Thursday, September 20, 2018

The ECB And Draghi Are Starting To Grasp At Straws

While much of the world is focused on trade wars when looking at the future value of the Euro it is important to keep in mind several key elements of "currency relativity." Bloomberg recently suggested that most likely the ECB’s economic forecasts projections would be downgraded and the ECB has confirmed this. The forecast has been adjusted lower cutting 2018 and 2019 GDP from 2.1% and 1.9% to 2.0% and 1.8%, respectively Draghi assessed that the expansion is "still solid" while noting that "uncertainty around the inflation outlook is receding." This comes at an important time for the Governing Council of the ECB which was thought to be prepared to marginally wind back stimulus.

Euro Leaps Higher Against Dollar As Draghi Talked
The concession that growth is slowing dampens the excitement of those that have been warning us we were about to be in for a hawkish surprise. Surprisingly the spin on lower growth caused the euro not to leap higher because Draghi also stated the ECB projects "significantly stronger core inflation." Apparently, this coupled with the latest miss in U.S. inflation as CPI  came in lower than expected added fuel to the spike. The mood was also boosted by Draghi's positives comments regarding the fact that so far all the major Italian ministers and the PM have said they will respect the EU’s budgetary requirements.

As of yet problems in Italy have been contained and have not had much effect on Europe. Italy with its newly-installed government has started taking an increasingly conciliatory tone with regards to their budgetary intentions. Despite this seemingly new approach from the populists, eventually, a clash between Italy and the EU seems inevitable. Such a clash would elevate grave concerns over Italy’s fiscal discipline and heightened fears over the nation’s intentions of paying debt held at the ECB. While people would like to probe Draghi on his views on the matter and what mechanisms the Bank has to counter any potential Italian crisis, this is a subject Draghi will most likely avoid by being nonspecific and referring to the general rules already in place.

Year After Year Of Little Growth (click to enlarge)

For years the Euro-zone has enjoyed a solid trade surplus from its dealings with America. It is pure folly if they think realigning the Euro-zone with China will result in the same kind of beneficial relationship. To make matters worse, it could be argued that the meager growth the Euro-zone experienced has come mainly from two areas and is neither balanced or has much further potential. Some of it has resulted from the influx of shall we say, "mainly unwanted" immigrates flowing into the area that needed to be housed and fed. And much of the rest from ECB stimulus. This slowing has occurred as the euro area trade surplus declined to the lowest level in four years in July, exports dropped 0.8 percent month-on-month, while imports grew 1.3 percent. Figures from Eurostat show the trade surplus fell to a seasonally adjusted EUR 12.76 billion from EUR 16.47 billion in June. This was the lowest since June 2014, when the surplus totaled EUR 12.22 billion.
The reality is that after years of doing "What Ever It Takes" Draghi must about be at wit's end. Draghi became the focus of the world at a speech in London on July 26, 2012, when the ECB President gave an account of the euro-zone economy as bond yields of weak euro-member governments were soaring. At the time many traders held grave doubts that EU-level institutions could get their act together in time to avert disaster. In the historic speech Mario Draghi pledged to do "whatever it takes" to protect the Euro-zone from collapse, this included fighting unreasonably high government borrowing costs. As Draghi sought to convince international investors that the region’s economy wasn’t as bad as it seemed. He then made the momentous remark:
“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
While the ECB might have sidestepped the collapse of the euro over recent years many of us skeptics believe it will ultimately result in a major devaluation of the euro with devastating side-effects for those holding the currency. The title to this piece referring to the ECB "grasping at straws" alludes to the idea no real solutions exist for the Euro-zone as it confronts the grueling challenges before it of remaining competitive in the global marketplace while a critical currency problem brews within its mist. Much of this relates back to the flawed way the euro was created and its failure to become a "truly unified" economic union. Draghi's stand continues to be that the euro is indispensable and is strong, because societies want it and that it is in no one’s interest to doubt its continued existence and even discussing its abolition is harmful.

This year six Euro-zone countries may break the European Union’s budget deficit rules which probably gives them little room to help by expanding spending. Belgium, Italy, Austria, Portugal and Slovenia, the Draft Budgetary Plans (DBP) pose a risk of noncompliance with the requirements for 2018 with France falling upon the same problem. The rules say that EU countries should have budget deficits below 3 percent of GDP and public debt below 60 percent of GDP. Italy, which has the second highest debt in the EU after Greece at more than 130 percent of GDP, to voice concern was singled out as particularly troubling.

