Saturday, October 30, 2021

Billionaire Tax Is A Ploy To Take Eyes Off Bigger Problems

In sports, the term head-fake is used to describe the act of moving the head in such a way as to deceive an opponent as to one's intended direction or move. The idea of a billionaire tax to tax the super-rich with the idea they will pay for all the gifts the government wants to shower on the people is such a distraction. The idea we can level a playing field that is totally tilted to favor the rich by taxing them after billions of dollars are transferred into their coffers through questionable policies is bullshit. 

Small Businesses Provide Choice
Politicians are about to embark on a bit of expensive theater to give the impression they can address inequality through increasing taxes on the ultra-rich, this will fail. What we need are policies that promote small businesses. Small businesses provide choice, and choice is freedom. Freedom to live as you wish and options on how you shape your future. Freedom stands in total opposition to the World Economic Forum idea that by 2030 you will own nothing and be happy. 

Let us assume that what ProPublica found is true; While the median American household earning roughly $70,000 per year paid 14% in federal taxes each year, the 25 richest Americans (by Forbes’ tally) paid a “true tax rate” of just 3.4% on wealth growth of $401 billion between 2014 and 2018. If so, you can understand why those households with a $70,000 per year income are steamed. ProPublica also claims that since the beginning of the COVID-19 pandemic, billionaires have seen a 70% increase in their wealth, from nearly $3 trillion to almost $5 trillion.

So, what exactly is in this "billionaires tax bill" and how would it work? Nobody really knows because the devil is in the details and those remain few and far apart. Supposedly, the proposal would only impact taxpayers with more than $1 billion in assets, or those with incomes of more than $100 million for three consecutive years. This means the tax would apply to only about 700 of the wealthiest people in America. 

The billionaire tax is an attempt to convince the American people the government can bring in more revenue to help offset the massive spending proposed by progressive democrats and the Biden administration. Such a ploy massively distracts from addressing the unfolding economic nightmare unleashed upon the American people. It also does little to alter the reality of growing inequality, a weakening economy, and the growing political divide that rips at our nation. The hole being created by the loss of choice and options can never be corrected by merely transferring wealth to the least wealthy. Once spent, this money quickly returns to those at the top.

Growing Inequality Was a Problem long Before Covid-19

I contend that today many of the super-rich are capitalist crones and shills of the government. They have been anointed to carry out the mission placed upon them by the super-powerful that pull the strings of society. Make no mistake, this bullshit is a pile of crap dished out to us by progressives so they can unleash their massive spending plan and transfer wealth to those supporting them. When you label something as free you tend to get a lot of takers and this time they are promising a gift to almost everyone.

The answer is to create a system where certain individuals have not been given favored status in the first place. Governments are often behind where many of these billionaires have gotten their profits in the first place. Jeff Bezos and Amazon had the aid of a tax system (no sales tax on online sales) and the United States Postal Service (below-cost deliveries) to propel it forward. Also, politicians rushed to give the company special deals for locating distribution systems in their area, local longtime businesses be damned. 

Tesla and Apple follow the same storyline. Elon Musk has sucked on the government teat to where everything he does is subsidized. While it is still debated whether electric vehicles are better for the environment the masses told by the mass media and a government that has never demonstrated much insight to creating a compelling sustainable future have declared them our savior. Before that it was Steve Jobs, people tend to forget how much of Apple's success flowed from the government buying and filling schools with Apple computers that were produced overseas. 

Two big issues, the first these taxes will not stay on the super-rich, they will morph into a system that works its way downward to the upper-middle-class. Second, the super-rich will avoid such a tax like the plague and shape any legislation to avoid affecting them. The super-rich employs an army of pencil pushers and experts with only one intention and that is to exploit loopholes in the tax code.

It is difficult to ignore how our government has battered small businesses since Covid-19 entered the picture. The one thing you can count on is that it is more about giving the impression we are now asking, no, requiring the wealthy elite to give back some of the wealth showered upon them. If that were ever to happen, which I doubt, we can expect to be told to stop criticizing them for taking so much. All in all, I call this noise about a billionaire tax bullshit.  Pigs will likely sprout wings and fly before anything gets done to address the true causes behind inequality, tomorrow politicians will be off on another tangent. 

