Using the Myth of Man-Made Global Warming to Acquire Money and Power

Posted by PITHOCRATES - August 31st, 2011

A Company needs Government Help when they can’t Compete in the Market Place

The new green energy sector was going to make America energy independent.  And create jobs.  Good, high-tech jobs.  Building high-tech, expensive things.  Things we could charge lots of money for.  So we could pay high wages to all those new green energy workers.  And the Obama administration helped.  Poured federal money into green startups.  That are now failing left and right (see What went wrong at Solyndra by Barry Cinnamon posted 8/31/2011 on CNNMoney).

Chinese solar panels are 10-20% less expensive than U.S.-made panels; but by some estimates, Solyndra’s panels were 100% more…

For five years or more, the U.S. government was providing support for solar manufacturing in the U.S.  The DOE Loan Guarantee program provided critical funding for Solyndra’s manufacturing growth, supported by over $1b in private capital. Unfortunately, both these private investors and the DOE made a couple of bets on Solyndra that didn’t pan out.

A company needs government help when they can’t compete in the market place.  So they can continue to build a more costly and/or a more inferior product.  And even when they get that help they still can’t compete.  Which just means this was a bad investment from the get-go.  Only getting as far as it did because of government help.  Which was tax money poorly spent.

So why did they fail?  A couple of bad decisions by their CEO.

The first bad bet was that refined silicon, the feedstock for the solar panel industry, would stay expensive. Solyndra invented a solar panel that didn’t use expensive silicon. Unfortunately for Solyndra, and fortunately for all the silicon solar panel manufacturers and customers, silicon has gotten very cheap over the past few years…

The second bad bet was that Solyndra’s flat roof installation technology would make up for their relatively expensive panels.  Solyndra did indeed see big savings on flat roof installations, but the rest of the industry did not stand still. Other commercial flat roof products are on the market (full disclosure, Westinghouse Solar has an inexpensive and easy to install flat roof solar panel product) with similar benefits at much lower costs to Solyndra.

Of course, had they never had the government help they never would have gotten off the ground.  And anyone who would say otherwise needs to answer the logical follow-up question.  If they could have done this without government help, why didn’t they?

The Public Sector doesn’t know Squat about a Good Business Idea

But it’s just not Solyndra.  There’s green failure wherever you look in the unfolding saga that is the tragedy of green energy (see Green jobs only produce fiscal black hole posted 8/31/2011 on qcsunonline.com).

Lowlights of the saga include the recent bankruptcy of Evergreen Solar Inc. of Massachusetts, recipient of $58 million in direct subsidies and tax breaks, including federal “stimulus” funding, but which cut 800 jobs and is now $485 million in debt, with more job losses to come with the closure of a Michigan plant. Green Vehicles of Salinas, Calif., received $500,000 in city subsidies, but closed last month without having produced anything of significance, Human Events magazine reported. The company had promised to create 70 jobs and pay back local taxpayers $700,000 a year in taxes.

Seattle got a $20 million federal grant to weatherize 2,000 homes and create 2,000 jobs. After a year, three homes had been retrofitted and 14 new jobs created, many of them administrative. That’s a return on investment of about one job per $1.4 million. In Michigan, Fisher Coachworks is out of business two years after being touted as part of the state’s green future, and despite millions in state subsidies to sell buses bought with federal tax money.

The U.S. Forest Service awarded $490,000 in stimulus funding to Urban Forestry Revitalization Project in Clark County, Nev., to plant trees and other greenery in urban neighborhoods. It created 1.7 jobs, one of them a full-time temporary job, and 11 short-term and temporary.

Overall, estimates the Competitive Enterprise Institute’s Chris Horner, $30 billion in green handouts in the stimulus bill cost taxpayers about $475,000 per job.

These are good examples of why there is a private sector and there is a public sector.  The private sector aren’t experts on providing for the common defense or promoting the general welfare.  And the public sector doesn’t know squat about a good business idea.

Lobbyists’ Money influences Government Misdirection into Economic Affairs

The government is backing a lot of electric cars and hybrids.  They believe this is our future.  And, of course, ethanol.  So while they are interfering with natural market forces, good ideas may not get a chance.  Like, say, this one (see Old newspapers could make gas substitute by Colin Bird posted 8/31/2011 on USA Today).

The researchers have discovered a bacterial microbe that likes the taste of old newspapers — the cellulosic wood pulp that makes the paper, to be more exact. In the process of eating the paper, the microbes excrete a biofuel that can act as a substitute for gasoline, the Detroit News reports.

Such microbes aren’t new; we outlined their potential to make ethanol a few years ago. The difference here is the type of fuel that comes out of the microbes: butanol.

Butanol is better than ethanol because it doesn’t require any modifications to today’s gasoline-powered engines. (Many older cars can’t accept E15, let alone E85.) Also, butanol would generate similar gas mileage performance as gasoline. Ethanol has 27% less energy per gallon compared with gas.

It’s not yet known if this discovery is marketable or scalable, especially since alternative fuels are a bit out of vogue, with more attention focused on electrics, plug-ins and hybrids.

Anyone who has ever tried E85 that actually had a real commute to work saw what a bust E85 was.  There was no cost savings because you had to pump 27% more of it into your tank than gasoline.  Worse, the first time you found out about this you may have been driving home from work.  Late at night.  Going through an area not known for its bright lights and safety.  And have to stop.  To buy gas.  Not a lot of fun.  Especially if you’re a woman.

But the government is committed to E85.  Because, of course, of the powerful corn lobby.  Who is chopping in high cotton these days.  The price of corn has never been higher.  What with it being both a staple food and now a fuel.  So while the money will influence more government misdirection into economic affairs, butanol may die a quiet death.  For it has no lobby.

Global Warming may not be Man-Made, but the Myth of Man-Made Global Warming Is

All of this government malinvestment in products is one thing.  And a complete waste of taxpayer’s money.  But it’s ‘the why’ that they are doing this that really rubs the salt into the open wound.  To save the planet.  From man-made global warming.  Which, as it continues to be shown, is a myth (see Watching A Green Fiction Unravel posted 8/30/2011 on IBD’s Investors).

Experiments performed by a European nuclear research group indicate that the sun, not man, determines Earth’s temperature…

The results from an experiment to mimic Earth’s atmosphere by CERN, the European Organization for Nuclear Research, tell researchers that the sun has a significant effect on our planet’s temperature. Its magnetic field acts as a gateway for cosmic rays, which play a large role in cloud formation.

Consequently, when the sun’s magnetic field allows cosmic rays to seed cloud cover, temperatures are cooler. When it restricts cloud formation by deflecting cosmic rays away from Earth, temperatures go up.

Or, as the London Telegraph’s James Delingpole delicately put it:

“It’s the sun, stupid.”

Why, this seems to disprove much of what the global warming alarmist have been alarming us about for lo these many years.  And being scientists, of course you know what they will do.  Do everything within their power to hush things up.

This new finding of 63 scientists from 17 European and U.S. institutes from an experiment that’s been ongoing since 2009 is, if we may paraphrase Vice President Joe Biden, a big deal. Which is exactly why the mainstream media, with so much invested in global warming hysteria, is letting last week’s announcement from CERN pass like a brief summer shower, ignoring it.

Even CERN’s own director general, Rolf-Dieter Heuer, is trying to avoid the meaning of the findings.

He told Germany’s Die Welt Online that he’s “asked the colleagues to present the results clearly, but not to interpret them. That would go immediately into the highly political arena of the climate change debate.”

But, as British science writer Nigel Calder points out, Heuer would have no reservations about entering “‘the highly political arena of the climate change debate’ provided” his results endorsed man-made warming.

Of course, without global warming, the globe isn’t warming.  Even at the poles.  Where the icebergs are.  Which can mean only one thing.  Those icebergs aren’t melting.  And the sea levels aren’t rising.

And it’s not just the CERN research creating a problem for them. They also need to explain why sea levels, like presidential approval numbers and consumer confidence, have fallen. According to NASA, the oceans are down a quarter of an inch this year compared to 2010.

Under the rules of climate change, sea levels, due to melting ice and water that expands as it warms, should be increasing in a way that we’re all supposed to believe is a threat. But NASA scientists say that El Nino and La Nina, weather cycles in the Pacific Ocean, have caused sea levels to fall.