John Mauldin, chairman of Mauldin Economics, thinks the flashpoint for the next crisis is likely to be in Europe, especially Italy and the choice of Europe in coming to terms with whether to put a lot of bad debt on the balance sheet of the European Central Bank or deal with defaults and the contagion that flows from them. If not addressed the Euro-zone breaks apart and we’re going to get a 50% valuation collapse. “Greece,” he said, “is a rounding error. Italy is not" This means Brussels and Germany are going to have to allow Italy to overshoot their persistent debt, and the ECB is going to have to buy that debt. It seems that until now, a program known as "Target 2" has been the salvation of the euro and responsible for preventing countries from collapsing.

Since 2015 we have been again witnessed capital fleeing to the north as a result of Draghi starting QE in 2015 and the Bundesbank starting to buy back bonds on the market. The Italian central bank is dependent on the ECB and has to buy Italian government bonds. German investors have to exchange these bonds for euros in Italy and transfer the money via Target 2 to their German bank. The growing differences in the Target 2 balance sheet is the result of the Germans, who own the Italian bonds dissolving them in Italy and transferring the money to Germany. Italians have also added to the capital flight as they liquidate their bonds and send their money abroad. This translates into enormously huge debt claims on the German side where this year they have already reached a trillion euros which is about 25% of German GDP. 

These German Target 2 claims are not covered by any securities. If Italy or Spain withdraw from the Euro-zone, the Germans will be left holding worthless paper. This has not generated much unrest in Germany only because the Germany people have great confidence in the Bundesbank. At a press conference on 26 July this year, Draghi said about Target 2: “It has nothing to do with the movement of capital from country to country” and the clearing balances cannot be overdrawn as long as no one leaves the Euro-zone. This translates into, Italy must not leave the Euro-zone! Italy's debt amounts to 2.3 trillion euros and its liabilities in Target 2 rose in June 2018 to 481 billion euros from 164.5 billion euros in 2015. This means that Banca d’Italia owes the Bundesbank almost half a trillion euros!

So, we have Draghi, the Italian who uses his position to save his country, and on the other, there are many German economists who criticize Target 2 and see it as a check that cannot be cashed. Still, the slowing of the Euro-zone economy means the ECB appears once again to be on auto-pilot and has postponed the idea of raising rates until other central banks raise theirs the ECB is safe hiding in plain sight but if the Fed moves even a bit higher all bets are off. Weakness in the euro almost certainly will result in a stronger dollar which could be the catalyst for the emerging market crisis to spread to the rest of the developed world and evolve into a global deleveraging event. Again it is difficult to ignore the fact the euro remains very vulnerable. 

Wednesday, September 19, 2018

Is Housing Sector Joining Autos In A Slowdown?

Two of the biggest and most solid drivers of the economy over the last several decades have been the housing and automobile manufacturing. New data shows that after three ugly months earlier in the year a small rebound occurred in July. August numbers were expected to see those gains consolidate but the picture was extremely mixed with housing starts spiking 9.2% month over month while permits plunged 5.7% during the same time period. The data highlighted below emphasis just how mixed and cloudy the housing picture has become.
  • The surge in Starts is the best month since January 2018
  • The plunge in Permits is the worst month since Feb 2017
The fact is housing was overbuilt in 2008 with many people owning more than one house. Demographics, as well as the student debt weighing upon many young people, has created a drag on housing. While housing has not again reached the torrid pace we witnessed before the crash, because of super-low mortgage rates, easy financing, and a slew of programs to help first time home-buyers, the housing market has become more elevated than it should be. It is important to note that this has resulted in the premature death of many houses that in the past would have been renovated rather than demolished. Houses that are in areas of weak demand, poorly constructed, or even simply been allowed to fall into disrepair have become victims of the wrecking-ball far before their time. In many ways, a lot of what we are witnessing is the result of misguided housing policies topped off with malinvestment.

Overall It Appears Auto Sales Have Topped
As for the auto sector, while we have not seen a massive amount of information about it recent numbers confirm a malaise is settling over the auto industry. After more than a century-long run, giant automakers like Ford was the first to boldly face the obvious: The demand for traditional cars is beginning to dry up, thanks to the evolving tastes of millennials and baby boomers. Ford announced plans recently to eliminate some of the company’s most well-known cars in North America, including the Fiesta subcompact, Fusion midsize sedan, Taurus large sedan, and the C-Max van. According to Ford’s quarterly earnings statement, this decision has been made following years of declining car sales.

