Saturday, February 18, 2012

The good news is that inflation is up; that's also the bad news

From an economic point of view we have good news, (especially if you regulate the economy with monetary policy like the Fed) because we are experiencing about 3% inflation. This is coming mostly from the price of gasoline, and from food, both of these are only going up because of speculation on the commodity markets by Wall Street banks. This sort of speculation used to be something that would send you to Federal prison, but a succession of Administrations have decriminalized it, but especially Newt  and Clinton (Bill as a result of intimidation and/or bribery) who threw the door wide open.

The new Dodd - Frank Act made this illegal again, but Republicans have since loaded it up with so many loopholes as to make it largely irrelevant. Cynical liberals might have a case to make that Obama could have done something about it, but I'm not so sure he has that much power.

Okay, back to why this is "good news"; in theory, maintaining a modest rate of inflation forces the big players who are hoarding trillions in cash to get back in the game. If you can't make money by waiting for asset prices to drop, and then buying up "real" things for pennies on the dollar, you need to go back to trying to make money by actually doing business. You know like hiring people to make and sell stuff.

Why this is also the bad news: real wages are falling because of high unemployment. Corporations continue to layoff workers and replace them with lower pay people. There are few labor strikes (that might increase wages), but instead we have many lock outs that result in massive cuts to pay and benefits. Management is able to do this only because 20% of the workforce doesn't have a real job, if any at all. Half of those who do work are really the "working poor" and can't fight back at all.

Inflation is hard on people who are stuck with a fixed income or falling wages. The only way things could be worse is if we had a national "right to work" law. The Republicans can't wait to impose that on the states. (screw that states' rights position when ever it suits them)

You'll just have to take the current inflation rate as a glass half full situation. The alternative is much worse. We are gaining jobs, and that is what matters at the moment. Anybody that says we need austerity and lower wages is at best ignorant of how an economy works. Really, any bright fifth grader should be able to do the math. Take money out of the economy and it shrinks resulting in even fewer jobs, more shrinkage, and repeat... a death spiral as it were.

More jobs and high prices lessens the impact of existing debt. This puts more money into circulation and grows the economy, and repeat... a growth spiral. If we can keep Republicans from killing it.


Thursday, February 16, 2012

Just the way it should be

It’s Thursday, this is when the new unemployment numbers come out, and they continue to edge downward, we had “only” 348,000 initial claims for the past week. The number of newly jobless hasn’t been this low since four years ago when the Bush collapse was really just beginning to pickup steam. At that time this number was seen as worrisome, oh how expectations have changed. We know jobs are being created, but the high number of layoffs indicates a drag on wages from large employers who continue to layoff higher paid workers because they can.

Then there are the Red states under the thrall of austerity ideology where public sector layoffs continue to drag down employment numbers. Some 750,000 government workers have been laid off in these states to fund giveaways to corporate cronies. Each of these jobs in turn no longer supports other jobs in the economy also putting downward pressure on the wages of remaining workers, public and private.

The big bright spot today was the announcement of all time record profits at GM. While employment is way up at GM with some plants running three shifts, a big chunk of those profits actually come from selling Buicks in China.

US parts suppliers are producing a higher percentage of the content that goes into American cars and this is adding jobs too. The whole point of Obama’s loans to the car companies was to keep these parts suppliers in business. They simply would have been wiped out if the car companies had been forced into unaided bankruptcy, where the suppliers, as the major creditors would not have been paid.

As well as the car companies coming back in Detroit, their economy is being aided by massive campaign spending on behalf of Mitt Romney. His strategy is to convince non-union blue collar workers that the so-called bailing out of the unionized car companies was wrong. He has to convince them that there is truth in Republican mantra that lower wages for union workers will some how magically benefit low wage workers. A lot of blue collar workers actually believe this nonsense, somehow they rationalize that their piece of the pie will grow as other people sink to their level. Just the opposite is true of course, but a guy in a suit that costs twice what they make in a month told them “black is white my friends“, so it must be true.

Mitt is also hammering hard at Santorum’s record as a Washington earmark specialist, and about his many millions made from consulting to lobbyists after being driven from office by the voters. Santorum can point to having paid double the 14% tax rate that Romney paid. Neither one of them would actually raise taxes on the rich of course, so the billionaires continue to pour money into their campaigns. Romney wants to cut his tax rate in half, Santorum would cut Romney’s rate by a quarter, and remember the Newt? He would have cut Romney’s taxes to zero.

To the billionaires the amount of money they are spending thanks to the Supreme Court is really just chump change, like betting on a horse at the track. The eleven million dollars that Sheldon Adelson spent on the now fading Newt Gingrich amounts to three hours income for him. For the average US worker that would be like spending $40, although Mister Adelson will miss his $11,000,000 a lot less than a $12/hour worker will miss three hours pay. At $25,000 a year for 50 years the average worker will earn $1,250,000 and have about zero left at that point. If Romney wants to win in Michigan he has to convince them that is just the way it should be.

