Monday, May 30, 2016

EU Defenders Spreading Nonsense

The EU defenders, who oppose the Brits leaving the EU, are repeating the same nonsense that bureaucrats always resort to.  They are claiming economic disaster if the Brits walk.

That is completely ridiculous.  There has been no real boom from joining the EU and there will be no economic collapse when they leave.

In fact, freed from the expense of the EU bureacracy, the average British taxpayer will have one more useless expenditure to deal with. 

Even better, the Brits need not turn over the sovereignty decisions on who can or cannot enter Britain to the unelected bureaucracy in Brussels.  That is the issue that stirs the Brexit folks and rightly,  People have a right to decide their own immigration policies.  You may not like what they decide, but the Brits should make that decision, not Brussels.

CUNY and the End of An Era

There is an interesting story today in the New York Times about the budget woes at CUNY, the once-famous college for New Yorkers, who come from less-wealthy backgrounds. CUNY, originially known as CCNY, produced some brilliant scholars and many successful business entrepreneurs over its rich history.  Now, it is becoming a delapidated relic of itself.


The story, like most stories about the modern university system, looks at the "decline" in state funding.  There is, of course, no decline in state spending -- at CUNY or anywhere else.  What is declining is the percentage of school costs paid by the state.  And why is that declining?  Because the denominator -- spending -- is racing off to infinity.

Administrative budgets have ballooned in the last decade or so and spending on non-educational parts of these schools has mushroomed.  Spending on what you and I would think of as education has actually declined in real terms.  Chalk and classroom space are actually pretty cheap and have not been increasing in cost.

But take a look at administrative expenses at any of these places.  They are completely out of control.  Not only do the university presidents and deans have compensation packages that would make Wall Streeters blush, but there are a host of new centers, multi-cultural deans and staff, gender equality operations, and micro-aggression police forces on campuses.  These costs are enormous and contribute little or nothing to the education process.  These are mostly political centers, meant to influence student opinion on political matters.

The system of tenure makes sure that competent faculty are kept from competing for spots in the modern university.  What tenure means is pretty simple.  If someone else can do the job better than you can for less pay, so what?  You have tenure, so you can pretty much do what you want.  Notice who wins in this system.  Certainly not the education process.

Tenure was supposed to protect the political freedom of faculty.  Since almost 100 percent of the modern faculty have the same political identity -- moderate left to far left -- there is no protection afforded for those that don't share this monolithic view of the world.  Tenure, in fact, serves to keep diverse views from being represented at the modern university.  It also protects incompetence.

So, CUNY is going down the drain.  They will eventually have a lot of company as wealthy donors and unwitting taxpayers lose interest in supporting a modern club med for one-percenter administrators, tenure-protected faculty, and the plethora of university centers designed to separate one student from another.

With the rise of the internet, gaining knowledge has actually become ridiculously cheap.  It is only in the modern university, that education, what's left of it, has become so extraordinarily expensive.  That's because the modern university is less and less about education and more and more about social experience and the promotion of political ideology.

Saturday, May 28, 2016

Musings from Paris

Most everyone in Paris dresses in dark clothing, likely for good reason.  The future here is not bright unless you are installed in the massive bureacracy, a sinecure for life, or you come from wealth.  If you are not one of those, you are flat out of luck.  The same is true pretty much across the European plain.  In some countries, the chickens have already come home to roost -- Greece, and to a lesser extent, Spain and Italy.

The combination of stifling government regulations, enlarged by the Brussels regime of the European union, has all but wiped out innovation and change in the European continent.  Those Americans who believe that this is the best of all worlds should come visit (and listen to European TV).  The problems in the health care system and the fruits of denying economic opportunity to millions of Europeans are displayed daily.

Yes, Europe is great if you're set.  But, it's a disaster if you're not set.

Once free markets are obliterated, which they pretty much are in Europe, those without have no way to join those within.  These societies are totally economically stratified.

This is the direction that those who seek more and more regulations want to take the US.  By and large, those advocating more regulations come from the most comfortable section of the American society.  That's why students at elite colleges are in the forefront of the advocacy for more stifling legislation, aimed at shutting down opportunities for the poor.  Higher minimum wages effectively lock the poor out of any hope of moving into the middle class.

