The Current Volume of Mail only Warrants a Postal Service that is in Large Part Part-Time

Posted by PITHOCRATES - December 11th, 2011

Week in Review

Looks like the digital age is not causing problem just for the United States Postal Service (see Two thousand post offices to close and re-open with substandard service by Christopher Hope posted 12/11/2011 on The Telegraph).

Under plans that will be rolled out from June, one fifth of the branch network will be converted into new “PO Locals”, which offer a downgraded service within other commercial premises.

Customers will not be able to apply for driving licences, send post bulky mail overseas, pay car tax or make cash withdrawals using passbooks.

The changes will affect one in five of the 11,500 post offices across the country.

The profit in mail was in the mail.  But if people are talking, texting and emailing more than they are mailing, that’s a huge hit in the revenue stream.  And a cause for change.

Andy Burrowes, a postal expert at Consumer Focus, told The Daily Telegraph: “These are subtle but quite fundamental changes for customers concerned.”

He said the trials had found that often postal services were treated as a “secondary offer” by the shop or garage owner in PO Locals.

Instead of a dedicated counter for postal transactions longstanding post office customers would be expected to queue up behind other people buying milk and crisps in order to receive their weekly pensions…

Michelle Mitchell, Charity Director of Age UK, said: “Post offices are a real lifeline for many older people who use them as a ‘one-stop’ shop to access their pension, benefits, pay their bills, get advice and even in some cases socialise with others.

Ever see Green Acres?  An American sitcom from that aired from 1965 to 1971?  Sam Drucker ran the general store in Hooterville.  If you needed to buy anything you went to Sam.  And you went to Sam if you needed to mail a letter.  Because Sam was also the postmaster for Hooterville.  The little post office inside the general store was a secondary offering.  And it was like that through much of Rural America.

So the PO Locals is not a new concept.  And it may be the best way to fix the problem with ailing postal services everywhere.  Make them a secondary offering with part-time postmasters.  Because the current volume of mail only warrants a postal service that is in large part part-time.


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The Eurozone to fail because they will Never have the Fiscal or Political Union Required to make a Currency Union Work

Posted by PITHOCRATES - December 11th, 2011

Week in Review

The Eurozone is doomed.  For the things they say they need to do they just can’t agree to do (see Like it or not, the euro is doomed by Hibah Yousuf posted 12/9/2011 on CNN Money).

European leaders, particularly from France and Germany — the eurozone’s two largest economies — have had very different views on the ultimate role of the fiscal compact, and the latest proposals are just “too little, too late, and miss the structural problem,” said Leach.

Germany has been strongly opposed to sending the ECB down a path of printing money to stabilize Europe’s economy.

“Printing money is associated with hyperinflation, the collapse of the Weimer Republic, and the rise of Hitler,” noted Leach. “From a German perspective the question is that, once the ECB has lost its virginity printing money, just how promiscuous could it become.”

Hyperinflation and the collapse didn’t happen when they started printing money.  These happened after they printed a lot of money.  It was a progression.  For it takes time to make your currency worthless.  Which is something the Germans don’t want to experience again.  Because it didn’t end well for them the first time.

Afseth said the fiscal union needs to focus more on boosting economic growth, rather than just pushing for budgetary discipline and fiscal austerity. And it needs to advocate for pooling the eurozone’s debt together, so the region can issue eurobonds, another highly contentious topic among Europe’s political leaders.

Despite the multitude and extent of the political disagreements that could lead to the eurozone’s crumble in the near-term, more optimistic experts say Europe’s leaders will likely find a middle ground to avoid the severe economic consequences.

“The political arguments are strong, but they come against a hard economic reality,” said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh, Scotland, noting that the costs for a single country leaving the eurozone could amount to at least 15% or 25% of its economy, if not more.

There are those who want the European Central Bank (ECB) to assume the debt of the member states.  Like the U.S. did in 1790.  But the Americans already had a currency union.  And a political union.  As well as a common language.  A common heritage.  Common institutions.  A national post office.  And a lot of other common things.  With only about 100 years of history.  And despite all of this the idea of assumption did not go over well.  It took a fight.  And some wheeling and dealing.  Europe, on the other hand, has only a common currency.  And they’ve been around for about 2,000 years of history.  So chances are all they will have is a common currency.  And they may not be able to save that.

