Economic Populist Commentary

Economic commentary by a pro-capitalist, economic populist. Demand-Side Economic theory. Consists of author's economic views. Questions & comments appreciated. Dissenting views are VERY welcome and encouraged. Main "agenda" is crafting and advocacy of a "populist" economic agenda. A secondary goal is prevention of an economic Armageddon. Encouraging open discussion of US economy.

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The author is a physician by profession, and a "student economist" by necessity. The current status of our economy necessitates the latter. The intent of this blog is to explain and discuss economics in layman terms. It is designed to promote thought and discussion. It is written by a layman. Comments and critiques of these theories and letters are welcome and ENCOURAGED. Dissenting comments are also WELCOME! They form the basis for discussion.

Friday, September 02, 2005

ECONOMIC GROWTH and WEALTH DISTRIBUTION



The benefits of hard work are often stressed in our society. Most agree that hard work and productivity should be rewarded. Those that are more successful usually receive larger rewards than those who are less successful. Successful businesses rightfully expect to be compensated for their success.


At some point, however, these rewards may become excessive, as well as counterproductive. If businesses are rewarded excessively, at the expense of labor & consumers, it will decrease their own ability to sell their products. If workers aren't compensated well enough, their ability to buy production is reduced. This reduces business profits, and reduces economic growth.


LABOR, along with the production tools built by CAPITAL, are the factors that produce wealth. The combination of labor and capital combines to increase the value of raw materials. They do this by creating something more valuable than the original raw materials. You might call this a "labor value-added" effect, or a "capital-labor value added" effect. Though LABOR is absolutely essential, it's wealth-producing capacity is severly reduced without sufficient CAPITAL investment, because of the production enhancers capital provides. But capital, without labor, has NO value. Furthermore, without demand for production, neither capital or labor will be used to create wealth. Capital won't be invested, if there's no potential profit. Workers won't be hired, if the product of their labor cannot be sold. Low consumer income, with low consumer spending, reduces the ability of capital to create profits. It reduces the ability to SELL finished products. Profits are made by SALE of goods, not production of goods. As such, low consumer income not only hurts consumers, it hurts the businesses who sell to consumers. INCREASING CONSUMER INCOME HELPS BUSINESS, as well as consumers.


The major functions of capital are to provide raw materials and to increase industrial CAPACITY. This increases potential ability to produce goods and create wealth. But there's a catch here. The actual production of goods and wealth requires UTILIZATION of this industrial capacity. No wealth is produced by industrial capacity that remains idle. And there is no benefit to increasing industrial capacity size when it is currently under-utilized. In the case of under-utilization, wealth will only be created by increasing current utilization RATE. Economists refer to this as CAPACITY UTILIZATION RATE (or industrial capacity utilization rate.)


Our current industrial capacity is UNDER-utilized. The utilization rate has dropped from 85% during the Clinton years to 79% at present. Increased investment to increase the size of this capacity is not beneficial. In contrast, increasing the utilization RATE would be very beneficial. What would increase the rate? You guessed it. Increased DEMAND for production. Demand that would rise from increased consumer spending, resulting from increased consumer income. I can state this concept in 2 equations: Reduced Capacity Utilization = Reduced Consumer DEMAND. Increased Capacity Utilization = Increased Consumer DEMAND


For maximum economic growth, there needs to be a balance between the "means of production" and the "means of consumption." (This equates to Supply equaling Demand) Shifting the balance in either direction reduces economic growth, wealth production, and GDP. Excess production, when measured in terms of potential dollar-value, cannot be sold. As such, no profits can be made from it. In contrast, insufficient production in terms of quantity can be profitable. Prices can be raised to maximize profit from that limited production. Raising prices reduces the quantity demanded. This allows the supply to meet the demand. The reverse is only true in terms of quantity demand. Demand can be increased by reducing price, but the dollar-value of that demand does NOT change. The dollar-value of demand is limited by spendable consumer wealth. This is where the concepts of Micro Economics end, and Macro Economics take over. This is where AGGREGATE DEMAND comes into play.


Aggregate demand is absolutely limited by aggregate consumer wealth. The best way to increase aggregate consumer wealth is to balance the "means of production" with the "means of consumption." The capital invested needs to be no greater than that needed to meet production demand. In turn, production demand is created by the "means of consumption." If resources are un-balanced in favor of the "means of production," there will be insufficient demand to drive production. As a result, there will be less production, and less wealth produced. In contrast, greater wealth would have been produced if some of the investment capital had been re-directed towards consumer income. It would have increased demand, and driven production. Both consumers and business would have prospered. Economic "growth" would have increased. GDP would have increased.


If investment and consumer income are out of balance, correcting the imbalance increases economic growth, and improves our economy. If investment capital is excessive, diverting that excess into consumer income increases the benefit of the remaining capital. Taxing the affluent more to improve this balance is not "socialistic." It's "capitalistic." Balancing the "means of production" with the "means of consumption" is not a "share-the-wealth" concept. It's an "increase-the-wealth" concept. Such "wealth redistribution" would increase "wealth production." It would increase industrial production and GDP. Again, insufficient consumer spending REDUCES GDP. It reduces wealth creation by labor and capital, by reducing the demand for its creation.

Demand may not be everything. However, it is the biggest single factor affecting our economy. Consumer spending is the "dollar-value" measure of that demand. The consensus among economists is that 2/3 of economic activity is consumer spending. From this one would conclude that the most important factor in economic growth is consumer spending, or the "dollar-value" of consumer demand. Again, it's not the only factor, but it's the biggest factor.


I think the significance of DEMAND is under-emphasized in current economic commentary. That needs to change. This is not only about the subjective concept of "economic justice". It's also about "economic growth." It's my belief that some downward redistribution of wealth will help the economy. It will increase wealth production, because it will help balance the "means of production" with the "means of consumption." We would ALL benefit from a better balance of these factors, rich and poor alike.


The Bush Administration has done its level best to keep investment and consumption out of balance, thus TEMPORARILY allowing business to profit excessively from labor, despite the long term cost to ALL AMERICANS. Bush policies hurt ALL Americans in the long run. The following is a link to a graph from "Briefing.com." It shows the relative levels of personal consumption expenditures and investment capital. See which way you think the "balance" is shifted at present.




This chart can also be found at Briefing.com at
http://www.briefing.com/Common/Images/Content/PageContent/EcData/pce.gif


EconomicPatriotForum

84 Comments:

Blogger unlawflcombatnt said...

Note to posters:

I delete anything that appears to be an advertisement for a product. Information-type site postings are OK, but postings that are advertisements for consumer products will be deleted.

4:45 PM  
Blogger Loosecannon said...

UnLawful,

I applaud your commentary, it is well stated, almost concise and factually accurate.

Parts of it are so over simplified as to be worth mentioning.

There are other factors that come into play in the equations of wealth creation other than demand, wealth, production/capacity and capital. And there are limitations inherent in a closed resource base that also effect the economic production.

Two very notable factors are mechanization and energy.

Both mechanization and energy have worked in tandem to render labor almost irrelevent in the supply/ demand equations. Labor has been so minimized as to have almost no bearing on the equations of wealth and production. Labor under the influence of globalization is highly interchangable and extremely cheap. So cheap that I would wager a guess that in one half the worlds manufacturing arena labor comprises less than 5% of the retail value of goods produced.


Robotics for example accomplish the vast majority of the actual work or processes of manufacturing today. Labor is secondary even the skilled labor (generally not categorized as "labor") that facilitate the robotic applications.

Energy also plays a very significant role in eliminating the role of labor as mechanization converts artificially cheap energy into work by way of intelectual property accumulations.

An unlikely example of this trend would be the peoples republic of China.

Most Americans would never guess that during the last 7 years China has actually lost more manufacturing jobs (measured in volume not percent) than any nation on earth. These jobs were lost to mechanization even tho China's manufacturing capacity has grown dramatically during the same period. The costs of mechanized production are so low that in any economy it is more efficient in terms of manufacturing dollars spent to purchase mechanization than it is to purchase labor.