 

 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Sunday, October 24, 2021

China Housing Market Is On Life Support

We must understand the housing market in China to fully comprehend how wealth is stored by many people in China. To those looking in from the outside, the housing market in China appears a house of cards ready to collapse at any minute. It is also a market sector that has become greatly oversized that it may now account for 25% or more of China's GDP. Because it has become so ingrained in China's economy we find that the Chinese government has no choice but to shore it up while at the same time trying not to encourage its growth. 

Prices Have Soared In Top Tier Markets
China has over 680 cities but four are considered to "rule supreme" and are viewed as the best; Beijing, Shanghai, Shenzhen, and Guangzhou. As in many countries, the supply of housing falls well short of demand in the top cities, leaving many people increasingly stretched to buy there. The average price for a one-bedroom apartment in Shanghai is nudging towards $1 million. The  job magnet metropolis of Shenzhen is no bargain either, at about $700,000 for a flat.

A clear sign something is wrong is evident in the findings of an analyst for economic research firm Rhodium Group that estimates around 90 million apartments across China are sitting vacant. This indicates a huge oversupply in some areas of the country and unaffordable homes in certain cities. For years, developers have put up large apartment blocks in isolated parts of China. This was done because the land is less expensive in these areas and under the concept "if you build it they will come," but often, they have not. 

China's Housing And Iron Ore
Yes, people bought these apartments, which still remain empty, as investments because housing prices in China have a history of rapid price appreciation. Earlier I referenced this market as a house of cards, maybe the term, Ponzi scheme, might be more appropriate.  This is why recently some commentators have pondered whether the collapse of the world's most indebted company, Chinese property giant Evergrande, will doom China's economy and spillover across the globe. To be clear, Evergrande's meltdown is partly due to a cooling in demand for new projects in smaller cities.


China's Government Pulls The Strings
To fully understand the importance of real estate we must look at the figures, China's property market is worth around $US60 trillion ($83 trillion). The property market represents about 25 percent of GDP and is where 62 percent of household wealth is being held and by its nature, it is deeply interwoven with shadow banking. Any drop in real estate values would have huge ramifications. Deeming many of those 90 million vacate apartments as uninhabitable and possibly worthless would be a very big deal. It would not only impact the wealth of millions of Chinese citizens and companies but also shake faith in the whole Chinese economy and financial sector.

The  government of China has been concerned over rising house prices for years.  Following the Central Economic Work Conference in December of 2016, it issued a statement saying,  "Houses are built to be inhabited, not for speculation." Over the years low investment returns in the real economy and easy credit have triggered excessive growth in property prices in China and attracted too many financial resources to the real estate sector. Despite efforts by the government to cool this market and moderate property prices, market sentiment has remained robust partly due to a lack of other good investment options.

Typical Upscale Housing Development In China

As a contractor and being heavily invested in real estate, I was thinking about how "draw systems" work. This has to do with how a certain percentage of the cost of construction is shelled out as each stage of construction is completed. This is done partially to make sure projects are actually completed. Please note, much of the money spent on constructing a housing unit is spent in finishing, many people give this little thought.

Years ago Home Depot was excited about entering and developing the massive market in China because apartments are sold by the developer at the "roughed in" stage with no interior. You might know Home Depot cut and ran after a few years adding to the list of American companies that failed in China. Home Depot has blamed their bad experience on not understanding the Chinese culture. After reading this article you may question both the quality and just how well many of the housing units in China have been finished. The fact is, many will never get "finished" or occupied. 

In trying to understand the massive housing market that drives much of China's growth it is important to realize that people in China buy apartment units that are only roughed in. This means the buyer is essentially purchasing what we in America would call an "empty shell" or an unfinished apartment. In most cases, apartments are sold with internal walls and electrical outlets in place but everything else, including doors, flooring, and bathroom fixtures will need to be built out by the owner after purchase. Understandably, this created a great deal of excitement for a company like Home Depot that sells the "rest of the package" in a way that can be a one-stop answer for any home buyer.    