So, yes, global warming is man-made.  The myth of global warming, that is.  Just like the billions of dollars the government has been throwing at these bad green investments.  The idea that these ‘investments’ will create jobs is another man-made myth.

Money and Power – the Driving Force of all Mankind and Governments

The green energy sector is based on man-made global warming.  Which real science continually disproves.  Man isn’t warming the planet.  The sun is.  As it always has.  And always will. 

And the scientists know this.  The real ones.  And the fake ones that have been pushing global warming.  Why do they do this?  Just look at what they have accomplished.  Costly new regulations.  And all that government spending on green energy.  Paid with our taxes.  Stifling real economic output.  And transferring a lot of wealth from the private sector to the public sector. 

And there it is.  Like it always is.  Money and power.  The driving force of all mankind.  And governments.

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FUNDAMENTAL TRUTH #81: “Gross pay is a myth.” – Old Pithy

Posted by PITHOCRATES - August 30th, 2011

The sooner Kids don’t Believe in Santa Clause the sooner they get Clothes as Gifts

When we were young the world had unicorns.  A jolly fat man in a red suit gave out toys once a year.  The Tooth Fairy paid us for our baby teeth.  Thankfully after they had fallen out.  And an Easter Bunny left hardboiled eggs for children on Easter morning.  Because kids love hardboiled eggs.  As well as the occasional piece of chocolate.

But that was once upon a time.  In a far distant land.  Our childhood.  And as we left our childhood we learned some hard truths.  They weren’t real.  Except unicorns, of course.  But Santa Clause?  The Tooth Fairy?  And the Easter Bunny?  Just childhood myths.  Existing only in our childhood.  Until the day our parents killed them.  Just to save a buck. 

Raising kids is expensive.  And these things just added to the cost.  Especially in large families.  The sooner your kids didn’t believe in Santa Clause the sooner you could wrap their clothes as gifts.  And skip the expensive toys.  Because Daddy worked hard enough.  And the money from that second job could buy Mommy some nice things for the house.  Or a new car.  Besides, there are only so many hardboiled eggs Daddy can eat.

Progressivism replaced Rugged Individualism with the Feminization of Men

Speaking of myths, there is another one many of us remember from our childhood.  Daddy’s paycheck.  He may not have earned a lot.  But he kept almost everything he earned.  And he could raise a large family.  Kids grew up with lots of brothers and sisters.  But then something happened.  And Daddy couldn’t do that anymore.

Government began to grow.  You can probably blame this on a war.  But probably not the one you’re thinking about.  Unless you’re thinking about the American Civil War.  For that war killed a generation of fathers.  Leaving a lot of children fatherless.  To be raised by widows.  During the 1870s and 1880s.  Some who would go on to enter politics.  And served in the federal government.  Joining the Progressive Party.  Which began the ending of rugged individualism.  And the feminization of men.

This was the founding of the nanny state in America.  Boys who lost their fathers in the Civil War had no male role models in their lives.  They were surrounded by women.  And went from rugged individuals to refined dandies.  In the Northeast, at least.  Overly sensitive to other people’s feelings.  Overflowing with empathy.  And filled with a mothering instinct.  Learned from their own doting mothers. 

(These Civil War widows went through unspeakable hardships.  Losing husbands, fathers, brothers and sons.  The Civil War killed approximately 2% of the population.  Some 620,000 people.  That same percentage of today’s population would equal some 6,000,000 people.  They lost so much that they doted on their remaining children.  As any parent would.  This is not a condemnation of their parenting.  These widows should be held up in the highest regard.  It’s just a story of numbers.  Such a large generation of fatherless children was destined to change the body politic.)

The Term ‘Gross Pay’ has gone the way of the Unicorn

The fatherless children of the Civil War began the growth of the federal government.  Where the best and brightest would make everything fair.  And better.  Woodward Wilson greatly expanded the federal government.  Then it was FDR‘s turn.  And then LBJ.  Every time government grew so did the cost of government. 

Wilson gave us the first income tax since the Civil War.  And gave us the Federal Reserve System.  FDR gave us the New Deal (including Social Security).  LBJ gave us the Great Society (including Medicare and Medicaid).  All expensive programs.  All requiring heavy taxation.  And where did those taxes come from?  Daddy’s paycheck.

During this period of expanding government a new term entered the American lexicon.  ‘Net’.  As in ‘net pay’.  If you got a pay raise or a bonus, your wife didn’t ask how much your raise or bonus was.  She asked how much will you ‘net’.  After taxes.  That part of the check you actually got.  Because by this time the term ‘gross pay’ went the way of the unicorn.  (Yes, I know unicorns don’t exist.)  Gross pay is a myth.  It may have existed at one time.  But now the term is meaningless.  Because of all the taxes taken out of your paycheck.

High Taxation and Inflation make it difficult for Daddy to Raise a Large Family Today

The gap between ‘gross pay’ and ‘net pay’ is now very large.  It is a very big part of the reason that Daddy can’t raise a large family anymore.  Even with working nights for a little extra money.  Now it takes two full time wage earners to raise a large family.  And a booming child care industry.

But this growth of government took spending to such heights that taxing alone could not pay for it.  So they borrowed a lot of money.  And printed a lot.  In fact, they were printing so much that President Nixon took us off the ‘gold standard’.  Which was the only real restraint on printing money.  And once he did, they printed away.  Giving us permanent inflation.  And a faster growing CPI.  Which shrank our shrinking paychecks even further.

It’s the one-two punch of high taxation and inflation that makes it difficult for Daddy to raise a large family today.  On a single paycheck.  Thanks to an ever rising CPI.  And an ever shrinking net pay.  It’s gotten so bad that kids often get socks and underwear for Christmas.  From Santa Clause.  Even when kids still very much believe in him.

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Keynesians like Tax, Spend and Inflation. Those living in the Real World Don’t.

Posted by PITHOCRATES - August 29th, 2011

Trying to get Economic Traction during Periods of Inflation is like trying to crawl up a Slippery, Muddy Slope

Good news.  Consumer spending is up (see Consumer spending rebounds, calms recession fears by Lucia Mutikani posted 8/29/2011 on Reuters).

The Commerce Department said on Monday consumer spending increased 0.8 percent on strong demand for motor vehicles, after slipping 0.1 percent in June…

When adjusted for inflation, spending rose 0.5 percent last month, the largest gain in 1-1/2 years and the first increase since April.

Half of one percent.  Wow.  If it wasn’t for inflation that could have been 0.8%.  Now is this good news?  Or is it just the back-to-school summer bump?  People buying those things they have to.  So their kids can go back to school.

Despite the rise in spending last month, economists remain worried about the slow pace of income growth. Income gained 0.3 percent after advancing 0.2 percent in June.

Disposable income increased 0.3 percent, but when adjusted for inflation fell 0.1 percent — the first decline since September.

Thanks to inflation, a gain in disposable income became a loss.  No wonder people aren’t spending.  They have no money. 

The report also showed inflation pressures remain elevated. The personal consumption expenditures price index, or PCE, rose 0.4 percent after slipping 0.1 percent in June.

Compared to July last year, the index was up 2.8 percent, the largest increase since October 2008, after advancing 2.6 percent in June.

Whoa.  The PCE rose 2.6% in June?  No wonder we have no money to spend.  These higher prices are the same as taking a 2.6% pay cut.  That’s why consumer spending is flat.  Inflation is shrinking the money in our wallets faster than we can spend it.

Trying to get economic traction during periods of inflation is like trying to crawl up a slippery, muddy slope.  You struggle to ascend 3 feet then pause to rest.  And slide 2 feet back down.  Or, based on the disposable income numbers above, you slide 4 feet back down.  Ending up worse off than when you started.

The hell with Inflation, let’s just keep Heating up that Economy with Artificial Demand

Yes, inflation is bad.  It destroys real economic growth.  Real wealth.  And the standard of living.  But Keynesians love it.  And they want more of it (see Changing target posted 8/27/2011 on The Economist).

The gap between the performance of inflation and that of nominal GDP is so big that some economists, such as Scott Sumner of Bentley University, are dusting off an old idea. They are calling for central bankers to switch targets. Rather than directing monetary policy to hit inflation targets (as they have done for the past 20 years) central bankers should take aim at nominal GDP (or NGDP)…

Advocates of nominal GDP targeting claim that it would achieve greater macroeconomic stability.