The Eurozone was the answer to the United States.  The world’s number one economy.  Because within her borders was the largest free trade zone in the world.  Which exploded her economic growth to the top spot.  The Eurozone was to replicate that in Europe.  A united states of Europe.  And it worked.  But it probably won’t last.  If only one nation drops out of the Eurozone it could reduce the economy of the united states of Europe by 25%.  And if one goes more will probably follow.  This economic powerhouse will be united no longer.  And it will probably plunge Europe into recession.

“A break-up could result in very major recession in Europe, and so it’s hard to imagine how any politicians and governments could possibly make a conscious, voluntary decisions to leave the eurozone,” said Milligan.

So clearly the Euro failing will be too painful to endure.  So painful that the member states will try everything within their power to prevent that.  Including trying to get the ECB to issue Eurobonds.  And print money.  Much like Richard Nixon did when he abandoned the gold standard in 1971.  Saying he was then a Keynesian, too.  And the U.S. spun out of control with double digit inflation rates.  High unemployment.  Stagflation.  And it wasn’t Keynesian economics that finally fixed this mess.  It was the anti-inflation policies of Paul Volcker of the central bank.  He raised interest rates.  And stopped printing money.  This fixed the inflation problem.  Then Ronald Reagan fixed the economic problem.  By cutting taxes.  Something the Europeans may not be physiologically able to do.

So it really doesn’t matter what they do.  For the end will be the same.  It may be sooner or later.  But the Eurozone will most probably dissolve.  Because they will never have the fiscal or political union required to make a currency union work.


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The Eurozone Contagion Spawned in Spain, Greece and Italy has Infected French Banks

Posted by PITHOCRATES - December 11th, 2011

Week in Review

Here is how a contagion spreads (see Moody’s downgrades top three French banks posted 12/9/2011 on UPI).

Credit rating agency Moody’s Investors Service lowered credit scores for three of the largest banks in France Friday…

The rating service said it was concerned the conditions in Spain, Greece and Italy could deteriorate further, which would mean the French banks would suffer deeper losses on the government bonds they hold.

The whole point of the Eurozone is to replicate the massive free trade economy of the United States.  And it’s been somewhat successful.  The economy of the united states of Europe has matched and even exceeded the economic output of the United States.  But some of the member states cheated to get into the common currency.  The Euro.  By lying about their true debt levels.  And their deficits.  These states are now in trouble.  The costs of their welfare states grow.  Which requires more government borrowing.  And these continuous and growing deficits add to that massive debt.

There comes a point when people doubt whether these states will be able to repay their debt.  And that’s what private investors are now thinking.  So they’re not buying anymore of their debt.  Unless they make it worth their while.  With very high interest rates.  Which increases the cost to service the debt.  In fact their borrowing costs have grown so great that they have to borrow money to pay the interest on the money they borrow.

Of course, this makes it even more doubtful that these countries will be able to repay this debt.  Which scares away more private investors.  Despite those high interest rates.  And threatens the solvency of these countries.  And the common currency itself.  The Euro.  And if the Euro goes so does the Eurozone.  Including the economic powerhouse of the united states of Europe with it.

So other countries of the Eurozone step in and buy these worthless bonds.  To try and save the Euro.  And their own economies.  Now the financial problems of Greece, Spain and Italy are now everyone’s financial problems.  Because of those worthless bonds sitting on the balance sheets of healthier banks.  Which are not quite so healthy anymore.  Because of their exposure to this contagion.

It’s a dangerous game they play.  To save the Eurozone they have to infect themselves with the contagion.  And hope that they are financially immune enough to live through this sickness.  But they are teetering on the brink with their own massive debt.  Their own massive welfare states growing their deficits.  Which will be a problem.  For they refuse to take the same medicine Greece, Spain and Italy are refusing to take.  Austerity.  So the chances are pretty good that they will fall to the contagion, too.  As it continues to spread and infect everyone in the Eurozone.  Until there will be no Eurozone.  Or a united states of Europe.


