The Drought and Methanol Mandates decimate Corn Crops and High Quality Prime Cuts of Beef

Posted by PITHOCRATES - August 26th, 2012

Week in Review

Restaurants are one of the greatest job creators.  Because there are so many of them.  And if they open for breakfast, lunch and dinner that’s a lot of food servers, chefs, cooks, barkeeps busboys, dish washers, supervisors and managers.  Running a restaurant is hard.  It’s the number one business that fails.  Because margins can be thin.  And the amount of competition great.  But the people who mortgage their homes to open up a restaurant put a lot of people through college.  Gave single parents flexible hours to work around their kids schedules.  And let some people just do what they love.  Work with people.  Create great food.  And provide exceptional service.

This recession has been hard on restaurant owners.  As eating out is one of the first expenses a family cuts in their family budget.  Now things are going to get even harder (see Peter Luger Steak Prices May Soar as Drought Culls Herds by Peter S. Green and Esmé E. Deprez posted 8/21/2012 on Bloomberg).

The worst Midwest drought since 1956 has scorched crops and sent the price of corn, the main ingredient in livestock feed, up 62.8 percent since mid-June. Ranchers are culling herds to avoid feed costs, flooding the market with cheap supplies of beef.

There’s a parallel decline in the quantity of animals that yield the highest-quality prime cuts, which require months of extra feeding. The shift will be felt in steakhouse menus down the road.

So prices will go up and the quality of the meat will go down.  Which raise the prices on their menus.  And drive patrons away.  Because they, too, are facing higher costs in their lives.  And they can’t afford to pay more for less.

The drought prompted President Barack Obama to help farmers with $170 million in government meat purchases.

“We’ve got a lot of freezers,” Obama told a campaign rally in Council Bluffs, Iowa, on Aug. 13. The government is also considering cuts to ethanol mandates after livestock producers complained that too much grain is being diverted to make fuel.

“We’ve got a lot of freezers.”  The government has trillion dollar deficits in all four years of Obama’s presidency and he’s still spending money that he doesn’t have.  Which isn’t very smart.  And will do little.  For how is buying this meat going to solve the problem everyone is having in the food industry?  The high price of feed corn?

Why not just do the easy thing?  The thing that doesn’t increase the debt?  Don’t consider cutting methanol mandates.  Do it.  Cut them all.  Eliminate every last one.  Let gasoline be gasoline.  And food be food.  If we don’t divert 40% of the corn crop to the methanol industry that will nearly double the corn crop.  Now that would make an impact that would go a long way in lowering food prices for every American.  From eggs to chicken to milk to cheese to hamburger to prime cut steaks.  Lower prices for everyone.  And more economic activity.  From the extra money households don’t have to spend on groceries.  So they can go out during the week for dinner and a movie.  Helping all those restaurants.  And all the people who work in them.

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The U.S. and Japan assailed Argentina’s Mercantilist Trade Policies at the World Trade Organization

Posted by PITHOCRATES - August 26th, 2012

Week in Review

International trade can be a funny thing.  For mercantilist ways of the past are hard to give up.  Especially the misguided belief that a trade deficit is a bad thing.  Some nations are better at some things than other nations.  And have a comparative advantage.  And it would be foolish to try and produce something another nation can produce better.  It would be better for nations to do the things they are best at.  And import the things that others are better at.  Just as David Ricardo proved with his law of comparative advantage.  Still everyone still wants to export more than they import.  Still believing that their mercantilist policies are superior to the capitalistic policies that are characteristic of advanced economies.  While mercantilist policies can rarely advance beyond emerging economies.  Case in point Argentina (see Argentina says to file WTO complaint against U.S by Tom Miles and Hugh Bronstein posted 8/21/2012 on Reuters).

The United States and Japan assailed Argentina’s import rules as protectionist at the World Trade Organization on Tuesday, putting more pressure on the country to revamp policies that many trading partners say violate global norms.

The two complaints mirrored litigation brought by the European Union in May and triggered a swift reaction from Argentina’s center-left government, which vowed to challenge U.S. rules on lemon and beef imports.

Argentina is seen by many fellow Group of 20 nations as a chronic rule-breaker since it staged the world’s biggest sovereign debt default in 2002. It remains locked out of global credit markets and relies on export revenue for hard currency.

They have inflated their currency so much that it is nearly worthless.  They can get little of foreign currency in exchange for it.  So they depend on the foreign currency buying their exports for their money needs.  For they can’t destroy foreign currency with their inflationary policies.  Only the wealth and savings of those in Argentina who don’t have access to these foreign currencies.

In the old days the mercantilist empires brought gold and silver into their countries.  They had their colonies ship raw material back to the mother country.  The mother country manufactured them into a higher valued good.  Then exported it for gold and silver.   Today we don’t use gold and silver anymore.  So Argentina just substituted foreign currency into the formula.  While keeping the rest of it in place.

