest to state the budget deficit the way it is stated. The idea of a social security "Trust fund" is a political fiction. Social Security is a welfare system, taxes are paid, and benefits are paid out from those taxes. Currently, the government takes in more from payroll taxes than it pays out in benefits, leaving a social security "surplus" You can cherry pick any tax and spend policy to manipulate numbers if you want, but the honest way to do it is to use the entire spending and revenue collecting of the entire federal government, including social security, a practice that did not begin in January of 2001, and should continue, even when, absent necessary reform, payroll taxes begin to be exceeded by social security payouts.

The more honest way to describe Paul Krugman, who recklessly is predicting an economic meltdown, is by his former position that most relates to his competence. From now on, lets all refer to him as "Former Enron Advisor Paul Krugman". Enough said.

The fact is that the economy continues to grow at a strong rate, despite your constant predictions of imminent recession. Unemployment continues to decrease, down to a level once considered dangerously low, 5.0%. Home ownership is at a record high, long term interest rates remain low. The budget situation continues to improve along with economic performance. Non-defense spending is being reigned in.

In fact, if you fix defense spending growth at its pre-9/11 rate, and subtract supplemental spending for the wars in Iraq and Afghanistan, as well as additional funding for the Department of Homeland Security, you will have a surplus for fiscal 2006, despite the fact that Bush's tax cuts will be at that point nearly fully implemented.

Bush fulfilled his promise, returning the surplus to the people. We are now running a tiny deficit (compared to the 80s and WW2) despite being involved in two major theater wars as well as a global war against terrorism.

Former Enron Advisor Paul Krugman is way off, so are you.

Don't believe me? Re-read this post on July 28, 2006. Absent a major setback in the global war on terror, you will see continued improvement economically.

9:06 PM  
Blogger unlawflcombatnt said...

John,

You're certainly right to call the Social Security trust fund "fictional" when Bush dishonestly uses the surplus to fill the budget deficit he has recklessly created.

The "entire revenue" that you refer to includes Social Security taxes that were supposed to be put in the trust fund, but were used to fictitiously reduce our budget deficit below it's real value.

The true way to measure the deficit is exactly as I previously described it. Subtract the National Debt from 1 year ago from the National Debt today. The difference is the real budget deficit for the year.

The fact that the economy continues it's pseudo-growth is due to the addition of excessive amounts of debt-financed consumer spending to the wage-financed consumer spending. In addition, excess investment capital is also added in. Further addition to our alleged economic growth comes from underestimating inflation, so that the GDP calculation is higher.

The biggest contribution to the debt financing of consumer spending comes from home equity loans. Home equity loans account for $300-400 billion of consumer spending. That amounts to 2.5-3.3% of our annual GDP. Without that contribution, our annual GDP growth would be almost 0. And this money is derived from the artificial overvaluation of real estate. It's paper wealth only. And it's being used to supplement consumer spending, because wages can't keep up with production.
An explanation of the housing bubble's contribution to our pseudo-growth can be seen in economist Dean Bakers article "The Housing Bubble Fact Sheet." That link can be found at:
http://www.cepr.net/publications/housing_fact_2005_07.pdf

This so-called economic "growth" has been accompanied by the most stagnant job growth record of any recovery. We continue to lose manufacturing jobs, in spite of the dishonest claims to the contrary by the Bush adminstration.

Business profits have soared, but wages have continued to decline. Wages have declined even further this year, despite the statements by the government that the economy is "strong, and getting stronger." Inflation-adjusted hourly wages continued to decline through the month of June, according to the Bureau of Labor Statistics. June's inflation-adjusted wages declined 0.6% from May. June's inflation-adjusted $8.13/hour marked a decline from May's $8.18/hour. This also marks a 1.2% decline from April's inflation adjusted $8.23/hour. At this rate, hourly wages would decline 7.2% over 12 months.
This information can be found at the U.S. Bureau of Labor Statistics site at:
http://stats.bls.gov/news.release/realer.t02.htm

June's weekly, inflation-adjusted income declined 0.8% to $274.95, from May's $277.29. June's decline marked a 1.7% decline from December 2004's weekly income of $279.73. Going back further, June's decline represents a 1.8% decline in the weekly wages from December 2003, which were $280.09/week.

Below is a link to a graph of per capita real disposable income from the Dept. of Commerce. They use a different inflation measure than the Bureau of Labor Statistics, called "chained 2000 dollars," which deliberately understates inflation. Even with this understatement of inflation, wages have clearly been stagnating since the beginning of 2005. Note in the graph below the lack of increase since January of 2005.
http://www.bea.gov/briefrm/percapin.gif

(Note: the above link is to a chart that includes all income, including stock dividends and other non-wage sources of income.)

Wages definitely have NOT recovered during our alleged "recovery." In contrast, corporate profits have soared. Is corporate profit growth the ONLY measure of our economic growth?

You are right that the Iraq War has contributed greatly to our national debt. This debt is 100% the result of Bush's lies that got us into the war. This debt falls completely on the dishonest shoulders of George W. Bush.

Bush hasn't returned any "surplus" to the people. He's stolen money from the people's surplus and given it to his rich corporate buddies. He's taken money that was earmarked for the middle class's retirement and given it to Corporate America as a reward for helping him get fraudulently elected. He's created a huge deficit by his reverse Robin Hood, Corporate Welfare policies.

"Absent a major setback in the global war on terror" we will see continued wage stagnation and increasing debt. If we have a major "setback" on the war on terror, our economy will worsen even more. (Also, John, did you miss the latest Neo-con talking points' memo? It's not a "war" on terror any more, it's only a "struggle." That way Bush won't have to admit that we are losing. It's only a struggle, not a war like it used to be. Reminds me of the book 1984. Just rewrite history to eliminate anything that's inconvenient or damning.)


unlawflcombatnt

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I've bookmarked it and told my blogger freak friends about it. It's intelligent, sometimes funny and always refreshingly honest. Keep Up The Good Work!

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11:14 AM  
Anonymous Anonymous said...

Am perplexed. You can't be both 'pro-capitalist' and seriously trying to avert an 'economic Armageddon.' The seeds of the latter are in capitalism itself, which requires above all constant growth in profits. There is no way to constant increase profits without ultimately causing an economic Armageddon. Thinking that you can be both 'pro-capitalist' and against an 'economic Armageddon' reminds me of the Lewis Carroll character who made a habit of believing two contradictory things before breakfast each day.

12:59 AM  
Blogger unlawflcombatnt said...

Anonymous,

Thanks for your comment. I wanted to address the comment:
"Am perplexed. You can't be both 'pro-capitalist' and seriously trying to avert an 'economic Armageddon.' The seeds of the latter are in capitalism itself, which requires above all constant growth in profits. There is no way to constant increase profits without ultimately causing an economic Armageddon. Thinking that you can be both 'pro-capitalist' and against an 'economic Armageddon' reminds me of the Lewis Carroll character who made a habit of believing two contradictory things before breakfast each day."

Actually you can be pro-capitalist and still hope to avoid an Economic Armageddon. Capitalism is an extremely productive economic system. Unfortunately it is subject to almost unlimited abuses and perversions. It is these abuses that are leading us to an Economic Armageddon, not capitalism itself.

"Corporatocracy" is a better definition of our current economic system, rather than free enterprise capitalism. The number of anti-free enterprise, pro-corporate laws and policies of our goverment is extensive. When extensive legislation exists to protect corporate interests, our system of "free market" capitalism is compromised. There are many examples of such corporate protection. Patent exclusivity is one example. Numerous extensions of patent exclusivity greatly reduce competition. These are anything but "free enterprise" policies.