Wednesday, February 15, 2012


The most powerful man on the planet dropped into visit the people in Iowa who helped launch his climb to power. No, I don’t mean President Obama, I mean Vice President Xi Jinping (shee jeen ping). In a year he will ascend to the Presidency, or as he’s known in China, Comrade Chairman of Communist Party Central Committee.

Despite a heavy diplomatic schedule, Comrade Xi insisted on stopping to visit the farm family in Iowa that put him up in their spare room for two nights in 1985. He was a minor party official from a remote agricultural province back then, seeking to improve pork production in China. He succeeded, and next year he will begin overseeing a five year plan that will leapfrog the People’s Republic past the United States as the dominate world economic power.

To emphasize his roots in agriculture, the Chairman had a new purchasing agreement for $15 billion worth of soybeans signed his trade representatives while he visited Iowa. China now buys every fourth row of soybeans grown in the US. These massive purchases amount to little more than a rounding error in China’s trade surplus with the US. They use a lot of the extra cash to buy up copper mines and such around the world. Those USDs end up in the cash reserves of third world countries, so-far they haven’t figured out they traded the copper mine for a handful of magic beans, not soybeans.

Know as an economic reformer throughout his career, Mr Xi is also known as a being very conservative on government issues. The Obama Administration was careful to show him all the pomp worthy of a world leader. The Bush Administration didn’t show this level of respect for his predecessor when he made the same tour just before his ascension to power, but another ten years of Reaganomics have made China into our biggest banker, and you have to be courteous to the guy who can call your loan.

The truth is that China doesn’t really have that much power over us, that is they wouldn’t if our country was run by people who worked for us instead working for the transnational corporations controlled by a handful of billionaire capitalists. We don’t really borrow money from China, no US government checks are payable in renminbi.

We borrow USDs from Chinese bankers that have them piling up there because of our insane trade, manufacturing, corporate tax, and financial services policies. The damage done to our economy far exceeds the few trillion that ends up in China, basically the Republicans will burn down the chicken house just so they can steal the one chicken that runs out.  

President Obama spent his day at a factory in Milwaukee that brought its manufacturing back from China. His speech suggested ending tax breaks for companies that outsource and he called for tax credits for companies that come back. Not that the big companies pay any taxes in the US, so tax breaks don’t mean much. They in fact pay a lot of taxes in China, Mr Xi sees to it.

No mention from Obama of re-instating the tariff rates that we had from 1790 until the Republicans started dismantling our manufacturing base.

Here comes another flaming chicken, try to grab it on the way by and we can eat today.  [no actual chickens were harmed in the writing of this rant]

Tuesday, February 14, 2012

It's only eight months till October

The evening news starts almost every day with a scary story about the price of gas going to $5.00 by Memorial Day, and how bad that would be for the economy. They usually follow with a story about Iran threatening to block the Strait of Hormuz, or maybe that will be lead story today. They don’t mention that that currently the largest manufactured export from the US is gasoline. The oil companies are even closing refineries because they can’t get rid of enough gasoline to justify running them, but still the corporate media dutifully reports that the “shortage” of gasoline is driving up the price.

The truth is that oil companies and Wall Street banks are trying to carry through on their threat to take down Obama if he didn’t play ball. Indeed the media is playing up the potential damage to the economy if the price of gas actually goes up as much predicted. The really scary news stories quote unnamed sources as promising $6.00 gas by mid-summer or EVEN HIGHER!

The problem is that these are exactly the same stories they ran this time last year. It’s true that gasoline is a bit higher than this day last year and has just jumped by 40 cents recently, but still below the high last year. The thing about commodity price increases is that they eventually get incorporated into the economy, and cease to have any real effect. The prices of consumer products that ran up last year with these “promises” of high gas prices were even coming down again as the price slid below $3.00/gallon briefly.

That’s not to say there aren’t millions of people suffering, but it’s not really from the price of gasoline. The suffering comes from depressed wages and from national policies that only favor the 0.1% of Americans. If the minimum wage was $14/hour like it was in from 1938 until 1980 (when adjusted for inflation), and skilled factory jobs paid $63/hour like they do in Germany we wouldn’t be worried about $5 gas that much.

The price of gas probably has a lot to do with current efforts by Republicans to ram the Keystone XL pipeline through Congress. Republicans are hoping they can tie it to something else that Democrats won’t give up. The current deal on the Fica tax cut extension and unemployment benefits is rumored to be going through without anything attached to it, but that seems unlikely to persist.

On the other hand, maybe there is consensus among the cockroaches that it’s time to skitter back under the refrigerator until the kitchen light goes out again. Approval of Congress is down to 10%, but that’s an average, for Republicans it’s even lower. According to recent polling, 20% of registered Republicans are actually leaning toward voting for Obama. It’s possible they may simply let go of their “never give an inch” stance until after the election to minimize their losses.

The chances of Democrats actually fixing the economy on permanent basis is slim at best, there‘s still all that lobby money sloshing around. The Republicans can count on Americans forgetting everything that they’ve done, and in another four years Republicans can again promise trickle down prosperity. Still there is an October, the month of “surprises”, between now and the election so we probably shouldn’t count the Republicans out just yet.