Thursday, February 26, 2015

Greece Is A Problem That Won't Go Away

Greece A Small Economy With A huge Debt
Recently Greece has become rather obnoxious and unruly to the members of the euro-zone who have continually loaned it the money to stave off default. It appears that at least inside Greece they have accepted the argument that they are the victims of lenders willing to allow the country to fall deeply in debt. The elections have placed in power Greece's new 40-year old Prime Minister, Alexis Tsipras and left many euro-zone watchers stunned.  His far-left Syriza party took 149 seats, and along with a junior coalition partner it now holds a governing majority.

It is clear the people of Greece have decided they no longer want an agenda of austerity and what they see as destruction. This has huge ramifications on those holding Greek debt. Syriza supporters are elated and have responded with what might be described as "revolutionary" zeal. Greece's new government has a big plan. It is deeply opposed to German Chancellor Angela Merkel's "Austerity" package of spending cuts and social security reform. After making the key issue during the election a promise to renegotiate Greece's massive debt obligation the new government also promised  it will  increase government spending, believing that more government is the answer to Greece's sputtering economic malaise. Sadly, a conflict exist within Greece, it seems the Greeks deplore paying taxes to the government that provides its society with goods and services.

It is important to note that the people of Greece are not alone. All across Europe far-left groups are taking notice and hailing Syriza's rise to power as a watershed mark in how governments will deal with the economic malaise  that has settled over the continent. When the new coalition in Greece took a hard line towards austerity and how it will negotiate with "the troika" it opened the door to speculation about broader effects and how it will effect the euro-zone. As some members advise caution and concessions others disagree. A key player, German Chancellor Merkel has taken a hardline and said that she is willing to accept a Greek exit from the EU. It is important to remember the Greek economy contributes only a very small portion of the overall euro-zone GDP.

While many people in America look on and see this as another example of Greece again failing to live up to its promises many people involved in this unfolding drama believe this is a moment of systemic change. Below is an "open letter" to German citizens in which the new Greek Prime Minister recently made an appeal to the Germany people. To better understand the position of Greece it is important to read this letter that was published on Jan.13 in Handelsblatt, a leading German language business newspaper.

