Sunday, April 05, 2015

So, despite printing a huge amount of money with their quantitative easing program, the US dollar has risen in strength against other currencies, something I find boggling.  The only explanation I can come up with is that other countries are increasing their currency base even faster than the United States.  As the article mentions, devaluing one's money is a good way to drive international business to your industry, despite other negative effects it will have.

The short-term effect on the United States will be to defer inflation as imports get cheaper.  But (1) we can't count on other countries continuing to drive their currencies into the ground, and (2) we're so addicted to government spending it's unlikely we'll stop printing more money.  In the end, the national and total monetary bases are expanding, and that means inevitable inflation.

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.