Saturday, March 21, 2015

Sorry, it's been a long while since I've posted.  I've got a few things on my mind, but I'll start with Keynes and Obamacare.

How could Keynes and Obamacare be related?  Read on...

John Maynard Keynes was an economist who rose in popularity during the Great Depression of the 1930s.  He pointed out that when, thanks to automation, it's easy to produce everything everyone *needs* to live, the rest of the economy relies on peoples' *desires* and not needs; and that when people don't feel like buying all the things that a fully employed economy can produce it results in layoffs and businesses being closed.  His solution was to take the people who were out of work, give them subsistence, and put them to work building infrastructure.

Today's version of Keynes' solution is for government to throw a crapload of money at their cronies to give a very few people high-paying jobs.  Keynes would be spinning in his grave.  But I digress...

The above solution is only one of the ways the government has been trying to plug the hole in the economy caused by automation.  Another solution was to increase the number of regulations businesses have to adhere to, requiring more personnel for oversight and paperwork.  Regulations making construction, food, toys and other products more expensive also put more people to work.

Another trick governments use to get more people employed is to limit the amount of work those who are employed can do, requiring companies to divide the work among more workers.  France is a good example, forbidding employees for many professions from working more than 35 hours per week.  In the US, regulations are a bit more vague but accomplish the same things.  Overtime for working more than a certain number of hours per day or days per week.  Giving a different classification for those who work 35 hours a week or more, that requires companies to provide more services for them, also encourages companies to hire "part-time" workers instead of "full-time".

One of the tricks Obamacare slipped in was to require companies to provide health insurance for workers who work 30 hours a week or more, an expensive proposition.  The result was of course to discourage companies from scheduling people for that many hours.  "Part-time" effectively went from 35 to 30 hours per week.

The end result?  While the unemployment rate has dropped a bit recently, this statistic only follows people who are entirely unemployed.  The rate of people who are *under-employed*, those who have dropped below the poverty level because they can't get enough hours at work, has risen significantly.  Good luck reading about that in the news, though.

Tuesday, February 01, 2011

Egypt's unrest may have roots in food prices, U.S. Fed policy

Let's put quantitative easing aside; it isn't, IMO, the biggest factor in rising food prices.

So let's get this straight...

(1) OPEC starts squeezing oil prices, pushing them higher and higher, currently up to $100/bbl.
(2) Farmers need fuel for tractors and it takes more fuel to transport the food from the farms to the consumers. The higher prices are passed on.
(3) Oil isn't just turned into fuel and burned; it's used in chemical synthesis, to create, for instance, fertilizers? And pesticides? More expenses passed on to the consumers.
(4) Consumers in OPEC countries see food prices rising as fast as oil prices, don't get more money from their governments, and riot.

Thursday, January 27, 2011

In the news, Chinese investors are looking into putting money in US firms and infrastructure. A damn good idea on their part, they have a metric crapload of dollar-denominated assets, swapping any significant amount of currency would cause rapid devaluation, and hard investments in our capital would be the best way to weather the coming inflation.

This will naturally help along the very inflation they are working to avoid, as the dollars they spend to buy these assets re-enter the US economy.

Can't expect them to hold greenbacks forever though, and I don't blame them a bit.

Friday, January 21, 2011

The Republican side of the House of Representatives has introduced a bill which outlines significant cuts to the budget. Prompted by the popularity of the Tea Party, this bill kills the new health care scheme, reduces discretionary spending and proposes other cuts totaling $2.5 trillion dollars over ten years. This would be an excellent start to reining in our out-of-control government - except I don't believe it.

(1) The neo-conservatives in the GOP may be running scared and trying to hide their big-budget ways, but they will be very unhappy and will won't spare effort to weaken or destroy the bill behind the scenes.

(2) They would then have to run the gauntlet of the Senate, which still has a Democratic majority and isn't likely to pass such a bill.

(3) The bill would then go before Obama, who won't want to admit mistakes and would almost certainly veto such a bill, and there's no way enough of our congress-critters would vote to override it.

We can hope for change, but Obama has already co-opted Hope and Change.
This news story says the Federal Reserve is planning to use an "accounting tweak" to prevent insolvency. Huzzah! One problem though: While modifying the Fed's accounting strategy may save it from internal trouble, it increases the risk and amount of inflation by allowing the Fed to release more currency into the market. Couple this with "quantitative easing" and with how unlikely the current Congress is to significantly cut spending, and we're seeing no limit to how far the dollar can inflate.

Tuesday, November 30, 2010

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Saturday, November 20, 2010

Dueling articles:

Bernanke blames China for some of the US monetary problems by keeping its currency weak compared to the US dollar.

The Chinese government is causing controversy by increasing the reserve requirement for banks, a move which will tend to deflate and strengthen the currency.

So which is true? Both?

Friday, November 12, 2010

I've been watching the price of oil lately, and while in the short term the market continues to stymie me, from what I can tell, in the medium-to-long term the price of oil is governed by a negative feedback mechanism and is thus (potentially) predictable.

Our economy is reliant on petrochemicals and energy generated by burning fossil fuels. Should the price of oil rise too high, the economy will collapse. When the economy threatens to collapse, the demand for oil goes down, which means prices retreat. Therefore, oil follows a value which sucks any usable excess out of our economy, short of a level which would crash it.

Or in other words, our country is being steadily milked of its cash, not enough to kill the cow but too much for the cow to be happy.