Most of you, dear Handesblatt readers, will have formed a preconception of what this article is about before you actually read it. I am imploring you not to succumb to such preconceptions. Prejudice was never a good guide, especially during periods when an economic crisis reinforces stereotypes and breeds biggotry, nationalism, even violence.
In 2010, the Greek state ceased to be able to service its debt. Unfortunately, European officials decided to pretend that this problem could be overcome by means of the largest loan in history on condition of fiscal austerity that would, with mathematical precision, shrink the national income from which both new and old loans must be paid. An insolvency problem was thus dealt with as if it were a case of illiquidity.
In other words, Europe adopted the tactics of the least reputable bankers who refuse to acknowledge bad loans, preferring to grant new ones to the insolvent entity so as to pretend that the original loan is performing while extending the bankruptcy into the future. Nothing more than common sense was required to see that the application of the 'extend and pretend' tactic would lead my country to a tragic state. That instead of Greece's stabilization, Europe was creating the circumstances for a self-reinforcing crisis that undermines the foundations of Europe itself.
My party, and I personally, disagreed fiercely with the May 2010 loan agreement not because you, the citizens of Germany, did not give us enough money but because you gave us much, much more than you should have and our government accepted far, far more than it had a right to. Money that would, in any case, neither help the people of Greece (as it was being thrown into the black hole of an unsustainable debt) nor prevent the ballooning of Greek government debt, at great expense to the Greek and German taxpayer.
Indeed, even before a full year had gone by, from 2011 onwards, our predictions were confirmed. The combination of gigantic new loans and stringent government spending cuts that depressed incomes not only failed to rein the debt in but, also, punished the weakest of citizens turning people who had hitherto been living a measured, modest life into paupers and beggars, denying them above all else their dignity. The collapse of incomes pushed thousands of firms into bankruptcy boosting the oligopolistic power of surviving large firms. Thus, prices have been falling but more slowly than wages and salaries, pushing down overall demand for goods and services and crushing nominal incomes while debts continue their inexorable rise. In this setting, the deficit of hope accelerated uncontrollably and, before we knew it, the 'serpent's egg' hatched – the result being neo-Nazis patrolling our neighbourhoods, spreading their message of hatred.
Despite the evident failure of the 'extend and pretend' logic, it is still being implemented to this day. The second Greek 'bailout', enacted in the Spring of 2012, added another huge loan on the weakened shoulders of the Greek taxpayers, "haircut" our social security funds, and financed a ruthless new cleptocracy.
Respected commentators have been referring of recent to Greece's stabilization, even of signs of growth. Alas, 'Greek-covery' is but a mirage which we must put to rest as soon as possible. The recent modest rise of real GDP, to the tune of 0.7%, signals not the end of recession (as has been proclaimed) but, rather, its continuation. Think about it: The same official sources report, for the same quarter, an inflation rate of -1.80%, i.e. deflation. Which means that the 0.7% rise in real GDP was due to a negative growth rate of nominal GDP! In other words, all that happened is that prices declined faster than nominal national income. Not exactly a cause for proclaiming the end of six years of recession!
Allow me to submit to you that this sorry attempt to recruit a new version of 'Greek statistics', in order to declare the ongoing Greek crisis over, is an insult to all Europeans who, at long last, deserve the truth about Greece and about Europe. So, let me be frank: Greece's debt is currently unsustainable and will never be serviced, especially while Greece is being subjected to continuous fiscal waterboarding. The insistence in these dead-end policies, and in the denial of simple arithmetic, costs the German taxpayer dearly while, at once, condemning to a proud European nation to permanent indignity. What is even worse: In this manner, before long the Germans turn against the Greeks, the Greeks against the Germans and, unsurprisingly, the European Ideal suffers catastrophic losses.
Germany, and in particular the hard-working German workers, have nothing to fear from a SYRIZA victory. The opposite holds. Our task is not to confront our partners. It is not to secure larger loans or, equivalently, the right to higher deficits. Our target is, rather, the country's stabilization, balanced budgets and, of course, the end of the grand squeeze of the weaker Greek taxpayers in the context of a loan agreement that is simply unenforceable. We are committed to end 'extend and pretend' logic not against German citizens but with a view to the mutual advantages for all Europeans.
Dear readers, I understand that, behind your 'demand' that our government fulfills all of its 'contractual obligations' hides the fear that, if you let us Greeks some breathing space, we shall return to our bad, old ways. I acknowledge this anxiety. However, let me say that it was not SYRIZA that incubated the cleptocracy which today pretends to strive for 'reforms', as long as these 'reforms' do not affect their ill-gotten privileges. We are ready and willing to introduce major reforms for which we are now seeking a mandate to implement from the Greek electorate, naturally in collaboration with our European partners.
Our task is to bring about a European New Deal within which our people can breathe, create and live in dignity.
A great opportunity for Europe is about to be born in Greece on 25th January. An opportunity Europe can ill afford to miss

While the above letter represents a splendid effort to re-frame the request from Greece in a positive way it does not resolve the problem of around 300 billion dollars of bad debt and the ramifications of what happens when a default occurs.  One thing is crystal clear this creates a great deal of uncertainty for the euro-zone. All eyes will now watch this slow moving drama knowing that other countries and players will want similar concessions in regard to their debt if Greece is granted relief. While I am not interested in or advocating a particular course of action I must ask how anyone or the markets will be able to interpret this mess as good news. It appears those in power will again try to devise another way to kick the can down the road remember as I wrote earlier, Greece is a problem that won't go away.

Monday, February 23, 2015

China Faces Flagging Growth

To most Americans China's economy is not front and center. It has been confirmed that China's factory sector unexpectedly shrank for the first time in nearly 2-1/2 years in January and we should not be surprised if more gloom lies ahead. This will raise expectations that policymakers will take more action to reverse this trend. The official Purchasing Managers' Index also known as the PMI, fell to 49.8 in January, China's National Bureau of Statistics said, this is just a freckle below the 50-point level that separates growth from contraction on a monthly basis. Slightly better results had been expected.

Several factors are currently negatively impacting growth in China, they include a housing slump, massive industrial overcapacity, erratic growth in exports, and a state-led slowdown in investment. China's economy has steadily lost steam in the last year with growth sinking to a twenty four year low of 7.4 percent. The downturn in manufacturing has also expanded into the country's fast growing services sector. The official non-manufacturing PMI slipped to 53.7, the lowest level since January 2014, from December's 54.1. The services sector has weathered the growth downturn better than factories, partly because it depends less on foreign demand. This sector made up about 48 percent of China's $10.2 trillion economy last year.

To revive demand, China's central bank unexpectedly cut interest rates in November after unveiling a stream of stimulus measures. Despite the steady policy support, both analysts and the IMF still expect economic growth to sag further this year to around 7 percent. In the January factory PMI, all but one of the sub-indices in the PMI fell from December, indicating entrenched weakness. Adding to the ugly report business expectations fell to 48.7 its lowest level on record. Even factory employment dropped to its lowest in nearly a year at 48.1, compared with the previous month's 47.9. New export orders, a proxy for the trade industry also fell, bottom-line little in the way of good news was evident.