In other words, they say the hell with inflation.  Let’s just keep heating up that economy with artificial demand.  Until real demand catches up. 

So were they wrong all this time?  And if so, why would we think they got it right now?  I mean, they have a history of being wrong.  And a change in policy is an admission that they were wrong.

They tried something like this before.  During the Seventies.  Where we had both high unemployment.  And high inflation.  You know what finally fixed that?  Ronald Reagan.  Who wasn’t a Keynesian.

The Central Premise of Keynesian Economics is any Spending is Good Spending

So why are they still taken seriously?  If Keynesians have a record of failure, why is Keynesian economics still the mainstream thought?  Because it empowers government.  And government spending.

It’s a religion to them.  And they never lose their faith.  Despite a long record of failure.  Besides what other economics school puts a bunch of Poindexters in charge of economic policy?  Telling American people what’s best for them?  Despite never having done anything themselves in the private sector?  This is about as close to an aristocracy that you can get in America.

To get an idea of how out of touch with reality these economists are, consider their central premise.  Any spending is good spending.  No matter where that money comes from.  Because they don’t look that far back.  They don’t see alternate uses of money.  Or the loss and sacrifice that often accompany ‘stimulus’ spending.  They just see the ‘goodness’ of spending.  And nothing better illustrates this than their love of disasters (see Disaster isn’t a stimulus package by Jeff Jacoby posted 8/28/2011 on boston.com).

“One of the most reliable results of any natural disaster,’’ remarks economist Russell Roberts, “is the spreading of bad economics.’’

And how they love to spread bad economics.  Where any spending is good spending.  Even if it takes loss of life and destroyed cities to initiate that spending.  Consider the following:

Japan’s Earthquake and Tsunami

Three days after disaster struck, the Huffington Post published Nathan Gardels’s essay celebrating “The Silver Lining of Japan’s Quake.’’ Urging his readers to “look past the devastation,’’ he rejoiced that “Mother Nature has accomplished what fiscal policy and the central bank could not.’’ Now the Japanese would have lots of bridges to build, “entire cities and regions’’ to reconstruct, and information networks to revamp.

“The result of all the new wealth creation,’’ Gardels concluded, “will be money in the pockets of Japanese.’’

9/11

“It seems almost in bad taste to talk about dollars and cents after an act of mass murder,’’ wrote Paul Krugman in The New York Times less than 72 hours after the atrocities of 9/11, but the terrorist attacks could “do some economic good.’’ After all, Manhattan would “need some new office buildings’’ and “rebuilding will generate at least some increase in business spending.”

Hurricane Katrina

Barely had the storm subsided when J.P. Morgan economist Anthony Chan was assuring CNN/Money that hurricanes tend to stimulate growth. Granted, New Orleans had been shattered, said Chan, but “over the next 12 months, there will be lots of job creation, which is good for the economy.’’

Southern California wildfires

“This will probably be a stimulus,’’ University of San Diego economist Alan Gin told the Los Angeles Times, since “there will be a huge amount of rebuilding … financed by insurance payments.’’

Sure, some people will benefit from the economic activity to rebuild from a disaster.  But a lot of people will have already lost by then.  And will lose even more via higher insurance premiums.  Higher taxes.  Or higher inflation.  Because there’s no such thing as a free lunch.  Someone ultimately has to pay.

Or, said in another way…

More than 160 years ago, the French political economist Frederic Bastiat skewered such attitudes in a now-famous parable: A boy breaks a shopkeeper’s window, and everyone who sees it deplores the pointless destruction. Then someone insists that the damage is actually for the good: The six francs it will cost the shopkeeper to replace his window will benefit the glazier, who will then have more money to spend on something else. Those six francs will circulate, and the economy will grow.

The fatal flaw in that thinking, Bastiat wrote, is that it concentrates only on “what is seen’’ – the glazier being paid to make a new window. What it ignores is “what is not seen’’ – that the shopkeeper, forced to spend six francs on that, has lost the opportunity to spend them on better shoes, a new book, or some other addition to his standard of living. The glazier may be better off, but the shopkeeper isn’t – and neither is society as a whole.

Would a Keynesian leave his or her car in a bad neighborhood with the doors unlocked and the key in the ignition?  To encourage someone to steal that car?  So they can stimulate the economy by buying a new car?  That would result in new spending.  And they believe all spending is good spending.  But somehow I don’t think they would.  Not with their car.  Your car, perhaps.  But not theirs.

The Obama Administration is a Keynesian Administration

Inflation destroys real economic growth.  Real wealth.  And the standard of living.  Yet it’s the favorite policy tool of Keynesian economists.  Well, that and devastating disasters.  To other people, that is.  Not to them.

These people don’t live in the real world.  They live in the fairyland of academia.  It’s a world of theory.  Not reality.  Where they can tell each other how brilliant they are.  Despite all their failures.

And the scary thing is this.  These are the people guiding U.S. policy.  The Obama administration is a Keynesian administration.  While the Great Recession lingers on, these people live comfortably.  Thinking up the next thing they can do to help this economy.  And us.  Because they know what’s best for us.  And they don’t even have to ask us.  Not that they would want to.  Or would.

And their record so far?  Why, it’s so good that they want to change the way the Fed targets monetary policy.  And by ‘good’ I mean bad.  Very, very bad.  For they say if it ain’t broke don’t fix it.  And they’re trying to fix it.  So it must be broke.  Very, very broke.

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Chinese Women outperforming American Women in the Corporate World

Posted by PITHOCRATES - August 28th, 2011

Women are Thriving in Emerging Markets because things don’t Cost that Much

Corporations are the big bad in today’s world.  Everyone hates them.  They’re evil inhuman pariahs sucking the marrow of humanity.  They should be punished.  Taxed to the hilt and then taxed some more.  Those filthy, rotten, greedy corporations.  You just can’t say anything good about them.  Never.  Except, of course, when women climb the corporate ladder (see The daughter also rises posted 8/27/2011 on The Economist).

The emerging world is home to many businesswomen like Ms Zhang. Seven of the 14 women identified on Forbes magazine’s list of self-made billionaires are Chinese. Many firms in emerging markets do a better job of promoting women than their Western rivals, some surveys suggest. In China, 32% of senior managers are female, compared with 23% in America and 19% in Britain. In India, 11% of chief executives of large companies are female, compared with 3% of Fortune 500 bosses in America and 3% of FTSE 100 bosses in Britain. Turkey and Brazil come third and joint fourth (behind Finland and Norway) in the World Economic Forum’s ranking of countries by the proportion of CEOs who are women. In Brazil, 11% of chief executives and 30% of senior executives are women.

I wonder if these women are the ones Mitt Romney was referring to when he said corporations are people.  Or are these women just soulless scum of the earth, too?

Funny.  Corporations are evil.  But women climbing the corporate ladder is good.  Even though they’re climbing the ladder of evil.  As if there was something good about being in high places in these evil inhuman pariahs.  Perhaps people think that women will do away with the profit motive in business once they’re in charge.  Instead paying everything they earn beyond the cost of sales as income taxes.  They could.  But they will fall off of that ladder pretty darn quick if they do.

So why China?  Why is it there that feminism is flourishing?  Where women can bring home the bacon?  And fry it in the pan?  Is it because of the one-child policy giving them more time to work in a corporation?  Is it a greater drive due to all of the girls aborted because parents wanted their one child to be a son?  Or is child care just cheaper in China?

Living in emerging markets offers many advantages for female professionals. Most obviously, there are plenty of cheap hands to cook and take care of children.

So in other words women are thriving in emerging markets because things don’t cost that much.  Child care.  Parent care (it’s the daughters who take care of aging parents in China).  There’s a lesson here.  If you want a smoking hot economy with opportunity for everyone, don’t make it so expensive to live there.  And that’s what high taxes and costly regulatory compliance costs do. 

Democrats feel our Pain and want to do Everything they can do to Help Us

A lot of women vote Democrat.  For they feel that Democrats care about women’s issues.  Unlike the out of touch old white men in the Republican Party who just care about profits.  Everything is just too logical with them.  They don’t feel.  Democrats feel.  They feel our pain.  And want to do everything they can do to help us.  Give us that which we crave.  Love.  Understanding.  And a job.  So you’d think they hit the mother lode with Obama.  The media loved him.  But it’s been almost three years and he hasn’t really done anything substantial to help us in the here and now (see Obama’s Enablers by Fred Barnes posted 8/28/2011 from the 9/5/2011 issue of the weekly Standard).