Ford's plan to eliminate selling most of its cars in North America except for two models will allow the company to focus on their “winning portfolio” in the United States, Canada, and Mexico. The Detroit automaker plans to continue manufacturing the Ford Mustang and a new Focus crossover that the company plans to release next year. That vehicle will be assembled in China and imported to the United States. Dropping other models will allow the company to devote more resources to SUVs and trucks which have surged in popularity while consumers lost interest in passenger cars, which no longer have a monopoly on good gas mileage, also their new marketing direction will allow Ford to expand into more electric vehicles bringing 16 battery-powered vehicles to market by 2022.

Circling back around to the intended focus of this article, it is likely jobs will be lost in both these important sectors of the economy in coming months. This will in itself create an economic headwind that affects overall growth. Many trends are expected to feed into the coming slowdown such as smaller housing units and self-driving cars as well as a slew of new car sharing programs. As the auto sector moves into the future we will see a reduction in the number of cars produced in and for America and as most production lines are retooled for new vehicles it is likely more automation and robots will be used. None of this bodes well for those predicting the economy will continue humming along.

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Footnote; Below is the link to a recent article about housing

Tuesday, September 11, 2018

Amazon Is A Threat To Our Democracy And Capitalism

The title of this piece is bold and may seem like an exaggeration but in previous posts, I have written about several of the cozy arrangements Amazon enjoys with our government and some of its new initiatives are taking the company to a new level. It must be noted Amazon's lust for power appears without limit. The deal Amazon is now trying to push through Congress grossly exceeded anything it has undertaken in the past and would place the company in a position to threaten our very democracy. The technology giant which is no stranger to sweetheart deals and has lined the pockets of its CEO Jeff Bezos at taxpayer expense is quietly moving in a direction that is destined to create even more controversy. Amazon is on the verge of winning a multibillion-dollar advantage over rivals by taking over large swaths of federal procurement.

Amazon Is Moving To Place Beyond All Control
This brazen move makes it increasingly difficult and almost impossible to ignore the fact that Amazon's CEO Jeff Bezos owner of America's most influential newspaper, the Washington Post, has embarked on a mission to quietly grab more power. When you couple the voice of the Washington Post with a company so deeply involved with discovering and archiving detailed files and information about individuals and politicians across America you command a great deal of muscle and clout. Because of this and some highly effective lobbyist, the federal government seems unable to stop giving Amazon, even more, advantages over the brick and mortar stores that line the streets of our communities. This has become a dagger into the heart of the capitalist system and is allowing Amazon to flourish while removing the ability of other companies to compete.

Congress under the cover of darkness has started down the path to change the federal purchasing plan that would result in Amazon’s most lucrative government handout yet. The language buried in Section 801 of the House-passed version of the National Defense Authorization Act would in effect move Defense Department purchases of commercial off-the-shelf products to online marketplaces. The House Armed Services Committee Chairman Mac Thornberry, argues it is needed to save money over the burdensome current system and that some IT equipment could be purchased more cheaply on the open market than through the current GSA’s “schedules.” The plan calls for developing an online marketplace platform through which federal agencies can buy products such as paper clips, bottled water, computers, office furniture and more in the same way any business would.

The legislation calls for a platform designed to “enable government-wide use of such marketplaces” which rules out all small players unless they employ a procurement and supply management firm big enough to serve the entire U.S. government by offering multiple suppliers for a massive number of products with constantly changing selection and prices. With all Amazon's influence, it is not an accident that Amazon Business is the company best positioned to exploit what is basically monopoly control over a great deal of the $53 billion in federal purchasing for the commercial supplies bought through no-bid contracts. As to whether this becomes law in the future the fact that Amazon got it through the house should cause us great concern and is proof of the company's ability to manipulate Washington  All this reeks of corruption and constitutes a major shift in power that would set up opportunities for abuse not to mention massive control over suppliers.