A close look at housing in China and the customs under which deals are completed will give Americans some real surprises. Getting information on this subject is not as easy.  It takes a bit of digging and research to better understand the internal workings of China and how its real estate system functions. Unlike property and housing ownership in America and other western countries, all property in China is simply being leased for 70-years. Also, the various procedures and steps Americans take for granted when purchasing a property such as; due diligence, housing inspections, and secure escrow accounts simply do not exist. 

The lease is supposed to renew automatically upon expiration, this might unnerve many buyers that know the Chinese government's relatively new Ministry of Housing and Construction retains full "property prerogatives," meaning that leases can be nullified at any time if the government determines that it needs that property for any reason. In addition, the government is also entirely free to decide how much compensation should be offered for that property in the event the land your apartment happens to be located on is reclaimed by the state. Residents now have the right to sue the government if they feel they receive unfair compensation, but they rarely win in court. 

The Trends Shown In This 2016 Chart Continue

It could be said cheap housing is something you won't find in China. While many of these units are poorly built, they are not cheap. China's housing market is among the most expensive in the world when compared to per capita income.
To be honest, the numbers I found are all over the board. For example, the average price of housing in New York City is around $1,000 per square foot with an average family income of $76,000 per year. By comparison, the average cost of housing in Shanghai for the year 2021 is around $1,200 a sq. ft. against an average family income of around $10,000. By American standards most apartments are small, no more than 30 percent of all new apartments can be larger than 90 square meters (970 square feet).

China Gives Savers Few Good Options
China is a place where the rules affecting value can change with little notice, until now investors have ridden the housing train to Profitville. How long this can go on is questionable. Global Property Guide notes on the information they post that China has poor house price statistics. They go on to state, the National Bureau of Statistics of China (NBSC) has monthly house price time-series starting January 2011 but only until August 2013. 

On Quora, back in 2015, Mike Lim, who worked in Shanghai reported of colleges that earned around $700 a month selling apartments for around $5,000 a sq. foot and driving to work in a 3 series BMW and carrying LV bags and totting the latest iPhones. He stated, since the late 1990s to early 2000, there have been many forced relocations to free up inner-city locations for development. New apartments are then allocated to these households and often a mid-sized family (e.g. two grandparents, two parents, one kid) could get 3 new apartments. Couples have been known to divorce just to get another apartment! Now with these 3 apartments, they usually occupy one, rent out the second and sell the third. 

Aside from the disagreement over the stability of China's housing market, it should be noted that foreigners may only purchase apartments to live in for personal use and not to rent out. Virtually no secondary market exists to sell into if you decide to relocate. When someone in China seeks to buy an apartment few give much consideration to anything but new construction. Still, most bizarre is that for such a large market, legal protections and real estate standards are not yet well-established.

 

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Saturday, October 23, 2021

When The Lights Go Out Society Grinds To A Halt

It is a simple fact that without electricity much of the world as we know it would grind to a halt. For years mainstream media has mocked people who stocked up on emergency supplies ("preppers") in case of a catastrophe as a bunch of "right-wing" survivalist kooks wearing tinfoil hats. Well, years ago, Ted Koppel's book, Lights Out, moved him into this group. He warns about a possible apocalyptic catastrophe that could knock out the nation's power grid for up to two years and is recommends that people stock up on emergency supplies.

We Are Totally Unprepared For This!

The motivation for Koppel's book was his desire for answers as he wondered, A:) are these people just exaggerating for reasons I don’t quite understand, and, B:) if they’re not, what is the government doing to prepare for it and to prepare the public for it? His research confirmed instinct told him that the answer was going to be "not much", and when he researched the matter it turned out to be close to the truth.

The power grid is the system that connects North America's supply of electricity so that if one area has particularly heavy demand, power from another region can serve as backup. The downside to all this is that because it is interconnected if a hacker manages to take down an entire grid, a huge portion of America along with parts of Canada could lose power. The electric grid operates as a series of networks that are defined by geography, failure in one place can cause failure in another place, which can cascade into a collapse of the system in a large area. 

Koppel interviewed many people, including the last four heads of the Department of Homeland Security and Department of Defense and it appears Koppel got the sense that none of them knew what to do if such an event were to occur. More frightening might be that several of them know that the likelihood of it happening is great. When Koppel spoke to Janet Napolitano just after she left after five years on the job as secretary of homeland security he asked the question, what do you think the chances are of a cyber-attack on the power grid? She said very, very high, 80 to 90 percent.

