Saturday, September 29, 2012

Post Office Defaults Again

The US Postal Service has announced that it will miss another payment to the U.S. Treasury, this one for $5.6 billion was due Sunday according to a report by the Associated Press. Postmaster General Patrick Donahoe said services won't be disrupted, but he sounded a cautionary note that the mail delivery agency has squeezed out all of the cost savings within its power, according to the report. One must wonder how such a large government agency fell into such disarray.

The Postal Service has been pushing for Congress to approve the necessary legislation needed to allow it to eliminate Saturday mail delivery and reduce its $5 billion annual payment for future retiree health benefits. Congress has wrapped up its session until after the November elections with no postal fix approved, this again helps keep up employment numbers and shield the public from the harsh economic realities facing America.

On Wednesday, April 25th I posted another article criticizing the waste of Saturday delivery and the stupidity of  delaying the necessary reforms,  Postal Service Reform Delayed

Thursday, September 27, 2012

Business Reinvetment verses New Investment

It seems that business reinvestment is not dead, the problem is that it is being done to reduce the amount of workers needed. A lack of growing demand for most products means that business has shifted its focus from growing and producing more, to cutting cost. Increasing productivity is a good thing in that it allows profits to grow and can reduce inflation, but this is a double edged sword in that it also reduced employment. Reinvestment should thus not be confused with new investment, new business start-ups tend to be far more job creative.

Today the government cut its calculation of U.S. growth in the second quarter to 1.3% from 1.7% in its third and final review, citing less consumer spending and business investment than previously estimated. Consumer spending rose 1.5% in the previous quarter instead of 1.7% as initially forecast. Business investment, excluding residential housing was revised down to a 3.6% increase from 4.2%. This trend should continue, expect consumers to spend less as business spends money in ways that reduce the numbers of high wage workers needed. 

On Sept.8th 2012, I posted a blog about how demand drives investment. When will policy makers begin to understand that demand drives investment, it is not about confidence, it is about lack of demand. Call it want you want, CEOs are unenthusiastic and banks have little incentive to loan money on half backed ideas for which their is little demand. It is becoming apparent to many that the financial system has become distorted and dysfunctional.  People are loaning money to governments and banks for five years with negative interest.  This is at a time that there is little demand for loans even at zero interest rates.

Those that have saved for years and had planned to retire on the interest are being forced to receive meager and historically low interest returns on their savings while inflation lowers their buying power. When it comes to the supply and demand part of the economy,  you would be surprised to the amount we can cut demand. Americans are so wasteful that often many of these cuts have little impact on their quality of life. Sometimes by cutting back people discover that "less is more", and that life is less cluttered. Till true demand increases do not expect the economy to move forward.

The Support System For Cars Is Massive

It should be noted that the automobile is not a stand-alone entity, it requires a massive support system. Roads and highways, parking areas, repair facilities, and fuel stations are just a few of the parts that make up the system. Most vehicles are used on average about one hour a day, this means the rest of their existence is spent in storage. The space built into, and allowed for in this system is always based on the largest vehicle using that space, even if it occurs infrequently. The issue of how large a vehicle "needs" to be is an area that needs to be addressed and rethought. For example, the insistence by the fire department to be able to turn around a large hook and ladder truck in a single-family residential neighborhood is a bit silly.

One of the unintended consequences of urban sprawl and a design flaw of modern communities is traffic patterns that make travel less efficient. The grid pattern, used in many cities after the inception of the automobile, has been replaced by a maze, or a can of worms design within a larger grid pattern. The case made for such a pattern in our neighborhoods is that it promotes privacy, safety, a better quality of life, and that it defuses traffic. These traffic patterns, however, often make it necessary for a person leaving their home to drive for several minutes just to reach the entrance of their sub-division that may be substantially closer as the crow flies.

The argument can be made that the more time a vehicle is on the road and the greater distance it has to travel causes environmental damage using more gas and creating more pollutants, this would call into question the logic and benefits of such patterns. Incentives to vary times of travel thus reducing "rush hour" congestion, expedites the flow of traffic adding to efficiency. Increased efficiency eliminates the need for additional roadways and traffic controls, it would also save fuel and reduce pollution. Our goal should be to keep at a minimum the square footage of pavement necessary to accomplish efficient movement of traffic.