On another subject entirely you sed: "The consensus among economists is that 2/3 of economic activity is consumer spending. "

The models you describe appear on the surface to represent models of manufactuing business circuits.

In the real world most economies on earth (even China) are comprised of a service sector that represents 60%-70% of the entire economy. Manufacturing in most nations is only 10%- 25% of the total economy. The drives that you list (labor, demand, production capacity, capacity coefficients, capital) are not nearly as neatly fitted to describing service sector business.

But it is definitely true that service sector business volume is more dependent than any other sector of having a population with disposable wealth.

Lastly, Unlawful, as much as I eppreciate the discussion you present, as much as it is relevant and drives home some valuable lessons, it is actually an artificial description in at least two senses. One is that supply and demand do not drive economies of the modern world. The modern world economy is driven 100% by credit. The rules of this credit economy are identical to the Capitalistic economy you describe in many ways. But because the world economy is credit driven, the issues of credit influence can, and do overwhelm the influences of economic causality that you have described. An example being that our present economy is excessively wealthy for reasons that have nothing at all to do with any of the drivers and causation vectors you described are responsible for. And in contrast, our economy could actually and almost entirely collapse next month entirely indifferent to the same.

This is worthy of more discussion, perhaps you will commit an essay to the credit economy at some point in the future.

The other factor that upturns the theoretical model that you have presented is monopolies. Monopolies, cartels, politics, regulation, treaties, subsidies, tarrifs, embargoes, policies and national borders so dramatically subvert the central model presented as to deem it a purely theoretical abstraction.

Which does not eliminate it's value as a commentary, but it removes it from being the central theme in the real world processes of economics.

You present good viewpoints Unlawful. You speak very well, you present good logical presentation, and you are logically and factually coherent. But you are presenting a ship in a bottle perspective.

Do you want to talk about real world economics, or just the theoretical aspects of the same?

8:02 PM  
Blogger unlawflcombatnt said...

Loosecannon,

Thanks again for you commentary. I couldn't agree with you any less about the "irrelevance" of labor. You are completely wrong on this point. "Mechanization" and "energy" have not made labor irrelevant. They have made it more productive. The fact that labor costs are irrelevant is because of the global wage-productivity gap. Wages simply haven't kept pace with the increased productivity of workers. This has been facilitated by the actions of multinational corporations who shop globally for the cheapest labor. This has resulted in the movement of production facilities to the sites of the world's most impoverished workers.

Despite what you've implied about declining labor demand in some countries, new production facilities continue to be built in 3rd world countries. Jobs are simply being moved from low cost labor markets to even lower cost labor markets. The fact that these workers make so little in wages is why their domestic production demand is so low. It is not "mechanization" that's costing jobs. It's the declining demand for production caused by declining worker income. Less ability to purchase production leads to less production demand, and less demand for workers to provide that production.

Again, this has nothing to do with "mechanization" making labor irrelevant. It has everything to do with wages being so low as to make labor "costs" irrelevant. Jobs in new and high tech fields are increasing faster than jobs in low tech fields are decreasing. Jobs in construction, machine work, ironworking, and shipfitting (which I did for several years) have not disappeared or become obsolescent. They've simply been moved to lower cost labor markets. This was not caused by energy or "mechanization." It was caused by "globalization."

I'd recommend you read my post on The Wage Productivity Gap I borrowed much of my thinking in that post from economist Ravi Batra from his book "Greenspan's Fraud." I'd also suggest you read the comments in the Wage-Productivity section by "DF." He is a French economist and has provided some very useful information in his comments, as well as at his own blogsite: Revolution2006

I'm in considerable disagreement with the remainder of your post as well. However, I'm going refrain from further comments until you've had a chance to read more about the "wage-productivity gap." It is in sharp conflict with your belief in the irrelevance of labor due to mechanization and energy.

9:58 PM  
Blogger Loosecannon said...

Unlawful,

To some degree we are saying the same thing with different words, to some degree we have an honest disagreement.

Globalization is possible, as we know it, because of 3 things.

Cheap energy allows materials and products to be shipped long distances cheaply assembled and then spread out world wide in distribution chains spanning as long as 40,000 miles from a raw materials point of origin. It is the cheap energy component that maintains this as affordable to the production distribution equation.

Mechanization also contributes tremendously to globalization, as we know it, in that a large skilled labor force is no longer required to produce products. A smaller, more skilled and highly interchangable labor force is required that can be found almost anywhere on earth.

Because Labor no longer has a value created by shortages in the labor market wages and benefits suffer. An increasingly mechanized manufacturing climate reduces the need (value of)for labor worldwide.

Labor has become a much smaller and much less deterministic factor in the economic equation due in very large part to the globalization that is made possible by mechanization and cheap energy.

I can't argue that income disparity and lowered incomes do not have an impact on lowering the price of goods produced. It does.

But how much? How much does it cost to manufacture ship and distribute NIKE sneakers? approx 20% of the retail sales price. Marketing accounts for the balance. How much more would Americans pay for the same sneaker if our wages were higher? The question is irrelevant. The value added marketing component adds more to the retail price than all other considerations combined, except demand, which is manufactured via marketing.

130 years ago a PR campaign was initiated to reduce the role of labor in world politics and the economy. Inspired by Marx labor became a very potent political force for 80 years in world politics.

Many things contributed to the decline of labors clout, public relations was probably the biggest. But streamlining international trade barriers, cheap energy and mechanization (again think globalization) played a large role in eliminating virtually all of labors influence on the economic picture.

If labor was the limitation in production today it would command better wages and be more influential in the politics that define economic development.

But there is a world labor glut. There has never been a world labor glut in all of previous history.

Slaves were hugely benefitial to slave holding ag plantations in the south precisely because labor was the limiting factor in ag production. Even in the immigrant sweat shops of colonial New England, the cost of labor represented a much higher percentage of finished goods than it does today.

For all practical purposes labor is irrelevant in the modern production equation.

And concerning demand driven by wages, sure, theoretically. But manufacturing wages have been falling for a decade and production has increased dramatically during the same period.

This what I mean when I say the theoretical models are trumped and overwhelmed by real world considerations.

I agree with your thesis in that increasing wages and re establishing a more balanced wage parity is benefitial.

But the manufacturing sector laughs at that concept, understandably. As they can offer generous proof that production is up, profits are up, and wages are falling.

9:16 AM  
Blogger Loosecannon said...

Unlawful,

I read your article on the wage/productivity gap.

A few fine points to add. The gap in wages and productivity has occurred for numerous reasons. The largest two reasons for this advent are mechanization and cheap energy, and a labor surplus.

Given a mechanized manufacturing capability, and cheap energy to power it the value of laborers to operate manufacturing operations becomes secondary, or tertiary to the actual means of production which is Machines, powered by cheap energy requiring human supervision and installation.

The advent of mechanization increases worker productivity, which in turn devalues the role of manual labor.

Even for a theorist like yourself, this aught to be pretty obvious.

You purvey the dogma of classic free market capitalist economics.

But you appear to be largely oblivious to the fact that we do not live in a free market capitalist system. And to the fact that numerous energies are at play intentionally manipulating the rules of supply and demand to create more useful dynamics for income distribution.

There are no actual "laws" of supply and demand. And if there were there is nobody enforcing them. What exists in the real world are milenium long attempts to subvert the natural orders for personal and class gain.

To pretend that economics is directed by the principles of theory is to be utterly naive to the realities of the world we live in.

Do you think the invisible hand has not been handcuffed and fingerprinted?

Serious question, Unlawful. Do you think that the invisible hand is actually the defining force in real world, non theoretical, economics?

7:07 PM  
Blogger unlawflcombatnt said...

Loosecannon,

I'd like to respond to your previous letter first. (I haven't read your last response yet. I spent considerable time today posting a letter challenging the alleged 3.8% GDP increase, which was reported by the Bush administration and its Neocon-Artist supporters.)