Even the suggestion of a pilot program is just another way for Amazon to wedge its foot in the door. It is important to remember by simply providing the platform necessary for companies to sell through to their current customers Amazon would extract money from those third-party sellers and collect billions of dollars annually. Typically it receives 15 percent to 20 percent of the proceeds from such sales, which means a huge revenue stream for Amazon for doing basically nothing while vendors are forced to cough up as much as half their margin. This would prove devastating to many small businesses. Amazon would also get an enormous amount of data on agencies which they could then use to identify top competitors and drive them out of the marketplace with increased fees or other rules changes. And it means many discounts that are normally negotiated for bulk rate purchases would flow not to the government and taxpayers but would be diverted into Amazon’s pocket.

This is only one of several initiatives Amazon is currently pursuing behind the scenes to quietly extend their hold over America. The people of this great country are only beginning to see how Amazon has begun to reshape America as the number of brick and mortar store closings increase on a daily basis. Fortunately, more and more articles are beginning to be published criticizing Jeff Bezos and Amazon for its abusive policies and calling it out for accountability. It is time for our government to stop subsidizing this monster it has allowed to grow and take shape and recognize it for what it is, a power hungry job killing exploiter that is destroying communities.

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Footnote; Below are the links to several other articles about Amazon.
 http://Online Transaction Fee Could Blunt Amazon's Edge html

Monday, September 10, 2018

Investors Would Be Wise Not To Fixate On GDP

GDP Shows Recent Strong Growth  In GDP
Investors would be wise not to fixate on America's recent GDP and accepting it as a sign or verification the economy is hitting on all cylinders. If investors fall into the trap of focusing on the GDP and lock onto this number as a confirmation all is well they may be in for a huge surprise. The fact is the GDP is a poor reflection of the quality of economic growth. It is also important to remember that a lot is happening across the world and the troubled economies of both the EU and China will feed into near-term market moves. When you throw in trade wars and the fact central banks are beginning to see they must deal with the problems flowing from years of QE it becomes easy to make an argument that caution is in order.

It is my personal opinion that Japan, another huge international economy, which has quietly tried to stay out of the spotlight when it comes to trade may be damaged by problems spilling out of China. Up until now, Japan has done a rather good job of allowing China and Mexico to absorb the bulk of Trump's trade tantrums and tariffs. By constantly reminding us Japan is a longtime ally that stands with us against China and North Korea. Prime Minister Shinzo Abe's administration has walked a tightrope. Decades of experience has taught Japan that when it comes to trade issues it is best to maintain a low profile because it is a game they cannot win.

Still, the links and ties between China and Japan are strong and problems in China do not bode well for Prime Minister Shinzo Abe's administration as it attempts to balance snowballing social security costs and increased defense spending. When we look closely it is easy to see the concern within Japan that the economy is just getting by. Abe has had to promise a stimulus package to offset the negative impact of a planned increase in the nationwide consumption tax beginning in October 2019, making it unlikely that Japan will shed its status as having the worst fiscal health among advanced economies anytime soon. Sadly, what is seen by many as "a good economy" is simply an illusion build of massive deficit spending.

Federal Spending Is Skyrocketing (click to enlarge)
Here in America, many investors point to an improving GDP as proof of an economic rebirth, however, it is difficult to ignore that the national debt is not just growing but it is exploding. A recent report issued by the Office of Management and Budget that went largely unnoticed titled the “Mid-Session Review” paints a far bleaker forecast of the deficit going forward than originally predicted. The illusion of a robust economy has been propelled forward by the sheer mass and sum of economic growth rather than its caliber or quality.

This spending has been exacerbated by the stupidity of Congress passing an Omnibus Spending Bill with little thought as to how the spending would play out. It has now become apparent that over the final weeks of fiscal 2018, the government is slated to embark on a spending spree of historic proportions as federal agencies look to spend $140 billion more than they expected to receive prior to the bill being passed. I concede that rushing to spend this money as fast as possible should bolster things over the near term but may prove extremely wasteful. Circling back to the crux of this article is the fact we have allowed numbers that mean "nothing" to seep into how the gross domestic product (GDP) is calculated all in an effort to create the illusion of growth.

In 1962 Kuznets, the father of the GDP formula emphasized that we must keep in mind the difference between quantity and the quality of growth. He made clear a distinction exist between cost and returns. This translates into the reality that the number we are spoon fed and await with such glee has little to do with real growth but often simply mirrors or is merely a reflection of monetary pumping. The GDP number fails to highlight a slew of important factors that feed directly into our standard of living and the health of our economy. The landscape of our economic future becomes far more uncertain when putting into perspective how flawed the GDP number is. It is not in any way an accurate forecaster of growth and should not be considered an indicator confirming a trend or real strength in the economy. It should be noted this is not a problem occurring just in America but across the world.