Argentina began requiring prior state approval for nearly all purchases abroad in February. Imports have since fallen compared with last year’s levels, boosting the prized trade surplus but causing some shortages of goods and parts and sharply reducing capital goods imports.

EU and U.S. officials say Argentina has effectively restricted all imports since the new system came into place…

On Monday, Argentina hit the EU with a separate WTO complaint, alleging discriminatory treatment by Spain against Argentine shipments of biodiesel.

“This measure, like others taken by the European Union and other developed countries for decades, effectively aims to keep our industries from rising along the value chain, limiting the role of developing countries to the provision of raw materials,” the Foreign Ministry said in a statement…

Latin America’s No. 3 economy relies heavily on a robust trade surplus, which is used to help fatten central bank foreign reserves tapped to pay government debt. The government has also moved to curb imports to protect local jobs, while imposing capital and currency controls to keep dollars in the country.

“Import growth has halted, which we should have done long before,” Foreign Trade Secretary Beatriz Paglieri was quoted as saying on the presidential website last weekend…

Argentina has also been criticized for a policy of “trade balancing,” which forces an importer to guarantee an equal value of exports. That has spawned offbeat deals whereby a car producer, for example, must ship a large amount of rice out of the country in return for a consignment of vehicle components.

Mercantilist to the core.  Which will forever trap them into being an emerging economy.  For they’ve been doing this for decades.  And they’re still an emerging economy.  Juan Peron rose to power with the same mercantilist arguments.  He was a Justicialist.  Today’s president is a Justicialist.  President Cristina Fernandez.  And little has changed since World War II.  Argentina is still an emerging economy.  Thanks to their mercantilist policies.  If they’d only give capitalism a chance their economy would explode with economic activity.  At least, based on history.  For the most advanced economies today are NOT based on the current Argentine model.  They’re based on the free trade of capitalism.  And David Ricardo’s comparative advantage.

In countries with free trade people enjoy higher standards of living.  Their governments give them this good life by doing as little for them as possible.  Letting the free market shower them with wealth and happiness.  Which brings us back to the funny part about international trade.  The countries that try to do the most for their people by restricting free trade give their people a lower standard of living.  Except, of course, for the few in power.  Or for those connected to power.

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Republicans are such Old Fogies that they aren’t Expected to Take in the Naked Ladies of Tampa

Posted by PITHOCRATES - August 26th, 2012

Week in Review

The Republican National Convention will be in Tampa.  A city famous for one thing one would normally not associate with Republicans.  Naked ladies.  The Democrat Party of Bill Clinton, perhaps.  But the Republicans?  Not quite (see Tampa’s strip-club king ready for Republicans by Tamara Lush, The Associated Press, posted 8/20/2012 on The Vancouver Sun).

More than sunshine, cigars or the rollercoasters at Busch Gardens, Tampa is known for its naked ladies.

Tampa and strip clubs are often mentioned together, like New York City and the Statue of Liberty. Or San Francisco and the Golden Gate Bridge. Or St. Louis and the Arch.

And the man in the thick of this spectacle is Joe Redner, who almost single-handedly made Tampa’s adult entertainment world famous. He’s a wiry 72-year-old with an amused smile and skeptical brown eyes who owns what is arguably the most notorious of Tampa’s all-nude clubs: Mons Venus.

The club — located less than six miles from where the Republicans will gather to nominate former Massachusetts Gov. Mitt Romney as their presidential candidate — isn’t much to look at. The blue-and-purple building sits on a busy stretch of road next to a Taco Bell and near where the NFL’s Buccaneers play home games. There’s a sign outside that says “Home of the Most Beautiful Women in the World,” and another: “Live NUDE Shows.”

“I don’t expect the RNC to be as busy as Super Bowl,” Redner said, with a dismissive wave of his hand. “I don’t think those people are coming to party.”

Must be that Republican war on women.  The Republicans must hate women so much that they won’t even support young women (many who are the same age as their daughters) dancing naked for tips.  No wonder women vote Democrat.  Not only do Republicans have old fashioned views on how to treat women they won’t even go 6 miles for a little fun with young naked nubile women grinding into their laps.  Heck, if Republicans had their druthers they’d like to close places like this.  And stop the objectification of women into mere sexual objects.  Talk about being out of touch with American women.

It is interesting that the women who vote Democrat vote for the same candidates that strip club owners and pornographers vote for.  Who make their money by objectifying young women into sexual objects.  Which is worse than anything they can accuse the Republicans of.  Other than making women buy birth control pills.  Sure, that’s pretty awful and Neanderthal-like.  But does it rise to the level of paying women only for their ability to look good in the nude?