Again, I certainly don't agree with you about labor being irrelevant. I would agree with you that current demand may be insufficient to employ more workers. But that's a result of aggregate labor income being insufficient to create more demand.

We appear to have a disagreement regarding the effect of increased worker productivity. Your position is that the increased productivity reduces demand for labor. However, this implies that demand is fixed. But consumer demand is determined by the ability to purchase production. This demand for production determines the demand for labor to provide that production. Increased consumer income, and the increased consumer spending it finances, increases production demand. A "glut" in labor simply means the labor supply is in excess of the demand for labor. It means consumer demand is insufficient to create enough labor demand. Thus labor demand can be increased by increasing aggregate labor income. Insufficient labor income, not mechanization, causes what you refer to as a global labor glut.

Let me restate this. Demand for production, and the demand for labor to produce it, increases with increased worker income. What you refer to as a labor "glut" is what I consider insufficient labor income to buy production. The ability to buy production limits demand, as well as demand for labor to produce it.

Economics textbooks state that individuals have unlimited wants.These unlimited "wants" become demand when individuals have the financial ability to turn those wants into demand. Income limits consumer demand for production. With increased income there is increased demand, and increased demand for workers to provide that demand. What you refer to as a labor glut I'd call a demand deficiency, caused by insufficient aggregate labor income.

On a separate, but related issue, you state marketing creates demand. Though this may be true on a limited microeconomic level, it is not true at a macroeconomic level. Marketing does not increase aggregate demand, it simply shifts it from one area to another. I agree with your example about marketing creating demand for NIKE sneakers. But it does so by shifting that demand from other consumer items over to NIKE sneakers. However, it creates no new demand. Only consumers with the desire and ability to purchase production create demand. Marketing does nothing to affect the "ability" factor. Here again, demand is limited by consumer ability to purchase production.

It's true that credit extends that ability, but income is still the underlying foundation. At some point, credit-financed spending will reach its limit. And it will be unable to bridge the wage-productivity gap. The solution to this delemma is not to increase "savings," it's to increase wages enough to reduce credit-financed spending. Wage-financed consumer spending needs to replace credit-financed consumer spending. Simply reducing credit-financed consumer spending without increasing wages will cause an economic armaggedon. It will not be a "soft landing." It will be a "crash landing."

Again, I agree with you about the role of credit. It supplements wage-financed consumer spending, and the production demand it creates. As such it allows for a temporary (and unsustainable) increase in consumer spending. Thus consumer "deficit" spending does increase demand. Government deficit spending is one of the tools governments can use to increase aggregate demand and increase GDP. Government deficit spending, initially proposed by Keynes, was always designed to be a temporary measure. Keynes clearly did not consider this to be a permanent solution to insufficient aggregate demand. Yet this appears to be the way our economy is being sustained, both at the private and government level.

It is this deficit spending that has allowed for the wage-productivity gap. Without it, consumer spending would be limited to that which could be financed through wages alone. But this deficit spending has allowed for increased consumer production demand, without an accompanying increase in consumer income. It has allowed American industry to overpay CEOs and overinvest in production capacity with little deleterious effect.

Again, this is not a sustainable course. If wages don't begin to increase along with productivity increases, consumer spending will fall, as well as the production demand it creates. Wages will fall due to decreased demand. The whole cycle of decreased spending & demand will snowball. If uncorrected, this snowball will avalanche into an Economic Armaggedon.

9:40 PM  
Blogger unlawflcombatnt said...

Loosecannon,

I'm glad you read my post on the "Wage-Productivity" gap. This concept appears to be our greatest point of disagreement.

Apparently we'll never reach an agreement about the value of labor. Mechanization has changed nothing regarding the demand for labor. It has simply allowed individual workers to produce more goods. If those workers were paid sufficiently, the would increase the demand for goods, and increase the number of workers needed to produce those goods. All machines need someone to operate or program them.

Again, machines allow more work to be done by individual workers. It is the fact that they are not paid enough to purchase their increased production that makes them "irrelevant," not mechanization.

Again, as I stated in my last letter, society has unlimited wants. But demand is limited by the ability to purchase goods and services "wanted." Increasing that ability increases demand for goods and services. Paying workers more increases their ability to buy those goods and services. As such, it increases consumer demand. With that increased demand, there is increased demand for workers to provide goods and services. "Mechanization" simply allows those workers to produce more goods and services. It does not eliminate demand for them. Only consumer production demand will do that. And if consumer income is sufficient, it will create enough production demand to make those workers "relevant."

I had to laugh about your reference to me being a "classic free market capitalist." I certainly do consider myself a capitalist. The humor here is that I've frequently been called a "leftist," and even a Marxist. I'm certainly happy to labeled otherwise.

I think there is some truth to the "invisible hand" belief. But I wouldn't go too far with it. Today's alleged "free market" is anything but free. Corporations and big business are given tremendous amounts of government assistance, as well as protection from competition. What we have today is nothing at all like the free market Adam Smith envisioned. Smith believed it was the rightful role of government to promote competition, not stifle it like our current Corporatocracy does. Smith believed the government should actively prevent monopolies and mergers, as well as blocking anything else that reduced competition between small businesses. One might even conclude from Smith that businesses should never be allowed to become large enough to dominate markets.

What passes for "free enterprise" today is essentially a Corporatocracy. Before we condemn true "free enterprise," we need to try it first. Though the Right-Wing espouses "free markets," they've done everything possible to eliminate them. The Republicans have now become the party of big government. It's this Corporate-dominated government that controls our country at present, not an "invisible hand."

If you ever get a chance, you should read "Greenspan's Fraud," by economist Ravi Batra. It's about $25, and well worth it. Chapter 6 is about the Wage-Productivity gap. It's very interesting, and very easy reading. It might change your perspective some.

10:24 PM  
Blogger Loosecannon said...

Unlawful,

I am giving up on the idea of getting you to see what I am saying. You are pretty invested in your perspectives, which is fine, but it seems like what I am saying is just not reaching you. I will try once again, maybe my last attempt. You sed:
"Economics textbooks state that individuals have unlimited wants.These unlimited "wants" become demand when individuals have the financial ability to turn those wants into demand."

There is little doubt that people want plenty, and given the income and availability of goods would certaintly create the demand of which you speak. So I don't take issue with the reality, but with the concept in three ways.

First as a statement of fact, and an absolute at that the statement is patently ludicrous. It assumes that humans A) would live to consume at at infinite rate if possible. Their lives would become entirely dominated by the consumption pursuit B) it assumes that humans live in a world which has infinite resources with which to produce sed infinite goods. and C) it assumes that the equations of economic forces are what actually shape economic reality.

All three of these assumptions are false altho admittedly the first assumption does not really effect the out come.

Allow me to ask you some questions just to demonstrate how these assumptions are flawed.

1)If there were 4 billion laborers of various skills in the world, but only enuf food for 1/2 that ammount, would the equation you state still function? Or would the shortage of food trump the equation and raise the price of food to match the demand? Would labor go up or down in value relative to food? What if there were only enough of all resources to satisfy the basic needs of 1/2 of the world potential workforce? would the value of labor go up or down relative to food and basic goods?

What if productivity was so maximized that only ten percent of the worlds potential workforce was required to produce and distribute all of sed goods? would the value of labor go up or down relative to the goods produced?

What if across the board income parity was acheived and investment capital was succinctly provided in the most benefitial possible way by non human institutions like banks who operated in a similar interest concerning investments and returns? With each of the worlds fully employed people receiving approx $13,000 in income, might some decide that instead of using that income to "demand" more goods that they might instead opt for a shorter work week, a pension based on capital investment accounts or just to hoard their money in a way non productive to the greater economy?

After all, all of these things happen.

Approaching the question thru a different lense: Labor has never commanded anything close to an equal share in any economy unless it was organized politically as in unions and political parties. And even then there has always been a struggle between classes to distribute income up and down the demographics ladder.