Eventually the politically centrist parties lose their clout as increasing numbers of their constituency realize that there is no hope for themselves.  In the US, that explains a lot of the Trump-Sanders appeal.  If there is no outlet for moving up the ladder because of an overzealous government, then the next step is to move to what appear to be more extreme political alternatives.  The recent vote in Austria is a clear indication of where this is all heading, as the Greeks demonstrated two years ago.

There isn't any path toward opportunity that doesn't include free markets.  There are no historical examples of middle class enlargement without free markets.  The world is rife with examples of entrenched bureaucracies trampling on the opportunities of the less privileged.

It's no wonder that American politics is now dominated by two extremely wealthy partisans -- Hillary Clinton and Donald Trump.

If you want to see where this is headed, come to Europe.  To cut to the chase, visit Greece first.

Thursday, May 26, 2016

Don't Get Excited About the Stock Market

At the end of the day, as they say, economic stagnation cannot bode well for business profits and future stock price growth.

The US and Europe are mired in a sinkhole of their own creation.  The US has regulated itself out of any hope of real economic progress.  The bureaucrats and the wealthy will do fine, but everyone else is left to fend for themselves with a declining economic pie.  This has been case for decades in Europe.

There are potentially catastrophic winds on the horizon.  Debt is the problem.  The massive wealth transfers that are now built into US and European fiscal policy are unsustainable and will prohibit any future economic growth of any substance.

The stock market, near its all time highs, is not a buy.

Scare Tactics Plague Brexit Vote

The European Union is a sinking ship and the Brits would be smart to abandon the EU.  All the scare talk about British home prices dropping twenty percent are pure nonsense.  The argument for that is based upon no economic analysis at all.  It is similar to the argument that raising prices has no impact upon demand (which is what the higher minimum wage advocates argue).  No wonder voters no longer listen to the established political leadership.  They just make up whatever stories they wish to justify their hegemony.

The problem with the European Union is the same problem that has developed in the American economy over the last half century.  Increasingly, more and more regulations, about everything, defeat the purpose of a common economic union.  In the US, Washington DC has taken over, even to the extent of regulating the use of bathrooms.  It's truly amazing.  Their is very little left for local folks to decide on.

Consider the American school system.  Local schools have zero autonomy.  Most of their marginal budget decisions are driven by federal mandates.  Increasingly that argument is applied to private as well as public schools.  Arbitrary executive mandates, without legislative authorization, deny local citizens the right to make their own decisions.

While everyone likes free trade zones, that isn't really what goes on in the European Union.  Worse, things like the Greek bailout, which could never, ever have occurred without the Eurozone and its larger partner the EU, have plunged Europe into a land of increasing debt and declining local sovereignty.  Who runs Greece today?

The Brits should bail to protect themselves from Brussels' bureaucrats.  This unholy alliance of bureaucrats and leftist politicians have destroyed any chance of economic growth in Europe and left younger people with no future, unless they were born with wealth in the first place or have personal ties to the bureaucracy.  Why would the Brits want to be a part of that?

Wednesday, May 25, 2016

Media Bias Is Everywhere

The latest evidence of media bias or media incompetence, sometimes it is hard to tell which is more pervasive, is the Associated Press story today about "disparate access" to retirement savings programs.  The story is complete and utter nonsense, as are many AP stories.

The truth is that everyone in the US has access to a retirement savings program if they have a cell phone or a computer or knows anyone that does.  The subset of the population not fitting into this category probably has nothing to save with, so they don't need access, they need money.

The effort to show discrimination in every nook and cranny of our lives typically results in rewarding incompetence, sloth, mendacity.  The AP is a master of that effort.

Friday, May 20, 2016

Blinder Puts on The Blinders

Princeton economist Alan Blinder, former Vice Chairman of the Fed, was quoted today in today's New York Times:

“Students learn in Economics 101 that lower taxes and/or higher levels of government spending can mitigate recessions by boosting aggregate demand,” he writes. “That simple Keynesian idea should be no more controversial today than Darwinian natural selection or global warming.”