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If Sarkozy gets his way it will Speed Up the Demise of the Eurozone

Posted by PITHOCRATES - December 11th, 2011

Week in Review

You knew it couldn’t last.  The peace between archenemies France and Great Britain.  It’s just too hard to forget a century or so of history I guess (see EU Treaty: Nicolas Sarkozy’s push for power poses ‘biggest threat to EU unity’ by Bruno Waterfield posted 12/9/2011 on The Telegraph).

France has long pushed for an “intergovernmental” organisation that could reshape Europe around the kind of protectionist model that has traditionally been opposed by Britain and a coalition of free-trade nations.

“The fear is not the possibility of an intergovernmental treaty between 26 EU countries. We have to remember and beware Sarkozy and his speeches calling for a smaller union,” said Mr Verhofstadt. “Everyone knows that is the big risk now.”

In speech in Marseilles yesterday, Mr Sarkozy called for a “real European industrial policy”, a revision of the EU’s single market competition policy and the imposition of trade barriers on Asian countries, such as China, with lower social standards. “I would like to see Europe stop allowing products to enter its territory that respect none of the rules we impose on our producers, our farmers and our stockbreeders,” he said.

First France wanted the European Central Bank to start printing money to solve the Eurozone’s debt woes.  Germany not being too keen on inflation was not too keen on that idea.  They’d rather see countries enact austerity.  And live within their means.  Like the Germans are doing better than most in the Eurozone.  Of course that’s the last thing these countries want to do.  Cut back on their welfare states.  For it’s what makes them European.  Well, that and very high taxes.

Not only does France NOT want to enact any austerity measures, they want to let the good times keep rolling.  By finding other sources of revenue to pay for them.  Such as import tariffs on goods coming into the European Union.  Especially those goods from Asia that their domestic industries can’t compete against because of those high taxes to support those generous welfare states.

But this isn’t a solution.  Which is why Great Britain is against it.  As well as that coalition of free-trade nations.  Import tariffs are just taxes paid by the consumers.  They increase domestic prices.  Pulling more money out of consumers’ pockets.  Which reduces economic activity.  It also invites retaliatory tariffs.  Which increases the price of exports.  Which means people in those export markets buy less.  Because they have less money in their pockets.  Which also reduces economic activity.

Import tariffs won’t be the panacea Sarkozy thinks they’ll be.  Because economic activity is dynamic.  It isn’t static.  Yes, at first tariffs will increase tax revenue.  But they also will be a drag on the economy.  And less economic activity means less tax revenue.  Just like every nation that tried to tax away their debt problems learned.  One tax rate increase was never enough.  For every time they raised the tax rate there was a corresponding reduction in economic activity.  Which only made the original problem worse.

If Sarkozy gets his way it will speed up the demise of the Eurozone.  Which is inevitable.  For they have shown unity in currency will not work without political unity.  And there will never be political unity.  At least you’re not going to get political unity when you’re talking about the benefits of a smaller union.  Because you can’t reach a political consensus in the full union.


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When China talks about Limits and Constraints over Property Rights we need not fear the Economic Dominance of China

Posted by PITHOCRATES - December 11th, 2011

Week in Review

You know what’s funny?  People oblivious of history giving advice.  You know what’s not funny?  People lying to empower the state so they can oppress the people.  You decide which this is (see Op-Ed: The impoverished ‘Asian century’ by Chandran Nair posted 12/8/2011 on China Daily).

Western leaders concerned about climate change must understand that economic instruments like emissions trading are not a panacea. For Asia, resource management must be at the center of policymaking, which may include Draconian regulations, and even bans. Otherwise, resource shortages will push up commodity prices and create crises in food, water, fisheries, forests, land use, and housing, thereby leading to greater social injustice.