It’s counterintuitive, but Obama has been hurt by the media’s leniency. Both his presidency and reelection prospects have suffered. He’s grown lazy and complacent. The media have encouraged him to believe his speeches are irresistible political catnip, though they aren’t. His overreliance on words hasn’t helped.

The kind of media pressure that can cause a president to sharpen his game, act with urgency, or take bolder steps—that has never been applied to Obama. If it had, I suspect he’d be a more effective, disciplined, energetic, and popular president today. Ronald Reagan is a good role model in this regard. When the media attacked him over gaffes in the 1980 campaign, “Reagan responded like all competitive men by working to improve himself,” says Reagan historian Craig Shirley. “Experience taught him to be better and try harder.” He took this lesson into the White House…

Absent pushing and prodding by the press, the Obama presidency has atrophied. His speeches are defensive and repetitive and filled with excuses. He passes the buck. With persistently high unemployment and a weak economy, Obama recently declared, in effect, “I have a plan. See you after my vacation.” The press doesn’t goad him to lead.

Three years.  Almost.  And we still have high unemployment.  And a weak economy.  Despite all those speeches about focusing on jobs.  With a laser-like focus.  Instead we get higher taxes.  And more costly regulations.  Nothing like those women in China have to deal with.

“Private sector job growth is good,” he said in Alpha, Illinois. In reality, it’s bad and getting worse. “The economy is now growing again,” he said. Barely. Obama said trade deals and patent reform would promote hiring, if only Congress would approve them. But it’s the president who has delayed the trade treaties, and both houses of Congress have passed patent reform measures.

The media routinely give Obama a pass on such stuff. On the tour, Obama insisted, as he has many times before, that he saved the nation from a “Great Depression.” So far as I know, the press has never challenged this dubious claim. But it is belied by the fact the recession came to an official end in June 2009, months before Obama’s policies could have played more than a minimal role.

This reminds me of an episode of Scrubs.  The Janitor was making some ridiculous claims.  So Carla asked the janitor if he is familiar with the term ‘delusions of grandeur’.  He replied, “I believe I coined that term.”

If you can’t Raise Revenue via Income Taxes because of a Bad Economy, go after Wealth

So what if anything is the Obama administration doing to address the problems of this nation?  Well, for one, they’re doing a pretty good job of transferring wealth from the private sector to the public sector (see Banks seeking relief from regulators as deposits swell by Bradley Keoun, Dakin Campbell and Dawn Kopecki posted 8/26/2011 on The Washington Post).

Deposits are flooding into the biggest U.S. banks as customers seek shelter from Europe’s debt crisis and falling stock prices. That forces lenders to raise capital for a growing balance sheet and saddles them with the higher deposit insurance payments. With short-term interest rates so low, it’s hard for financial firms to reinvest the new money profitably…

The extra deposits are problematic because they’re subject to withdrawal, so banks have to park the money in low-yielding short-term investments, Litan said. With few other choices available, banks have stashed their excess deposits at the Fed, which means the cash gets counted as assets.

Do you have a 401(k)?  If so, how did you pick your funds?  Well, if you’re young you probably leaned towards high-yield risky growth funds.  If you’re close to retirement, you probably leaned towards low-yield ‘safe’ income preservation funds.  Young people can ride a few boom and bust cycles and not lose money in the long run.  When you’re close to retirement you can’t.  So you park that money where it’s safe.  Knowing it will be there when you need to withdraw it.

In a volatile world, people and corporations with money act like people who are close to retirement.  They will sacrifice yield to keep their money safe.  Even pay a small fee.  For they don’t want to see their wealth disappear in a crashing stock market.  Or a collapsing bond market.

Now Keynesians attack this ‘hoarding’ of money.  This is the reason why there is no demand.  Which is keeping the economy weak.  Because no one is taking any chances with their money.  So what is a government to do?  Get rich.

If the FDIC agreed to forgive some fees, it would have to give up some of the extra premiums that it’s counting upon to rebuild the Deposit Insurance Fund, which covers customers for $250,000 per account in the event of a failure. That makes the agency unlikely to grant a waiver, one of the people said, adding that the existence of the insurance is one of the reasons banks are able to attract the deposits.

The FDIC’s fund, which fell into a deficit of almost $21 billion after a wave of bank failures, turned positive during the second quarter for the first time in two years, the agency reported this week. On April 1, the FDIC changed its formula for assessing premiums, increasing the cost for most large banks and adding to their deposit expenses.

Yes.  They saw all that money and said I’ll take some of that.  They increased their FDIC fees.  Which is ridiculous because the money is just sitting in the bank.  As if there was no such thing as fractional reserve banking.  Which is the very reason why they created FDIC.  In case banks loaned out too much money when faced with a lot of depositors demanding their money back.  At the same time. 

FDIC was a way to prevent a bank run.  If you know your money is insured even if a bank is going under, you won’t run to the bank to get your money.  But with virtually 100% of these deposits held in reserve, everyone could run to the bank and demand their money back.  And the bank could repay every depositor. 

So why raise the FDIC fee?  Why not?  If you can’t raise revenue via income taxes because of a bad economy, go after wealth.  Especially if it’s just sitting there.  For all intents and purposes, the FDIC fee on funds that a bank does not lend out is little more than a wealth tax.

A Growing Public Sector Oppresses Women whereas Capitalism Unleashes their Potential 

So women are climbing the corporate ladder in emerging countries.  While the world’s number one economy sputters and spits along.  Despite nearly three years of applying a laser-like focus on job creation.  Which in Washington-speak means writing more job-killing regulations.  And thinking of creative new ways to transfer wealth from the private sector to the public sector.

So what’s the big difference between the U.S. and these emerging markets?  Legacy costs.  The U.S. was once an emerging country.  But now it’s a Big Government social democracy like in Europe.  China doesn’t have long established entitlements growing greater than the government can ever hope to fund.  And it doesn’t have an established environmentalist movement choking the life out of free enterprise.  China doesn’t have these.  And their economy is booming.  And women are shattering the glass ceiling.

The lesson is a simple one.  A growing public sector oppresses women.  Whereas capitalism unleashes their potential.  And that is the lesson of the booming emerging markets.

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Libya is free from Kadafi, so what’s Next? Peace? Or more Blood?

Posted by PITHOCRATES - August 27th, 2011

Living in Peace is one Advantage of an Oppressive Dictatorship 

Tripoli has fallen.  Kadafi‘s days are numbered.  Now it’s time for a glorious rebirth.  And peace.  If they can make peace.  And keep it (see Some fear post-revolution Libya may look like Iraq by Borzou Daragahi posted 8/27/2011 on the Los Angeles Times).

Although young men protect their own neighborhoods, major institutions such as banks, ministries and historic sites remain relatively unprotected. A number of banks and commercial towers have been thoroughly looted. Law enforcement is left in the hands of rebel fighters, some of whom had never been to their country’s capital.

Young men continue to pillage military sites abandoned by Kadafi’s men, carting away huge stores of weapons, just as Iraqis hauled off guns and explosives later used to make car bombs and launch attacks on Iraqi and U.S.-led forces.

Stores of weapons in the hands of angry young men?  Rarely does that end well.  And rarely does lawlessness just spontaneously turn into lawfulness.  Put the two together (angry young men with weapons and lawlessness) and what do you get?  Woe to anyone that is identified as a loyalist.

Reports also have begun to surface of reprisal killings of suspected loyalists, although few accounts could be fully verified given the chaos and lack of communications in Tripoli…

More obvious right now is the visceral violence of rebel forces hammering away at residential neighborhoods known to be strongholds of Kadafi supporters.

Rebel fighters use artillery and antiaircraft guns in such districts, which include Abu Salim, Hadba and Salahadin. At one point this week, rebels were firing assault rifles into residential apartment blocks in Abu Salim, where they suspected a sniper was holed up.