Leaving aside Darwinian natural selection, Blinder is right on target.  Economics 101 teaches complete nonsense about macroeconomic policy.  If higher levels of government spending worked, as a macroeconomic policy, we and Europe would be in Nirvana.  The enormous growth in government over the past 40 years has lead to a dramatic reduction in economic growth.

Using the term "aggregate demand" is a fudge.  No one really knows what that term means -- neither did Keynes.  But, one thing we know: increasing government spending, as a policy, is a fools game.  If that worked, Venezuela would be the richest country in the world.

The reason Blinder is right on target is that global warming is another of the left's hopeful excuses to limit the economic potential of the world economy.  Blinder and others like him relish the idea of stunting economic growth for the masses so that they can preserve their own hegemony.  You don't see very many poor people or lower or middle income people carrying banners about global warming.

It is the wealthy and the elite who fancy the global warming alarms.  Throw in protected academics, insulated from competing with others for their jobs.  These elite snobs are the real champions of the religion known as global warming.  Unfortunately, the scientific backup for this is best described as slim to none.  What little trends were in the data have all but disappeared.  Even if the trend of the last decade of the last century had persisted, it is largely irrelevant.

We have billions of years of history of carbon dioxide penetration of the atmosphere and its impact upon global temperatures.  In fact, throughout most of the history of the earth, carbon dioxide had much, much higher penetration of the atmosphere than the pitifully small amounts of today that so alarm the elite.  We also have temperature data for this history.  Guess what?  No relationship -- at all!

So, yes, Professor Blinder.  The idea that big government promotes economic growth is about as valid as the "science" of global warming.  They are both religious tenets of the religion of the wealthy and the elite leftists who promote this nonsense.

Friday, May 13, 2016

Cheering Stagnation

Retail sales for April came out today up 1.3 percent.  That number, pitiful, in context, signals mostly more economic stagnation.  Steve Liesman, chief economist for CNBC was ecstatic.  Liesman, an Obama fan, thinks that, if the economy isn't collapsing, then all is well.  By his definition, no growth is a winner.

That's why the big disconnect between folks like Liesman and average Americans.  Liesman makes a small fortune hanging out on CNBC every morning.  But, the average American is not in his situation.  The average American's disposable real income falls every single month.  Liesman, meanwhile, gets richer and richer.

No wonder, Liesman doesn't mind economic stagnation and can't understand why the average American is not appreciative of the Obama economy.  It works for him (and for Obama).

Monday, May 9, 2016

Puerto Rico Does Not Need An Oversight Bureaucracy

Jack Lew, US Secretary of the Treasury, seems to think bureaucracies can solve all problems.  There is no need to impose an oversight bureaucracy on Puerto Rice.  Puerto Rico does need to restructure its debt.  It needs to sit down with its creditors and come up with a plan.  If they cannot get a voluntary debt restructuring done, then bankruptcy is the only (and the correct) answer.

There is no need for the US national government to be involved at all, other than permissive legislation that would permit Puerto Rico to go bankrupt or to do a workout on their own hook with their creditors.

The American taxpayer should stay far, far away from this.  Puerto Rice and its bond buyers did this on their own, freely on their own.  If bondholders were stupid, then let them pay for their stupidity.  Someone in Des Moines, Iowa bears no responsibility for this.

If the bonds had paid off, bondholders would have been winners.  The bonds are not going to pay off, so bondholders should take the hit.

Trade Economics

The campaign trail always exhibits nonsense economics.  This year is certainly no different.  Perhaps the least understood issue is that of international trade.

Make no mistake about it.  The best trade policy is no trade policy.  We should have zero tariffs on all imported goods and that's that.  This is not even a close issue.

We are not shipping jobs to Mexico or anywhere else.  Companies will always locate in places that are favorable to their economics.  If you can get the same product produced at a lower cost in one location as compared to another location, that product will get produced in the lower cost location.  That is a good thing, not a bad thing.