In line with recent trends, the factory PMI showed smaller manufacturers which are often privately-owned were hit the hardest. A widely watched unofficial PMI by HSBC/Markit, which includes small factories, came in for January at 46.4, versus 50.3 for large manufacturers that are mostly government owned and run. All this underscores  the challenges facing China as factory profits grew at their weakest rate in two years during 2014. While China's industrial ministry said last week that it would aim to grow the manufacturing sector by 8 percent this year this is still a drop from last year's actual expansion of 8.3 percent.

The reason flagging growth is so important is that China still needs strong growth to add millions of new jobs, also a strong fear exist that China is be about to enter a rapid disinflation process. Some economists said the January reading was especially downbeat because it suggested that factories did not enjoy a usual spike in business before China's annual Spring Festival holiday that took place in mid-February this year. As to just how valid these figures are, it must be said, many people remain skeptical of the forecast and the numbers generated by China's internal government agencies.

Footnote; As always your comments are encouraged. Two other articles concerning China are listed below, also in the archives you will find several articles about this subject.

Sunday, February 15, 2015

Ukraine Was And Is A Failed State

Obama's War Is A No-Win Situation For People Of Ukraine
The euro-zone currently faces a lot of problems without jumping into a proxy war with rebels in Ukraine. I use the term proxy because without the money and backing of outsiders things would most likely go quiet. The failed and bankrupt country would most likely break into two parts with the eastern half and its people who share strong ties with Russia aligning itself with that country and Kiev, and the western oriented portion of the country drifting towards stronger ties to the euro-zone. What is the big problem with such a solution?

The whole concept of sovereign borders is a little gem promoted by those in power to galvanize the support of the people. Borders are a creation of man and not visible to the birds flying above. Much bloodshed and many wars could be avoided if the issues of regime change or borders could be handled in a more rational and constructive way, but do not expect this to happen. Borders and political control is a problem that haunts man since before the written word. President Obama and other officials have talked about the legal sanctity of sovereign borders, but in reality, this is an argument of convenience that masks deeper issues. Obama calls those in rebel-held areas "terrorist" and Putin labels them freedom fighters. When it comes down to it we and the people of Ukraine are just pawns in a sad power game. If you doubt this just ask some of the many millions of people displaced from their homes in Syria.

It is a very important starting point to remember Ukraine was and is a failed state. Sadly, Washington is trying to repaint that picture and ignoring reality, at the same time that Putin is busy facing down the West by upping his game. While Obama has pulled out all the stops to paint Putin with a brush dipped in all the bad colors Putin has gone merrily about the business of carving out a land path to Crimea. It is almost like Obama is doing everything humanly possible to keep the eyes of America diverted towards distant lands where he can honestly say the challenges are great and dire situations exist, this takes the focus away from the many problems haunting America at home. During all this not only has Putin played Obama as a fool, but he appears to be having fun doing it. Those who point to the harmful sanctions imposed on Russia should realize that those placing them are also suffering and as time goes by it is becoming more evident the Euro-zone is not behind ramping up hostilities in Ukraine.

A major advantage that Putin holds other than having a huge well-armed army just across the Ukrainian border is that any army cobbled together to face off with him would most likely be unenthusiastic and politically troubled at best. American soldiers will deploy to Ukraine this spring to begin training four companies of the Ukrainian National Guard, the head of US Army Europe Lt. Gen Ben Hodges said during his first visit to Kiev recently. The number of troops heading there is still being determined, however, this training effort is said to be part of a US State Department initiative "to assist Ukraine in strengthening its law enforcement capabilities, conduct internal defense, and maintain rule of law" a Pentagon spokeswoman said. However, this signals a deeper role for America that troubles those concerned about further involvement.

Dead Ukrainian Soldiers A Hidden Reality
Reports from the front that are often buried or hidden from public view appear to confirm that Ukrainian troops have been sent into a meat grinder by their current government. If Iraq is any example do not expect any amount of American training to make a great deal of difference. Financier George Soros, who’s been helping foster Ukrainian reform recently told a gathering in Davos that “there is a new Ukraine that is determined to be different from the old Ukraine". He claims this new group is unique in that it is not only willing to fight but engage in executing a set of radical reforms, but it is up against the old Ukraine that has not disappeared and it is also up against a very determined design by President Putin to destabilize it and destroy it. But it is determined to assert the independence and European orientation of the new Ukraine.”