Civil wars tend to be the cruelest of wars.  And the bloodiest.  They split up neighborhoods.  And families.  With vengeance often being the battle cry.  For these aren’t soldiers on a distant battlefield who don’t know each other.  This is far more personal.  It’s typically someone you know killing someone you know.  And what makes it especially cruel is that before the war these were people you called friends.  Or family.  This kind of killing unleashes an indescribable hatred.  And searing anger.  Hence the vengeance.

Members of the district council insisted that the men had taken up arms against the revolution and were being held pending trial. But they also said some of those arrested included people pulled out of their cars at checkpoints because they looked “suspicious,” often code for dark-skinned Libyans and others of sub-Saharan African descent…

Said one Tripoli taxi driver, “I have a fear that one day we’ll be like Iraqis, wishing for the days of Moammar Kadafi.”

As bad as Saddam Hussein was, at least he kept the peace.  That’s the advantage of an oppressive dictatorship.  People live in fear of the state.  Not each other.  And if you behave properly, the state might just leave you alone.  As long as you’re not an intellectual.  Can read.  Or wear glasses.  If you’re not a threat to state power, or a perceived threat, life can be good.  All you have to do is to say nothing.  Avoid eye contact.  And never, ever complain.  For if you thought things were bad, just wait until after you complain.

Typically in Civil Wars, the Winning Side often Unleashed a Bloody Purge on the Losing Side 

Many people may not know this but the American Revolutionary War was part civil war.  Those loyal to the Crown fought for the Crown.  Against the Patriots.  And the bloodiest fighting during the Revolution was between Loyalist and Patriot.  Especially in the South.  Where some unspeakable horrors took place.

Now typically in civil wars, the winning side often unleashed a bloody purge on the losing side.  But not in America.  At the end of the war there were no reprisals.  No hangings.  No persecutions.  At least, not by those in power.  Most of the Loyalists just left.  They went to Canada.  Or back to the UK.  General Washington resigned from the army.  And the elected civilian authority made the peace.  Quite shocking.  For few generals ever voluntarily give up near absolute power.  And returned to their farm.  He was the American Cincinnatus

About a decade later, the French Revolution erupted.  A more classical civil war.  Far more bloody.  With plenty of reprisals.  And guillotining.  The streets of Paris ran with blood.  The Reign of Terror purged political enemies.  Than the people who unleashed the Terror fell victims to it themselves.  The fighting unleashed Napoleon Bonaparte onto Europe.  And the Middle East.  Made him a great general.  Even impressed a composer by the name of Ludwig van Beethoven.  A fan of republican government.  Even dedicated his Third Symphony to him.  And then Bonaparte made himself emperor.  So the revolution to overthrow a king ultimately ended up with an emperor.  Infuriating Beethoven so that he slashed the dedication page from his symphony.

Two revolutions that were part civil war.  One atypical.  The American.  And one more typical.  The French.

Winning the War was one Thing.  Winning the Peace was Another. 

At the time these were some pretty nasty wars.  But they pale when compared to the American Civil War.  Some 620,000 died.  That’s a huge number.  About 2% of the population then.  To get an idea about how devastating 2% of the population is consider this.  With today’s population that would equal some 6 million dead.

Winning the war was one thing.  Winning the peace was another.  The war was horrific.  And a lot of Northerners wanted a hard peace.  To make the South pay.  But Abraham Lincoln wanted an easy peace.  Near the end, shortly before Robert E. Lee’s surrender, Lincoln met with General Ulysses S. Grant, General William Tecumseh Sherman and Admiral David Dixon Porter.  He discussed the easy peace he wanted.  He said he did not want any retribution.  Any trials.  Any hangings.  If the defeated Confederates would sign paroles promising to never pick up arms again against the United States, they could simply go home.  He wanted to bring the South back into the Union.  As quickly and as painlessly as possible.  Forgive and forget.  Echoing his sentiments in his second inaugural address:

With malice toward none, with charity for all

The South was beaten.  Lee was surrounded.  The question was what would Lee do?  Surrender?  Or disband and head into the hills.  Carry out guerilla war?  This was weighing on everyone’s mind.  It terrified Lincoln.  Grant and Sherman feared it, too.  Even Lee.  When Grant met Lee at Appomattox to discuss surrender, Grant offered very generous terms.  In keeping with Lincoln’s wish for an easy peace.  It had a very favorable affect on Lee.  And his men.  Lee surrendered.  And once his war was over he dedicated his postwar life to making peace.

A similar surrender was negotiated between Sherman and General Joseph E. Johnston.  Despite the assassination of Lincoln.  Which happened after Lee’s surrender.  Sherman waged hard war throughout the South.  But he did not hate the South.  War was war.  And once the war was over, he followed Lincoln’s directive for an easy peace without hesitation.  Eager to ‘let the South up easy’.  And bring them back into the Union.

Lincoln’s assassination infuriated the North.  They wanted vengeance.  They wanted retribution.  And they wanted to hang Lee.  But Grant stepped in.  Said he made the deal with Lee.  And the deal would be honored.  Or he’d resign.  President Andrew Johnson relented.  And Grant wrote Lee to assure him there would be no trial.  His terms would be honored.  And Lee reciprocated by dedicating his remaining life doing what he could to bring the South peacefully back into the Union.

Let us Judge not, that we be not Judged

The Civil War ended in 1865.  It easily could have gone on.  But thanks to Lincoln, Grant, Sherman, Lee and Johnston, the war ended.  And the peace began.  The Southern people looked to Lee even in defeat.  For he was like George Washington to them.  Loved.  And respected.  Washington’s and Lee’s words and deeds carried great weight in their postwar years.  And made peace possible.

But Lee surrendered to Lincoln as much as he did to Grant.  And it was Lincoln that made the difference in this civil war.  Made it different from other civil wars.  For he could see beyond the conflict.  To a higher plane.  As he said in his second inaugural address.

Both read the same Bible and pray to the same God, and each invokes His aid against the other. It may seem strange that any men should dare to ask a just God’s assistance in wringing their bread from the sweat of other men’s faces, but let us judge not, that we be not judged. The prayers of both could not be answered. That of neither has been answered fully. The Almighty has His own purposes.

This is what you need for reconciliation.  Do they have that in Libya?  Let’s hope so.  But history has shown this to rarely be the case.  You need great people.  A Washington.  A Lincoln.  A Grant.  A Sherman.  A Lee.  A Johnston.  Is this person in Libya?  Or is Libya to descend into terror?  Time will tell.

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Bernanke can’t Help this Bad Economy and Washington only Exasperates our Problems with their Regulatory Zeal

Posted by PITHOCRATES - August 26th, 2011

Congressional Action thus far has Scared the Bejesus out of Households and Businesses

All eyes were on Jackson Hole, Wyoming.  Ben Bernanke was giving a much anticipated speech.  And the markets waited with bated breath.  They’re not bated anymore (see Bernanke pledges Fed support, but notes limits by Chris Isidore posted 8/26/2011 on CNNMoney).

“Most of the economic policies that support robust economic growth in the long run are outside the province of the central bank,” he said.

And he warned that when Congress weighs future deficit reduction plans, it should be careful to not hurt the economy in the short-term. They “should not…disregard the fragility of the current economic recovery.”

He said there needs to be a better way of Congress making decisions on taxes and spending. And he said a repeat of the this summer’s contentious debate over raising the debt ceiling would likely hurt the economy.

“It is difficult to judge by how much these developments have affected economic activity thus far,” he said about the threat of default and the downgrade of the U.S. credit rating. “But there seems little doubt that they have hurt household and business confidence and that they pose ongoing risks to growth.”

The economy has big problems.  Problems, though, that will take more than monetary policy to fix.  But when Congress addresses these fiscal issues they should be very careful not to damage the fragile economic recovery.  Because thus far their words and actions have only been scaring the bejesus out of households and businesses.

Businesses Prefer Stability and Responsible Government that doesn’t Govern Against their Interests

Households and businesses are so frightened of what the future holds that they are sitting on their money (see Key Passages From Bernanke’s Jackson Hole Remark by David Wessel posted 8/26/2011 on The Wall Street Journal).

“Financial stress has been and continues to be a significant drag on the recovery, both here and abroad. Bouts of sharp volatility and risk aversion in markets have recently re-emerged in reaction to concerns about both European sovereign debts and developments related to the U.S. fiscal situation…. It is difficult to judge by how much these developments have affected economic activity thus far, but there seems little doubt that they have hurt household and business confidence and that they pose ongoing risks to growth.”