The Economy Would Grind To A Halt!

While most people view formulating a plan for such an event as the responsibility of the government, it is apparent that those in power haven’t taken that responsibility very seriously, or at least have not come up with a solution yet. At issue is the fact we must deal with the possibility of the power grid failing, but, and because we don’t know of any way to do so we have avoided the matter.

Knowing there is not a plan, and that mass evacuations from places like Manhattan can't be done because we have a situation of too many people and no place to put them should give us pause. Koppel is concerned enough that in his book he recommends Americans put away a three to six months supply of food and water.  While he understands that there are tens of millions of people in this country who can barely afford to put food on the table every day he urges those who can afford it to stock up. Koppel takes the stand that if people do that and if the government has a backlog of freeze-dried food, which lasts up to 25 years, we can probably survive something like this, if not, there will be thousands of fatalities. 

Towards the end of the book, the well-respected veteran newsman quite provocatively lays out the case that in addition to all the wonderful things that it does the internet can be used as a weapon of mass destruction. Also, he makes it clear a major worry is it would not require a foreign government to cause such a scenario to unfold, nor would someone need a ton of money to do it. Someone sufficiently skilled in cyber-warfare, using an individual laptop, can inflict enormous damage. He was told by the man who was the former chief scientist for the National Security Agency, that he believes there are individual groups, possibly a group like ISIS that could buy the expertise, and that the equipment they need is available off the shelf. This makes his warning a very scary prospect.

Poor Planning Means Long Gas-Lines
Those of us that have suffered through a few days without electricity will testify that it changes everything. Because I'm responsible for many buildings and the comforts of the tenants that fill them I'm very aware of the many problems that quickly surface when electricity takes leave. Elevators stop, alarms fail, pump systems, refrigeration, hot water, heating, cooling, communication breakdowns, and more grind to a halt. 

The ugly bottom line is that because everything is intertwined and dependent on electricity in some way or form few things would work. If this occurs we can only pray it comes during a season when mother nature has blessed us with reasonable weather that won't rush to test our limits. Few Americans today softened by city life have the training and knowledge that they can flush a toilet with a bucket of water, my point is that overall we are a helpless lot.

Think New Orleans After Katrina

A lack of electricity takes a devastating toll on items such as refrigerators and this is greatly compounded by lazy, stupid, and irresponsible people. An example of this can be seen following any major storm where power goes out for days. Many refrigerators are ruined by people simply not emptying and cleaning them out before the food within rots and destroys them. Also, security becomes a greater issue. Those of means that may be able to leave the affected area risk looking to return after the power is restored may find many of their belongings destroyed or gone. 

People can't work when businesses are forced to close, and cars don't move without fuel, even city water supplies stop flowing. In such a situation, it would not be surprising to see trillions of dollars of paper wealth based on "faith in the system" vanish in the blink of an eye. Few among us have researched the topic of grid failure to any degree, so I will defer to Mr. Koppel when he suggests that if and when the lights go off because of such an attack, that they will remain off for quite some time, and that power will be difficult to restore.  

When Koppel weighed into this issue nobody in the government rushed to call his claims false. Koppel has no history of bantering about revelations that "the sky is falling," gives credence that his concerns and warning should be given valid consideration. If such an event would occur in the cold of winter the death toll would be staggering, and I guarantee the government would be utterly paralyzed. I also contend that considering the importance of this issue not enough has been done to insulate us from such an event. 

Many of these outages occurring across the world are going under-reported and the blame for them is often placed on the current energy producers. Few stories blame the environmentalists pushing for "green" energy like wind and solar that have added to the difficulties. It should be noted many businesses and those "with means" have started putting in private generating systems. Power outages can be viewed as the "canary in the coal mine." 

This is also a big red flag that highlights the concern many people have about turning into a cashless society, a cashless society that runs on electricity. Power outages should cause pause for those that have no hard copy of records held in the cloud or rushing to buy electric vehicles. I have done a fair amount of reading on this topic and suggest it might be wise or for others to do the same. If they plan to do their search by a computer they might want to do so before the lights go out. When power is lost the feeling you are living in a third-world country tends to rapidly take hold.