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Sunday, September 9, 2018

Ignorance is bliss! - Creating A World Of Calm Serenity

Let Us Declare This As The Truth!
As we look around it is not difficult to understand the origin of the saying "Ignorance is bliss!" This article is a tribute to all those cute little sayings and witticisms that have laced their way through our culture and give depth to our vocabulary. While I will only highlight a few it should be noted that many more exist and they and often the result of generations of tried and true lessons pounded into the collective heads of mankind. Now back to the title of this article, "Ignorance is bliss!"  The lyrics from a song that was popular years ago indicated that "things get a little easier once you understand." Sadly this is not always true and sometimes understanding an issue only reveals the complexity hidden under the surface.

This Chart Is Scientific Proof The Link Exist
Statistics show that in recent years many Americans have dropped out of the workforce and are retiring early and it is not because they are rich but because they can. Like many people, I often think about just giving up and chucking it all. Oh, how sweet it must be to know little of the risk and hazards that surround us and to be totally oblivious as to the dangers lurking around every corner. Envision the joy of living in a state of mind that allows you to awake each day to a world of calm serenity.  The chart to the left proves and shows without any doubt the scientific correlation between ignorance and happiness does exist. This explains a lot about life and leaves little doubt as to the benefits of a lazy mind.

A Reassuring Lie Has Many Fans
It is often hard to quantify just how intelligent the masses are but, it is safe to say many people could not qualify as a rocket scientist. I strongly suggest it is not by accident the phrase "an inconvenient truth" came about or that "da Nile" is not only a river in Egypt.  Denial is a place or state where many people live out much of their life. Truth often has a sharp edge to it and is unbending which makes it rather exhausting to tolerate. This means it is often not very reassuring to question what we are told and far easier to go with the flow or accept the general consensus that the person you are following actually knows where they are going.

An Ugly Reality Can Lurk Just Below The Surface

Some of the drawbacks related to pursuing knowledge alluded to above may be only the tip of the iceberg in explaining why so many people choose the well-traveled path of being happy with what is, rather than thinking about what could be. I salute those who pick to live their life in a place where the color of the sky is of their choosing. The only problem with choosing the path of ignorance is the possibility that the illusion might collapse at any time if reality chooses to raise its ugly head. My research, however, indicates that a few witticisms have been created to cover even those situations, such as, "Don't worry be happy!"

We live in a world where Goldman Sachs is busy claiming to be doing God's work and a broad swath of mainstream media claims to be standing upon the moral high ground while spinning the news to suit their needs. Considering this it is hard to find a good anchor. Nowhere to be seen on CNBC, Bloomberg, the WSJ, or any other status quo propaganda media outlet is much that resembles honest or thoughtful information. Their job is not to analyze or seek the truth. Their job is to keep their government patrons and Wall Street advertisers happy while keeping the masses sedated, misinformed, and pliable.

After years of economic propaganda, artificially inflated stock prices, dishonest accounting, laced with pandering and outright lies we find Washington and the media have hollowed out our culture lulling most unsuspecting Americans to sleep. The rest of the world has not fared any better. Few among us no matter how dumb or how dense think the world would not be better off if they were in charge and calling the shots as ruler supreme. One thing is very clear, the issues a person would make their priorities if they held such a station of power speaks volumes as to what they value and what they hold dear.

I must say this article has been in the works for longer than you might imagine and was quite challenging to write. It takes a great deal of effort to put together such a profound piece of drivel and I hope I got the balance right. I find both solace and comfort in the idea that I'm not nearly as stupid as many of the people who occupy this world. Thank goodness the bar has been set so low because it creates a situation where it becomes much easier to compete. Sadly, this double edge sword leaves us living among people that are not too bright and unburdened by the worry of reality. I must admit it is rather ironic we who claim to see the bigger picture often envy their happiness?
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As a final thought to ponder below is a link to; Always Look on the Bright Side of Life - Monty Python's Life of Brian  

Saturday, September 8, 2018

China's "Postal Rate Break" Feeds Into Fair Trade Issue!