When huge amounts of taxpayer funds are given to business interests, the free market is compromised. Many "private" entities survive almost exclusively on taxpayer money. The defense industry is one such example. The only thing "private" about the defense industry is that profits go into the pockets of "private" individuals. Many other industries also gorge themselves at the taxpayer-funded feeding trough. Much of the money that funds HMO"s, healthcare insurance, and pharmaceutical cartels comes directly from the taxpayer, not private individuals.

Less direct monetary assistance also perverts the free market. Government insurance of loans encourages riskier and less productive investments. Corporate bankruptcy protection further insulates Corporate America from paying the consequences for poor business investment and practice. It also allows for abuse of the system and rewards misappropriation of funds.

Government granted monopolies, such as phone and power companies, are further perversions of the free market system. Regardless of any issues of necessity, such monopolies limit competition.

The whole concept of anti-trust policy has been perverted as well. Anti-trust legislation was designed to prevent monopolies and the control of the market by large corporations and businesses. It was designed to prevent price-fixing, as well as other market-controlling issues. Today anti-trust legislation is used to prevent smaller entities from grouping together, such as labor groups. Anti-trust legislation is now used ensure the exorbitant profits of Corporate America. It is rare for any government body to block a merger. Yet it is not uncommon to see collective bargaining rights denied under the guise of "anti-trust" violation. (For example, unionization of doctors has been blocked as an anti-trust violation.)

Our tax system is another method used to subvert "free enterprise" and support corporatocracy. Tax deductions for 401Ks and IRAs encourage workers to donate part of their wages to Corporate America, thus providing even more funding for Corporate America, allowing more overinvestment and misuse of funds. Few realize that much of their money goes toward CEO salaries, and further pro-corporate lobbying of Congress. Some of this money even goes into pro-corporate campaign contributions. Deceptively encouraging workers to give part of their income to Corporate America is definitely not "free enterprise."

There is also an ongoing trend of Corporate America to focus on short-term gains, at the expense of long-term gains. This may well be the most damaging of modern business trends. The reduction of labor costs (and labor/consumer income) may increase short-term profits. But it reduces consumer income, as well as the market created by that income. The end result is a continual reduction in the income necessary to buy American production. Much of this problem has been created by government intervention, as well as selective removal of key regulations.

Legislation to protect Corporate America, extensive taxpayer funding, and pro-corporate tax policy have largely eliminated "free market" capitalism. Adam Smith, the most noted proponent of "free enterprise," would roll over in his grave if he heard today's Corporatocracy was being touted as "free enterprise." Smith believed the government should take an active role to promote free enterprise, not stifle it like the current administration is doing.

The shortfalls of current pro-Corporate, anti-free enterprise policies have gone largely unnoticed. The reduction in labor/consumer income, government-enhanced price increases, and demand decreases that would have resulted, have been obscured by increasing consumer "deficit" spending. Consumers have been able to maintain demand with borrowed money, despite declining real wages. Spending financed with borrowed money has compensated for real wage declines. Had consumer spending been limited to income, the current Corporatocratic excesses would never have occurred. Business revenue would have been limited by the wage income that consumers had to spend.

The result of current government policy has been an overinvestment in most assets, as well as investment in minimally productive assets. Market forces have not been allowed to provide the negative feedback for bad business investment and practices. As a result, bad investments and business practices have continued unchecked by normal market forces.

The current business climate in America is not the result of capitalism, or "free enterprise." It's the lack thereof that is the biggest problem. Though so-called "capitalists" may be the cause of an Economic Armageddon, capitalism itself will not be the cause. The cause will be the many perversions that are masquerading as capitalism and free enterprise.

12:57 PM  
Blogger unlawflcombatnt said...

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Anonymous Monetizin' the Debt said...

Someone has drunk the koolaid. Tinfoil hats indeed; you have fallen prey to a believing in right-wing conspiracy theories.

If Bush is really as dumb as you say he is, how can he and his cohorts contrive such an elaborate scheme to influence arbitrary collection of information.

Also, why couldn't every president have done that previously? Maybe the whole Dot-com thing was Al Gore's pet project in mass hallucinations during his time in office!

The doctor recommends heavy sedation and anti-psychosis drugs!

12:31 PM  
Anonymous Monetizin' the Debt said...

BTW, you need to turn on keyword verification to remove the stupid blog spammers

12:34 PM  
Blogger unlawflcombatnt said...

Monetizin' the Debt,

I'm not sure what "conspiracy theory" you're referring to. But you certainly have your Right-Wing "talking points" down pat. Clearly any criticism of Corporate America's greed-motivated policies gets labeled as a "conspiracy theory." Anyone opposing tax cuts for the wealthy is a "tin foil hat" wearer, and must be a conspiracy theory advocate.

I think the Bush junta, and it's supporting Corporatocracy, advocate policies designed to enrich themselves at the expense of the rest of America. Everything possible is done to publish distortions of the truth, as well as outright lies, to deceive the public into thinking the economy is doing better than it actually is. Lies and distortions are published by the Bush junta to justify reverse Robin Hood policies of tax cuts for the rich and increased sacrifices for the remaining 98% of Americans. Bush's economic policy centers around the further short-term enrichment of his wealthy donors, at the expense of long-term economic growth and prosperity for all Americans.

Bush's economic policies are completely illogical from any economic standpoint, other than to make the wealthy even more wealthy over the short-term. There is absolutely no economic logic behind cutting taxes on the affluent to increase investment when investment capital is over-abundant at present. Such policies do nothing but inflate asset prices, increase CEO salaries, and increase rich stockholder dividends.

I'm not sure these policies qualify as a "conspiracy." They're just too illogical and wrongheaded. They do, however, qualify the Bush Corporatocracy as the most incompetent, corrupt and dishonest government in American history. Bush's "legacy" will be to have done more damage to his country than any leader in American history, and possibly all of world history.

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11:11 PM  
Anonymous Monetizin' the Debt said...

unlawflcombatnt said...
Monetizin' the Debt,

I'm not sure what "conspiracy theory" you're referring to. But you certainly have your Right-Wing "talking points" down pat. Clearly any criticism of Corporate America's greed-motivated policies gets labeled as a "conspiracy theory." Anyone opposing tax cuts for the wealthy is a "tin foil hat" wearer, and must be a conspiracy theory advocate.

I think the Bush junta, and it's supporting Corporatocracy, advocate policies designed to enrich themselves at the expense of the rest of America. Everything possible is done to publish distortions of the truth, as well as outright lies, to deceive the public into thinking the economy is doing better than it actually is. Lies and distortions are published by the Bush junta to justify reverse Robin Hood policies of tax cuts for the rich and increased sacrifices for the remaining 98% of Americans. Bush's economic policy centers around the further short-term enrichment of his wealthy donors, at the expense of long-term economic growth and prosperity for all Americans.

Bush's economic policies are completely illogical from any economic standpoint, other than to make the wealthy even more wealthy over the short-term. There is absolutely no economic logic behind cutting taxes on the affluent to increase investment when investment capital is over-abundant at present. Such policies do nothing but inflate asset prices, increase CEO salaries, and increase rich stockholder dividends.

I'm not sure these policies qualify as a "conspiracy." They're just too illogical and wrongheaded. They do, however, qualify the Bush Corporatocracy as the most incompetent, corrupt and dishonest government in American history. Bush's "legacy" will be to have done more damage to his country than any leader in American history, and possibly all of world history.