Traffic problems are often complex and the simplest changes can make a big difference.  Sometimes it comes down to something as simple as to, how or where cones are placed at a work area.  All inexpensive solutions to removing the "choke points" should be explored. The tendency to super-size is not always a good thing. I have written about this subject in my book, "Advancing Time". Our understanding of cities and people when dealing with urban planning is far from complete. In an ever-faster changing world, trying to apply a "one size fits all" strategy risk leaving everyone feeling poorly fit. We must carefully create homes for the "animal" known as man, instead of high maintenance concrete environments for the machines that serve us. 

Footnote; I'm not in any way advocating doing away with cars or trucks, they are important and add to our quality of life. I only want to point out that the support system for the automobile makes our imprint on the planet much larger then you might want to think. What's in my energy footprint? I fear the answer is far more than what most of us would like to admit. Below is a post concerning the true size of our footprint,

Tuesday, September 25, 2012

Mitt Romney and "The Millionaire Mind"

A thought occurred to me this morning, I recently saw some pictures of Mitt at home eating off a paper plate and how he goes about life. One of his business partners went so far as calling Mitt "cheap", I would use the term thrifty,  not being wasteful is a good thing. Ironically, the lifestyle that Michelle and Barack Obama appeared to have chosen to pursue reeks of the nouveau riche and elitism. The private concerts in the White House, lavish vacations at taxpayer expense, and their use of Presidential perks have not gone unnoticed at a time that the country struggles. This is an artical that I posted on June 7th 2012, it seems to describe Mitt Romney and his style. The article is as follows:

The Millionaire Mind

What have you been reading?  I was moving around some books the other day and opened a book by the name of “The Millionaire Mind”. The author Thomas Stanley also wrote the book  “The Millionaire Next Door” which was a best-seller a few years back. The people he studies are financially secure. This book takes a deeper look into how these people think and make their money.

Far from what many of us might think his studies and research show that millionaires are a real down to earth group of people, the kind that made America famous. He looks at where they live, their favorite leisure activities, and the different factors that make them wealthy. Somewhat obscure and not just off the press this book is an excellent read and a manual for those of us wanting to get ahead.                                                                                        

 Thomas Stanley reminds us you can’t judge a book by its cover, and that the fella you see mowing his yard or sitting next to you as you fly in coach may just be a millionaire. The book is about making and saving money the old fashion way, not through winning a lottery. This is a far more realistic look at the rich and wealth in America then the hyped and unhealthy fixation of the media on billionaires.

Monday, September 24, 2012

Afghanistan, Peace With Honor?

The situation developing in Afghanistan is beginning to remind me of the American exit from Vietnam, just a bit more mild and less rushed. With America scheduled to withdrawal troops from Afghanistan by the end of 2014 we must ask, is this really "peace with honor" all over again?  Many of us remember the vivid video of Americas exit from Vietnam so many years, planes lifting their wheels off the tarmac with bullets whizzing by, enemies hot on our tail. It was not our greatest moment, we stayed too long.

Recently Australia's former top commander in Afghanistan Retired Major General John Cantwell said of the war effort there "I think it's a very noble and brave and courageous experiment, but I think it's also not going to end well". Cantwell has also criticized how politicians are portraying Australia's role and success in Afghanistan, describing the comments as "misleading". His latest criticism of the war comes as Australia prepares to begin handing over control for local security in Uruzgan province to Afghan forces.

Afghanistan is a deeply divided country, it's riven by tribal enmities and hatreds, it's divided geographically, it's divided by economy, it's divided by politics, it is a mess and it's a mess which will be in the same terrible condition for decades to come. Cantwell went on to say "We are deluding ourselves if we think we're going to turn Afghanistan into some little democracy, some gleaming bastion of westernized ideas in that part of the world. It's just not going to happen." Mr Cantwell has described Australia's mission in Afghanistan as "elastic", given that troops are now involved in a "nation-building" program which is not what they were originally sent there for.

It is difficult to be optimistic that Afghanistan will be able to get its act together, this includes its government not only being able to function, but also being able to defend itself. It appears that this may be the a soft bottomed or murky road that America is destined to go down. It could be said that we will continue pouring money into the abyss in an effort to create the illusion that we have not "cut and run". The case could be made that we are fulfilling the minimum we promised, our heart is no longer behind the effort. This is being done so that it appears we kept, or made an effort to merely live up to the commitments we have made.

 Footnote; This post dovetails with many of my recent writings. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged. A more recent article on Afghanistan can be found below.