While not trying to be optimist or pessimistic I think it is important to remain realistic as to just how much we can really do. Sometimes adding fuel to the fire does more harm than good. Again, I mention Ukraine is a financially failed state and while we can point to its potential and the massive oil, gas reserves these by all rights should belong to the people and for their benefit. Considering that Ukraine needs $15 billion in loans and grants in the next year to stabilize its economy in addition to its bailout from the International Monetary Fund. Ukrainians it is clear they have dug themselves into a deep, deep hole. A 20-plus year history of industrial levels of corruption flow from a series of bad governments after Kiev became independent of the Soviet Union.

Bottom-line is that America again continues to be following an unfocused foreign policy that cuts off its nose to spite its face. It is perfectly clear why many Americans have thrown up their hands and are full of disgust because in many ways we are driving Russia towards the East and into the open arms of China. This could create more problems long-term than it solves short term. It borders on the edge of insanity this so called war has not developed organically but appears to be the product of meddling. Mercenaries and money from America appear to be backing and propping up Kiev with Obama being the "champion" for this failed bankrupt country. How ironic it is that the chief instigator for creating this volatile situation was the winner of the Nobel Peace Prize for 2009 and that the man he targets is the 2007 " Man Of The Year." named by Time Magazine. The best way for the West and Kiev to prove they are on the right path is by letting the eastern part of the country seceded and then making Kiev a center of economic and democratic success.

Wednesday, February 11, 2015

Don't Go To War Armed With A Stick!

The Economic Battlefield Is A Very Dangerous Place
I began thinking recently about how most people are totally unprepared for any kind of massive financial shock to society. This vulnerability and invisible burden is carried by the masses as most people do not have at their disposal the full range of investment options those very engaged in the markets have developed. You should view the economy as an economic battlefield and imagine your enemy carrying an M16 while you are armed with only a stick.

Building a better arsenal is not an easy task and cannot be accomplished overnight, it takes both planning and a great deal of effort, this is not a task that should be outsourced or entrusted to someone else. Your financial survival depends on it, often people learn this lesson only after great disappointment and loss. Even though we are often lead to believe shortcuts exist the truth is the learning curve in how to invest and protect your assets is both long and hard.  Simply reading a book, taking an investment course, learning a new charting or technical system is no guarantee you will make money. Most investors only learn after a series of costly mistakes and errors how difficult investing really is.

This is a very important message because a lack of investment options means that many people will be left unable to react if and when a trend dramatically shifts. This leaves the bulk of society extremely vulnerable when a shift does occur. You do not want to be in this group! A major concern should be that we are often lulled into being far too complacent as to the real economic risk that surrounds us. A glaring example of this is how people just assume the bank will honor their credit lines or they will be given access to their savings in the case of economic difficulty. In a crisis as everyone rushes to the exit, it is silly to think you will be served in an orderly fashion or even fairly. Mind the "small print" and remember the bank is not your friend.

When will the next financial crisis hit and how deep will it be? That is a hard thing to predict or answer, just as difficult is speculating the form it will take. It has been many years since panic has dominated the streets and most Americans have never faced such a situation. It is important to recognize several catalysts exist that could usher in such a scenario, but predicting such an event is complicated and difficult to time. Watershed events can occur in the blink of an eye or be spread out over weeks or even months. The base on which our economy sits is comprised on ever growing debt that is unsustainable. Because this system has been able to exist for so long does not mean it can continue.  The fact the economy muddles through and forward does not guarantee that we will not suffer financial harm as individuals.

The study of economics is often baffling and confusing. Many economic theories exist, but they are full of holes and conundrums. Much of how people react to an overall economic policy may have to do with timing and perception as much as it does with reality. The science of economics is riddled full of loops that feedback upon themselves and unexpected pitfalls based on expectations that may never take place. All this can become quite abstract with economist seldom agreeing and often predicting events that never unfold as expected or planned. Many of the "modern monetary theories" in use today reflect an attitude that we can control economic cycles better than in the past by using newly forged tools that have not been proven over time.

Few people really think about the economy to any great degree or even try to understand it as they go about their daily existence. We who find the subject interesting and study it or are involved in seriously self-directed investments often forget this fact. While they will tell you otherwise the average person only begins to care about "the economy" when they are directly affected or financially slapped in the face. To navigate the treacherous terrain of investing without a road-map or knowledge means you travel at your own peril. This does not mean that even a person totally ignorant of basic economics will not have an opinion or garner a huge following.