Uncertainty.  The greatest fear of business.  Because you can’t plan uncertainty.  Because it is uncertain.  Businesses prefer stability.  Households, too.  That, and responsible government.  One that doesn’t govern against their interests.

The Department of Energy is going to raise our Electric Bills by 35%  

And so far government hasn’t been delivering what the households and businesses want (see US breaks ground on first industrial-scale carbon capture project by staff of Business Green, part of the Guardian Environment Network guardian.co.uk, posted 8/26/2011 on the Guardian).

The US government’s carbon capture and storage (CCS) efforts stepped up a gear this week, with the start of construction on the government’s first industrial-scale scheme and funds worth $41m set aside for another 16 research projects.

Work on the plant in Decatur, Illinois, which received $141m of public money and another $66.5m from private sector sources, started just a few weeks after American Electric Power abandoned plans to build its $668m CCS facility.

Is this responsible government?  After record deficits caused the first downgrade of U.S. sovereign debt ever should the government still be spending money on bad green investments?  How do I know this is a bad green investment?  Simple.  The private sector will only invest 32% of its total costs.  The taxpayers are picking up the other 68%.

The DoE said its selection yesterday of 16 projects across 13 states to share $41m funding over three years would further the aim.

Each project will focus on developing technologies capable of capturing at least 90% of CO2 produced, as well as reducing the added costs at power plants to no more than a 35% increase in the cost of electricity produced.

Oh, and the Department of Energy is only going to raise our electric bills by 35%.  So not only do the taxpayers have to pay for the construction of this plant, our electric bills will increase afterwards.  For both households.  And businesses.  Which will be a further drag on the economy.  Which won’t make Ben Bernanke happy.

Killing Businesses with Regulatory Compliance Costs

But it gets worse.  The EPA is causing uncertainty for American businesses.  And killing them with compliance costs.  So much so that John Boehner wrote a letter to President Obama demanding a tally of his punishing regulations (see Five EPA rules that will cost more than $1 billion by Conn Carroll posted 8/26/2011 on The Washington Examiner).

Boehner specifically mentions one regulation that “will cost our economy as much as $90 billion per year. That rule, titled “Reconsideration of the 2008 Ozone Primary and Secondary National Ambient Air Quality Standards” (aka “The Ozone Rule), is the biggest drag on growth that the EPA has formally proposed so far. The EPA is also working on global warming regulations that are sure to cost much more, but those proposals have not been published yet.

The EPA has published at least four other proposed regulations, however, that would inflict costs on the U.S. economy over or near $1 billion a year. These cost estimates are all from the EPA’s own numbers…

Here’s a chart summarizing the 5 regulations in this article:

 

And this is only 5 of them.  Imagine if you add them up in total.  Could it be holding back businesses?  Perhaps.  I mean, would you invest in anything new knowing billions of dollars of compliance costs were coming your way?  I wouldn’t.

Perhaps the Problem with the Bad Economy is the People trying to Fix It

Bernanke is right.  You can’t fix this stuff with monetary policy.  When you’re attacking American households and businesses like this, no one is going to borrow any money to invest.  No matter how cheap it is.

Furthermore, all of these costs are going to be passed onto the American consumer.  They always are.  So this means consumers will have less disposable income.  Which means this will be a further drag on the economy.  And less economic activity means less tax revenue.  Which takes us back to those growing deficits.  They ain’t going away.

Perhaps the problem with the bad economy isn’t due to a lack of demand as the Keynesians say.  Perhaps the problem is with the people trying to fix it.  And there is no quick solution to that problem.  As the 2012 election is still more than a year away.

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LESSONS LEARNED #80: “A nation’s government spends too much when its spending increases at a rate greater than its population growth.” – Old Pithy

Posted by PITHOCRATES - August 25th, 2011

Exchanging Dollars for Gold at $35/ounce was a Strong Incentive not to Depreciate the Dollar

It’s no secret.  Government spending is growing out of control.  It’s producing record deficits.  That caused S&P to downgrade America’s AAA sovereign debt rating.  No one denies that it’s a problem.  This spending.  Those on the Right want to address this via spending cuts.  Those on the Left just want to keep raising taxes.

LBJ exploded government spending with his Great Society in the Sixties.  Back then the U.S. was still on a quasi gold standard.  The U.S. honored an exchange of dollars for gold.  The point of this was to prevent the government from printing too much money.  Print too much and you depreciate the dollar.  So when you promise to exchange dollars for gold at $35/ounce you have an incentive not to depreciate the dollar.  Because as that $35 will buy less and less everywhere else, it will always buy an ounce of U.S. gold.

Well, with the Vietnam War and the Great Society, President Nixon had an unpleasant decision to make.  Unpleasant for a politician.  Either cut spending.  Or print money.  Politicians don’t like cutting spending.  So he printed money.  Which depreciated the dollar.  And countries were taking those cheap dollars and exchanging them for lots and lots of U.S. gold.  There was so much gold flying out of the country that Nixon did something shocking.  We call it the Nixon Shock.  He said the U.S. would no longer honor the dollars for gold exchange.  That was in August of 1971.  And prices have never been the same since.

The Growth of the CPI took off following the Nixon Shock

Keynesian economists were happy to see the end of the gold standard.  Because they like printing money.  And they’ve been advising governments to do just that.  To put an end to the business cycle.  And recessions as we know it.  For when the signs of recession are apparent, the government can pump a lot of dollars into the economy.  Thus avoiding a recession.  This was the policy since the adoption of the Federal Reserve Act in 1913.  Which put the nation’s best and brightest in charge of the American economy.  Who were unable to prevent numerous recessions.  A Great Recession.  And a Great Depression.

So the Keynesians have failed in preventing recessions.  Of all sizes.  Worse, their inflationary policies of freely printing and spending money has increased prices.  Caused a sharp increase in the growth rate of the Consumer Price Index (an inflation indicator).  As you can see in the following chart.  Where we graph government spending (outlays) and the CPI.  Dollar amounts are in billions of constant 2005 dollars.  Data is plotted in 10 year intervals.

 

(Sources:  Outlays, CPI)

You can see that the rate of growth in the CPI took off following the Nixon Shock.  That was the price for government printing money to keep spending beyond its means.  To make everything cost more in real dollars for us.  The consumers.  This shrinking of our paychecks put an end to the single wage-earner as we knew it.  Today the norm is that it takes two incomes to raise a family.  The exception is when one can do it.

Even before the Nixon Shock you could see that government was spending beyond its means.  Increasing its spending greater than the rate of inflation.  That means the size and number of government benefits was growing.  And it continued to grow until the Nineties.  When a Republican House forced a liberal president to the center.  After the Republicans won the 1994 midterm electionsBill Clinton‘s welfare reform decreased the growth rate of government.  For the first time after World War II.  But George W. Bush liked to spend the money.  Barack Obama, too.  Even more so.  Who took government spending to new highs with his $800 billion stimulus.  And his Obamacare.

The Number and Size of Benefits are growing Faster than the Population

Of course, you have to be careful not to let those benefits grow faster than the population.  Because government revenue comes from the taxpayers.  An increasing population means increasing tax revenue.  Because more people are paying taxes.  A decreasing population means declining tax revenue.  Because fewer people are paying taxes.

Likewise, spending that grows less than the population growth rate means a government is spending within its means.  Spending that grows greater than the population growth rate means a government is spending beyond its means.  And most probably running deficits.

We can see this if we graph population with government spending (outlays).  And we do that in the following chart.  Population is in numbers of people.  Outlays are in billions of constant 2005 dollars.  Data is plotted in 10 year intervals (to correspond with the decennial census).

 (Sources:  Population, Outlays)

Up until the Nineties, government spending increased at a greater rate than the population grew.  Clearly indicating that the number and size of benefits was growing relative to the population.  In particular, you can see an upward bend in outlays with the onset of the Great Society. 

This new growth rate remained consistent through the heyday of Keynesian economics.  The Seventies.  And through Reaganomics.  The Eighties.  Democrat Bill Clinton reduced the growth rate of government spending during his two terms in office.  Thanks to a Republican House.   But George W. Bush liked to spend the money.  For a couple of wars.  And a new Medicare prescription drug program.  And then Barack Obama became president.  And made George W. Bush look like a cheapskate when it came to government spending.