 

Footnote; This is a continuation of a prior post that was recently published on AdvancingTime. See, https://brucewilds.blogspot.com/2018/10/power-grid-failure-is-game-changer.html

 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Wednesday, October 20, 2021

Kamala Harris Could Be Most Entertaining President Ever

While many Americans have come to view President Biden as a perishable item few have come to terms with what that means. The reality is that if Biden is bumped from the top spot he will most likely be replaced by the current Vice President. This idea is more frightening than inspiring. The more familiar people have become with Harris the easier it is to understand why she did so poorly as a Presidential candidate during the primary.  

After observing Harris in her role as Vice President the reviews for her performance have been dismal at best. The adjectives that come to mind to describe her are unimpressive, disingenuous, and incompetent. Her failure to impact conditions at the border when assigned that task and her inability to smoothly carry out or give voice to the administration's goals has not boosted confidence that she is ready to lead the country. In an effort not to appear over harsh we should not have had high expectations. Biden indicated the two highest requirements for his running mate were that it be a woman and one of color, Harris checks both those boxes.  

Harris had previously served in the U.S. Senate (2017–21) and as attorney general of California (2011–17). A background such as this does not generally qualify a person to lead the most powerful nation on the planet but in the world today many factors feed into how politics play out. Some skeptics have voiced the idea Harris was carefully placed in her position as Vice President and is a pawn that can easily be manipulated by the powers to be, but again, maybe it is just one of those "one in a billion" things that randomly happen. 

 

Does She Have A Vision For America?
Even as some people struggle with how to pronounce her first name the notion has been floated that Kamala Harris has no real inner vision for America's future. It seems she swings in whatever direction the wind blows. Rest assured, this article is not racist or sexist, this has nothing to do with race or gender, it has to do with her competence. Whether earlier in her life she used her sexual charm to move up the career ladder as some of her detractors claim is not an issue I wish to address. The one thing that is clear is that she is an ambitious woman. 

In the same way the press examines each of Joe Biden's gaffes, Vice President Kamala Harris has found herself under fire whenever she goes in front of the cameras. Several missteps have been pointed out, such as laughing when asked about the deadly chaos in Afghanistan. She was also mocked over a space video featuring child actors. The video for World Space day has received much criticism for being cheesy, and “fake." This has brought front and center the feeling she is clearly in over her head.  

The fact Harris even became Vice President could be considered part of the "shallow bench" syndrome we have been witnessing for years in many areas of society. The public servant sector ranks high on this list. Public servant is a term I have come to despise because from my perspective it is an oxymoron. With so many of the people that have slipped into such roles more interested in serving their own interest rather than that of the public. This figure of speech that pairs two words together that oppose and contradict each other is a slap in the face of those forced to pick up the tab for the misdeeds they conjure up.

The term deep bench comes from sports and is used when talking about a team with a large number of talented players. The idea focuses on the depth and strength of a team and the fact if a player is hurt another can replace him or her and the team will remain just as strong. On the other hand, a shallow bench indicates little in the way of real talent is ready to step in to play. This helps explain why Washington continues to bring back the same time-worn faces again and again and few people called upon are able to fill the void and impress us.

Is Harris A Creation Of Convenience?
Many Democrats and progressives are elated at the idea of seeing a brown-skinned woman of Indian and Jamaican heritage placed in such a position of power. Still, they continue to be troubled by Harris’ mixed record on basic issues such as criminal justice reform, foreign policy, and health care. In many ways, the generally charismatic Harris is like Barack Obama in that she represents an image, and is the kind of “blank slate” on which liberals and independents can project their hopes and dreams. That, however, is not a proven road map to a better place.

Expect To be "Entertained!"
On the plus side for all the negatives Kamala Harris carries, she could prove to be the most entertaining President ever. Far too many times we have painfully been forced to watch as a weak, stumbling, and gaffe-prone Biden struggles to read the teleprompter before being whisked away by his staff. At least Kamala would be able to field a few questions from reporters. This would, from some of the recent footage of interviews and meetings, provide a bit of entertainment. Some of her recent "clown-like" antics and wild jesters promise to be a reprieve from what we have come to expect.  