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Birth Control and Abortion have reduced Tax Revenue and House Values for Seniors

Posted by PITHOCRATES - August 26th, 2012

Week in Review

Birth control and abortion will bankrupt Social Security and Medicare.  And they will bring down Obamacare, too.  When Social Security became law we had a growing birth rate.  More people were being born each year.  So the population was expanding.  And the Roosevelt administration thought it would keep expanding.  So they created a Ponzi scheme.  Social Security.  Where more young people (i.e., taxpayers) pay into the system than retirees (i.e., tax consumers) collect from the system.  A foolproof system.  As long as the population continues to expand.  Keeping the base of the pyramid growing larger than the top of the pyramid.

Well their assumptions didn’t hold.  Women stopped having babies beginning in the Sixties.  Just as the Johnson administration gave us the Great Society and Medicare.  Based on the previous assumption that women would keep having babies.  So the funding mechanism was a flawed as it was for Social Security.  And now Obamacare is going to expand the Medicare model.  In the face of what is now a declining population growth rate.  Meaning the number of taxpayers will dwindle as the number of tax consumers retiring will explode.  Causing the aforementioned bankruptcies.  And that declining birth rate is causing even more financial damage (see Is Our Aging Population Partly to Blame for the Slow Recovery? by Philip Moeller posted 8/21/2012 on U.S. News & World Report).

As the unusually weak economic recovery continues, you’ve at least got to wonder if future studies of what ails us will include our aging population as a material cause. Simply stated, older people tend to liquidate assets to fund their retirements. Younger people tend to acquire financial assets as their personal wealth rises and they build their own nest eggs.

The United States has enjoyed nearly 40 years where the number of people acquiring assets was greater than the number of people disposing of them. This condition is being turned on its head. We now face roughly 40 years where there will be more people in this country wanting to sell financial assets than buy them. This supply-demand shift could put a lid on asset values and depress overall economic growth.

So on top of the government failing us in our retirement even our own retirement savings are going to fail us.  It will be like being on the far side of a housing bubble after the bust.  Where seniors want to sell their houses to finance their retirement.  Only to get tens of thousands of dollars less than they had planned.  For just as there are fewer taxpayers to pay the taxes to support an aging population there are fewer homebuyers (as well as other asset buyers) to buy the houses of an aging population.  Lower demand means lower selling price.  And a less comfortable retirement.  All because of that generation of greed and selfishness.  The baby boomers.  Who were all about sex, drugs, rock & roll, birth control and abortion.  And not so much about raising children.  Of course they, too, will suffer the effects of their selfish ways.  As there will be fewer taxpayers to support them in their retirement.  Or to buy their houses.

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The High Cost of Labor Contracts and Environmental Regulations cause Planes to Run Low on Fuel

Posted by PITHOCRATES - August 26th, 2012

Week in Review

Here is a lesson in basic economics.  There is a tradeoff between costs and safety in aviation.  You could hire thousands of additional mechanics to give an airplane a complete overhaul after each flight.  And double their pay rate just to make sure they are especially happy workers.  You can have a couple of chase planes follow a passenger airliner on every flight to observe the outside of the aircraft so they can warn the pilot of any problems.  And you can top off every fuel tank on an airplane just to be extra safe.  These things would make flying safer.  But they would also make it very expensive to fly.  So expensive that few people would fly.  Thus reducing the amount of airplanes in the sky.  As well as the number of flight and maintenance crews.  Which illustrates the ultimate cost of generous union contracts.  The more they ask for the more they put themselves out of a job.

But these unions are powerful.  Margins are so thing in aviation that a strike could turn a profitable year into a money losing year.  So to avoid a strike they cut costs where they can.  And the one cost that gives them something to work with is their fuel costs.  Because an airplane only needs enough fuel to fly from point A to point B.  Plus some reserves.  So they are very careful in calculating the fuel requirements to get from point A to point B.  But sometimes weather can enter the picture and add a point C.  And this can sometimes cause a fuel emergency (see Pilots forced to make emergency landings because of fuel shortages by David Millward posted 8/20/2012 on The Telegraph).

Pilots have had to make 28 emergency landings because they were running low on fuel according to figures compiled by the Civil Aviation Authority…

Although the total represents of fuel-related emergency landings is a reduction on 2008-10, when there were 41 such incidents, some pilots have warned the airlines are operating on very narrow margins as they seek to cut operating costs…

One retired pilot told the Exaro website that he and his colleagues were under pressure from airlines because of the industry’s need to keep costs down.

“There is pressure on pilots by airlines to carry minimum fuel because it costs money to carry the extra weight, and that is quite significant over a year…

“The way in which aircraft are being developed in becoming more fuel efficient, there is less need for fuel.