Between tarrifs, subsidies, labor unions, cartels, political wrangling, religious influence (religion HAS a history of teaching folks not to look for rewards on earth but to expect rewards in heaven) cultural influences, trade barriers, banking and financial interventions, currency manipulation, how much of economic reality is really duictated by the inertia of economic forces. Almost every institution among men combines to subvert the influences of economics in distributing wealth.

I mean there are people whose "demands" are infinite. And those folks tend to become the ones who will avail of every means available to get those infinite "demands" met, without laboring at all. These people tend to be the hoarders who are at once pioneers of industries and the examples of success. But their success is in direct opposition to your model of increased wages for all driving economies.

Then there are the immortal institutions who are capable of 150 year long campaigns to craft environments that are disproportionately kind to filling their infinite "demands", like corporations churches, old family dynasties, stock exchanges, banks....

The world is hardly the economic level playing feild that your model describes.

And within the greater scope of the real economic forces, labor is dwindling in value to become so cheap as to almost be irrelevant in the larger economy.

Influence is worth so much more than labor. Oil is worth almost as much as labor. Someday food will be worth more than labor. For the half of the world living on less than $3/day, food is almost worth more than their labor now.

I again can only say the textbook scenarios you paint are not consistent with the real world.

I agree with the premise that more equal wealth distribution would be a good thing, but no invisible hand, or economic equation ever has, or ever will deliver that.


Economics, in reality is a subfunction of a greater process. The theoretical drivers within ecxonomic equations are not the formative forces in the world, they never have been and they never will be.

The paradigm that is emerging is of course a geopolitical divide, but speaking of the limited economic aspects within it, the economic drivers of greatest influence are gonna be resource scarcity and population.


Unlawful, unless you continue this conversation I will simply let it go, as I do not really see us reaching a common understanding.

I definitely wish you luck and do share a lot of your populist beliefs.

Loosecannon

5:31 AM  
Blogger unlawflcombatnt said...

Loosecannon,

I, too, doubt we'll come to a common understanding. You made some interesting points in the 2nd half of your post. I'll have to address those in a separate post.

I do appreciate you correctly quoting my statement "Economics textbooks state that individuals have unlimited," because it conveys that the source of this belief is from the textbook, not from myself. I don't completely agree with this statement myself. I do, however, believe that "wants" far outstrip current "demand." I also believe that there are sufficient wants in this world to create enough demand to eliminate any possible world labor "glut."

I realize you are approaching this from a more environmentalist position than I am. The world's resources are definitely limited. It's certainly true that the absolute limit to economic growth is determined by production factors. However, this limit will never be approached while low wages limit production demand. Furthermore, recent improvements in productivity and energy have been driven by demand. The ability to produce even more, as well as improve "mechanization," is driven by demand for production. Would automobiles have ever been produced in large quantities if there wasn't a demand for a faster way to travel?

Though supply certainly does not create demand, the converse is not true. Increased aggregate demand does increase aggregate supply. It creates a need for more product, which raises the price and/or the quantity demanded. If the supply of an item is severely limited, the demand will be reduced by price increases. Eventually the price will rise to a point where the demand matches the quantity produced. This is what free markets are all about.

An example of how markets work is with automobiles and gas prices. In Europe and Japan, where gas prices have been at least double U.S. prices for many years, most cars are smaller and more fuel efficient. This is no coincidence. This is the result of a greater demand for fuel-efficient cars in those countries. What will happen if U.S. gas prices increase a lot more? There will be increased demand for cars using less gasoline, or even no gasoline. When alternate fuels become cheaper than gasoline, cars will be made that use alternate fuels. Some of these alternate fuels are in almost unlimited supply, such as hydrogen. I don't currently see how a car can be made to run on hydrogen. But someone else will, especially if there's sufficient profit motive in doing so. Sufficient demand for such a car will create a supply. However, it won't happen until there is sufficient demand. And our comparatively low gas prices are reducing demand for alternate fuel cars.

I do want to re-visit your apparent environmental concerns. You mentioned a situation involving 4 billion workers. Having attended college at a very environmentalist-oriented school, I do have some views on the subject. The #1 environmental "problem" is population growth. Nothing has a bigger effect on the environment than the growth of the world's population. Hopefully you share this view. Otherwise you might be missing the forest for the trees. The most important step in reducing environmental damage is controlling the population. People are the ultimate utilizers of the world's resources, and the ultimate source of their exhaustion. Regarding population growth, I'm definitely an environmentalist. Regarding the use of more exhaustable resources vs. less exhaustable, I'd be also be considered an environmentalist. However, I don't view the world through an environmentalist's eyes. I suspect that you do. I think this is the source of most of our disagreement.

Believe it or not, your views are not dissimilar to those of supply-side economics advocates. You seem to view supply limitations as more important than demand limitations. This would put us 180 degrees apart on underlying economic philosphies. As you've undoubtedly noticed, I'm a demand-side proponent. I don't view current "supply" of anything (other than consumer income) as a limiting factor at present. I believe current consumer demand is tenuous at present. Demand is hanging by a thread. With an anticipated reduction in consumer "deficit" spending, and continually declining real wages, our economy is in serious danger.

My view is that the economy is going down hill, and that the economy is currently in more trouble than the environment. Not that this applies to you, but many vocal environmentalists are in the upper income category. Their incomes are secure, and the prospect of financial hardship is not a foremost concern. As such, the environment is a greater concern to them than the economy.

I don't even attempt to address this group. The majority of Americans have more immediate concerns about employment & wages than they do about the environment. An unemployed worker is more concerned about making ends meet than about the environment. His life is immediately affected by his employment situation, not the environment. An unemployed IT worker whose job was sent to India is more concerned about finances than about the environment. His employment situation is his top priority, not the environment. This is an important distinction. If our economy collapses, even fewer people are going to care about the environment. Environmental concerns would be much greater if there were less concerns about the economy. The 8 million unemployed workers in this country, as well as those below the poverty line, probably don't consider the environment their top priority.

There's a simple message here. Hopefully environmentalists will take heed. We need to fix the economy first. The worst thing that could happen to the environment is an Economic Armaggedon. If this happens, environmental concerns will disintegrate. An Economic Armaggedon may well be extended into an Environmental Armaggedon. What do you think'll happen to environmental safeguards if we have a 2nd Great Depression?

3:52 PM  
Blogger Loosecannon said...

Unlawful, I do understand how hydrogen powers cars and no matter what kind of demand occurs it ain't gonna happen till a few tech problems are resolved and until a safe economical way to produce hydrogen is developed. Don't hold your breathe, create all the demand you want, better not count on it happenin. It will never be the best solution therefore no matter how much "demand" exists, it ain't never gonna create a supply.

I actually am not approaching this discussion from an envirommental point of view.

I am neither a supply side or demand side economic proponent.

My point is much more simple:

The economic vectors described in textbooks are imaginary forces arbitrarily animated to perform roles in equations of an abstract and ficticious nature. They are IDEAS about reality and not REALITY.

And as such, being mere ideas they are NOT the actual forces that drive economic conditions. They REPRESENT the driving forces.

But to demonstrate how these "concepts" are not in fact the drivers of our actual real world economy, these IDEAS are not even the most powerful or formative instruments in our economy. They are secondary to the numerous other forces that are actually superior in creating our economic conditions. Things like: immortal insttutions; churches, laws, corporations family dynasties, banks, brokerage houses, international politics, national politics, subsidies, currency interventions and manipulation, politics, religious influences, social values, finite resources, technological limits, technological capacities, infrastructure, population.

In short, Unlawful the textbook economic drivers are small fish in a sea of hundreds of species of both small and very large fish. Those little textbook driver fish just don't add up to the deterministic factors in economic development, in fact, all things considered, they hardly rate.

Now maybe in a fish bowl with 3 same species fish of equal size and equal food consumption....then maybe the theoretical drivers will prove themselves.

Do you see the difference, Unlawful?