1:47 PM


Unlawfl,

Trying to attribute morality to markets is impossible. The same goes for politics. You are a monday-morning quarterback who is ignorant about the political process and spouting inflammatory words about something you have little knowledge of.

Your methods, however are standard military issue. I'll break it down for you:

1. Make a statement that is so inflammatory, rational people take a step back
2. Make another
3. Make another
4. Branch out on a tangent from issue #1 and rant.
5. Branch out on an additional tangent and rant.
6. Follow it up with a back-handed apology with a mini-rant.

I'm not sure if you know this, but we have 3 arms of government; each of which is a check and a balance on the other. And, if things haven't changed recently, laws (including federal budgets) are passed by Congress. (gasp, I know, the president doesn't control these things?)

2001 Tax cuts were passed as a means to spur spending; any macro Econ course will discuss basic macro and monetary policy, or do you somehow argue that we are exempt from basic Economic effects? You're not suggesting that the dot-com market meltdown and ensuing jobless increase was based on the new President's influence, are you? You're also not assuming that the 9/11 attacks were caused by Bush, are you? If so, yes, that is a conspiracy theory that you have bought hook, line, and sinker.

It appears that congress (not the president) was trying to incent citizens to save money and prop up the stock market by offering cuts to dividends. In their minds this was a logical reasoning based on beliefs at the time:

1. The US has an abysmal savings rate
2. We need long-term investors to support our economy, not day traders
3. Stable blue-chip companies (which by the way are the largest employers) are generally the only ones who pay stock dividends, and are in no way considered "expensive" based on P/E's, so even normal people can own them as an investment.
4. Companies are productive assets and investment in american companies will spur economic growth.

Monetary policy, unfortunately stepped on the gas the same time the fiscal policy did too. They were trying to prevent deflation vis a vis 1930's by cramming money down people's throats if they had to. However, this blew up the biggest bubble in history and lowered the savings rate even more. Now, we have

1. Insurmountable personal debt (federal deficits are not that big of a deal unless you don't understand basic economics, and I suppose you already know that.)
2. Hugely unproductive assets known as our homes
3. Future proletariat indentured servitude to debt.

Thanks to our good friend Alan, chairman of the Federal Reserve. And no, the federal reserve is not part of the government, it is independent, but I suppose you already knew that. So, Bush, nor congress is not responsible for the above 3.

See, what congress didn't understand was that people have a disease, and its name is materialism. That is the American religion, and all have bowed down to the big box retailer. You should know that living in Southern California!

There are some points that you and I might agree on, but I wish you wouldn't voice your opinion the way you do. You are indicative of the reason that we Democrats lost the 2004 election. You see, middle america (which could have swung our way) was far too frightened by our "shock and awe" demonstrations rather than rational, thoughtful criticism of policies. The Bush people knew that, and played us like a violin. You should not let your personal hatred influence your thought-provoking analysis.

I am, however a believer that the average American is smarter than you believe; and smarter than the average Democrat voter and more emotionally sensitive to attacks than we ever estimated. These are the people we need to capture and have agree with us. Clinton was successful because he was unshakeable; we have been trounced soundly ever since because his charisma let us be a-holes in the background. When we have to run the show, we look like th a-holes we are. If we are ever to attract mainstream america, we must embrace more moderated speech.

Remember, moderate Democrats are your friend; we are not "right-wing" enemies.

Monetizin' the Debt

BTW, you really need to turn on word verification on blogger or these spammers will eat you alive.

10:12 AM  
Blogger unlawflcombatnt said...

Monetizin' the debt,

To start with, I'd like to make it perfectly clear that I didn't offer you any "back-handed apology," or any other kind of apology. I'm certainly notoffering you an apology at present either.

You can call my explanations "rants" as often as you like. It doesn't concern me in the slightest. It's difficult to understand how anything I wrote was "going off on a tangent," since your post that I responded to said nothing of substance, other than to hurl personal insults and regurgitate half-witted Right-Wing talking point cliches. Not addressing your references to "Koolaid," "heavy sedation," and "anti-psychosis drugs," isn't "going off on a tangent." It's simply a matter of ignoring your pointless banter.

Furthermore, I'm not commenting on any "morality," other than government policies that are motivated exclusively by greed, and not the improvement of our economy.

In addition, I'm always elated when you Right-Wingers have no tangible arguments against what I've written, and can only resort to personal insults. When I read "Koolaid" and "anti-psychosis drugs" I realize you have nothing better to say. Your best response is your own worthless value judgement about my commentary.

However, it does appear we agree on a few points, though we disagree on a lot more.

The President and the Republicans in Congress are in a majority and they do set the agenda. It was Bush and the Republicans who pushed through the tax cuts. The tax cuts were not optimally targeted to stimulate economic growth. They were designed to reward rich donors. A large number of economists have commented on the tax cuts, and the consensus is they did little to stimulate the economy, and much to increase the deficit and national debt. Those tax cuts were the product of blind ideology and were not implemented to solve any problem. They were implemented when the Bush administration saw a "problem" it could exploit as an excuse to put the tax cuts in place. Paul Krugman might describe this as a "solution looking for a problem."

The tax cuts were implemented under the guise of "spurring consumer spending." Again, the consensus among most economists was that this would have been better accomplished by aiming the tax cuts at the poor and middle class, not the top 2%. This is what "any macro Econ course" would state.

It appears that the Republican Congress, under the direction of the president, was trying to satisfy the wishes of his rich campaign donors exclusively, while claiming something entirely different. The non-productive tax-cut plan most certainly is a problem created by Bush himself. His ability to get these anti-growth tax cuts passed was assisted by a Republican Senate and House of Representatives.

Your own prejudice comes through loud and clear when you re-hash your nonsensical justication for claiming I subscribe to a "conspiracy theory." I've posted dozens of pages of my writing at this blog and hundreds at other sites. And nowhere have I even hinted that the 9/11 attacks were "caused by Bush." I think you're well aware of that, but it assists you in discounting what I've written when you make such an irresponsible and unsupported suggestion. And to anyone except your Right-Wing friends, it diminishes everything you've said. It's completely consistent with Right-Wing hate-mongering that asserts anyone who opposes Bush is either ignorant, a nutball, wack-job, traitor, liberal, extreme leftist, socialist, Marxist, Communist, etc.

I completely agree with you on "1. The US has an abysmal savings rate, and, 2. We need long-term investors to support our economy, not day-traders."

Regarding number "3," I'm in limited agreement. I would agree that investment in American companies is a good thing in general, but only if consumer demand is sufficient to purchase the added production provided by that investment. With our current industrial capacity utilization well below maximum, further capital investment seems unwarranted overall. Consumer demand for production appears more limiting than availability of investment capital. Furthermore, there is an overabundance of capital at present and a lack of viable investment opportunities. Further opportunities will be created by increased production demand, which is created by consumer spending. Investing money to increase the amount of capital goods makes little sense when current capacity is already underutilized. Or to put it differently, it makes little sense when capacity is excessive (in relation to demand for its production.) Consumer spending needs to be bolstered. Capital investment does not.

Consumption has not dropped in sync with the drop in consumer income, however. This has occurred due to the ever increasing ability of American consumers to finance spending with borrowed money. This has obscured the decline in wage-financed consumer spending. And it has kept our industrial capacity utilization from falling to the level it would have, were it not for deficit-financed consumer spending. Thus, the true overinvestment and excessive capacity it created have been obscured by consumers' ability to spend borrowed money to maintain current production demand and capacity utilization.