We make jet fuel by refining petroleum oil.  And two things make this an expensive endeavor.  Higher environmental regulations.  And reductions in supply.  Often due to those same environmental regulations.  If they allowed the American oil business to drill, baby, drill, it would be safer to fly.  Because fuel would be less expensive.  And airlines could more easily afford to carry the extra fuel weight.

Airlines don’t have much power over controlling the price of jet fuel.  It is what the market says it is.  They have a little more luck in keeping their capital costs down thanks to the bitter rivalry between Boeing and Airbus.  Who are both eager to sell their airplanes.  Cutting their labor costs is another option they have but it comes with great political costs.  Usually it takes the specter of bankruptcy to get concessions from labor.  So when it comes to cutting their operating costs the least objectionable route to go is to cut fuel costs.  By loading the absolute bare minimum required by regulations.  And for safety.  Airlines want to save money.  But having planes fall out of the sky to save fuel costs will cost more in the long run.  In more ways than one.  (It’s hard to get people to fly on an airline that has a reputation of having their planes fall out of the sky.)

So there are only two practical options to fix this problem of skimping on the fuel load.  Either you drill, baby, drill.  Or you get labor concessions to lower you labor, pension and health care costs.  The very same things that are bankrupting American cities.  So you know the costly union workers are all in favor of drill, baby, drill.  Because the lower the cost of jet fuel the less pressure there is on their pay and benefits.

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Waiting Times may be on the Rise in Britain as the NHS Struggles to Cut Costs

Posted by PITHOCRATES - August 26th, 2012

Week in Review

It would be nice if we could step into a time machine to see how a government policy would turn out in the future.  To see if it did everything they said it would do.  If it made things better.  Or if that policy would be a complete and utter failure.  Well, time machines don’t exist.  But we can do the next best thing to time travel.  We can look at another nation that long ago enacted similar legislation.  And see what it did for them.  Such as looking at Britain.  And their National Health Service (NHS) (see Join the back of the queue: Waiting times set to soar as NHS trusts suffer from tough cuts by Anna Edwards posted 8/23/2012 on the Daily Mail).

Patient waiting times may increase as a growing number of hospitals face financial difficulties, a report warned today.

NHS foundation trusts, a marker of excellence in the NHS, are facing the challenge of improving quality of care while being forced to make cuts.

Trusts have told the regulator Monitor they are coming under ‘increasing pressure’ to meet accident and emergency waiting times and referral to treatment targets.

Under Labour, hospitals were told patients should be have to wait no longer than four hours to be treated in A&E, and should be given hospital treatment within 18 weeks if they are referred there by a doctor.

But struggling hospitals warn these targets may not be met as they face tough financial difficulties…

‘Particular challenges come from the need to improve the quality of care while delivering considerable savings each year.

‘Foundation trusts are planning to do this without planning to treat fewer patients or reduce the level and quality of care they provide…

‘NHS leaders know the real challenge is to tackle a flat budget while managing the increased costs of treating an ageing population, advanced technology and the growing rates of lifestyle diseases such as obesity.

An aging population and a flat budget?  There’s a little more to that than just a flat budget.  And it has to do with that aging population.  The growth rate of retirees (large consumers of health care) is greater than the growth rate of new taxpayers (people entering the workforce to pay taxes that pay for the retirees).  So available funding of the NHS is falling.  It’s not flat.  Funding is falling while demand for health care services is rising.  And it will continue to rise until the baby boomers die out.  And the pyramid re-inverts itself to where there are more people entering the workforce than are leaving the workforce.

This is why waiting times are growing.  More patients with less funding mean fewer doctors and nurses.  And fewer medicines, medical devices, surgeries and treatments.  Which means people wait longer.  Or are simply denied treatment.  Thanks to a system of rationing.

If everyone provided for themselves through a policy of being responsible this would not happen.  If they didn’t tax the people so excessively to support a welfare state they would have more money to spend on themselves.  To pay for routine doctor’s bills.  And to buy an insurance policy for the unexpected and catastrophic medical expense.  It would work.  Everyone paying a little bit on insurance to pay for the few with unexpected and catastrophic medical expenses.  Because that’s exactly how taxpayer funded health care is supposed to work.  The only problem is that the taxpayer funded variety includes everything.  Even those routine doctor bills.  Requiring excessive taxation.  And when the economy slows down, or a population ages, you simply can’t pay for everything any longer.

And so it will be with Obamacare.  Where policies have to cover everything.  And everyone will have to pay a little bit to cover everything.  Even birth control.  Only that little bit will become a lot.  Because it IS paying for everything.  And all of this with an aging population.  And a much larger population than Britain.  About five times the population.  And about five times the patients there will be in Obamacare.  Making the waiting times and rationing look mild in the NHS by comparison.

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