The West must help Asia to challenge the idea that consumption-led growth is the only solution, or even a solution at all. And Asia must adopt three core principles to avert environmental and social crises. First, economic activity must be secondary to maintaining resources. Second, Asian governments must take action to re-price resources and focus on increasing their productivity. Third, Asian states must recast their central role as being to defend our collective welfare by protecting natural capital and the environment.

All of this implies that Asian governments will need to play a far greater role than officials in Europe or America in managing both the macro-economy and personal consumption choices, which will require very sensitive political choices regarding individual rights, as well as policies that powerful business interests – many of them Western – will resist.

Asian governments will sometimes need to set strict limits on resource use – and have the tools to ensure that society respects these limits. They should begin, for example, by stressing that car ownership is not a human right. The debate about rights must emphasize constraints, not the utopian definitions of Western politicians.

There have been other countries that have talked like this.  In fact, they ruled like this.  The former Soviet Union.  The People’s Republic of China (China before capitalism).  North Korea.  The former communist Eastern Bloc.  All of these countries have enforced Draconian regulations and bans to re-price resources and increase productivity.  And you know what it got them?  Oppressive police states.  Chronic shortages of staple goods.  And famine.  Oh, and anyone trying to escape these socialist utopias were summarily shot.  For those who got away their families suffered.

China still has poverty and famine in the country.  It is only where they allowed capitalism that things are going well.  The eastern cities.  But all is not well there.  There’s unrest.  For these people have tasted a little freedom.  A little too much for the government.  So now they there’s talk about restricting this freedom for the good of the people.  I doubt many are buying this.

With this kind of talk the United States and Europe need not fear the economic dominance of China.  It sounds like the capitalist gravy train may be coming to an end.  For when they champion limits and constraints over property rights that’s usually when workers stop working hard.  Because when you sacrifice your wants and desires for the common good (i.e., the state), that’s when you start doing just enough to escape being punished.  And no country grew or stayed great doing that.


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Paul Krugman likes Keynesian Economics because it is more Political than Austrian Economics

Posted by PITHOCRATES - December 11th, 2011

Week in Review

Keynesian economics is a lot like the first 2 rules of business.  Rule number 1: the customer is always right.  Rule number 2: when the customer is wrong see rule number 1.

Keynesian economics has a similar set of rules.  Keynesian economic rule number 1: Keynesian economics always works.  Keynesian economic rule number 2: when Keynesian economics doesn’t work see Keynesian economics rule number 1.

Paul Krugman holds these Keynesian economic rules sacred.  He can go and an on about Keynesian macroeconomic principles to explain why the economy is still wallowing in recession despite massive doses of Keynesian economic stimulus.  Because it always goes back to these two Keynesian economic rules.  You see, in his world there is no such thing as a Keynesian failure.  For when there is there is a reason.  And that reason is that we didn’t go Keynesian enough.

It’s obvious that Keynesian economics works.  Just look at Keynesian economics rules 1 &2.  Need I say more?  At least, this is ultimately the argument Paul Krugman makes.  Which is purely political.  And rather ironic.  For he calls the non-political economic system, Austrian economics, political (see Krugman Disses Hayek by Peter Klein posted 12/6/2011 on The Independent Institute).

Krugman closes with the unintentionally funny snark that “the Hayek thing is almost entirely about politics rather than economics.” I suspect if one polled professional economists on which recent Nobel Laureate received the prize not so much for technical contributions, but because the Nobel committee wished to make a political statement, the answer would overwhelmingly be Krugman. I don’t know anyone who thinks Krugman’s work on trade and geography merited the Nobel at the relatively tender age of 55. Indeed, the Krugman thing is almost entirely about politics rather than economics. Quelle Ironie!

Hayek’s Austrian economics does not feature the government playing an active role.  Keynesian economics does.  That’s why it’s the economics system of governments everywhere.  Because it empowers them.  Gives them ‘authority’ to tax and spend and ‘stimulate’.  Because a lot of macroeconomic graphs say it works despites all empirical evidence that it doesn’t.

Now if that doesn’t say politics nothing does.  Keynesian economics is political economics.  Which explains why the biggest of Big Governments choose it for their economics.  Not because it works.  But because it gives them political power.


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