Considering that a garden gnome is more entertaining than Biden, following sleepy Joe, Harris should be a hit. If history is any indication, a Harris Administration promises to be chalked full of foul-ups, blunders, and all kinds of antics. As for whether she would be a good leader, probably not, Harris lacks that skill and will probably be downright dreadful in that role. Sometimes voters get what they deserve, in this case, as President, Harris is not expedited to disappoint. What do we deserve from a person that never should have been elevated to such a position? Not much, and that is what we will get, we can only pray the next few years do not become a catastrophe

 

 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Saturday, October 16, 2021

Power Grid Failure Remains A Game-Changer

When the power grid fails, modern life rapidly grinds to a halt. This game-changer is an issue we must seriously recognize. Whether we are talking about the grid or soaring electricity cost one thing is very clear, we are very dependent on electricity. This article should be considered a reminder of the fragility of our codependent modern society and how the things we have come to depend on could vanish in a heartbeat. By highlighting some of the vulnerabilities we face, even if they have been voiced by others in the past, at least we raise awareness of some of the dangers we face. 

News of blackout and energy shortages also raises the question of what is going on and whether we are being "toyed with" by those pushing us towards what they see as a greener future. It could be argued these "outages" are why we need to rapidly, "build back better" the whole grid. Of course, the flip side of that argument is that overzealous environmentalists are causing most of the problems that have resulted in outages. Electricity remains the lubricant of modern life, without it society cannot function. A great deal of damage occurs to the economy when a  power outage takes place. People can't work, food supplies are damaged, and in times of inclement weather, people suffer greatly. Most Americans remember the power outage that gripped much of Texas in February of 2021. It resulted in pipes freezing and bursting and a great deal of suffering.

Blackouts have long been a thing of the past in most major cities but that has started to change. According to Bloomberg, the energy crisis that is rippling through Asia and Europe could unleash similar electricity shortages and blackouts in the United States. Soaring natural gas prices are forcing U.S. utilities to quickly turn to more coal. This is expected to cause huge price increases for consumers of electricity in the future. The soaring natural gas, coal, and oil prices are a clear signal the green energy transition will not be fast or cheap. Supply chain problems and a lack of workers are rapidly adding to concerns.  Due to a combination of these factors, several areas of the world are experiencing electricity disruptions. People in China, the UK, Continental Europe, and now India are currently seeing power outages.

The reality we face is that labor shortages and a COVID-related collapse in global supply chains have made a mess of things. All this has left several countries desperate for badly needed fuel supplies from LNG to coal to unrefined crude oil. While this has taken the focus off financial issues such as the failure of Evergrande, the power cuts are causing real and immediate pain. With areas forced to adopt rolling blackouts, we can expect the temporary loss of power to factories to further weaken supply chains. At least two factory owners in southern Guangdong province confirmed to the ABC that they have had to partially halt operations as power plants struggle.

Years ago, Ted Koppel the veteran newsman and the former anchor of ABC’s Nightline wrote a book that delved into how we have grown accustomed to cyber-attacks and makes the point that we have never had a cyber-attack that amounts to a weapon of mass destruction.  The secretary of defense at the time, Leon Panetta, called the threat of a cyber-attack on the power grid potentially a cyber-Pearl Harbor. An attack that would bring down our nation's power grid would be devastating. There is no question that the moment the lights go out everything would change and both our country and economy would immediately be forced into survival mode.

Devastating Power Outages Happen

If you want a vision of real "gloom and doom" take a moment and ponder the possibility of a devastating cyber-attack on America's power grid. Being a believer in several of the ideas and theories presented by writers like Nicolas Taleb, author of the best-sellers "The Black Swan" and later a book titled "Antifragile" it is not unusual that I find Ted Koppel's book interesting. The book titled "Lights Out", points out that a cyber-attack on America's power grid is not only possible but likely and that we as both a country and as a culture are shockingly unprepared for such an occurrence. 