We are Spending Money at a Greater Rate than we’re Creating New Taxpayers 

Currently, the rate of government spending is increasing far greater than the population growth rate.  Meaning we are spending money at a greater rate than we’re creating new taxpayers.  Which can only mean one thing.  Record deficits.  Which we have.

We cannot sustain this spending.  It’s not a matter of insufficient tax revenue.  We’re just spending too much.  If we continue to spend at this rate there won’t be enough money to tax away from the private sector to pay for it.  Unless we have another baby boom.   Far greater than the last one.  But babies take time to grow up.  Before they become taxpayers.  Some twenty years or more before they pay any significant taxes.  So that’s a long-term solution at best.

But with the high cost of raising a family that isn’t likely.  Thanks to permanent inflation.  Courtesy of Keynesian economics.  With the way they (Keynesians) bent the CPI graph upward, big families are a thing of the past.  So that’s not an option.  That leaves one thing.  Spending cuts.  Significant spending cuts.  The very thing that would have preserved America’s AAA credit rating.

And you know how politicians love spending cuts.

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Another National Health Care Systems is Failing

Posted by PITHOCRATES - August 24th, 2011

If you want a glimpse of the future of Obamacare you can look at the UK’s NHS.  Canada’s health care system.  Or Costa Rica’s (see Costa Rica’s health-care plan falls ill by Alex Leff posted 8/24/2011 on GlobalPost).

Costa Rica’s respected universal health-care system is highly socialized. It’s also on the verge of going broke…

Now, hobbled by mismanagement, the system has become overwhelmed by a burgeoning population that includes an increasing number of elderly and new immigrants who rely on the public system for care.

A damning report by the Pan American Health Organization, an international public health agency, found that Costa Rica’s social security system, known as “la Caja,” or savings bank in Spanish, spent greater sums than ever on health care even as service in public hospitals faltered.

At hospitals considered among Latin America’s finest, waiting lists run painfully long. A tally of patients awaiting biopsies at one San Jose hospital reached 11,000 last year.

This is a common refrain of socialized medicine.  More patients than the system can handle.  Runaway costs.  Bloated bureaucracies.  And long waits.  Which equals rationing.  Even at the ‘finest’ of hospitals.  It is for these reasons that the UK is trying to reform the NHS.  And why Canada is trying to reform their health care system

“The (budget) shortage can no longer be covered by the current system, and any temporary solution will do nothing more than worsen the problem and the future situation of the institution,” Chinchilla said.

The long queues sway patients with means to opt for faster care in private clinics, popular among throngs of “medical tourists” from the United States…

But private health care prices are prohibitively high for most Costa Ricans, so they turn instead to la Caja.

To fund it, wage earners pay a little over 9 percent of their salary in social security tax. Their employer matches that with another 27 percent of each worker’s salary, and the government pays into la Caja as well to help cover the poor.

So there’s no quick fix.  And the attempt to provide quality health care services for everyone regardless of wealth has produced a two tier system.  Quality health care for the wealthy who can afford it.  And poor quality health care for the poor.  Who have no choice but to be dependent on the state.  And this despite the heavy tax burdens. 

Much of the blame for la Caja’s shortfall has fallen on previous managers. Under the former Caja chief’s watch, the public health system hired thousands of new workers and hiked wages. Pay for sick leave and overtime also ran up the bills. Social-security revenue, meanwhile, failed to keep pace.

This is why governments like national health care.  It’s BIG money.  Which invites patronage, cronyism and corruption.  The poor people stuck in the system may suffer poor quality health care.  But those in the health care aristocracy will be able to pay themselves very well.  And enjoy benefits few do in the private sector.

It’s a story as old as time.  Using the poor to live a better life.

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FUNDAMENTAL TRUTH #80: “A nation’s government spends too much when its spending increases at a rate greater than its population growth.” – Old Pithy

Posted by PITHOCRATES - August 23rd, 2011

Parents do what they can to Live within their Means 

People don’t have as many children as before.  Why?  Cost.  It’s expensive to have children.  And to raise a family.  Those who decide to raise children make serious changes in their lives.  Because of the costs.

Before kids these people may drive a new car.  Have nice toys.  A boat.  A motorcycle.  Electronic gadgets.  They may go out to eat a lot.  Eat steak at home a couple times a week.  Go to the movies.  Take some exotic vacations.  After kids?  Used car.  Fewer toys.  More hamburger-based dishes at home.  No more movies.  And vacations are closer to home and less exotic and more mundane.

Parents do what they can to live within their means.  And it’s not easy.  Because they typically start families when they are starting their careers.  So their incomes aren’t very large.  And kids are expensive.  Put the two together and you have some serious austerity living in these early years of starting a family.  But they do what they must do to raise their family.

Personal Responsibility is a very Effective System

So let’s take a look at these costs.  The Center of Nutrition Policy and Promotion’s 2010 annual report shows annual costs for different income groups for different ranges of children from babies up to age 17.  Let’s focus on the low set of income numbers (average annual income of $36,840).  To reflect a new family starting at the same time as the income-earner’s career.  And average the two groups of children that cover ages 0-5.  Crunching these numbers to see the impact of adding one additional child on remaining monthly income looks something like this:

(Source:  Center of Nutrition Policy and Promotion’s 2010 annual report, page 26.)

This is only a crude estimate.  But the numbers are telling.  Kids are expensive.  The more you have the less you have.  Money, that is.  That’s why married men raising a family are such better employees than single men with no kids.  That kind of financial responsibility keeps you in on a Friday night instead of drinking with the boys.  It makes you a punctual employee.  And a hard worker.  Eager to advance to higher pay levels.  Because if you don’t, things are going to get pretty difficult when that third child comes along.

It’s a very effective system.  Personal responsibility.  Especially when it’s your income paying your expenses.

We have Social Safety Nets to Help People in their Time of Need

Now suppose this worker doesn’t advance his or her income before having 4 children.  Which will leave only $141.67 a month to live on.  That won’t pay for much rent.  Or food.  In fact, this person will probably be evicted from their home.  And file personal bankruptcy.  Unless family and/or friends offer to help with their finances.  Or they become a ward of the state.

Sadly, things like this happen far too often.  A plant closes.  A husband has a debilitating injury.  There’s a catastrophic health crisis in the family.  So we have social safety nets in place for these people.  To help them in their time of need.  Due to circumstances beyond their control.

But what about those who willfully spend more than their income can support?  People who live on credit?  Refusing to ever live within their means?  Often blaming others for their insufficient income that won’t support the level of spending they want to maintain?  What about them and their irresponsible ways?  Should they force others to pay more to support their irresponsible spending?  Just because they have the power to tax.  And can run deficits?

The Social Safety Nets are becoming more like European Socialism

The federal government has the power to tax.  When they can’t tax anymore they can run deficits.  Financed by borrowing.  Or by simply printing money.  When spending beyond your means is that easy, you can see why the government continually spends beyond its means.

And they are spending ever more.  And the social safety nets have grown.  Social Security.  MedicareMedicaid.  And now Obamacare.  Which are no longer social safety nets.  But more like European socialism.  Like the social democracies of Europe.  That are currently imploding in the Eurozone financial crisis.

Why?  Because the Europeans are no longer treating their people as citizens.  But as children.  Children that never leave the nest.  Cared for from the cradle to the grave.  The responsible parent can understand the problem.  They are trying to raise more children than they can afford.  Just like a few extra children can bankrupt a family of modest income, this ever expanding social welfare will bankrupt the state.  It’s just a matter of time.

Government could take a Lesson from the Average American Family

The problem with generous benefits is that they cost.  And as populations grow so do these benefits.  So they have to pay these ever increasing costs with ever increasing revenue.  Which becomes a problem.  In the private sector.  As well as the public sector.

As GM lost market share, their health care costs increased greater than their sales growth.  They went bankrupt.  Social Security and Medicare costs are growing faster than the population growth.  Which means fewer taxpayers will be available to pay a growing number of benefit recipients.  Both programs are projected to go bankrupt.

Families have to live within their means.  That’s why a family with an annual income of $36,840 doesn’t raise a family of ten children.  They wait until they can afford to.  If that’s what they want.  They make sure they work hard to earn the income necessary to raise a large family.  Government could take a lesson from the average American family.