I contend that never before has mankind diverted such a large percentage of wealth into intangible products or goods and this is the primary reason that inflation has not raised its ugly head or become a major economic issue in recent years. Like many of those who study the economy, my misgivings with current economic policies are many, of chief concern is the massive debt being accumulated by governments and the rate that central banks have expanded the money supply.  If a great deal of this money would suddenly shift into tangible goods seeking a safe haven inflation would soar even as debts go unpaid and promises are left unfilled. In such a situation you will want to be able to defend all you have worked for with more than a stick.

FOOTNOTE: I encourage comments and urge you to explore the archives for any other articles that might interest you.

Sunday, February 8, 2015

SSI The Trojan Horse Of Welfare

Gaming the system has become a national pastime for many Americans. Once on these programs it is often hard to get someone off of them, on the contrary getting on one program often helps a person qualify for another, then another. Today people do this in many ways, we have layered layer upon layer of programs to help the poor and needy. One such program that is often misunderstood and sometimes confused with Social Security Disability insurance and many people are not even aware exist is Supplemental Security Income.

SSI is a Federal government program originally created to provide "stipends" and help low-income people who are either age 65 or older, blind, or disabled.  The program is administered by the Social Security Administration and funded by funds from the treasury and not social security taxes. SSI is a massive program that tends to lay just below the surface out of sight of many hard working Americans busy trying to earn a living. It has become the go to "sweet spot" for aid. Unlike food stamps, SSI is structured like the earned-income tax credit and unemployment insurance in that it delivers benefits in the form most poor people find most useful, cash.

What is Supplemental Security Income?
Supplemental Security Income (SSI) is a Federal income program funded by general tax revenue;

It is designed to help aged, blind, and disabled people, who have little or no income; and 

It provides cash to meet basic needs for food, clothing, and shelter.

To see if you are eligible for SSI benefits you merely have to link onto a government screening tool and take 5 to 10 minutes to answer a few questions. This also will tell you if you are also eligible for other benefits. For a little background on this program SSI was created in 1974 to replace federal-state adult assistance programs that served the same purpose. The restructuring of these programs was intended to standardize the eligibility requirements and level of benefits. The new federal program was incorporated into Title XVI (Title 16) of the Social Security act. Today the program has grown to provide benefits to approximately eight million Americans.

One requirement for SSI is that the individual's resources are below a certain limit. This amount is $2,000 for a single individual and $3,000 for an individual and their spouse (whether the spouse is eligible for SSI or not), $4,000 for a child applicant with one parent living in the household, and $5,000 for a child applicant with two parents living in the household. However, conditional benefits may be paid if a substantial portion of the resources are considered non-liquid, resources that cannot be sold within 20 working days, if they agree to sell the resources at their current market value within a specified period and repay the money after the non-liquid property is sold. However, it should be noted that not all actual resources are counted in calculating an individual's or couple's resources for SSI purposes. The numbers below show the rising cost of this program, I did not show every year to save space, after 2009 the numbers became elusive.
  • 1990 - 4,817,127 - $16,132,959,000
  • 1992 - 5,566,189 - $21,682,410,000
  • 1994 - 6,295,786 - $25,291,087,000
  • 1996 - 6,613,718 - $28,252,474,000
  • 1998 - 6,566,069 - $29,408,208,000
  • 2000 - 6,601,686 - $30,671,699,000
  • 2002 - 6,787,857 - $33,718,999,000
  • 2004 - 6,987,845 - $36,065,358,000
  • 2006 - 7,235,583 - $38,889,000,000
  • 2008 - 7,520,501 - $43,040,000,000
  • 2009 - 7,676,686 - $44,906,000,000

This could be interpreted to mean that when you get older you will not be forced to live within your means and on your meager social security if you have saved nothing, and if you are younger the same fact may apply. The SSI program, or Title XVI of the Social Security Act 1611, provides monthly federal cash assistance of up to $698 for an individual and $1,011 for a couple (as of 2011) to help meet the costs of basic needs of food, shelter and clothing. In most states, SSI eligibility usually assures concurrent access to important medical coverage under the various state Medicaid programs and sometimes access to section 8 housing benefits.  

In some states, supplemental payments are made by the state, increasing the cash assistance available through SSI. For example, the state of California, through its State Supplementation Program (SSP), increases the cash assistance by $171 per month for a disabled or aged individual with access to cooking facilities in 2011, making the total SSI benefit $845 per month. So while supporters hail SNAP as a key income support for the working poor, seniors and the disabled, as well as an “automatic stabilizer” it must be noted the government already has programs, and bureaucracies, for each of those groups and policy goals. This means as an example, a third of the seniors living on food stamps also get Supplemental Security Income (SSI).