I agree with you on your next set of points: 1. Insurmountable personal debt, 2. Homes as unproductive assest, and 3. "Future proletariat indentured servitude to debt."

I also agree with your belief that Alan Greenspan had a large role in creating the economic mess we're in. The Federal Reserve is technically independent, but Greenspan certainly does have his own political-economic views. And he certainly applies them to decisions, as well as his pronouncements. Greenspan was the principal architect in raising payroll taxes (Social Security taxes) in the 80's to create a surplus under Reagan, with the full knowledge that this money could be used by the Federal government to finance Reagan's tax cuts. In essence, this shifted the tax burden off the affluent and onto the less affluent. Many economists believe Greenspan bears a large amount of the responsibility for some of our current economic problems. Many believe he is playing down most of those problems as well.

I don't believe for a second that you're a "moderate Democrat." When you start a post with a Right-Wing talking point cliche like "Koolaid," and end it with "anti-psychosis drugs," you sound like a Right-Wing extremist. That's because you are a Right-Wing extremist. Your shallow, insulting, accusatory commentary is a dead giveaway.

1:18 PM  
Anonymous monetizin' the debt said...

"I don't believe for a second that you're a "moderate Democrat."

Well, believe what you want, doesn't change facts. Of course, from your vantage, I'm sure darn near everyone appears far right.

Here's a good definition from the guys over at answers.com regarding drinking the koolaid

"Kool-Aid

[from a kid's sugar-enriched drink in fruity flavors] When someone who should know better succumbs to marketing influences and actually begins to believe the propaganda being dished out by a vendor, they are said to have drunk the Kool-Aid. Usually the decortication process is slow and almost unnoticeable until one day the victim emerges as a True Believer and begins spreading the faith himself. The term originates in the suicide of 914 followers of Jim Jones's People's Temple cult in Guyana in 1978 (there are also resonances with Ken Kesey's Electric Kool-Aid Acid Tests from the 1960s)."


Unlawful said:
"When you start a post with a Right-Wing talking point cliche like "Koolaid," and end it with "anti-psychosis drugs," you sound like a Right-Wing extremist."


And what do you sound like?

Here are a couple of rants on this string alone...
"The Bush administration has done nothing but manipulate statistics since Bush took office."
"I could devote an entire blog to exposing the manipulated statistics used by the Bush plutocracy."
"Bush is the worst president in US history. His administration has manipulated every statistic possible to obscure this."
"At present, my attention is being diverted by an Ebay fraud scheme I've been the victim of, along with 48 other Ebayers. This is the same Ebay that Dick Cheney says has created so many "unreported" jobs for our economy. Something he should certainly take pride in -- another crooked corporation. It's a Bush-Cheney specialty."

From your side, you are not only drinking the koolaid, you are pouring the koolaid.

You seem very pensive, and quite unhappy with life. I am, however, quite satisfied with life and what it has offered. I am sure you will see this as a trademark "right-wing" trait, and rant accordingly.

Perhaps you have forgotten that the Democratic party was founded on normal, regular people. Personally, if we could all take a vote, we would vote you and your ilk out permanently so we could go back to winning elections based on sound reason and logic.

What's sad is that you already have a majority of people's support; the reason that your viewpoints are not receiving general praise (except perhaps in your section of the blogosphere) is because you are extreme. Not a typical left-wing liberal extremist who stuffs flowers in guns, but the kind who can do nothing but create enemies. How you ever ended up to be Democrat is beyond me, as YOU are more like Republicans than you would ever admit.

No matter, you do not appear to understand the way to win this conflict. Perhaps you can reflect on this from Sun Tzu.

"Know thy enemy and know thyself, find naught in fear for 100 battles. Know thyself but not thy enemy, find level of loss and victory. Know thy enemy but not thyself, wallow in defeat everytime."

BTW, why don't you turn on word verification?

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5:00 PM  
Blogger unlawflcombatnt said...

Monitizin' the debt,

To answer your question about turning on word verification -- I have, and it does not work. You continue repeating this suggestion as if you know it will work. This now seems unsurprising since you've grossly overestimated the extent of what you know in other areas.

I pulled my punches to your last response. I resisted the urge to call it childish and ignorant. I will now take that opportunity. Your response is shallow, childish, and unsubstantive. You've made no points, other than to prove you have no argument regarding what I've posted. Only Right-Wingers lead into a comment with an insult. It's a dead giveaway. They assume that their little jabs are clever and someone reading it will be really impressed. If you'd wanted to "discuss" something, you'd have started by saying you disagreed. Of course, you didn't really want to "discuss" anything.

Instead of a foolish, illogical explanation of Kool-Aid, maybe you could address specific statements that you disagree with. Again, you haven't done so, because you have nothing of substance to say. You may think your "Kool-Aid" comments are clever. But I doubt many others would agree.

No one except you can see how pointing out the Bush junta's statistical manipulation is "drinking the Kool-Aid." I've laid out in great detail how it is done, and you've done nothing but post childish insults and suggesting that I'm "psychotic."

You take great pleasure in quoting me, and yet don't address anything that you've quoted. You've done nothing but parrot Right-Wing talking points. I suppose you've impressed yourself with your non-response responses. I'm not impressed, and I doubt others are either.

I have to give you credit for your Bush-like attempt to dishonestly connect unrelated ideas. Your reference to Jim Jones is a typical Bush-like attempt to draw a connection where none exists. Whereas Iraq had nothing to do with 9/11, neither does Jim Jones have anything to do with what I've written.

Your quotation about my Ebay experience is assanine. This is something that affected a lot of people, and it's something I wanted to make known to the public. Unlike you, I deal in real events that have actually happened. I won't discuss it any further here, since you clearly you have no interest in knowing the details. It would upset the fantasy world you live in. Discussing it might require you to do some of your own thinking. You might have to come up with something besides your worn-out talking points rantings.

And despite your implication that I have "succumbed" to something (the way you clearly have), rest assured, my ideas are my own. If you'd taken the time to read further in my blog, you'd know that because I've explained exactly how I arrived at my beliefs in great detail.

In the future, you might consider doing some of your own thinking, instead of just regurgitating the nonsense you've heard on Fox News and other Right-Wing sources.

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1:55 PM  
Blogger Loosecannon said...

Unlawful,

I just stumbled onto your main page after talking to you for months from a secondary page.

You have done a masterful job of compiling a lot of really good data.

Big Salute, you deserve credit for the whole body of work.

The recent news about GDP decline and unemployment incline exacerbated by even more pessimistic concerns about future economic performance is compelling. And not in a fun way.

It seems to be beyond doubt at this point that none of the primary drivers in the economy (FED, WH, financial sector, corporate outsourcing manufacturers, tax break recipients) really care at all about the general economy. They are either deluded about the consequences of the increasingly unsustainable trends, or are prepared for a general decline/collapse of the US economy.

Somehow, leadership has escaped us. The agencies that we trust with the management of our economy and future have fallen off the job. It seems like only the gold trading community has it's head up.

Good work, M'Man

You know of course that demand side economics is at odds with the architecture of our economy? What I mean is, in it's organic development, the economy was actually not designed to work. It was designed to afford opportunities to bankers and corporatists.

It would be worthwhile to discuss this in future discussions.

8:02 PM  
Blogger Loosecannon said...

Unlawful,

On a side note: have you considered in any detail what the phrase monetizing the debt REALLY means?

Deja vu in reverse!

8:12 PM  
Blogger unlawflcombatnt said...