Sewing Needles On E-bay For $0.99
The landscape of retailing in America can take us down an interesting path when buying something as simple as a needle and some thread to sew on a button. Most of us have not purchased a simple needle and thread for a long time, maybe decades, maybe never. These are not expensive articles to manufacture but what is shocking is that you can buy them cheaper from a company in China and have them shipped directly to your home for far less than you can buy them here in America. The question is how or why. The needles pictured on the right can be bought online from a seller in China for $0.99 or $3.99 from a seller based in "LA, United States" at your local store you pay around $5. This means local stores here in America can’t compete which results in more retail jobs disappearing or just hanging on with lower pay and benefits being reduced. Also when foreign online sellers pluck a sale away from American brick and mortar stores they are not collecting or paying any sales tax or income tax like importers located in the USA. 

Companies have repeatedly pointed out the rates that have been set by the United Nations Universal Postal Union or UPU currently allow a small package to be shipped to a customer in America from China for far less than it can be shipped across town. Reuters reports that the U.S. State Department said it would push for foreign postal carriers to pay the U.S. Postal Service more to deliver small parcels within the United States. It added that if insufficient progress is made with the UPU the U.S. Secretary of State will make recommendations for future action which would likely include adopting self-declared rates. The rates have been a longtime issue and a source of complaints from UPS, many American companies shipping here in the states and even Amazon.  They have rightfully claimed that because they give foreign companies a huge advantage in pricing they are unfair and harm American businesses. 

In the latter part of 2016, the National Review ran a piece calling for America to stop subsidizing foreign postal systems for both economic fairness and national security. It stated the Postal Regulatory Commission was slated to determine whether the new proposed rules of the UPU were consistent with the mission of the U.S. Postal Service. While it is difficult to find what was decided or how anything has yet to change the article made it clear what the commission decided could go a long way in either making us all safer and more secure.  Currently, the international postal-package system enables terrorists, drug dealers, and Chinese e-commerce companies to abuse us at our expense. A big problem here is the proposed new rules mirror the old rules with a few minor changes meant to mollify the growing number of critics here in America.

Under the current rules set by the UPU, the charges the USPS is allowed to charge foreign postal services to deliver packages they send into America (called terminal dues) are set ludicrously low for certain countries, among them China. Under UPU rules China, the world’s second-largest economy currently enjoys the same break on terminal dues as do Gabon and Botswana. This means that the USPS actually charges China's post office less to deliver a package from China into the U.S. than it charges a U.S. business or customer to deliver a similar size package within the 48 states. The post office is losing money on every package it delivers from China and then has to pass the cost on to its American customers and U.S. taxpayers.

Adding to the insanity of working under the rules set by the UPU the USPS is compelled to deliver all packages from foreign sources even if they have not passed any customs inspection, and even if the post office has no information about what the package contains or where it originated. This means under UPU rules, our post office has become a mule for international drug traffickers. As the traffic in international postal packages has exploded in the past decade due to e-commerce, so too has the ability of drug traffickers to flood the U.S. and the world’s postal systems with packages containing flakka, fentanyl, and other drugs. Again, much of this is flowing out of China. This is not just a gift to the world’s drug dealers but opens the possibility that terrorists could also exploit this flaw in security.

Why this has gone on for so long is disturbing but President Donald Trump issued a memorandum on "terminal dues," or rates one country's postal service pays another for finishing an international delivery and the State Department has finally signaled changes are necessary. Trump's memo states, "The current system of terminal dues distorts the flow of small packages around the world by incentivizing the shipping of goods from foreign countries that benefit from artificially low reimbursement rates," It is not clear if this memorandum is tied to recommendations, not yet made public, of the postal task force Trump set up this year to examine USPS's business and linked to a study of the low delivery rates Amazon currently enjoys.

The bottom-line is the UPU doesn’t care whether its rules pose a threat to the U.S.or other countries but internal postal regulatory commissions should. America should rapidly move to declare the UPU status quo isn’t consistent with the mission of the USPS in terms of postal rates and preserving our economy, our health, and our national security. Such a ruling would no doubt set off a firestorm at the UPU and within the U.S. State Department which has until now largely turned a blind eye to the dangers inherent in the international parcel-post system, for fear of creating a diplomatic brouhaha but it is the right thing to do.