The answer is not to preserve the horse and buggy.  The answer is to provide free markets and free choice.  America did not become a great nation because of tariff walls.  It became a great nation because of the absence of tariff walls.  If tariffs made sense, the fifty states of the American union would set up tariff walls against each other's products.  Why don't they?  Yes.  Because it would be stupid.

Safe schools with free choice of schooling for parents will easily provide the necessary skills for the next generation to perform well in good jobs, assuming free markets are permitted to provide them.  That's not the case now.  Bureaucrats now decide who can work and where they can work and what they get paid.  The free market needs to make these decisions.

Schools in low income neighborhoods are dangerous places.  Parents in low income neighborhoods, who would like their children to have a chance are denied that by the teachers unions and national education bureaucrats, whose children do not live in low income neighborhoods.  These latter groups don't give a hoot what happens to low income children and neither does Obama, Clinton and the rest.

Parents should have choices about educating their children and the teachers unions and the state and federal bureaucrats that protect these unions should butt out.

Freedom, not bureaucracy, is what creates hope and opportunity for people.  Passing laws that forbid consumers from buying the best products available worldwide at the best prices is just stupid.

Saturday, May 7, 2016

The Elephant in the Room

Most of the American political rhetoric this year has little or nothing to do with the problems that ail the US.  The most important issue facing the country hasn't really been discussed at all.   That fact probably has a lot to do with why Donald Trump is the Republican nominee.

The last Republican candidate to understand the big issue in American life was Ronald Reagan. He rarely if ever discussed the kinds of issues that dominated the 2016 Republican primary.  For Reagan, getting the mighty American economic engine going again was his central campaign them. That's why he beat George Bush in the Republican primary race, who referred to Reagan's views as "voodoo economics."

Reagan ran against incumbent President Jimmy Carter (and the American media) in the general election, defeating Carter soundly.  He ran in a positive manner, but ran in an environment of the mediocre economic growth of the 1970s.  And Reagan made the most of it.

Reagan proposed sweeping regulatory reform and lower and simpler personal income taxes.  When elected, Reagan delivered on both.

Reagan spent no time criticizing his opponents.  He projected a vision to get economic growth going again.  He won and he delivered.

Contrast Reagan's approach to that of Marco Rubio, Ted Cruz, John Kasich and the raft of failed Republican presidential aspirants.  None of these folks devoted much campaign time to the need to get the American economic engine going again, even though they ran amidst an environment of the worst economic recovery in American history and ever-declining living standards for the average American.

The average Republican could not relate to the campaigns of the sixteen non-Trump candidates.  That should not come as such a surprise.  Americans are mostly worried about economic issues.

So, the average Republican voters drifted over to a reality-show candidate who kept saying "Let's make America great again."  Interestingly, that was exactly the same slogan used by Ronald Reagan in his successful 1980 campaign for president.

Maybe the voters were hearing some hope in that slogan for themselves.  Tired of the sluggish economy and the timid Republican Congressional response to the Obama onslaught on the economy, the average Republican voters likely voted for Trump because only Trump held out the possibility of trying to deal with economic malaise that the US economy has faced since 2000.

This hope for a better economy and the hope for someone who might reverse the declining living standards brought on by years of Democratic Congressional Rule capped by the Obama economic policy nightmares, might just provide the path for a Trump route to the presidency.  We shall see.

Friday, May 6, 2016

From sluggish to terrible: the labor market

Today's employment report of 160,000 jobs in April is a terrible number, compounded by the downward revisions in February and March.  Tough luck for the middle class. They can expect further reductions in American living standards.

Meanwhile, the elite classes:  Obama, Buffet, Gates, Gore, Pelosi, Trump can move from limousine to jet back to limousine, basking in their dominance of the economy.  The bureaucrats and academics have to love this!

Thursday, May 5, 2016

The Brits Should Leave The EU

My suspicion is that the British will vote to remain in the EU.  That said, if I were a Brit, I would vote to get out of the EU.

A free trade zone is a great idea, but letting Brussels make your labor laws and economic regulations for you is quite another.  European politicians have hamstrung their own economies to the point of almost total economic stagnation.  Why buy into that?