10 Things Apple Won't Tell You

This is the bulk of an article that appeared on MarketWatch on Aug. 7, 2012. It was penned by Quentin Fottrell who writes for can chase the article down but this will give you the general idea of its message.My comment is at the bottom with reference to a post I wrote some time ago

           10 things Apple won’t tell you

1. “Our customers are worn out.” All that initial excitement over the first iPhone or iPad has quickly given way to what analysts are dubbing “upgrade fatigue”—with even Apple’s most loyal customers upset about the steady stream of newer models 
2. “Be careful of that app.” Smurfberries—that virtual red fruit that’s the primary source of nutrition for Smurfs—may sound like cheap fun, but costs can add up. Madison Kay, an eight-year-old from Rockville, Md., unwittingly spent $1,400 buying Smurfberries while playing the game “Smurfs’ Village” 
3. “We’re getting in the way.” Checking an occasional Facebook update via iPhone during dinner is the least of some couple’s worries. One in five people reach for their phone as a 21st Century replacement for the post-coital cigarette 
4. “You may spend more with our devices.” Not only do Apple’s products tend to be pricier than those of competitors, people spend more using them. The average iPhone owner, for example, spends over 10% more on their monthly bills than other pre-paid smartphone users—$90 versus $81
5. “We need another game-changing gadget.” Upgrade fatigue isn’t the only thing critics dislike about Apple’s product rollouts; some say the new products aren’t new enough. Investors are growing impatient with Apple’s pipeline 
6. “The iPhone is overpriced—even compared to the iPad.” The iPhone costs hundreds of dollars less than the iPad, but Apple has much higher profit margins for the phone than the tablet, experts say. Here’s how it breaks down: Apple earned gross margins of up to 58% on its United States iPhone sales between April 2010 and March 2012 and margins of 23% to 32% on the iPad 
7. “Don’t be fooled by our soft sell.” When Carmine Gallo recently walked into the glass-fronted Apple Store in Pleasanton, Calif., the “concierge” wanted to talk to his two children about what Disney movies they could get on the iPad 
8. “Our features are falling behind.” Some consumers want Apple’s iPhone to follow the Android market’s lead by bringing out bigger screens. Nancy Batchelor, a teacher who lives in Washington D.C., recently gave up her iPhone because it was too small. “I seriously can’t read anything on that phone,” she says. Batchelor has plenty of other options to choose from that have larger screen, Samsung’s SII has a 4.8-inch display—dwarfing the iPhone’s 3.5 inches 
9. “We’ll hook you for life.” Storing digital content like movies, music and books on Apple’s “ecosystem”—the company’s compatible suite of hardware and software—may lock in customers for life. (that is the plan) 
10. “Our fans don’t care if we screw up.” Of course, many customers are happy to be part of Apple’s global community: A Facebook page, “Fans of Apple,” has over 935,000 members. And when it comes to controversy about or criticism of the company, experts say the company’s loyal fan base often have a blind spot. Apple’s marketing encourages this tribal following, industry pros say. The company’s borderline “fairytale” or “religious” language also helps stir up passionate support for the brand and upsets people when apple is criticized, says Lindstrom, the branding expert and author, who adds, “Apple knows how to inspire its customers.” Case in point: the company’s website contains this statement about the third incarnation of its tablet computer: “The iPad is a magical window where nothing comes between you and what you love.”

MY  COMMENT;  It appears that Apple continues to roll on like a juggernaut, nothing has been able to take the shine off this company. Apple has even enlisted the courts and legal system to fuel its advance, by attacking rivals and trying to ban competing products from the market place. I continue to be amazed at how much American taxpayer money is spent buying products from this "American company" that does all its manufacturing overseas. Schools, the military and government have poured massive amounts of  our tax dollars into Apple products.  Please take time to read my March 14th post, tHE pOISON aPPLE

Sunday, September 23, 2012

Obama Phone? It is not a myth!

The Obama phone, have you heard of it? No it is not a myth, just bing it! This explains why we see so many people that would not appear to have a dime in their pockets able to be walking along or driving down the street with a cell phone up to their ear. What exactly is the free Obama phone? It is a program that is meant to help the financially unstable who cannot afford access to a cell phone. It seems that communication should not be limited to people in relation to what they are able to afford. This federal program is a perfect example of a government program run a muck, and a $2.2 billion lesson in what happens when Washington’s good intentions go bad. The Lifeline program started decades ago to help low income families have access to land lines has been expanded. Over the years the cost of cell phones and cellular service has decreased and the program has been extended to cover cell phones.