Loosecannon,

Thanks for the compliments. I agree that none of the major drivers of our economy seem concerned about anything more than their own short-term self-interests. It seems as many in the financial world are trying to extract as much wealth as possible before it collapses. The longer they deceive the public about our direction, the more they can extract before it all comes tumbling down.

The agencies we've trusted are simply trying to keep our sinking ship afloat by inflating it with their own hot air. They think they may be able to keep the economy going on "faith" alone. Eventually, however, factual reality will prevail.

You're right on target about the "gold" community. They seem to be one of the best sources of honest economic information.

During the organic development of our economy, classical economics was the rule of the day. The concept of demand and the idea that there were limits to how much consumers could purchase seem not to have occurred to anyone at that time. Even still, many economics writers of the day, such as Adam Smith, spoke against monopolies and the formation of larger, anti-competitive entities. The free enterprise writers of the day would not have considered permanent patent protections, government-sponsored monopolies, and large government giveaways to business to be "free enterprise." Again, however, their ideas also seemed to be based on the concept of unlimited consumer demand.


Regarding "monetization of debt," I assume it means creating money through loans and sale of securities in order to finance the debt. Regardless of the exact meaning, it's not an encouraging concept.

12:13 AM  
Blogger Loosecannon said...

Hey Unlawfull, sharp as always.

Monetizing the debt has two meanings. The first you locked onto, paying off the debt with new currency therefore spreading the cost across the entire currency spectrum.

The other is even more insidious and appears to be happening now.

The appearance is that the fed reserve banks are paying the debt, and affording the new (US Govt.) debt by selling the bonds to themselves thru "hedge funds" of unknown ownership. Thus they are buying the debt of the US deficit for the right to print 107 dollars of money to loan in exchange for every dollar of US debt created. All based on a reserve currency ratio that the board of presidents of the Fed banks votes to set. The reserve currency requirement is less than one % of the currency the fed can lend as a result of our deficit. They literally have an almost unlimited license to print new money, all based on federal deficits.

If it all goes to hell, well, this will be the central cause.

Keep up the good work, Unlawfull, and Merry Christmas.

8:53 PM  
Blogger unlawflcombatnt said...

Loosecannon,

Thank you for your comments and your salutation.

There is no required reserve for the Federal Reserve. They have unlimited license to print money. It sounds like the new Fed Chairman will be even more liberal about printing money.

Hopefully he won't continue to fan the flames of outsourcing and other means of reducing labor income, the way his predecessor did. Unless someone in the government starts to realize that consumer spending cannot continue to rise while real wages are falling, we're going to have an economic meltdown.

Unfortunately, I see no evidence that helicopter Ben is going to significantly "change the course." He does advocate "inflation targeting" which has the purported effect of assuring investors and consumers that inflation will continue at a predictable rate, as opposed to an uncertain rate. This apparently reassures investors and consumers, encouraging them to spend more. (At least, this is my understanding of the effects of "inflation targeting.") Somehow this doesn't seem very reassuring.

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7:52 PM  
Blogger Loosecannon said...

Unlawful, Bernanke is a wild card. He is certainly well educated and experienced to a point. I was thinking about it the other day, how little we really know about him.

In the past the FED had one tool, short term interest rates. And with that one measly little tool Gspan managed to maintain forward progress for 17 or 24 years without a really hard recession or depression. Now Ben has a new tool, unlimited currency creation.

He may target 3.5% inflation, but I would bet my house he can't deliver. He inherited a hot inflation market and I see no way in hell anyone is gonna slow it down, unless they STOP printing money.

If I had his job that would be my number one goal. STOP printing money and let the corrections occur.

Ben's a smart guy, lets see what he does.

The longer you forestall the corrections that are in demand , the worse they are. Greenspan defered the maintenance of the economy to the point of inevitability.

I predict 10% inflation for seven years (or 8% inflation for ten years) starting sometime in the next few years. I could be wrong.

I will keep an open mind.

8:54 PM  
Blogger unlawflcombatnt said...

Loosecannon,

Your prediction of 10% inflation is kind of scarey, but certainly not unreasonable. I guess it'll depend on what new formulas the Bush junta can concoct to reduce the calculated rate.

I have to agree that Bernanke is a wild card. In his favor, in my opinion, is that he couldn't possibly be as much of a Corporatocrat as Greenspan, who clearly took sides with big business and corporate interests. It's hard to imagine anyone being worse for American workers than Greenspan. To me, it is also in his favor that Paul Krugman generally approves of him. (Since I generally agree with Krugman, I consider this a big plus.)

Bernanke appears to be less of an inflation hawk than Greenspan. This not only results from his stated policy of "inflation-targeting," but also with his concern about deflation. So I think inflation will be worse under Bernanke. I've read some of "Helicopter Ben's" statements and concerns about the hazards of deflation, and how aggressive he would be trying to fight it. His writings do make some sense, but he still sounds less concerned with inflation than I'd like to see.

In addition, Bernanke appears less hawkish in his concerns about a housing bubble than Greenspan (and Greenspan was certainly a "dove" in that respect.) So he probably won't do much to discourage banks from making insanely risky loans. Thus, he'll probably prolong the housing bubble, making its bursting even worse.

Hopefully he won't share Greed-span's disgusting concern about wages rising too much. Greedspan's concern about rising wages just makes me sick. He was just terrified that wage increases might reduce Corporate America's exorbitant profits. Hopefully Bernanke won't be as militantly pro-merger, pro-monopoly as Greedspan. And hopefully he won't spend countless hours trying to concoct reasons why outsourcing American jobs to cheap foreign slave-labor markets is "good" for America. Again, Greedspan's frequent babbling about the "dangers" of protectionism were just disgusting. Almost as disgusting was Greedspan's opposition to the minimum wage. Hopefully Bernanke won't be as militant an enemy of the American worker as Greedspan was.

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4:42 AM  
Blogger Loosecannon said...

Unlawful,

you didn't like G span.

I take it as a given that a fed chairs job is to be the ceo of the banks. Nuf sed.

Bernanke seems to be very well educated and informed. He cares about a more balanced set of goals, including employment ratios and relative economic health. G span trained the media to actually write reports that openly pitted wage earners against fed policy. Ben will not do that. But he still represents the banks.

The fed has taken a course to ensure against a dollar collapse. There are very few tools or options left available on this course. And without the luxuries of strong economic growth, I suspect Ben will have very few options to exercise aside from a better rhetoric.

China! welcome to the demise of the dollar as a world reserve currency giant.

My expectations of a 50% devaluation of the dollar within 7-10 years just began yesterday.

I don't see the housing bubble collapsing as the value of property has been mostly stable while the dollar collapsed.

What I see coming is an increase in the real value of Chinese wages, and a real decline in the actual value of US wages and a long term and very graduated stealth inflationary trend here in the US.

I just don't see that ben b. will have many choices about his policy. He will address the congress and public but his options are preset.

All in my opinion.

I give a deep bow to Allen Greenspan. One hell of a reign as the most powerful man in the world. Masterful work. You son of a bitch. But again congrats on a masterful job of setting our course in the last and next 20 years.

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11:47 PM  
Blogger unlawflcombatnt said...

Loosecannon,

Thanks again for your response. You're right in assuming I don't like Greenspan. I've read a book by economist Ravi Batra called "Greenspan's Fraud" which is less a critique of Greenspan and more an expose of how our economic system of free enterprise capitalism has evolved into monopolistic corporatism. Needless to say, Greenspan has been the principle architect of that evolution. As you've stated, Greedspan pitted wage earners against federal policy and has implied that increasing their pay would hurt our economy. What he really meant was that increasing their pay would hurt the short-term profits of rich investors and CEOs.