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Looking at the Economic Data it’s getting hard to tell who’s President, Barack Obama or Jimmy Carter

Posted by PITHOCRATES - August 22nd, 2011

Keynesian Economists’ Poor Forecasts suggests their Keynesian Economics doesn’t Work

More bad news for the housing market.  Not that this is a surprise.  That was a pretty big housing bubble that the Fed created.  With their stimulative low interest rates.  And the bigger they are the harder they fall.  Or pop, as it were.  And as the market corrected the Fed’s damage, it threw a slew of people out of work (see Early Mortgage Delinquencies Rise to Highest in Year as U.S. Economy Slows by Kathleen M. Howley posted 8/22/2011 on Bloomberg). 

The percentage of U.S. mortgages overdue by one month rose to the highest level in a year in the second quarter as homeowners who lost jobs were unable to make their payments…

The gain in early delinquencies signals a slowing economy may increase foreclosures, said Jay Brinkmann, chief economist of the trade group. The unemployment rate in the three months ended June 30 rose to 9.1 percent from 8.9 percent, the first quarterly increase since 2009, according to the Labor Department. Jobless claims jumped to an eight-month high in late April, government data show.

For the quarter ending June 30 unemployment was at 9.1 percent.  Ouch.  Remember why it was so urgent to pass the Obama Keynesian stimulus?  To keep the unemployment rate under 8%.  That was in February of 2009.  That’s two years ago.  Guess Keynesian economics doesn’t work.

The world’s largest economy grew at a 1.3 percent annual rate in the second quarter, the Commerce Department said on July 29. That was less than the increase of 1.8 percent forecast by economists surveyed by Bloomberg. A Federal Reserve report last week showed manufacturing in the Philadelphia region contracted in August by the most in more than two years as orders fell and factories fired workers.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. lowered their forecasts for U.S. gross domestic product last week. The U.S. will expand 1.5 percent this year, down from a previous forecast of 1.7 percent, according to Goldman economists in New York. JPMorgan predicts 1 percent growth in U.S. GDP in the fourth quarter, down from an earlier projection of 2.5 percent, the bank said last week.

And the news just keeps getting better.  And by better I mean worse.  Again another record.  This one for manufacturing.  And actual GDP numbers are coming in under economists’ estimates.  The numbers are so bad these economists are revising their future projections down.  It should be noted that the vast majority of mainstream economists are Keynesian economists.  Which suggests their Keynesian economics doesn’t work very well.

Inflation Growing at a Greater Rate than Wages equals Real Pay Cuts

These mainstream economists said the Great Recession ended by July 2009.  Said that the Obama administration followed their Keynesian advice.  Kicked that recession in the behind.  And launched the recovery with a Recovery Summer.  Yay said the Keynesians.  Everything was going to be all right.  And yet two years later here we are.  Where things are still not right (see Survey: US companies say they’re planning another year of small raises for workers in 2012 by the Associated Press posted 8/22/2011 on The Washington Post). 

After increasing salaries by 2.6 percent this year and last year, companies are planning a 2.8 percent bump in 2012, benefits and human resources consultancy Towers Watson reported Monday.

That’s somewhat smaller than raises in the last decade. From 2000 to 2006, the year before the Great Recession began, salaries rose an average 3.9 percent for workers who were not executives.

And the modest bump may not help add much buying power for shoppers. In the 12 months through July, prices for consumers have risen 3.6 percent, according to the government’s latest calculations.

Those lucky enough to have a job are taking real pay cuts to keep those jobs.  Inflation is growing at a greater rate than their wages.  Which means as prices go up their pay checks will buy less.  Despite those raises.  High unemployment.  And rising inflation.  The last time the economy saw numbers this bad was during the Seventies.  When we called it stagflation.  And blamed Jimmy Carter.  Who became a one-term president because of it.

Obama Cares enough about the People to Hide from them on the Golf Course

President Obama is aware of the nation’s woes.  He is even thinking about them while on vacation.  On Martha’s Vineyard.  Playground for the uber rich (see President keeps low profile on Martha’s Vineyard by Mark Shanahan & Meredith Goldstein posted 8/20/2011 on the boston.com).   

But it was later, at the Vineyard Golf Course in Edgartown, where the president’s recalcitrance was most evident. Approaching the eighth tee in a golf cart with friend and frequent golfing buddy Eric Whitaker, the president noticed three TV cameras and a Globe photographer across the street. Rather than stop and be photographed teeing off, the president skipped the hole.

That’s how much he cares.  He’ll skip a hole during a round of golf just so we don’t see him living well during these bad economic times.  Talk about sacrifice.  He’s just not playing 17 holes instead of 18.  Skipping that hole may have an adverse affect on his handicap.  He called for fair-share sacrifice.  And he, too, is sacrificing.  Walking it like he talks it.  So think about this noble act before you start bitching about another tax hike.  He skipped a hole of golf.

Obama bailed out General Motors and Chrysler and put Detroit back to Work

But it’s back to work after Martha’s Vineyards.  Just like the rest of us after our vacations.  Though our vacations are a bit more Spartan these days.  And rarely venture farther than our own backyards (see Obama to join unions’ Labor Day festivities in Detroit by Aaron Kessler posted 8/22/2011 on the Detroit Free Press). 

WASHINGTON – President Barack Obama will join thousands of union members at Labor Day festivities in Detroit, the Free Press has learned,

Obama will deliver remarks at a Labor Day event sponsored by the Metro Detroit Labor Council, according to a White House official with knowledge of the trip.

While no other details were immediately available, it is likely he would again use the opportunity to tout his administration’s role in the rescues in 2009 of General Motors and Chrysler.

So the president is going to Detroit to celebrate Labor Day.  It makes sense.  I mean, he bailed out General Motors and Chrysler, didn’t he?  And put the good people of Detroit back to work.

With 13.7% Unemployment where’s the Summer Recovery in Detroit?

Then again, looking at the U.S. Bureau of Labor Statistics, it would appear that he has not put the good people of Detroit back to work (see Metropolitan Area Employment and Unemployment Summary posted 8/3/2011 on the U.S. Bureau of Labor Statistics). 

Eleven of the most populous metropolitan areas are made up of 34 metropolitan divisions, which are essentially separately identifiable employment centers. In June 2011, Miami-Miami Beach-Kendall, Fla., and Detroit-Livonia-Dearborn, Mich., registered the highest jobless rates among the divisions, 13.9 and 13.7 percent, respectively. Nashua, N.H.-Mass., reported the lowest division rate, 5.4 percent, followed by Bethesda-Rockville-Frederick, Md., 5.8 percent. (See table 2.)

No wonder Maxine Waters is so angry.  He skips Detroit on his ‘listening’ bus tour.  And vacations on the very exclusive Martha’s Vineyards.  While the Detroit area is suffering double-digit unemployment.  If he was listening anywhere, it should have been in Detroit.

The Detroit area unemployment rate is 13.7%.  While the national rate is only 9.1% for the same period.  Yes, the national rate is bad.  But it’s not Detroit bad.  And this after the automotive bailouts.  That put the good people of Detroit back to work.  On top of the Obama stimulus.  So where’s the Summer Recovery in Detroit?  What’s happened to the Motor City? 

So this is what a Second Jimmy Carter Term would have been Like 

In a word, Obamanomics.  His Keynesian policies that were supposed to save jobs have killed jobs.  In Detroit.  And across the nation.  Worse, on top of high unemployment these policies have ignited inflation.  Unemployment plus inflation equals stagnation.  Misery.  And malaise

So this is what a second Jimmy Carter term would have been like.  Makes one want to say, “Welcome back Carter.”  But not in that warm nostalgic way like in that Seventies sitcom (Welcome Back Kotter).  Of course you never saw Jimmy Carter living it up like Obama.  So there are some differences.

This economy will not help Obama in 2012.  Worse, the American people will get no relief until after 2012.  For it’s like Ronald Reagan said in his campaign against Jimmy Carter (see President Ronald Reagan – Liberty State Park [Pt. 1] at 5:26).  A recession is when your neighbor loses his job.  A depression is when you lose yours.  And recovery is when Barack Obama loses his.

I’m paraphrasing, of course.

www.PITHOCRATES.com

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