Meanwhile, there are other problems.  The various bailouts of profligate countries: Ireland, Greece, Portugal come to mind, are just beginning.  Why should British taxpayers pay for the nonsense that goes on in Greece, France, Italy, Spain, etc.?

Let the Germans pay if they want to.  Germany's historical guilt probably is their main motivation for bankrolling their neighbors, but why should Britain join hands with Germany in this nonsensical bailout game.

Leave the EU.  Let the EU sink into the economic quagmire of its own making.

The Coming Sticker Shock in Obamacare Land

Today's Wall Street Journal documents the dramatic and historic increases in health care costs that have been created by Obamacare.  Two numbers for 2016 are now on the table.

Providence Health Plan -- the largest in Oregon is seeking an average increase of 29.6% (that's just a one year increase!).

In Virginia, Anthem is asking for 15.8 percent, year over year.

As the WSJ notes, "a number of insurers are likely to seek significant (premium) hikes as they aim to cover costs that have continued to outstrip their estimates.  The companies .... have detailed the challenges in their Affordable Care Act business in a round of earnings releases...."

These are the same insurance companies that supported the passage of Obamacare in the first place, licking their chops at a government mandated host of new clients.  Too bad.  The problems: (i) those with the worst health condition dominated the new sign ups; (ii) the rules and regulations of Obamacare added a plethora of new, often completely unnecessary, costs to the insurance plans that could be legally sold (and purchased).

So, what is the Obama crowd's answer to this surge in premiums.  It runs like this:  "Well, the taxpayer will pony up to cover, through subsidies, a lot of the premium increase."

Some answer!  Regardless of who pays, the fact is: Obamacare has dramatically increased the cost of health insurance and health care.  Current increases are way, way bigger than the increases that incurred on annnual basis before Obamacare became the law of the land.

So, higher costs, less health care -- an America with a declining ability to provide health care for its citizenry.  That's what big government gets you.  This is Barrack Obama's legacy and Hillary Clinton's game plan.

Wednesday, May 4, 2016

Donald Trump --Really?

Seeing Donald Trump triumphantly blovating his way to the Republican Presidential nomination is like waking up from a bad dream.  If arrogance and bombastic rhetoric was an improvement over common sense, Trump would be just what the doctor ordered.  But is this really what the doctor ordered?

The American economy is sick and getting worse.  Culturally, vast numbers of Americans have bought into the idea that capitalism is just a game for the rich.  So, Donald Trump is the answer?

Trump has demagogued the trade issue, feeding off the ignorance of many Americans, whose job insecurities underlie much of the current angst.  Bad deals with China have nothing to do with the moribund US economy.  The US economy has been strangled by over-regulation -- not bad fiscal or monetary policy or bad trade policy.

How to get the American economy back to the 3 1/2 to 4 percent growth of its pre-2000 history?  That is pretty simple.  Get back to the regulatory environment in which the US economy thrived from 1865 until 1970.  That environment produced an America that was the wealthiest country pre capita in the world and where the middle class consistently gained ground. 

Look at the American health care system.  Costs are surging, unnecessary procedures proliferate and the poor and lower incomes find their health care availability disappearing.  This is what happens when government takes over the health care system, as it has in the US.

What's Trump's answer to the health care system's travails?  Go to a single payer system.  What does that mean?  It means turn the entire health care system into one more government bureaucracy, effectively destroying the historic doctor-patient relationship in the US and ushering in a system guaranteed to decline in quality, much like American public schools -- also run by an uncaring, unfeeling bureaucracy, whose main purpose seems to prop up jobs and incomes for sub-standard employees.

Sounds pretty bad, doesn't it?  Until you look at what is happening in the Democratic Party nomination race.  Hillary Clinton?  Bernie Sanders?  These two would embarrass Hugo Chavez with their demands for more and more wealth redistribution and government largesse.  Sanders is more than a socialist.  He gave evidence of his love for the old Soviet regime when he spent his honeymoon worshiping at the Moscow tomb of Vladimir Lenin.