The Greedspan-led Federal Reserve certainly has attempted to fight dollar devaluation. This is somewhat of a "conundrum" to me, since analysts claim that a dollar devaluation will improve our trade balance. However, I think I know some of the real answers as to why the Fed doesn't want the dollar to devalue.

The obvious one is that they don't want the dollar to lose its position as the world's reserve currency. And they don't want foreigners to stop purchasing our debt. However, I think there's a more sinister, greed-motivated reason. If the dollar loses value, it will reduce the ability of Corporate America to invest in foreign production facilities. The U.S. dollar wouldn't buy as much in foreign countries, and it would cost more U.S. dollars to pay their semi-slave labor. In addition, their foreign-made goods would cost more in the U.S., so they'd sell less in American markets. So the big American-owned Corporate multinationals would be hurt by dollar devaluation. Greedspan certainly doesn't want anything to impede Corporate America's quest to exploit the cheapest labor on the planet.

Thus, despite the purported advantages dollar devaluation would have on our trade balance, the powers that be don't want that to happen. Again, I think much of it's because it will hurt the Americans that own foreign companies and exploit the cheap labor of those countries. And as I've stated many times, Corporate America is destroying its major consumer market with these policies. Eventually they will find out that they need consumer spending and demand, and that concerns about demand aren't just some "left-wing conspiracy."

I hope you're right about Bernanke. It certainly appears at first glance that he has a more "balanced" set of goals. I'm still concerned about his belief (which I think you share) that there's no housing bubble.

When one looks at housing price appreciation vs. income growth, the unsustainability of the last 5 years' appreciation becomes obvious. That appreciation has resulted from multiple factors that have artificially increased demand. Low interest rates have allowed buyers to afford more expensive homes. The reduction of common sense loan practices has also allowed many more buyers to get into homes that they otherwise couldn't afford (and shouldn't have purchased.) The onset of massive housing speculation has further escalated demand and prices. The speculation, however, is based on the idea that there will be residential buyers in the future who can continue to purchase these increasingly higher-priced homes. This simply won't continue for a number of reasons. Real wages for most people have declined under the Bush Corporatocracy. People can't continue to spend more for homes if their incomes don't increase. Though they have done this over the last 5 years, this clearly can't continue. And when it does become apparent that price appreciation has ceased, the speculators will put their homes on the market in a nanosecond. To non-residential speculators, homes are no different than stocks. When a price decline becomes a certainty, they're going to try to sell those homes, flooding the market with homes and driving prices down even further as a result.

In addition, many so-called "residential" owners are actually quasi-investors. Despite their "residential" status, they bought their homes with the understanding that they were also investments and sources of wealth. As such, many of them will also to try to sell their homes when prices start falling.

In Southern California, prices in the major markets have been declining, or at least stagnating, for several months. In the last 4 months, Los Angeles home prices have declined 6%, Riverside has declined 0.2%, Orange County overall has remained unchanged, Newport Beach has declined 3.6%, and San Diego has declined 6%.

Here are the links to that information.
Housing: Los Angeles
Housing: Riverside
Housing: San Diego
Housing: Orange County
Housing: Newport Beach

Northern California is also seeing price stagnation or decline. San Francisco home prices have increase 0.1% over the last 4 months. San Jose home prices have declined 3.5% in the last 4 months. The links for this can be found at:
Housing: San Jose
Housing: San Francisco


I'll have to get back to you on China. I need to review some information on that subject first.

2:27 PM  
Blogger Loosecannon said...

Wow, Unlawful you said so many things that I need to respond to..

"how our economic system of free enterprise capitalism has evolved into monopolistic corporatism."
This was the very first topic I discussed with you when I started visiting your site.

Tackling dollar devaluation and home prices with a diversionary approach.

The Bush admin appears to want to be able to spend deficit resources. And they also want the dollar to fall to make American exports more competitive. Subsequent to that a decline in wages occurs that is virtually invisible to most Americans. So there is a minimal political downside to this practice of deflating the dollar via deficit spending.

The FED reserve is in a whole other position. The FED is owned by 3 private banks. Those three banks in turn are members in a larger network of central banks called the BIS. The BIS through it's membership includes most of the worlds central banks under one umbrella. The only exception I am certain about is China who maintains an independent Central bank.

The central banks of the BIS all operate as a partner/monopoly. They trade funds to establish reserve currencies that are all comprised of a basket of currencies, primarily the dollar the Euro, and Yen.

So in a very real way, the dollar is no longer the worlds reserve currency, or even the exclusive reserve currency of the Federal reserve. The BIS banks also cross insure each others outstanding debt with intricate and massive volumes of "interest swaps" ( derivatives that transfer risks and rewards from bank portfolios across the entire network of BIS banks).

So in a meaningful way, the incentives for the federal reserve are not exclusive to the success of the dollar, but are in reality committed to the success of a variety of currencies, among which the dollar and euro are approx equal.

Housing prices. Bubble may not be the right word.

Obviously lenders are lending to unqualified borrowers and a real default risk exists. And yes prices are probably higher than real value would indicate.

Here's the conundrum. If ALL currencies were operating equally on the basis of rapid currency creation as is the dollar, you would never be able to accurately appraise anything in terms of currency. The BIS has the power to make this happen and almost certainly is managing this effect, with the exception of China.

With that condition present in the world, the only accurate method for appraising something like real estate, or even gauging it's inflated pricing would not be currency comparisons, but other hard and durable commodities. Like Gold, silver, copper, steel, corn, soy, oil etc.

Using that yardstick, I don't see much real inflation of housing worldwide.

Wages are not keeping pace with real estate evaluations at about the same pace that wages are not keeping pace with gold and oil evaluations.

And the thing about real estate and land, is that in a world with a liquidity surplus, land is a sure a sound investment, or hedge against the falling value of currencies. And with such a strong need for stable hedges, I see land becoming increasingly popular as an investment refuge for years to come.

Prices may fall, but as soon as they do, they become attractive to long term investors. No collapse will happen.

The secret to understanding the world of macro central banking is to assume that Central banks are greedy bastards and see everything thru the lens of their incentives.

Central banks in a nutshell, are long term players in a game wherein they print phony money, and try to end up exchanging the phony money for objects of real value. The last person holding the paper loses, while the person holding the land deeds, gold etc wins.

It is called equity extraction and is the singular end goal of central banks, and always has been.

10:23 AM  
Blogger Loosecannon said...

One more little rant:

The Central banks are busy doing more than manipulating the gold markets.

That nasty question rises. Why would central banks sell gold reserves to drive down the prices?

OK, on the front side it drives down gold prices and masks the deflation of currencies.

But the long term goal is to kill the gold market. Why?

Because gold always has been an accurate and widely visible gauge, available everywhere to accurately appraise the value of any currency.

The Central banks are unifying all the worlds currencies under a single management network (BIS), and gold remains the last gauge to accurately determine the real value of what is becoming an entirely artificial (fully manipulated) currency market. This goes hand in hand with the Fed terminating its M3 reportings.

As soon as gold is broken away from its perpetual inverse relationship to currencies, then the artificial currencies will be free to demand their own values in an entirely artificial way.

10:38 AM  
Blogger unlawflcombatnt said...

Loosecannon,

Thanks again for an interesting post. Gold price manipulation is an important subject to me, since that's what my limited amount of "investment" has gone into. Do you have any good sources on actual gold price manipulation by central banks? I'm aware of some events in the gold market, but not many of them. In the past I've reviewed the information on gold supply and demand from the World Gold Council. However, I still think there are quite a few actions being taken that I'm unaware of. So any sources you could give me would be appreciated.