A big question is whether once on SSI a person will ever start looking for work again in time. Look at U-6 unemployment over recent years and it suggests many of the people on the edge of the labor force have hit the exit. One explanation for that may be government benefits directly affect incentives to look for work. This means more generous unemployment benefits tend to elevate participation rates since workers must be looking for work to qualify. With disability insurance (DI), however, the opposite applies: to qualify applicants must generally demonstrate that they cannot work. In theory, disability and unemployment should not be correlated and for many years they were not. Due to changes in 1984 DI eligibility criteria were eased so that applicants could qualify based on a combination of conditions rather than just one.

Since then, highly subjective conditions such as back pain and mental illnesses have grown to account for most DI beneficiaries, and claims have become more correlated with unemployment. This strongly suggests that many workers find a way to qualify for DI when other benefits have been exhausted.  Although DI recipients may initially have climbed because the economy was weak, their numbers will almost certainly not decline as it strengthens. Past figures show only 4% of beneficiaries return to work within ten years. The proportion of working-age adults on DI has risen from 1.3% in 1970 to 4.6% in 2013 and while the participation rates appear cyclical at first it is beginning to look more structural. Europe may hold some important lessons as to what we face going forward.

In the 1970s DI became more generous in the Netherlands, and case loads exploded. Had the increase in disability numbers shown up in unemployment instead, the Dutch unemployment rate, which was 6% in 1980, would have surged to 13.4% says a 1992 report. The crushing expense of DI eventually forced the Dutch government to make reforms years ago that made employers bear more of the expense of employees who end up on the system. Since then, case loads have dropped. In America the DI trust fund is expected to run dry in 2016 if current trends continue. This would lead a person to see the long term implications of people not working but turning to more government aid will become a heavy burden for society.

 Footnote;  Other related articles may be found in my blog archive, thanks for reading and comments are encouraged. Below are a few of those on a similar subject.

Saturday, February 7, 2015

Automobiles And The Future Of Man

A Massive Support System Is Required For Automobiles
Nobody will argue both the automobile and mankind are solidly linked for the immediate future, however, it should be noted that the automobile is not a stand alone entity and requires a massive support system. Roads and highways, parking areas, repair stations 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. This is not an efficient use of space or resources and will have a major impact on how we plan in the future. Far too much of our assets are tied up in expensive concrete and pavement that is only used for brief periods during peak load.

Empty Roads At Night Come At A Great Cost
Our current system allows and is 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 and leads to an unintended consequence and urban sprawl. Several design flaws in planning modern communities create traffic patterns that make travel less efficient.

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. 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 privacy, safety, better quality of life, and that it defuses traffic.  These traffic patterns often make it necessary for a person leaving their home to drive for several minutes just to reach the entrance of their sud-division that may be substantially closer as the crow flies.

A strong 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. Had the automobile not become so popular our culture would have developed in a totally different way. The two and three car family contributed greatly to the growth of sprawling suburbs in recent decades. I'm not in any way advocating doing away with cars or trucks, they are important and add to our quality of life, but it is important to point out that the support system for the automobile makes our footprint on the planet much larger than many people might want to think and tends to weaken our ability to sustain our current lifestyle.

We may soon see an expensive and unwise extension of this support system across America under the guise that we are creating new jobs by improving infrastructure. Get ready for a barrage of talk from Washington pushing the myth that infrastructure is a "silver bullet" that will boost the economy and drive growth. As usual, the politicians in search of easy answers often dust off an old idea polish it up and act as is they have a new magic formula. While most people and economist agree infrastructure is important I contend that the old 80-20 rule applies to this vital part of our lives more than they might want to admit. It is ironic timing for such a push to pour more concrete across America comes just as technology begins to explore using driver-less cars and trucks to more efficiently move both people and freight. Such technology would revolutionize and shift the movement of semis and large trucks to nighttime and off-peak hours.  

Much of this article is a rehash or extension of an article I wrote in the fall of 2012 that pointed out traffic problems are often complex yet the simplest changes often can make a big difference. Traffic flow can come to a halt over something as simple as to how or where cones are placed in a work area.  All inexpensive solutions to removing the "choke points" should be explored as an alternative to immediately super-sizing everything as we often do. In my book "Advancing Time" I also wrote about how 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 built to serve us.

