Friday, May 29, 2015

Are We Still in the Recovery?

The economy grew an estimated minus 0.7 percent in the first quarter.  That's an annualized number, so the actual estimate is one-fourth of that.  This was the first revision from the first released estimated, which was a positive 0.2 percent.  No point in fighting over numbers, the real truth is that neither reflects a healthy economy.  Too much government, too many regulations, taxes are too high (way too high) -- all of these things virtually guarantee stagnation.

We're Europe now.  The big government folks have said for years: "If every other modern country can afford free this, free that, then why can't we?"  What we're learning -- watch Europe -- is that no country can afford any of this.  The only way this has worked is by borrowing huge amounts of money from unsuspecting bondholders.  But, slowly they are beginning to see how the end game plays out.  Greece, Portugal, Ireland, Spain, and Italy are nothing more than harbingers of where France, Germany and England are headed.  The US is headed that way as well and at a pretty fast clip.

Free markets are the antidote, no more interference in the name of justice, inequality, fairness and all the other.  Is it fair that UC Berkeley, a public institution funded by taxpayers, paid a politician $ 300,000 to give 45 minute speech last year.  That politician claims to be fighting against inequality?  Really?

When merit is replaced by political favoritism and when most employees feel they are 'entitled' to this and to that, then those at the bottom of the heap no longer have a way out.  The poor, the minorities, they are toast in an economy like this and the facts show it.  Only free markets give people the ability to rise out of poverty and carve out a new life.  Government programs just select who is to be favored with taxpayer money and imprisons those to whom they bestow that money.

If you want to see poor people do better, then let them choose who they want to work for and at what wage, even a negative wage if that's what it takes to build skills.  Let them choose the schools they want to send their children to.  Rich folks do that, why not poor folks?  Get government off the back of the poor and lower income folks and real economic growth will be the result.

The truth is that Europe never could afford all this and we can't either.  A couple of generations got away with borrowing without limit and living high on the hog.  But, now the chickens have come home to roost and it's time to let free markets come back into fashion.

Monday, May 25, 2015

Back to the 17th Century -- Modern France

Slowly but surely France is reverting back to the good old days, centuries ago, where except for a handful of rich folks, most people who were prosperous worked for a government entity at some level.  Ultimately by the end of the eighteenth century, there wasn't enough money for all of this government largesse and the end result was the French Revolution. 

France is headed that way again.  Fewer and fewer Frenchman are involved in anything remotely resembling a private sector (banking can no longer be considered part of the private sector in France) and most bureaucrats, including teachers, have absolutely no fear of losing their jobs.  And what are they producing?

The real producers are the capitalists.  But, as in America, they are mostly the butt of late night comedy show jokes.  Personal income tax rates of 80 percent are considered okay here in a country that hasn't had any real economic growth in two decades.  Those two facts are not unrelated.

The big government agenda has done its work here.  Now there simply remains the political battle to see whether the far left or the far right will emerge victorious in the never ending effort to divide a shrinking pie.  Greece and Spain are further down that road than France.  But, France will catch up, in time.

These are observations based upon my annual trip to Paris to the French Open.  At least at the French Open, there are still people who still believe in competition, but not many folks in the French government share that belief.

Friday, May 15, 2015

Why Punish Poor People?

The minimum wage and other artificial "market fixes" are public statements that the poor cannot be expected to learn skills and improve their bargaining position in the market place.  Minimum wages impose, long run, a minimum skill level required to hold a job.  Those without those skill levels join the ranks of the unemployed and are barred by law from trading their labor for skill development.

Gone are the days when it was legal to be a "free intern" or an apprentice.  Only the affluent are legally permitted to be free interns, so long as they work for government, or in cases where they already posses a very high level of skill.  Those at the bottom are legally prohibited by minimum wage laws from finding a way to improve their skills.  Effectively, this legislation guarantees a permanent class of citizens with little or no skill and a permanent legal bar to developing skills.

This appeals, of course, to college students, with no such legal barriers in their way, or professors, long protected by their monopoly tenure positions.  They have nothing to fear.  Or the extremely wealthy left-wing politicians (think $ 100 million plus Clintons, with Bill Clinton earning $ 500,000 per speech, mostly paid by government sponsored entities), who claim to be defenders of the middle class.

But, a poor person who approaches a company pleading to work for free in exchange for learning a skill is likely, if successful, to wind up in jail.  Great system.  Tax the cigarettes purchased by poor people and use the money to fund the Clintons.  Meanwhile, legally prohibit the poor from developing the skills to escape poverty.  The Clintons have got this figured out.

Friday, May 8, 2015

Putting Lipstick on a Pig

The market cheered today's job report of 223,000 increased nonfarm payrolls.  Whoop-te-doo!  Meanwhile, the revisions blew a 39,000 job hole in February and March numbers.  Net, net: 184,000 new jobs, which is pitiful by any reckoning.  Headline in Reuters:  "Job growth regains steam..."  Really?  I guess compared to the newly revised 85,000 jobs created in March, this number is an improvement -- it's better than zero or perhaps a negative number.

Is this the new normal? What hope does the middle class have when numbers like this are considered  the "successful" outcome of economic policy? Free markets have been known in the past to deliver one million jobs in a month and more and no one was surprised at the time.  Now, we cheer this mediocrity.  Welcome to the fruits of Obamanomics, Obamacare, Dodd-Frank and all the other anti free market programs that have reduced the American economic engine to a shell of its former self.

I guess the main message from the Obama White House is that everyone should revise downward their expectations of their own personal economic future.

Wednesday, May 6, 2015

The Beginning of the End

The Euro has bounced back nearly 10 percent in the last ten days and European interest rates are rising in every locale.  Meanwhile, Greece totters towards its inevitable bankruptcy.  The Wall Street Journal reports today that global inflation is turning up.  Recent data on the US is surprising for its weakness after glowing reports of an economic breakout at the end of last year.

It's time to sit up and smell the coffee.

The long, slow, dull, weak economic recovery in the US is coming to an end.  Europe is stuck in quagmire of its own choosing.  Central bankers in the western world have cooked up the perfect stew of economic stagnation and future inflation.  The BRIC countries are stagnating.  Meanwhile global political instability, almost everywhere, is on the rise.

This looks like the beginning of a "risk-off" cycle.