3:21 PM  
Blogger unlawflcombatnt said...

Loosecannon,

I responded to your last post without seeing the one preceeding it.

Thanks for the enlightment on the Federal Reserve. I'll have to research the BIS some.

I understand the point you're making about housing. Certainly a lot of investment money is going into housing. I certainly understand the investment value of real estate. However, I have to disagree about the direction of the housing market.

My belief is that it's extremely overvalued due to an extremely exaggerated, artificially supplemented demand. The source of this artificial demand has been the extreme ease with which homebuyers have been able to obtain loans buy homes. This has allowed huge amounts of borrowed money into the housing market, forcing prices upward.

In the past, home prices have paralleled income and employment increases. In contrast, there has been a complete disconnect in the recent price increases. And this disconnect cannot be maintained for multiple reasons.

Eventually homebuyers won't be able to borrow the money necessary to keep home prices increasing, while their wages are declining. This also affects investors, as the value of homes is determined by what buyers can pay. When the ability of buyers to pay more money starts declining, so will home prices.

Since Bush took office, California home prices have increased 132%, while wages have increased almost none. The consumer price index has (allegedly) increased only 15%. So the remaining 117% increase cannot be accounted for by any fundamental factors.

Again, the value of homes is determined by what buyers can pay. With investors, it's determined by what they think they can re-sell it for. When it becomes apparent to investors that the price they can re-sell homes for is declining, many will also try to sell their homes. Those investment homes will continue declining in value as still fewer residential buyers can afford them.

In general, as affordability of homes to residential buyers declines, prices will also decline. It is conceivable that more investors would buy up homes as prices decline. However, that seems unlikely if they know that the re-sale price is declining. Investors generally don't buy if prices appear to be on a sustained downward path. They would be losing money over the short-term at least. And that "short-term" could be years.

I suspect the effect of increased foreclosures has been overstated. Though I think there'll be a big increase in foreclosures, I don't think it'll be as big as some suggest. The banks are going to be reluctant to foreclose if they don't think they can sell the homes. I suspect there being lots of "deals" made with potential foreclosees. Banks will realize it's better to get smaller mortgage payment instead of none at all. (This is just my own opinion here based. I could easily be wrong on this.)

Rental vacancies continue to be higher than previous years. As a result, rental rates have not increased at the same rate as home prices. There's simply a higher supply to demand ratio. Significant rental vacancies will continue to keep rental rates low. As such, potential home buyers can save significantly by renting instead of buying (as I'm doing.) Equivalent rents in Southern California are less than half that of monthly mortgage payments. In addition, there are even more "unequivalent" rental options that are even less expensive, such as studio and 1-bedroom apartments. This latter factor is often forgotten by analysts. The availability of much cheaper options for a place of residence will continue putting downward pressure on home prices.

Many factors are mentioned as to why home prices will rise, such as land shortage, increasing population, good climate (in California), etc. These so-called "fundamental" factors all existed before the bubble. None of them are new. Yet prices have risen at very atypical rates over the last few years. The only new factors are lowered interest rates, easier mortgage obtainability, and reduced investment opportunities in other areas--causing an increase in uninvested capital. The 1st 2 factors are already losing steam. But the "capital" factor continues today. Whether this "capital" factor can compensate for declining residential buyer affordability is the question. I don't think it can. Prices are already declining in most areas of Southern California. Only time will tell how far prices fall and how long they keep falling.

Just remember Japan. They've experienced declining real estate prices for over 15 years. And all of the same fundamental factors applied to them that applied to the U.S. -- limited landspace, increasing population, etc.

I'll try to post some of the graphs and links to housing information in my "Housing Bubble Deflation" section. The link for that is Housing Bubble Deflation.

10:38 AM  
Blogger Loosecannon said...

Unlawful,

yeah with a 132% real estate inflation in five years, CA definitely has lots of room to fall. Like maybe 22% from todays prices before the long term investment value begs for investors to cash in.

www.321 gold is where I get most of my gold info. Google it.

Japan collpased following a currency correction in 85'.

Japan had pegged it's currency to the dollar as condition of the Marshall plan. When they unpegged in 85' the value of the yen almost doubled within a year causing Japan to price itself out of the manufacturing sector, and a big down turn in the economy ensued.

China is wise and won't go that route.

Point is, Japan is an exceptional example of housing price trends. Not a norm.

9:21 PM  
Blogger unlawflcombatnt said...

Loosecannon,

Thanks for the advice on the gold link. I'd previously saved that link. If you think that's the best one I'll re-visit it.

I'm still wondering what would make investors want to continue investing in real estate if it starts declining. It'll only have re-sale value to other investors if affordability to residential buyers stays as low as it is at present. What real value will it have it can't be ultimately sold to residential buyers.

My bet is that homes will actually become less affordable because banks will be forced to tighten up loan requirements. Even the maniacs in the Bush administration will eventually see that current loan practices are excessively risky and need to be reigned in. (Though they've surprised us before with their complete recklessness. Maybe they'll do so again.)

Though the currently stated "affordability" of homes in Southern California is around 10%, obviously the ability to obtain a mortgage is much higher. I think the true affordability is going to decline when banks are forced to tighten up on their risky loan practices.

You mentioned that Japan's housing situation was an exceptional example. Don't you think today's American housing market is also exceptional? It has certainly deviated from any previous norms as far as housing fundamentals are concerned.

I think we'll have to agree to disagree on this one. Only time will tell which way the housing market will go.

3:23 PM  
Blogger Loosecannon said...

Unlawful, on gold

http://www.lewrockwell.com/north/north424.html

9:40 PM  
Blogger Loosecannon said...

Unlawful,

Dollars are just paper, so are stocks, bonmds derivatives, hedge fund shares, etc.

Land deeds backed by law are real value. as is gold, aluminun, soy, corn, oil.

My point is as money continues to be printed at exorbinent rates dollars devalue and prices for real property inflate.

But there is a very genuine shortage of real commodities to buy as well. Land has never lost value against the inflation corrected dollar.

http://www.lewrockwell.com/douglas/douglas12.html

9:47 PM  
Blogger Loosecannon said...

http://tinyurl.com/bgv89, there you go, unL

9:48 PM  
Blogger unlawflcombatnt said...

Loosecannon,

Thanks for the "tinyurl" link. It was very interesting. I'll be waiting for the 2nd and 3rd parts.

Again, I understand your point about investment money getting poured into land and real estate. If there continues to be a gross excess of investment capital over investment opportunities, you may be proven right.

To my way of thinking that's the crux of the problem. Will the income gap between the most affluent and the less affluent continue to increase? If it does, than there will continue to be a surplus of investment capital over investment opportunities. I would think the excess would be pumped into something else, like gold or other precious metals. But I do believe real estate will remain overpriced for awhile. Investors will jump in for a short time at least, thinking they're buying into a market that will soon go up. However, I think the realization that it will not go up in the near future will limit such investment.

2:21 AM  
Blogger Loosecannon said...

Hey Unlawful C,

those metal charts are interesting.

Do you think those price increases hinged directly off of oil prices?

9:54 PM  
Blogger unlawflcombatnt said...

Loosecannon,

My view of the metal prices is that it is more a reflection of global currency devaluation. Since the Euro has done poorly over the last year in relationship to the dollar, it's hard to state this is simply from U.S. dollar devaluation. However, it makes sense to me that this reflects devaluation of the Dollar, Euro, Swiss Franc, Pound-Sterling, and Japanes yen, since gold (and other metals, I assume) has gone up in value in all of these currencies. And to an equal or greater degree than in the U.S. dollar.