Footnote; As always your comments are encouraged. If you found the article above interesting the two articles below may also be of interest to you. The first concerns what makes up a person's "true" energy footprint, I fear the answer is far more than what most of us would like to admit. The other explores the myth big business and politicians use to push huge infrastructure projects.

Tuesday, February 3, 2015

Coming To America!

Drawing Money Like A Magnet
When doing a computer search of "Coming To America" two choices leap from the page. The first, Coming to America is a 1988 American romantic comedy film directed by John Landis. It is based on a story originally created and stared in by Eddie Murphy. The second,  "America" (also known as "They're Coming to America" or "Coming to America") is the name of a patriotic song written and recorded by Neil Diamond.  Today much more is coming to America and that is money and wealth from all over the world.

While America has been described recently as the cleanest dirty shirt in the closet, or the best house in a bad neighborhood, both place it as the least worse option. The reality is other options fail to pass the smell test. This means what is coming to America is wealth and money seeking a "safer" place to take refuge from the coming storm. Today America has become a money magnet, Lady Liberty the symbol of America that stands in the harbor of New York while a bit tarnished is still giving people hope even if Washington is not overwhelming us with the same glowing feeling.

The money coming into America is flowing into both bonds and stocks. This supports lower interest rates and drives the stock market ever higher. Do not underestimate the power of cross border money traveling into the country as a driving economic force. Another thing you should not underestimate is the advantage our currency has because of its role as the world reserve currency. This makes it the "default currency" and by the size of its market, float, and liquidity the currency by which all others are weighed, measured, and often pegged. The chickens are coming home to roost for countries that face growing debt and policies that make them uncompetitive. Some of these countries are increasing looking at ways to confiscate the wealth of their citizens, it is only logical these people would move their money to a safer place.

Countries can steal wealth by way of various Trojan horse methods such as monetizing debt through printing massive amounts of new currency or new taxes. As people all over the world try to get out of their home currencies a surge in the value of the dollar is logical. In the end this will not be the salvation of America or its economy but it sure does help create a bit of a lift that we would be wise to take advantage of. As things turn ugly across the world it is only expected that as in Neil Diamonds patriotic song the wealth of the world like its people just wants to be free. Like the people he sings about it seems wealth also appears to have legs and as the people, everywhere around the world the money is coming to America! Yes, it is coming to America, today, today!

Footnote; For fun if you haven' heard if in a while the link for the song "Coming To America" is below. It comes complete with some very good visuals, enjoy.

Footnote #2;  If you look close you will see the currency markets are beginning to reflect diminished confidence in the system central banks have created. As the currency games continue to ratchet ever higher it is becoming more apparent that we are standing on shifting sand. The schemes bankers have used for years to hide and transfer debt are coming under attack, if they crumble under the assault it will culminate in a reset of the economic system across the globe. The important article below explores what we might  face in the next round as these dangerous games continue.

Sunday, February 1, 2015

Revealing The True Economy

The True State Of The Economy Is Shrouded In Mystery 
Good luck with getting a clear view of our economic future. Somewhere between what we are told is occurring in the economy and what we see happening on Main Streets across America is the real and true authentic economy. It is ironic that the more the economy slows it only reinforces the idea that the Fed needs to pour even more fuel on the fire. This is exactly what many of us oppose and see as pure insanity. Some people point to or fear that deflation will take hold causing a great deal of pain and reduced spending by consumers going forward. Those behind increased and continued easing say more action is needed or a loop will develop that feeds on itself and ends in a deflationary depression.

On the other side of this argument are those of us who have a problem with current Fed policy and claim that after more than six years of expanding money supplies and dropping interest rate the economy has not fared as well as many in government represents. We that object with what has been done, loudly state that in the future both the economy and society will pay dearly for the sins of the Fed and that no options exist to get out of the box they have put us in. The fact is low interest rates have punished the very people who have done the right thing by saving and sacrificing to put away money for future needs. It must be noted savers have been encouraged and forced to take on risky investments as they search for higher yields that are unavailable in safer more conservative options. 

This debate continues to polarized those who study the economy and play in the dangerous land of investments. Meanwhile the failure of a crash to materialize and bring markets back to reality over the months and years is causing a breaking in the ranks. We have reached the point where many of the nonbelievers in current policy are capitulating and joining with those who live by the mantra "don't fight the Fed". This song of the market sirens that promise both wealth and profit has lulled many into complacency. Each day more investors surrender to lure of the markets and buying into what they had only a short time ago seen as the dark-side. Those who remain firm in their beliefs point to this as another sign we are nearing the top a place where all bulls are fully invested, this "all in" situation is a common sign of a market top.