So who qualifies? It seems that if you, or members in your household are, receiving the following benefits you automatically qualify for the Lifeline program. Those interested in the program must have an income of less than 135% of the Federal Poverty Guidelines or about $22,350 per year for a family of four.
  • Food Stamps or Supplemental Nutrition Assistance Program (SNAP)
  • Medicaid
  • Supplemental Security Income – commonly known as SSI
  • Health Benefit Coverage under Child Health Insurance Plan (CHIP)
  • The National School Lunch Program’s Free Lunch Program.
  • Low-Income Energy Assistance Program – LIHEAP
  • Federal Public Housing Assistance ( Section 8 )
  • If you are a low-income Eligible Resident of Tribal Lands
  • Temporary Assistance to Needy Families – TANF
The best way to know if you qualify is by filling out an application for a Lifeline provider in your state. Lifeline is a government sponsored program, but who is paying for it. Some people claim that the government is using taxpayer’s money to run this program, however, the claim is false. Universal Service Fund (USF) which is administers by Federal Communication Commission along the Universal Service Administration Company (USAC), pays for the Lifeline phone assistance program.The Universal Service Fund (USF) was created back in 1997 by Federal Communication Commission in order to achieve the goals set by the Congress under the Telecommunication Act of 1996. According to the Act, service providers are obliged to contribute a portion of their interstate and international telecommunications revenues.  OK, SO IN EFFECT IT LOOKS LIKE THE SAME PEOPLE THAT PAY TAXES, ARE PAYING FOR IT, IN A BACK HANDED UNDER THE TABLE SORT OF WAY.

It is written that if you are one of those people who have lost their jobs due to recession, then probably you’re having hard time with your daily expenses. On top of that, paying telephone bills will add extra pressure on you. However, you can get rid of this extra burden if you apply for the Lifeline Assistance Program run by the government. With the turmoil in the economy, more and more people are being eligible for this program and around eight million people have already signed up with this program up to now. In order to avail this facility you need to contact with the provider of this service. Government has approved many companies at national and regional level to provide this service to the eligible people. Currently, the government is thinking of providing free wireless internet service to the people under this program instead of old-fashioned land phones. It’ll be a great effort if government includes this service in Lifeline program.

Just how much would one of these free government cell phones change your life?
  • An employer can more easily reach you with a job offer if you have a free government cell phone.
  • You can you stay in touch with your doctor and other emergency medical professionals more easily with a free government cell phone.
  • A free government cell phone can help you keep in touch with family and other loved ones.
And the good news is that while a government-assisted cell phone provides you with up to 250 monthly minutes to go with your free cell phone. While that’s a generous contribution from the government, it’s really barely enough airtime to get by on for a month. But good news! You can easily buy more minutes for your phone from each of the major Lifeline cell phone companies. And if you use a promotion code, you can get some very good deals.

Abby Schachter has penned a post titled “Free cell phones are now a civil right.” Suffice it to say, she is none to happy about the free cell phones by the government program. She is particularly incensed that some are now calling a free cell phone a “civil right.” But who ever said it’s a civil right? Unfortunately, it was Gary Carter, manager of national partnerships for Assurance Wireless, whom she quoted in her blog post: “The program is about peace of mind,” Carter said. “It’s one less bill that someone has to pay, so they can pay their rent or for day care. … It is a right to have peace of mind.”

                                    To those who pay their fair share I ask, will this ever stop?

Footnote; The post below is a follow up to this article, it goes into just how large the program has grown. As always comments are encouraged and feel free to explore the archives for other post that might interest you.


Saturday, September 22, 2012

10 Things Mitt Romney Should Say

These are ten things Mitt Romney should say and make perfectly clear if he wants to get elected.

1      Politicians have often rushed to offer infrastructure like bridges but fail to address the massive waste in government spending projects as they tear up and replace perfectly good sidewalks, the jobs government creates are the wrong kind of jobs. Mitt Romney should focus on this issue, a "Government Centered Economy" is one that does not work. All jobs are not created equal, we need real jobs!

2      The healthcare bill Romney helped create differs greatly from Obamacare, several big differences exist. "Romneycare" covered only one state, not the whole Nation, it is fairly easy to leave the state. Massachusetts has a far healthier population then America in general, obesity and poor unhealthy minorities are much less of a problem to drive cost skyward. He should remind voters that he was working within a very liberal state solidly controlled by Democrats, in this case the bill that was passed was largely embraced and not crammed down the peoples throats. For the average American that pays for healthcare, prices have soared.