I'm not that knowledgeable about how this would relate to oil prices. Today I heard on the radio that gas prices were $.45 higher than 1 year ago. If this reflects oil prices, then this is a price increase on the order of 20-25%. This would make oil price increases in the same league as metal prices.

This makes it even harder to believe that the so-called consumer price index has increase only around 3.5%. It seems like the government had to put "hedonics" in overdrive to come up with a consumer price index that's as low as they claim.

Many people, in addition to you and I, believe the inflation rate is much higher than that stated by the Bush administration.

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6:00 PM  
Blogger Loosecannon said...

Unlawful,

I calculated a baseline for the metals chart you posted. It was around 157.

With an increase to 190 within two months, it is an unusual increase if it is based entirely on currency devaluations. Esp across the board currency devaluations. It represents an approx 16% metals appreciation within two months.

On the surface it seems to suggest an oil price increase effect.

But I am willing to allow your currency devaluation a fair shake at being the causation.

What do you know about interest swaps?

Some forward thinking economists are saying that Greenspan has tapped the money supply well to it's hilt and Ben B is in a world of hurt, destined to create new currency at ever escalating rates until a _______occurs.

Any thoughts on what might happen if Ben B. actually increases the M3 supply?

At this point I simply cannot imagine it, and I can not imagine it not happening.

This is why I predicted a 7% inflation for ten years or ten percent for 7 years. I simply can not imagine a fix for debt loads that do not include massive inflation. And I can't imagine what will happen if the money supply is not restored to a more normal range of growth.

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10:30 AM  
Blogger unlawflcombatnt said...

Loosecannon,

I read a little about interest rate swaps. I can't say I understand it very well. All I can say is that it sounds like another way to encourage more risky loans and more risky banking practices.

My reason for thinking there is a global currency devaluation is partly because of the generalized price increase in most hard assets, such as metals, as well as the apparent indebtedness of all major industrial powers. From the CIA link you provided, it appeared most countries were in considerable debt. I think even China was in debt. Since the entire world is spending more money than it has, and prices of most hard assets are increasing, I can't come to any other conclusion. Add to that the tremendous amount of artificial wealth created by derivatives. It seems we'd almost have to have a world currency devaluation. And if the Chinese or Japanese ever put much of their US dollar reserves into circulation, there'll be a huge devaluation of US and Chinese currency.

If helicopter Ben inceases the M3 supply I think your 7% inflation number might be too low. And I can imagine that happening. Especially since the government has done such a good job of low-balling our true inflation rate, as well as no longer publishing M3 supply statistics.

I agree with you about the debt load. I can't imagine a fix that won't involve massive inflation. Bush will fight to the death to maintain those high-end tax cuts. And so will his supporters. So we'll continue to spend more than we take in, unless the government just prints more money. That seems like the most likely "solution" to our debt problem.

1:33 PM  
Blogger unlawflcombatnt said...

Loosecannon,

Below is a copy of my commentary on Friday's GDP report.

-----------------
Today's GDP report showed the slowest quarterly growth since 2002. Consumer spending was the lowest since 2001. The NeoCon-Artist spin machine was immediately put in high gear following the report.

The immediate response by some was that the economy had just "hit a pothole." A more accurate statement would be it "fell off a cliff." The DECLINE in the Final Sales number to -0.3 from the previous +4.6 is especially worrisome. Also, the huge increase in inventories gives further indication that much of production contributing to GDP was unsold.

Below is a link to a partial copy of today's GDP report from Briefing.com
GDP

Here's a link to Briefing.com's GDP report: GDP

Given that consumer spending is 2/3 of all economic activity, the 1.1% change gives further evidence that the economy is slowing down. Christmas spending would be expected to make 4th quarter spending higher, rather than lower. Had the 4th quarter not included Christmas, consumer spending would have been lower still.

With New Home prices declining sharply to a -3.4%, the source of home equity loan spending is also shrinking. Combined with a yearly decline in real hourly wages of 0.49 %, consumer spending can only be expected to decline further. (Wage information can be found at: BLS: Real Hourly Wages )

In 2005, consumers spent 115% as much as they earned. The savings rate has declined to below 0. Can consumers continue to increase spending when their income is declining and the source of their borrowing is declining in value? Will production continue to increase if consumers' ability to purchase that production decreases? Will capital investment increase if purchase of the production it facilitates decreases?
----------------------


Also, I'd like to invite you to post at my forum listed below. It basically has the same letters as my blog does (except for this 1st one.) It's a little easier to access than my blog is. It's also easier to post links and it's also possible for responders to post graphics. Also, posters can start threads, instead of just responding to those that I've posted.

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2:26 PM  
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10:07 PM  
Blogger unlawflcombatnt said...

For those who are interested I have started a new discussion forum, the Economic Patriot Forum

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Anonymous,

Thanks for your comments. I certainly don't have all of the answers on the new bankruptcy laws. You might try posting a question on these laws at my discussion forum, Economic Patriot Forum. There are some posters there that are more knowledgeable about banking-related issues than I am.

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Anonymous Anonymous said...

Mike-

I have a question for you.

We now know the Bush Adminstration cooked the books, lied about everything and held the economy together with bailing wire and scotch tape for over six years. We know the Federal Reserve, investment banking, brokerages, oil, big pharma, armament and other industries are all on board this corrupt fascist administration. We know Israel's elite are pulling our chain and Iraq/Iran is really their War.

Soooooo.... why hasn't this house of cards fallen sooner?

G.

9:41 PM  
Anonymous Anonymous said...

The following is from a very interesting article written by J. Bradford DeLong posted at "Project Syndicate" web site-
http://www.project-syndicate.org/commentary/delong56

FYI-

According to Barro, the consequences of enhanced fear of a general or unpredictable catastrophe depend on how it affects the global pool of savings. Fear as much as institutional blockages may be the source of what is either a global savings glut or a global investment shortfall, depending on how you view it. If people are risk-averse enough that increased fear of the future causes them to save more, rising global uncertainty will raise bond and stock prices, and lower interest rates and dividend and earnings yields. Creating new assets for investors to hold costs resources, and the greater the demand for such assets the higher the marginal cost of creating them.

This may be the situation that the world financial system is in now. The principal fear, at least in the circles in which I move, is of a sudden unwinding of “global imbalances”: a rapid and destabilizing end to America’s very large trade deficit and to Asia’s very large trade surplus.

In such a global financial crisis, if the Federal Reserve accommodates inflation and accelerates devaluation in order to prevent collapsing employment in formerly foreign capital-financed sectors from spiraling into a depression, American debt will be among the worst affected assets? But if the Fed refuses to accommodate inflation produced by a dollar collapse and accepts a depression in the belief that the long-run benefits of maintaining its credibility as a guarantor of price stability will come before we are all dead, American equities will suffer. Chinese property values and manufacturing assets would also be vulnerable, as the US abandons its role as importer of last resort and China’s coastal-export development strategy turns out to be a dead end.

Don’t get me wrong: somewhat more than half my brain agrees with Rubin, Summers, Wolf, and company. The principal risk I see today is that being borne by investors in dollar-denominated debt – and I don’t believe they are charging a fair price for what they are doing. But a quarter of my brain wonders how investors should attempt to insure against the lowest tail of the economic-political distribution, and that quarter of my brain cannot see which way somebody hoping to insure against that risk should jump.
_____________________________________

What do you think? On target?

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