Do not expect this to be resolved and either faction to accept defeat or to admit they are wrong until the economy reveals the truth and abundant solid undisputed growth is evident or we have sunk into a mess so dire that financial Armageddon is upon us. Our current perplexing economic state continues to confound and confuse. It seems every time the numbers fail to meet expectations or fall short those in power or the media raise the bar and crank out the fairly dust, some hype, or spin a tale of coming promises and stories of better times soon to come. This has postponed the day of reckoning and a resolution as to the debate. The conundrum we face is how to resolve this mess in the least damaging way. To those of us who doubt the numbers a massive problem exist on how to exit the current path.

Speculation Can Be Great Waster Of Time!

Speculation Was Not Kind To Mark Twain
Speculation has the potential to be a massive time waster, but both men and women tend to get sucked into this pastime that can while away the hours. This is not to say thinking through problems or looking at the various options being presented has no merit, but more often than not humans waste a lot of time pondering things that will never happen or never did. We even ponder why someone took a certain action or why something took a unpredictable turn.

Speculation is defined by Oxford University Press as,a noun, spekyəˈlāSHən  as the forming of a theory or conjecture without firm evidence: such as "there has been widespread speculation that he plans to quit" or as the act of investing in stocks, property, or other ventures in the hope of gain but with the risk of loss:such as "the company's move into property speculation"  This article is focused on the first definition of speculation. It is true that in terms of investment or other such pursuits speculation can extend into a form of placing a bet by buying or selling a commodity or stock. It can also be the driver for someone to scream a prediction from the rooftop as a way to prove their superior judgement or intellect.  As I have written in a prior post I consider predicting the future is an impossible task, a fools errand, full of pitfalls.

Events never seem to unfolded as we might expect or predict. When you see how the world has developed, the twist and turns are most unpredictable and full of what the author, Nassim Taleb calls "Black Swans", this term is used to describe events that seem to  descend out of nowhere catching everyone by surprise. A great example of speculation gone wild can often be found on the Sunday morning talk shows emanating from our nations capital. These shows originally designed to inform and report the crucial news of important issues facing our nation tend to quickly leave the facts and stray into the area of speculation. The line between opinion and speculation is fine and can easily be crossed. Blurring this even more is the habit many people have as stating an opinion as a fact does not make it one.

Speculationville is where the confident and suave television and news commentators, politicians, and the experts that speak with such authority live, I include the pundits and so called specialist. Whenever, I find myself drawn down the path toward Speculationville I try to stop and ask if the journey ahead has any real merit or payoff. Often the subject we speculate over is a big factor into just how frivolous the effort is. This means I find very annoying the efforts of media, news programs, and talk shows to drag us into huge areas of speculation instead of focusing on facts and important issues. When they start talking about who will run for President in not only 2016 but 2020 we know where they are taking us.

It is often not the message they crank out, but the spin and way they project it with their heads all a bobbing and their arms moving all around. It seems they have risen through the ranks by stating their case with such brilliance and force that we are carried away by their enthusiastic message. As the words spew from their mouths and we read the reams of material they write it is easy to overlook the large number of often misstated facts and forget they are speculating or merely guessing. Sometimes they even go as far as to tell us exactly what someone was thinking, for example a commentator might say, "when Martin jumped he knew it was to his death", I ask, how do they know that? It is possible that Martin was an optimist thinking he might survive the fall or the light never came on.

Fact is that when it comes down to what someone is or was thinking unless these authorities have had a deep honest one on one conversation with that person they are only speculating. After they have used every recent "buzz phrase" they say, "that being said" and after "having said that" they often wow me with "just do the math" or "it is not if, it is when".  A major pet peeve of mine is the mixing up of "millions and billions" of dollars when taking about money or cost. But what sends me over the top is a line of pure speculation often used by politicians and our so called public servants to justify some unsavory action, "it would of been far worse if we had done nothing". How do they know that? On more then one occasion when it comes to our government I find myself wishing they had done nothing.

We have all witnessed the crazy unenlightening information generated  from media coverage during "live crisis" coverage of a news event, it is a reminder that often the world is clueless. It seems that people love to defer to the opinions and advice of so called experts so they don't have to think. When we look behind the curtain, we often find their background in the subject is weak and short, or clouded and blurred by bias. One thing I do know that is not based on speculation or hearsay is that a certain point speculating about the future tends to get excessive and becomes a great waster of time. Most of us might better spend our time focusing on real problems in the real world rather then whether Michelle Obama will run for President in 2020.