Friday, September 7, 2018

"Job Friday" Highlights The Role Of Jobs In The Economy

The first Friday of each month is typically the day when the BLS releases its latest jobs report that is watched closely by economists and investors. The report is seen as a key indicator of whether the American economy is on track and where it is headed. Within the numbers are subtle reminders that Americans don't just want jobs, they want "good jobs" and this means full-time work that pays well and has benefits. Today few occupations are totally secure from the wave of labor-saving technology currently in the pipeline. This means it is the job of those we have sent to Washington to create or paint a vision that shows how America can integrate labor-saving devices into a job-creating bonanza or at least an economy that is sustainable going forward.

Amazon Moving Rapidly To A Robot Work Force
Many Americans feel Washington has failed in some way or another to protect jobs. For decades policies have allowed or even encouraged manufacturing jobs to leave the country. Recent reports make it increasingly clear that automation is not going away and minimum wage policies only accelerate and drive the trend of replacing expensive human workers with robots. Amazon the behemoth retailer known for cutting prices and exploiting brick and mortar retailers often boast of its cost-saving move to utilize more robots and cut human jobs. The fact that last year more than 7,000 stores closed their doors, more than twice the amount of stores that opened in the same time period is not a reassuring sign.

Several new technologies headed in our direction scream more economic disruption ahead. One writer I follow has pointed out on more than one occasion how self-driving vehicles is a game changer. Self-driving semi rigs able to safely maneuver and fill the nations interstate highways during the night when traffic is light will reduce daytime congestion but also greatly reduce the number of people paid to drive these vehicles, this is a major occupation that pays relatively well. The ramifications of self-driving vehicles will extend into areas such as taxi jobs and potentially change the relationship most American's have with their automobile a mainstay of modern life in this country. Imagine not having to own a car or reducing the number of automobiles in your family because a safe and secure ride is available at the push of a button.
The fact is in my area while we continue to hear about unemployment at sixteen-year lows many people remain underemployed and are struggling. The average American has good reason to worry not only about their job but the future opportunities available for their children. Let me make it clear, robots taking our jobs will bode poorly for the huge majority of society. The idea that those ultimately left with the decision as to how to divide the economic pie will be generous or fair is a little naive. History shows the ruling class tends to tilt the rules in their favor. Soaring economic inequality is already a major issue and the divide is most likely going to grow ever wider. When it is pointed out that entitlements are about to explode the deficit in coming years logic dictates the nation can no longer delay addressing this issue. While very important to voters creating good quality sustainable jobs is an area where Washington has failed to excel. 

Is A Robot Coming For Your Job?
Without jobs a glimpse into the future becomes very grim. The fear of being replaced by a robot or seeing your job being outsourced or eliminated is on the rise. Rest assured when push comes to shove those displaced from the job market are only able to scrape by will find they are only given enough to ensure they remain docile and behave. If it ever comes to the point where these people hit the streets in angry protest it is very likely they will be beaten into submission for the greater good, possibly by robots given the task to restore civil order. It should be pointed out that going forward those on the government dole or a guaranteed income may find they are at the mercy of a system where at any time benefits are canceled or cut.

Tied into Trump's solution to create new jobs and energize America's economy is the strong message that we must demand from other nations fairer trade policies that level the playing field. We cannot compete when other nations pay their workers little, degrade the environment, and often subsidize exports in various ways. This is a stand Trump shares with Bernie Sanders.  Like many backseat political strategist, I have grown weary of politicians failing to fulfill their promises or for that matter accomplishing much of anything. Even while we are told unemployment is at a sixteen year low and we hear companies are clamoring for workers something is definitely wrong and a series of polls indicate that a focus on job creation and the economy is where the attention of those in Washington should be.

After facing decades of stagnating or falling wages after adjusting for inflation it is little wonder why the average American feels insecure or downright betrayed. This was why many people voted for Trump, as a businessman they hoped he would have a strong real-life advantage over politicians in understanding how to create jobs. To be great a country must be economically strong. The key to any policy geared to creating jobs is getting the foot of government off the neck of small business. This means reducing the regulations strangling the nations most vibrant creator of jobs and where workers gain valuable work skills is a must. Tax reform and laws governing business must reduce the advantages mere size gives big business and its ability to destroy competition by mass alone. As it is big business will benefit most by adopting more automation and robot workers and this could bode very poorly for most workers and society in general.