In fact, our whole society has become based on what we consider an unending flow of current that allows us to live lives of comfort. In the past when the lights go out it is usually because of Mother Nature and we have always managed to get through it. But what if the power went out in several states affecting millions of people for weeks, even months?  In "Lights Out," Koppel  does not pussyfoot around, he paints a grim picture of a paralyzing power outage in the form of an all-out cyber-attack on the nation's electrical grid. This is a grim possibility few Americans are willing to consider or face. When Americans can no longer check their food stamp balance on their $800 cell phone, it means reality has come home to roost. 

 

 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Thursday, October 7, 2021

Like The Dance Band On The Titanic, The Band Plays On

As The Ship Goes Down The Band Plays On
It is said the dance band on the Titanic played on as the ship went down. This was all done as a grand effort to reassure the passengers and ease the panic in their hearts. Consider the possibility that behind all the noise we hear today a similar effort is being made to comfort us and take your attention off the hopeless feeling that comes when things sink away beneath your feet. For the last several months I have come to feel a similar story is playing out here. The Biden-Yellen-Powell economy is less than inspiring. 

Looking back, it is clear the Fed's policies have hurt savers, It has caused savers to flee towards riskier investment in search of higher yields, driven speculation, increased equality, and added to inflation. Rather than using the bully pulpit and warnings of higher interest rates to keep government spending in check, the Fed has acted as an enabler to the crowd in Congress that loves nothing better than to sending taxpayer money back home claiming it is a gift and proof they are "working hard for their district."

With historically low-interest rates, rising inflation, and many consumers struggling to make ends meet. The economy is at a place where there is not much capability to increase consumption without throwing money from a helicopter and massively increasing the national debt. The problem with that is such stimulus programs are poorly focused. As we look about in this post-pandemic covid-lite era we see supply chains crumbling, stagflation mounting, and jobs being lost to automation. These are all immense problems even in the best of times.

With this in mind, the president has thrown his weight behind a huge infrastructure bill at the worst possible time. These type of bills coming out when employers are already having difficulty filling jobs because many workers have lost their motivation to work will only add to the labor shortage and cause inflation to soar. While he mumbles phrases such as "the buck stops here," and "I take full responsibility," Biden has a way of resorting to finger-pointing and leaping into the blame game at a second's notice. 

President Biden on Monday blasted Republican lawmakers’ approach to raising the federal borrowing limit and warned about the dangers of failing to do so. “A meteor is headed to crash into our economy,” Biden said during a White House speech. “Democrats are willing to do all the work stopping it. Republicans just have to let us do our job — just get out of the way.”

Money Supply Growth Indicates A Problem
It appears that Biden simply doesn't get it. Rather than aligning himself with the American worker, he is part of a larger coalition made up of the poor, the deep state, and the globalist elites. All these groups have one thing in common, and that is they are willing to sacrifice our future for more money and power today. 

This is evident in a number of policies rubber-stamped by this coalition that constantly favor big businesses such as Amazon over the far smaller companies that made American famous. Giving people money to stay at home and order online is devastating the brick and mortar stores that line the streets of our communities. These are the companies that pay taxes and provide jobs for our friends and families. The major labor shortage and a fall in productivity will have long lasting implications and become evident in the form of stagflation.

Amazon is the poster child of a failing America. In an ever changing economic environment, the government has aided Amazon in destroying America. Things like the USPS slating the company for special services and pricing. Approving Amazon to participate in delivering home grocery delivery on the SNAP program, and locking people in their homes while forcing many small businesses to close during the pandemic have all played to Amazon's advantage.

Not only have small companies lost sales, but they also cannot afford to automate and replace workers with robots like their giant competitor Amazon. Small companies don't have access to the cheap money flowing from Wall Street. This means small companies cannot compete and often cannot pay the same wages as large companies. Instead, small companies across America are forced to cut hours or even close at times because they cannot get employees. When customers find them closed they tend to develop the habit of looking somewhere else to buy things.

Adding to the woes of many smaller businesses are the expensive and ever-changing mandates being placed upon them by those in power. After the ship goes down, do not expect things to be pretty. Already, statistics show that 1-in-4 Americans primarily live on government support. The idea of simply giving these people more money in the hope it will boost consumption is unsustainable because the numbers don't work. 