3      The entitlement societies that have developed over the last several decades were created on the back of technological advantages, industrial revolution, capital accumulated from the colonial era, and the domination of global finances. They were built on the assumption that those advantages would continue in both Europe and US, now reality has raised its ugly head and it is becoming apparent that this is unsustainable. The entitlements and promises that have piled up and have become overwhelming. While the populations of Europe and America were led to believe the good times would never end their core capital, technological and productive advantages have eroded and manufacturing jobs have gone elsewhere.

4      For years Americans were led to believe that they were moving up the value chain, while in reality the opposite was true. The debt fueled prosperity and consumption growth led many to believe that their future would be secure if they moved towards "higher value adding activities" than the emerging and developing countries. This has proven false, instead low skilled service jobs have replaced them and have removed the supports from our debt fueled prosperity showing it to be unsustainable, and we must now minimize that damage.

5     That he is an excellent CEO that understand business and money, these are qualities that are needed to clean up and set America's economic house in order. A strong America and a safe America cannot exist if the country is financially weak. This is not only from a military standpoint but includes those that depend on entitlement programs like social security and medicare. While we do not need to love him, we do need a President that has these qualities. The Presidency should not be a popularity contest.

6     Claims that Obama saved the auto industry with his government bailout are far overblown. A far better and healthier GM would exist today if GM had gone through bankruptcy. Bankruptcy does not mean going out of existence, many airlines have gone bankrupt and reorganized, we see their jets flying overhead everyday. Sad fact is the American economy is supported by a pool of debt and deficit spending, six trillion dollars of it over the last four years. This equivalent to a staggering 18,000 dollars for every person in America. Can your family write a check today to repay its share? The coming years appear no better.

7     Yes, he has made a great deal of money, and he would of made a great deal more had he not become Governor of Massachusetts and spent so much time setting the Olympics straight for America. Mitt Romney has made enough money and has since given back to his country. Has he protected his wealth for both himself and his family? Yes, wouldn't you?

8      He pays the income taxes as the law requires. He does not set the tax rate, that job has fallen on Congress. Tax policy is a major factor in determining how people invest and spend their money. The tax code must be "simplified and cleaned up". At the same time he should pledge that he would not appoint as Secretary of the Treasury a person guilty of cheating on his income taxes. Yes, I'm talking about Obama and his appointment of Tim Geithner.

9     America and the world needs to establish a longer vision of our future. We must begin to "conserve", the world must begin to face the fact that its resources are limited. The development of the planet is maturing, we need to move the world in the direction of being a kinder and more gentle place. We must consider that less can be more, and that quality is often better then quantity. If this is not done the world may soon become a very hostile and violent place as we are forced to fight over Earth's resources.

And finally #10     He must say that he is not George Bush! He never has been, and never will be, he is Mitt Romney. Obama is not running against George Bush. Obama cannot run from his record of high deficits. Obama has pitted Americans against each other in a game of class warfare. Our culture needs to be one of personal responsibility and opportunity, not over regulation and dependence on government. Romney must remind Americans that you cannot legislate decency.


China, "made by America"

Many Americans cringe when they think about the billions of dollars of consumer goods we import from China every month, but what makes it even more bizarre is that China is an American made product. Decades ago America started down a perilous path to build China into a world power. This was driven by a  pathological fear of  Russia and the Kremlin’s atheism. Because of this America sought a counterbalance in the region. Central to this effort was offering the prospect of economic incentives to China. We combined this with a hardline military response to communist aggression. Ironically, it was China’s communist longevity the Washington wise men should have feared more.

China Is An American Created Export Machine
In our arrogance and efforts to control the world, we greatly underestimated the Chinese leader's ability to bend our goals to fit their needs. We also did not consider how such an underdeveloped nation would be able to retain an anti-American attitude as they took advantage of a system where they reinvested their profits and bought our debt. This gave them influence and sway over our future policies. Few Americans ever thought China would rapidly grow to challenge America economically and worse yet gain massive influence across the world.

To support China’s economic growth and over 1.3 billion people an export machine has developed, absorbing the products created by their export agenda. China's output has resulted in many industrialized countries experiencing a decline and stagnation, this includes those in Europe. Because of low production cost, and little regulation, jobs began to be shifted and work "outsourced" to China. Disloyal multinationals are now shipping their products great distances from China to the same infrastructure that they have abandoned and left with excess capacity.