Clinton is less of an idealogue.  Clinton is mainly about gaining personal money and power.  She could just as easily put on the cloak of conservatism as the cloak of liberalism.  Ideas really don't matter much to Clinton, as her constantly shifting views on every subject provide testament.

But there are two things that Clinton supports -- more regulation of business by government and arbitrary decrees by the executive without consultation with Congress. She is publicly on board for both of these Obama-Clinton programs.  These are the very things that have destroyed American economic growth and led to declining real income for middle-class Americans.

So, who would be a better president?  That's easy.  Trump is a far, far, better choice than either Clinton or Sanders.  But, it's a shame that it has come to this.

Monday, May 2, 2016

Let Puerto Rico Go Into Bankruptcy

Puerto Rico has $ 70 billion worth of debt that they cannot pay now or ever.  They should declare bankruptcy and sit down and work out some kind of deal with their creditors.  Trying to get Puerto Rico to pay their debts in full is stupid.  They can't do it.

Some Republicans are insisting that bond holders be repaid in full.  Why?  They knew the risks when they bought Puerto Rico bonds, whose yields were substantially higher than other, better quality, bonds.  Why should a group of hedge funds and sharpies be saved from their own stupid speculation?

Those owning these bonds should suffer. Period.  That is the right answer.  Keep the American taxpayer out of this.  They didn't spend the money that the bonds raised.

The Puerto Rico situation is the first shoe to fall.  Next up to the plate is the city of Chicago, followed shortly by the state of Illinois.  They, also, should go bankrupt and bondholders should be the losers, not taxpayers.  Eventually almost every state and large city in America will be forced to do a "debt workout" of some kind.  No way, these folks can pay off their debts.  It is just not possible.

The market can't work if lenders don't pay the price when they make bad loans.  Bankruptcy is the right answer and the lenders should get, deservedly, hosed.

Welcome to the American version of the Greek crisis.  This is the first act of a long running play.

Buffet's Annual Shareholder Meeting

Warren Buffet is center stage this week and, as he is wont to do, he devoted a lot of time to taking pot shots at capitalism.  Buffet's view of capitalism is pretty simple:  everything that Buffet does is legitimate capitalism, but activities of others are either criminal or non-productive. This is typical Buffet.

When asked about money management generally, Buffet lambasted money managers as "creating no value." He encouraged average investors to invest in index funds.  I agree with that, but how does he defend himself.  He made his original stake, aside from the silver spoon at birth as the son of a United State senator, by charging huge fees -- much, much larger than the hedge fund fees that he complains about today.  He seems to have forgotten that episode.  But then, the rules that apply to others never seem to apply to Buffet.

Then, on to the subject of middle class angst in America.  What was Buffet's opinion.  He trotted out the stale and incorrect view that Americans are mostly unhappy because no one went to jail in 2009.  Hey wake up, Warren!   It's 2016.  People want jobs and higher living standards, something that became little more than a pipedream for a huge swath of the American middle class.  Why!  You, Warren, you and your friends!

Why are health care costs going through the roof?  I suspect that bothers people a lot more than the Buffet narrative that bubbles are caused by Wall Street bankers.  Stagnant incomes in a stagnant economy thanks to Buffet and his favorite politician, Barrack Obama. 

Now, Buffet, who seems to think the current economy is great, is backing Hillary Clinton.  If you liked the last eight years, you'll love the next eight under Clinton.  But, if your name is not Buffet and you are in the middle class, you better get prepared for declining disposable income, higher health care costs, pension fund bankruptcies, and public monies siphoned off into friends of Bill and Hillary.

Just who is it that should have been put in jail?  How about Buffet himself?  Goodness knows, he is every bit as greedy as any Wall Streeter. 

Buffet enjoys his status as one of the two or three wealthiest Americans and he will do whatever it takes to maintain that status, even if American's middle class is saddled with economic roadblocks imposed by his political sidekicks.

Meanwhile, Buffet maintains his folksy pose as he jets and limousines from place to place to hang out with the beautiful people that he seems to need to hold close so desperately.   Too bad if you are an average American.  Buffet's not your guy.