Big dynamic world with hundreds of incalculable drivers that actually create conditions vs text book vacuum scenario which can not account for the variables of real world conditions.

Then there is the tricky part, almost every institution of men is actually designed to subvert free market capitalism, cuz nobody wants that, everybody wants a better than fair shake.

I wouldn't mind at all, Unlawful, if we just disagreed but you seem to legitimately not get what I am saying which is truly amazing to me. You seem like such a bright guy.

7:07 PM  
Blogger Loosecannon said...

Unlawful,

I the paragragh above that listed the numerous agencies that actually determine economic reality I failed to mention monopolies, cartels, and political parties.

I don't want to come across as being rude or flip in my conversation. But my central point is fairly essential to any real discussion of economics.

All theories are incomplete models of reality. They only work or serve any purpose to a point. In the case of economics that point is reached pretty quickly as the characters/vectors/deterministic factors are really very secondary to competing influences that are much more pervasive, numerous and targeted.

If the discussion you want or need to have is about purely theoretical economics, the fish bowl variety, it is just an exercise or fixture in whatever, ammusement, conversation, creative thinking etc.

But it is decidely not real.

Economics is two foxes and a hen deciding what to have for dinner.

7:20 PM  
Blogger unlawflcombatnt said...

Loosecannon,

I'm addressing your 2nd to last letter here. You are correct in assuming I "don't get" what you are saying. It really doesn't make any sense to me.

I use textbook references because they support concepts that I arrived at on my own. I believe in the Keynesian principals of Aggregate Demand and Marginal Propensity to consume because I arrived at these principles before ever opening an economics textbook, or ever reading about Keynesian economic theory. I support such ideas because I discovered them independently.

I mention this because you assume I arrive at such conclusions because I "learned" them from someone else. Nothing could be further from the truth. When I review statistics and events on my own, and derive a concept from those statistics and my own logic, I do hold to those beliefs. I listen to people who disagree. And if they present good arguments against what I believe, I will revise my beliefs.

However, nothing you've stated has convinced me to change my views on economics. Again, this is not about convincing me that what someone else has told me is wrong, it's about convincing me that what I've discovered myself is wrong. Needless to say, that's a hard sell.

You seem to maintain that such "simplistic" rules and laws don't apply because there are other things that are more important. I completely disagree. There are only other factors that distort the manifestation of those rules.

I do not consider many of the factors you mention to be major ones. I consider them smaller factors that contribute to a bigger picture. I do agree that market forces are grossly distorted by the actions of governments and other entities. My view is that these markets would work better if there were less interference, and especially if that interference was less one-sided.
We have a complete and irreconcilable disagreement about the role of demand. I believe demand is the driving force of economic activity. In contrast, you consider it irrelevant. I do believe demand is distorted by credit spending, which you alluded to in a previous post. But again, demand is the driving force behind the economy. You haven't swayed me any from that viewpoint. This is a viewpoint I essentially arrived at on my own, though it is supported by many in the economics community as well. Credit doesn't replace demand, it supplements it.

No doubt you've heard the adage that "necessity is the mother of invention." So it is that "demand is the mother of supply." It doesn't matter how plentiful production factors are. If there is no demand for their use, they will not be utilized and there will be no production.

I used production of hydrogen cars as an example of something that seems impossible to me, yet could probably be accomplished if demand warranted it. Demand isn't sufficient at present to make it possible.

I'm not certain what your big picture overview is as to what drives our economy. Mine is that demand drives it. When (and if) we reach maximum utilization of our productive capacity, then availability of production factors will be the limiting force. Are other factors besides market forces affecting our economy? Absolutely. But this doesn't mean market forces don't work. It simply means they're being distorted by outside factors.

I won't assert that completely unfettered "free markets" will solve all economic ills. But I do believe that many current economic ills are the result of interference in free markets, rather than lack thereof. We can't blame capitalism, free enterprise, or free markets if they don't even exist at present. We certainly can blame some economic woes on outside interference, however. We agree that "free markets" don't really exist at present. However, we disagree on whether free markets are generally good or bad.

9:53 AM  
Blogger Loosecannon said...

Unlawful,



Excellent, this feels like the first time you appear to be responding to what has been my singular point so far.

"But I do believe that many current economic ills are the result of interference in free markets, rather than lack thereof."


We agree on both of these points
*****


"We can't blame capitalism, free enterprise, or free markets if they don't even exist at present."


And we agree on this
********


"We certainly can blame some economic woes on outside interference, however. We agree that "free markets" don't really exist at present."

And this statement too we seem to be in full agreement

*****
This last statement is loaded. I don't actually have an opinion about whether free market capitalism is good or bad, not do I identify with demand or supply side economic theory


"However, we disagree on whether free markets are generally good or bad."
*******

OK you feel as if demand side economics are the primary forces that drive economic conditions.

That is a central point of contention.

I believe that there are hundreds of factors that drive economic conditions. The influence of which are always in differing proportions.

If I had to choose just one as the primary influence it would be the engineered aspects of classist pursuit, or class warfare. Which really is just another way of saying the long term, generational ambitions of a few to acheive an unbalanced playing feild.

It is my belief that generational wealth and generational poverty (and all the accompanying institutions) distort any realism of free market capitalism.

As for FMC and other economic paradigms, I have an open mind.

Since we have barely even tried any pure economic form aside from oligarchy, I still have a fully open mind toward any alternatives.

11:13 AM  
Blogger unlawflcombatnt said...

Loosecannon,

It's good to see we agree on at least some points. We agree that there is a definite lack of "freedom" in our alleged "free markets."

I also happen to agree that our government is to a large extent an oligarchy. I would use the term plutocracy, since it takes financial means to be a member of the oligarchy.

Given the effect of money on politics, I believe minimizing that influence would be a huge step towards a government that is more representative of the people, and less representative of rich campaign donors. Stricter limits on campaign financing, or even public financing, would be a step in the right direction.

I agree with you about generational wealth's ability to compromise, if not destroy, any genuine "free markets."

George Bush is a perfect example how generational wealth can put someone in power who has demonstrated universal incompetence at everything he's done. But his wealth, as well as his alliance with others of wealth, has put him into the highest office in the land.

Again, all of this certainly has distorted the effects of any real free market capitalism.

It is partially for these reasons that I stress narrowing the wage-productivity gap, as well as reducing the degree of uneven wealth distribution. This would help reduce the power of the oligarchy, as well as improving our economy.

12:36 AM  
Blogger Loosecannon said...

Unlawful actually we agree generally about the economy. I find few areas of disagreement.

How do you suggest that wage parity be pursued.

I heard yesterday that CEO/front line entry level pay has increased to 500:1. In the late 70's it was 30:1. These are American based corporations.

Campaign reform, reforming our charters for corporations, tax changes. What else.

Have you heard about binary economics?

6:45 AM  
Blogger unlawflcombatnt said...

Loosecannon,

I'll have to spend more time reading about "binary economic" before I say too much. My first impressions of it are not positive. It's first flaw is the statement that it is based on "classical" economics, which I do not agree with at all. The assumption that spreading capital out to everyone makes little sense to me. Though spreading out capital more in our current situation would be a huge improvement, spreading it out evenly among the entire population would not. The basic rewards systems that drives a free market economy appears to be greatly reduced, if not eliminated with this system. The most obvious shortcoming, however, is the seemingly astronomical amount of government regulation and interference necessitated by such a system.

It appears that binary economics, like supply-side economics, minimizes the significance of demand and its role in driving production. Assuming I've interpreted this view correctly, this is a complete non-starter for me. Again, I'll reserve judgement until I've read further. I would argue that a system that requires 20-30 pages to explain what it's about is going to be a hard sale to me.

In general, the more complicated the idea, especially when it requires government intervention, the less likely it is to work. The more variables involved, especially when they have to be controlled by the goverment, the harder it will be to implement.