Back in the 1970s when MAD (mutually assured destruction) and the communists' stated goal of global domination defined much of international politics the US foreign policy initiative aimed at splitting China from the USSR was an obvious choice. To separate China from Russia by strengthening our ties with China, and help develop the country made sense. For straightforward geopolitical reasons America went down this path, but the path became a slippery slope, a slide greased by greed and short-term self-interest. Those who let this nightmare get out of hand should have been forewarned, "be careful what you wish for."

Footnote; While many Americans think China is massively strong reality shows many flaws. The post below delves into some of them.

Saturday, September 15, 2012

QE 3, No Change, just More Smoke and Mirrors

After five and a half trillion dollars of stimulus during the last four years Ben Bernanke is again pushing on the string. On Thursday he announced the start of QE3. I find myself camped out with those that feel troubled, noting that each time the Federal Reserve adds liquidity to the system it produces less results and more negative side effects. While one might argue that it will help reduce unemployment at the margins, this policy cuts both ways, causing offsetting damage to savers.

QE 3 may have begun, but it is far from an answer to all our woes. Yes the stock market has continued to move up as more savers are forced to move to riskier investments in an effort to protect their assets from inflation.and the dropping dollar. If markets turn south these investors will be crushed. With the dollar moving lower foreign money is less likely to move to America or buy our bonds. The American dollar is the world wide reserve currency, if money begins to move offshore at an accelerated rate this could spell disaster for America.

The fact that Ben Bernanke is continuing on this course make one wonder, what does the Fed know that we don't?  How afraid are they of the economic clouds on the horizon?  Despite a media that is trying to put a positive spin on the economy as the Presidential election and the "fiscal cliff" approaches many Americans and much of the world is mired in an economic morass. Do not be surprised if things get much, much worse.                                

To better understand my concerns, please see my August 12th post; Low Interest Rates Distort The Economy


Social Security Disability Runs Amuck!

Social Security is so overwhelmed by disability claims that some officials are awarding benefits with little review of the applications. People making bogus claims are bilking the American public out of billions of dollars, this is adding to the program's financial problems as it edges closer to the brink of insolvency. Congressional investigators say in a new report that in more than a quarter of the 300 cases reviewed decisions to award benefits "failed to properly address insufficient, contradictory or incomplete evidence." In many cases, officials approved disability benefits without citing adequate medical evidence or without explaining the medical basis for the decision.

The judges are expected to rule on at least 500 cases a year, with one judge deciding an average of 1,800 cases a year for three straight years, the report said. It appeared that administrative law judges struggling to reduce backlogs didn't take the time to review all the evidence, the report said. "The administrative law judges are not looking at the cases because the pressure from Social Security is to get the cases out," said Sen. Tom Coburn of Oklahoma, the top Republican on the subcommittee. "I think you could flip a coin for anybody that came before the Social Security commission for disability and get it right just as often as the (judges) do."

Social Security has been working for years to reduce a huge backlog of disability claims. A spokesman said, "We share the subcommittee's concern that a small number of judges have failed our expectations with regard to a balanced application of the law, proper documentation, proper hearings and proper judicial conduct." He added, "We recognize the need for further improvement and are working hard toward that goal." This flood of applications has strained the disability program's already troubled finances. Disability claims have increased during the great recession because many people who worked despite their disabilities have lost their jobs.

Social Security's disability trust fund will run out of money in 2016 without congressional action, and leave the program unable to pay full benefits. According to the trustees who oversee the program, they are asking  Congress to shore up the disability system by reallocating money from the retirement program just as they did in 1994. This however would further weaken the retirement system which already is due to become insolvent. Take this as another red flag, this again shows how government bureaucrats fail to get the job done. Hard working Americans should be outraged, as they watch those to lazy to work or just wanting "a little extra money" waiting by the mailbox to get "paid".

Thursday, September 13, 2012

A Time For Action, 1980?

In his book "A Time For Action" written in 1980 William Simon, a former Secretary of the Treasury tells how he was "frightened and angry".  In short he sounded the trumpet about how he saw the country was heading down the wrong path. William Simon (1927 – 2000) was a businessman, and a philanthropist. He became the Secretary of the Treasury on May 8, 1974, during the Nixon administration and was reappointed by President Ford and served until 1977.