As the band plays on and water laps at our feet, most Americans ignore the signs we are in real trouble. Do not be surprised when we enter what will likely be a more protracted, deeper, and more damaging recession than what we saw in 2008. We would already be there if it were not for the crazy deficit spending going on in Washington. In fact, expect a depression, defaults and bankruptcies are only in the very early stages. The Fed has added a tremendous amount of liquidity to the system in order to repair credit spreads and mask over the flaws in the financial system but this will only delay the ugliness ahead.

Because so much is going on, current events have been drowning out reality making it hard to stay focused on the crux of financial and economic issues. That music coming from the dance band is a distraction that is difficult to ignore. There is no playbook for what is about to unfold when the ship goes down or anyone to turn to that has all the answers. Each of us must be aware of the risk and manage our finances accordingly. 

The one thing we do know is that in such a situation, the poor have little to lose, the rich often have ways to skirt much of the pain or, a reservation in the lifeboat. It is the so-called middle class that will be cast into the cold icy water to die when reality finally hits. An economy based on consumption and huge deficits is unsustainable. We need an economy where people produce and that appears to be slipping away.  

 

 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Friday, October 1, 2021

Biden's Infrastructure Package Is Poorly Timed

Like many Americans, I'm concerned and put off by the size and goals of President Biden's infrastructure package. Even the scaled-down package is unnecessary. Part of the problem is the timing of this massive spending bill. Such packages are often introduced at a time when unemployment is high and people can't find jobs, currently, that is not the case. We certainly do not need to stimulate demand at a time suppliers are suffering huge supply chain disruptions.

While many people and politicians see government spending on infrastructure as a job creator and a silver bullet for our ailing economy I would like to raise a word of caution, things are not that simple. Several reasons why the timing of this bill is horrible are staring us in the face, the most notable is that currently, no shortage of jobs exists. In fact, employers are having difficulty finding workers due to the fact many people have dropped out of the workforce and lost interest in returning to work in the current era of "covid-lite."

People are ignoring that a great deal of money already in the pipeline for states and local governments has yet to be spent. Much of this money could be used for infrastructure is being sent to governments based on a "use it or lose it" system of distribution.  Politicians often view this as "free money" allowing them to use it as they please. With this attitude, it is little wonder so much of it is squandered on stupid programs such as allowing people to ride free on public buses or putting in walking and bike lanes in areas where they will see little use. 

Many people have come to think that the money flowing from Washington does not cost us anything because often such bills are shrouded in the message the project will more than pay for itself over time by creating greater growth. The devil is in the details when it comes to such spending. Sadly, politicians often prefer to use such funds on what they view as legacy projects that will shape the future of their area or shiny pet projects that will enrich their cronies. Many of these tend to be rather wasteful and controversial and it is not uncommon to see them plagued by cost overruns.

Already Cones Galore But No Workers!

When recently driving the highways of America, I constantly encounter miles and miles of lanes coned off and in the middle of being resurfaced. 

Still, I often find there are no workers and little equipment present. Blame it on the way road work contracts are granted of work overseen but this indicates the companies performing the work are already stretched thin. Unfortunately, this tends to result in traffic jams. Having employees trapped in 

slow-moving traffic costs businesses a great deal of money and reduces productivity.

Throwing more money at companies already overextended is just asking for shoddy work at a higher price is hardly a formula for economic success. Expect no bargains for taxpayers when this bill gets passed. What it will do is push higher the cost of materials and labor which drives inflation. Ironically, it will also encourage the "premature replacement of good infrastructure" that still has years of useful life. This directly conflicts with the idea of pursuing a "green path forward" which those endorsing the bill claim gives it merit.

An example of this pops up in a recent study about how trading in your old car for a brand new electric vehicle may be doing more harm to the environment than good. Researchers in Japan say choosing to keep and drive your older gasoline-powered car longer is better than crushing it and going new when considering all the energy used to build a new vehicle. In short, research shows keeping older fuel-efficient cars on the road longer reduces CO2 emissions significantly more than speeding up the global transition to green technology. A team from Kyushu University says most of the debate over gasoline and electric cars focuses on fuel efficiency and the CO2 emissions they produce rather than the fact a rapid transition shoots up "manufacturing emissions."