I think there is a parallel here to our "free trade" agreements. Apparently Bill Clinton was able to make them work to some extent. Such has not been the case under the current corporatocracy. The amount of oversight and active intervention necessary to make them work has overwhelmed "nucular" George Bush. We've created our current "free" trade fiasco with these treaties which were simply instruments to facilitate global labor shopping by Corporate America. Unfortunately, the complexities of these treaties has obscured their underlying motivation. I think a complicated economic "paradigm" would also be abused.

I do have suggestions on how to bridge the wage-productivity gap. Raise the minimum wage. Enforce all laws protecting the right to collectively bargain. Increase the earned income tax credits. Shift the tax burden off the less wealthy who are more likely to spend their money, and back on to the more affluent who are more likely to save their money, and thus remove it from the economy.

The more obvious steps are to stop everything reducing the demand for labor, as well as anything increasing the supply of labor. Increased demand for labor increases wages. Increased supply reduces wages.

How do we increase the "demand" for labor. In addition to the above mentioned steps, we should do everything possible to eliminate outsourcing. Eliminate all tax credits on income earned in foreign countries. Eliminate any tax deductions for investment in foreign countries. Eliminate government insurance of loans for companies outsourcing work to foreign countries. Levy tariffs on products from countries that pay their workers excessively low wages.

How do we limit the "supply" of labor? Reduce the number of illegal workers crossing the border. The 5-10 million worker addition to our 145 million work force depresses wages by increasing the supply. The most effective step would be to prosecute employers for hiring illegal immigrants. Devote our immigration enforcement at the employers who hire them, rather than the workers themselves. Without the illicit demand created by law-breaking employers, we'd have no immigration problem. Employer prosecution is the way to eliminate the problem. Illegal immigrants risk little other than deportation. It's simply not a sufficient deterrent. In contrast, employer prosecution could provide an ample deterrent. Large fines and possible jail time might get them more interested in obeying the law.

We should also stop increasing the number of H1B visas when Americans in the involved fields are still out of work. Unlike illegal immigrants, who drive down wages (directly) in lower income occupations, H1Bs often drive down wages of high-income workers.

All of these steps would increase the worker demand:supply ratio. All these maneuvers would increase the "price" of labor, which equates to wages. Along with collective bargaining protection, and a minimum wage increase, these steps would increase aggregate American labor income. This would increase consumer spending, production demand, and the demand for labor to provide production.

Right-wingers and advocates of "classical" economic mythology would claim all this would increase prices and reduce demand for labor. Not only is that a very self-serving claim, it's completely wrong. Such claims are based exclusively on microeconomic principles, while completely ignoring macroeconomics. In fact, the resultant increase in consumer spending from wage increases would increase labor demand due to the increased demand for production created. The demand for labor is overwhelmingly determined by production demand and workers to provide that production. The cost of labor is a much smaller determinant. (I've elaborated on this concept in other posts.)

3:51 PM  
Blogger Loosecannon said...

This comment has been removed by a blog administrator.

7:39 PM  
Blogger Loosecannon said...

Wow!!

Unlawful, you exceed the norms of being serious by even begining to explore 20-30 pages of binary economic philosophy.

BE is the brain child of one guy. Variations of it are in play as the norm rather than the exception in Italy and to a lessor degree across Europe.

The idea IS complex. It's central theme is to get gummits and central banks involved in the capitalization of worker collectives.

As complex as it is, the core ideas are certainly no more complex than our present system and no more difficult to express.

Think FED, US bonds, stockmarket, derivatives, mutual funds, hedge funds, Corporate law, limited free market capitalism. Well there is 1000 pages to explain all that.

BE is just one idea.

Since our current systems evolved as they were generated and engineered by the wealthy elite expressly to serve the wealthy elite, we have never even tried to think openly and develop an economic system that works best for the nation or it's people.

There are hundreds of possibilities.

Responding to your ideas about income distribution, Kudos. Add to that list a steep inheritance tax and definitely raise minimum wage to a living wage.

By taxing inheritance, raising Min wage and privatizing industries like medicine, insurance, banking, energy we could eliminate all taxes on income and spending. If an insurance, medical, or utility needs to make a profit, why not let that profit become a direct government subsidy? Hell even farming could be a state run industry with private contractors. Beats the hell out of direct subsidies for farmers who don't grow crops.

I assume you kinda get my point.

But labor benefits including wages have always been the crux of the class wars. Gaining them required folks to die in union battles and it took the threat of global socialism to get gummits to take them seriously. 80 years later almost every labor gain has been lost if by no other means other than outsourcing and illegal labor.

I wish it was as easy as wishing, but those that have, won't give it up.

Are you at all interested in talking about the derivatives debacle and the looming housing bubble/ financial institution/hedge funds/stock market/ pension collapses?

This is surely THE biggest economics story in 40 years. Bigger than the rise of China or Japan.

Any interest in discussiing it?

7:46 PM  
Blogger unlawflcombatnt said...

Loosecannon,

I'd definitely be interested in discussing the derivatives debacle, if I fully understood it. It's kind of difficult to even "surround" the concept, much less fully understand it.

I think in the most general respect, the "derivatives" debacle has led to a tremendous amount of paper wealth creation. The trillions of dollars of wealth created through this method makes it very worthy of discussion, but tremendously complicated.

Suffice to say this is an area where I wholeheartedly believe we need more regulation, and less free market action.

1:25 AM  
Blogger unlawflcombatnt said...

Loosecannon,

I forgot to address the other things you mentioned, such as housing and pensions. I make frequent posts about housing-related issues. I am more than happy to discuss the housing bubble. It's a very hot topic in the public dialogue at present.

3:06 AM  
Blogger Loosecannon said...

Hey Unlawful,

Yes derivatives are traded secretly with no real regulation or accounting at all.

That is why we know so little about them.

What we do know is that the derivatives market has grown by 9 trillion dollars within 3.5 years to a total of 12 trillion dollars.

The interesting thing is that the housing bubble, the explosion of derivatives and hedge funds and the collpase of bond prices are all related to one thing: The unprecedented debt/currency that has been generated by the Fed Reserve since late 2001 as a direct result of lowering interest rates.

The available capital grew so large so fast that many folks were tempted to borrow, others to remortgage and a entirely disproportinate ammount of investment ready surplus capital was begging for a place to go to work earning interest dividends etc.

Prob was bond rates were down due to poor risk and low interest, stock market was flat, real estate got maxed out and there was still gazillions of dollars that needed to be invested.

The dollar was also falling so lotsa folks moved thier equity in euros and other currencies.

Since investments were becoming shaky, and short in supply derivatives and hedge funds became a rage.

Both are essentially hedge instruments, derivatives sold on margins, and both aredesigned to provide a level of risk sharing across the entire marketplace.

But there never was enough value in what the derivatives represent to justify the hog wild investments. That along with lotsa other factors concerning illegal and unsound practices all threaten the derivatives and hedge funds as they must eventually all be settled and when they are pension funds, banks, investors, insurance companies are all gonna lose trillions of dollars.

It creates conditions for a complete unknown.

Here is an astonishing link I am sure you will want to read. Don't get too tied up in the means tioll you get toward the end and the issues start to crystalize. I am sure you will love this:

http://www.ncans.net/intro%20to%20naked%20short%20selling.htm

Take care Unlawful

7:50 AM  
Blogger unlawflcombatnt said...

Loosecannon,

Thanks for your excellent post. I've seen estimates that the money in the derivatives market is even larger than that, though I can't seem to find them at present. This certainly is an example of a lot of "artificial" wealth being created.

Clearly a lot more of the so-called "wealth creation" in the last 4 years has come from such financial manipulations, and not wages, which have increased 0.0% since February 2001 (when adjusted for inflation.)

Our economy is little more than a deck of cards. The so-called increase in "wealth" that Greedspan has touted is through overvalued assets, not production.

3:47 PM  
Blogger Loosecannon said...

Unlawful,

You brushed against some very important stuff.

Yeah production is probably down a whole lot considering that a lot of our production includes assembling finished products with parts manufactured in China.