I recently picked up a copy of the book that I had read decades ago and while re-reading it I reflected on and tried to evaluate the events that brought us to today. As often the future is unpredictable, looking back, it is hard to imagine how we have made it this long without finding long-term solutions and addressing the concerns that Simon wrote about so many years ago. Back then it was about billions of dollars of debt, today it is about trillions of dollars. It appears that something has gone very wrong.

Do Not Underestimate The Importance Of The Reset By Paul Volcker
By the end of the 70s inflation started to soar. Only by taking interest rates to nose bleed levels was then Fed Chairman Paul Volcker able to bring inflation back under control. Paul Volcker, a Democrat was appointed as Federal Reserve chairman by President Carter and reappointed by President Reagan. Volcker is widely credited with ending the stagflation crisis where inflation peaked at 13.5% in 1981. He did this by raising the fed fund rate which averaged 11.2% in 1979 to 20% in June of 1981.  This caused the prime rate to hit 21.5% and slammed the economy into a brick wall. This also effected and shaped the level of interest rates for decades

Rates Today Are Ready To Fall Off The Chart!
This action and the increased interest rates in following years is credited by many to have caused  Congress and the President to eventually balance the budget and bring back some sense of fiscal integrity and price stability to America.  As the debt from the Vietnam war and soaring oil prices became institutionalized we moved on. Interest rates slowly dropped and the budget came under control. In recent years spending has again started to grow and at the same time taxes have been cut. This has slowly occurred over years and been ingrained in the system.

The path has again become unsustainable and many people will be shocked when the reality hits, this is not the way it has always been. Today many Americans feel just as frightened and angry as Simon did so many years ago. America has kicked the can down the road, failing time and time again to face the tough decisions, and failing as well to take action. Part of the problem is the amount of dept has grown so large that we can no longer imagine or put a face on it. The day of reckoning may soon be upon us, how it arrives is the question. Many of us see it coming, but the one thing we can bank on is that after it arrives many will be caught totally off guard.

Footnote; This post dovetails with many of my recent writings, for more I might suggest reading the article below. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged.

Inflafion is Surging!

The Labor Department announced that U.S. wholesale prices jumped a seasonally adjusted 1.7% in August, mainly because of higher fuel prices. Excluding the volatile categories of food and energy, so-called core wholesale prices rose a much smaller 0.2%. Economists surveyed had predicted a 1.5% increase in the overall producer price index and a 0.2% rise in core PPI. The energy index surged 6.4%, led by a 13.6% increase in gasoline and an 11.9% rise in natural gas. The wholesale cost of food, meanwhile, rose a sharp 0.9%, as the price of eggs and dairy went up.

As inflation jumped, applications for U.S. jobless benefits jumped by 15,000 to a seasonally adjusted 382,000 in the week ended Sept. 8. About half the increase related to tropical storm Isaac, the Labor Department said. This is the highest level of claims since mid-July. Last month job creation slowed and many people left the work force. Many of the jobs created in the last few years are low paying, this means that incomes are not keeping pace with rising cost. Housing cost remain tame, when they begin to rise, expect concern over inflation to explode. These trends do not bode well for the nation going forward.

Saturday, September 8, 2012

Demand Drives Investment!

When will they begin to understand that demand drives investment, it is not about confidence, it is about lack of demand. Call it want you want, CEOs are unenthusiastic and banks have little incentive to loan money on half backed ideas for which their is little demand. It is becoming apparent to many that the financial system has become totally dysfunctional.  People are loaning money to governments and banks for five years with negative interest.  This is at a time that there is little demand for loans even at zero interest rates.

It makes little sense to invest in constructing new buildings or buying new machinery when little real demand exist. The idea of economic growth is based on getting a return on savings and investments in the future, today we live in an environment that is not encouraging anyone to take that risk. Those who accept this risk must be rewarded. This means government must address the structural issues holding back such investment and the Federal Reserve must abandon the policy of using artificially low interest rates to drive the economy forward.

Those that have saved for years and had planned to retire on the interest are being forced to receive meager and historically low interest returns on their savings while inflation lowers their buying power. When it comes to the supply and demand dynamics of the economy,  you would be surprised to the amount we can cut demand. Americans are so wasteful that often many of these cuts have little impact on their quality of life. Sometimes by cutting back people discover that "less is more", and that life is less cluttered. Till true demand increases do not expect the economy to move forward.

FOOTNOTE; this dovetails with another post concerning the dismal job market and why businesses are not hiring;