My question is, where can anyone find reliable stats for real world economics indicators?

The cooking of stats is so pervasive that almost nothing can be trusted at face value.

I post on a lot of boards and most of the folks who advocate for our present economic leadership (esp for the fed) accept Fed and US Gummit figures as facts.

Of all the bureaus of the fed gummit the only bureau I trust is the GAO. But they do not publish comprehensive accounting stats.

Got stats, Unlawful?

Did you read the link I posted, the second half will drop your jaw onto the desk.

Just as a side note: (notes) I am not sure that the overvalued assets you mentioned are overvalued. I actually believe that the evaluation of land, gold and the Euro pretty definitively point to a fall in value of the dollar.

Real equity maintains static value, dollar shrinks, appraisals rise.

Where did you get your wage growth figures?

Cuz I am thinking that if you did not get a 32% wage increase in the last 4 years, you got a paycut.

Last 4 years:

Gold up 82% vs dollar
Land up 50% vs dollar
Euro up 32% vs dollar
Gas up 30% vs dollar

No way to conveniently crunch these based on gross volume, but at least 32% dollar depreciation if you honor the metrics.

I mean if you increase the money supply based on a static value base underlying the currency, you have to expect inflation. But as a world reserve currency, the dollar can show inflation merely as an increase in value of commodities and land. Which has certainly happened. The stats on inflation are more or less just pure BS.

7:14 PM  
Blogger Loosecannon said...

Unlawful, saw your thread opener on real estate prices falling.

Here we go.

Where is the bottom (?), and who will be able to keep that home?

Wealth distribution in play.

Any guess how overblown real estate will prove?

The kicker is, in the short run of 1-15 years it doesn't even matter what the real worth of real estate is. it matter at what point folks will be able to salvage mortgages.

If the appraised value of homes falls below the loan value, Banks can call for a quick payment of the difference.

Lotsa folks are in jeapardy. Where is the bottom?

8:36 PM  
Blogger unlawflcombatnt said...

Loosecannon,

Thanks again for another excellent post. You wrote a great little summary of inflation where you listed gold, land, Euro, and gas prices together. Currently the government reported CPI increase since 12/00 is 14.2%. The raw numbers for CPI can be found at: Consumer Price Index. I completely agree with you that this is a huge understatement. Even more interesting, it's less of an understatement of the "core" rate of inflation used by Alan Greedspan. I was well aware of the gold price increase, but not the Euro based increase. Since the dollar is the world's reserve currency, its apparent value has remained artificially high.

Your 32% figure seems fairly reasonable to me. Nominal hourly wages have risen 13.5% since 12/00. This can be found at Nominal Wages. This would make the decline in "real" wages about 18.5%. I happen to believe that the real wage decline is closer to that, rather than the 0.6% decline calculated using the BLS's CPI and nominal wage figures.

I also noticed today when calculating all of this that BLS's reported "real" wage change in 1982 dollars is only -0.1%. Yet, when calculating the increase in nominal wages vs. the increase in the consumer price index, there is a 0.6% decline in real wages. For example, average wages in inflation-adjusted 1982 dollars were reported to be $8.07/hour in 12/00, compared to $8.06/hour in September 2005. This comes out to a 0.1% decline in wages. Nominal wages were reported to be $14.26/hour in 12/00, compared to $16.19/hour in September 2005. The Consumer Price index was 174.0 in 12/00, compared to 198.8 in September 2005. Again, this leaves a 14.2% increase in CPI. The increase in nominal wages is only 13.5%. Using the ratio of 12/00 CPI divided by the 9/05 CPI (174.0 divided by 198.8), and multiplying it times 9/05 nominal wages (of $16.19/hour), the inflation-adjusted wage for 9/05 is only $14.17/hour (less than 12/00's $14.26/hour.) Again, this is a decline of 0.6%. So a 0.5% difference may not seem like much.. But it amounts to about $21 billion less in consumer income and spending. And it amounts to about 0.175% of our GDP. So it does make measurable difference. (This is of the same magnitude as the combined GDP of the CAFTA countries of $20-35 billion, which is supposed to make such a "huge" difference in our exports.)

I'll have to get back to you later on housing.

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10:45 AM  
Blogger Loosecannon said...

Unlawfull, this article, based on a report by the comptroller general is a must read:


http://tinyurl.com/dy3rt

I hear your message, avoid economic arm.....

It is prob too late. But if it isn't some hard decisions better be made faster than not.

And then there is the rebuilding. I am an open book about that as well. I have definitely learned a bunch of lessons but as to which basic economic platform I would trust the future of the world with, What an open question.

8:23 PM  
Blogger Loosecannon said...

Hey Unlawful Combatant,

Big thanks for those stats links.

There are major problems surrounding stats and accounting these days.

I have been having a LOT of trouble getting definitive info on tyhe national debt and who exactly owns US T bills. The posted stats I have seen vary wildly with a lot of unexplained overlap between categories.

If you happen across any National debt stats, please forward them to me.

You have a couple of self promoters above, wink.

Later unlawful....

Thanks again for the info.

8:37 PM  
Blogger unlawflcombatnt said...

Loosecannon,

I'm happy you found those statistics helpful. I have a link to the national/public debt (I think) listed in my links. I'm not sure if that's one of the items you were looking for or not.

I completely agree with you about how difficult it is to get accurate information. Another problem is that many government statistics are changed after the fact.

The derivatives situation seems like a time bomb ready to explode.

As you have already stated, much of what I call demand is being financed by credit, not wages. Much of that credit is being obtained from borrowing off overvalued assets, especially homes. This certainly is not a sustainable situation.

This administration continues to publish selectively edited information, as well as outright falsehoods. The longer the public buys into these falsehoods, the bigger the credit-borrowing-housing bubble will become. And the bigger the expolosion will be when it bursts.

4:15 PM  
Blogger Loosecannon said...

Unlawful,

One of my pet projects is to try to figure ways to pay down the national debt.

I have seen several sources post info on the nat debt. Some claim that the fed owns 55% of issued t-bills.

There seems to be a lot of dicrepency between the reports.

Have you seen a truly reliable source not only list but crunch by category the national debt?

I would like to know how much is held by the fed, how much by SS, other US gummit entitlements, how much by china, japan, Britain, Korea, etc.

What links can you share?

9:26 PM  
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1:38 AM  
Blogger unlawflcombatnt said...

Loosecannon,

I think the bottom of the real estate market is a lot lower than even the most pessimistic analysts are stating.

Real estate values have historically paralleled employment and wages. This has not been the case since 2001, and to some extent even longer than that.

California home prices have increased 132% since 2001. If adjusted for inflation, this becomes more like 120%. During the same time period, the increase in "real" wages has been 0%. My theory is that home prices will ultimately decline until their long-term level matches that of employment and wages. That would equate to a 60% decline in home prices. There may even be a temporary overshoot.

Clearly many that can afford homes with the current lax loan requirements would otherwise be unable to afford them. With rising interest rates and stagnant wages, they are going to be even more unable to afford them in the future. Many will lose their homes. Most speculators will dump their homes when evidence of a sustained price decline becomes obvious. These 2 factors alone will greatly increase the number of homes on the market. The increased supply of homes will drop prices like a rock.

Though home construction is slowing some, the slowdown is far less than the slowdown in home price appreciation. Which means the supply is still increasing faster than the number of people who can afford homes. The more people try to talk up the housing market, the longer the bubble will continue inflating.

Here are some statistics that I posted recently on the housing bubble:
Residential construction has increase 1.8% since June of 2005. Home inventories (unsold homes) have also increased 14% since June of 2005.This information can be found at: Construction This strongly suggests the supply of new homes has increased during that time as well.

In contrast, New Home Sales have DECREASED 6% since June. Nationwide the annual sales rate decreased from 1.298 million/year in June to 1.222 million/year in September. In the West, which is dominated by the California housing market, new home sales have actually declined 13% in the last 3 months. Regarding the nation as whole, the rate of annual New Home price appreciation declined from 7.8%/year in May to 1.9% in September. This information can be found at: NewHomeConstruction

I think the logic of a housing price decline is incontestable. If affordability is declining, how can home prices continue to increase? What can perpetuate price appreciation when affordability is declining? The only thing that would support continued price increases is increased ability of consumers to purchase homes. That means wage increases. And that simply isn't happening. Speculators with excess money to invest can sustain price appreciation for only so long. Ultimately they need to sell their homes to a residential buyer. What happens when there are no remaining residential buyers who can afford to purchase homes? Prices will decline. Prices cannot be maintained by speculators by simply selling homes back and forth to each other. Price appreciation depends on the presence of residential buyers who can afford the increasing prices of homes. And the media reminds us regularly that the number of residential buyers who can afford those prices is decreasing, not increasing.

There is nowhere for home prices to go but down. I think they will drop drastically in California.

9:46 PM  
Blogger Loosecannon said...

HMM!

Well, Unlawful, that is the most pessimistic forecast I have heard yet.

Since this is a highly speculative concern, don't take this as a contradiction, but I do have several points.

First it could actually be a lot worse than you say. Wages are headed down in real terms not staying level as the stats suggest. and there could be a collapsing of the economy if the employment/wage lag is not corrected sometime in the near future, ripple effects a trend toward depression conditions.

On the other side, a significant ammount of the house eppreciation was probably just an adjustment to a falling dollar.

Then last but not least. Whether it happens in steps, leaps or bounds I fully expect wages to lose ground against rent and home purchase prices as a direct result of upward wealth distribution.
Those corrections look primed to be happening as we speak and certainly more so if the markets fall and mortageges move into default.

Last: The investment markets have pretty much all gone south, speaking of bonds, stocks, and mortgages(banks lending at a lower rate than it costs them to borrow same). Rising interest rates should correct the loses banks have suffered in lending but there is still a glut of cash competing for investment opportunities.

I expect those investment dollars, not speculators but investors, will be agressively buying residential property if the market drops even 30%. Land is a fantastic long term hedge. Real estate even better.

But hearing your forecast is cause for concern.

I think the architects of our economy went too far with creating excess capital and have effectively broken the economic system.

What do you think about the US approaching wage parity with the rest of the world withion our life spans? Do you think this will happen? Or even a partial parity like the midpoint between here and full parity?

I do. I expect wages to fall at least 50% against the value of real estate and commodities with 10 -20 years.

Which is a lot better than falling to 25% of where they would fall to acheive parity, globally.

10:52 AM  
Blogger Loosecannon said...

http://news.goldseek.com/UnionSecurities/1131894066.php

This story trumps all preconceived ideas about the free market.

The way I read this is that the central banks of the fed reserve maxed out the currency creation potential of the reserve requirement by lending approx $40 trillion/year to each other, or to themselves. The unique ability to create unlimited currency does a lot of things. In this case it gave the fed banks a fully unparalleled opportunity to manipulate markets for their own purposes.

9:59 PM  
Blogger unlawflcombatnt said...

Loosecannon,

I suspect you've seen this real estate discussion site, but I'll post the link here in case you haven't. Housing Crash
This site usually has several new articles every day on the housing situation.

I think the bottom is a lot lower than most people think.

Again, you've made an excellent point about wealth distribution. The upward maldistribution is part of what has overvalued the housing market. Speculators have bought multiple homes and decreased the supply of homes on the market. This trend will reverse when prices start declining. 25-35% of homes bought in the last year are by non-residential buyers. These are homes that will be put on the market in a nanosecond if speculators think prices are dropping.

The maldistribution of wealth has created this excess "investment" money, which favors increased investment over increased consumption spending. Unfortunately, the latter would actually help our economy, while the former does not. But the Bush-Greedspan supply-sider junta continues to espouse the "investment creates jobs" mythology.

Consumer spending creates demand for production, and demand for workers to provide that production. Investment allows for job creation if, and only if, sufficient demand is present.

2:58 AM  
Blogger Loosecannon said...

Unlawfull,

I like the term maldistribution.

This article: http://news.goldseek.com/UnionSecurities/1131894066.php
discusses the meteoric growth of derivatives esp cross bank interest derivatives. The increase in the quantity of these funds leaves little doubt in my mind that the increase in the money supply generated by the fed is responsible for even more of the liquidity saturation we see today than even the maldistribution.

With a current $400 billion/year fed deficit, and a .92% (.0092) reserve requirement, the fed can create $43 trillion/year in new currency. Ordinarily they would be capped in that effort by a lack of borrowers, esp qualified buyers. The appearance is that after that cap was reached the Fed Reserve banks, which are all legal partners, began lending to each other. At 1% discount rate, with the ability to define their own terms and lending strictly to legal business partners I can see some extremely generous terms could have been arranged in intra bank lending swaps.

I can't be entirely sure if the massive volume of interest swap derivatives are the web or net refered to in the article, but I tend to think so.

I tend to think that approx $150 trillion in excess liquidity has been pumped into the markets in just 4 years. I do admit, however, that I am starved for accurate and meaningful figures on the money supply and the real activities of the Fed reserve banks. All MO.

The article is very interesting.

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10:16 PM  
Blogger unlawflcombatnt said...

Loosecannon,

Thanks for the reference on Naked Short Selling. From the article it appears sellers can sell stocks they don't actually have to a buyer, driving prices down in the process. Meanwhile, in many cases the stock is never delivered. It sounds like this wouldn't even be known to the buyer, until he tries to sell his shares. Even then, shares are shares, so the company owning the stock simply delivers the money for the sale of the stocks to the buyer, because they're still holding the other stockholder's shares (and money.) So this problem could be covered up indefinitely, or at least until all shareholders tried to sell their stocks. Do I have this right?

This is especially interesting to me in a somewhat related respect. I bought gold several months ago from an investment company/broker. I allowed them to hold it, until I suspected they had never done anything except take my money for it. Then I asked them to actually convert it into coins and deliver it. Of course, they charge a fee for this "conversion." The reality is, they're charging me a fee to actually obtain the gold that they claimed that they had already purchased. In other words, they weren't holding any gold at all for me. They simply had my money and had given me a piece of paper which was nothing buy an IOU for gold that they didn't even have. It took a month to "convert" the gold into coins and ship it to me. What really happened is it took them a month to find the coins at a low enough price and then buy them and ship them to me. Needless to say, they won't be "holding" anymore gold for me.

I don't consider any paper investment safe at present. At least with gold, you can actually have it in your possession, or put it in a safety deposit box. A stock certificate is nothing but a piece of paper a buyer exchanged for real cash, under the assumption that they actually can sell that piece of paper at a later date.

I already lost a lot of money in the stock market crash in 2001. When I tried to sell stocks at that time, the brokerage firm did everything possible to delay sale. They changed their own rules as to how much could be sold at one time. They sent checks from the sales of my stock to the wrong address. They put the wrong name on the checks. They even claimed they'd sent checks they'd never sent.

It wasn't until recently that I had much of an understanding about how all of this works. Money invested in the stock market is worth absolutely $0 until you've actually sold the stock. Prior to that it may completely disappear, and every maneuver imaginable can be employed to delay, or even prevent one from getting their money.

I'm not putting a penny of money into the stock market again. To me it appears to be little more than a scam. The large, rich stockholders know exactly how to game the system. They have access to far more information and can much more easily circumvent the rules than the average person. Furthermore, overall, there are very few good investment opportunities. With consumer spending being propped up by unsustainable levels of borrowing, there is nowhere for the stock market to go buy down. Like the housing bubble, it's just a matter of time.

9:29 PM  
Blogger unlawflcombatnt said...

Loosecannon,

I apologize if it appears I haven't responded to your posts. I'm having some problems with my blog. This particular thread apparently is listed 2 times, one under the month of September (or 9), and once under Novermber (or 11). So I've been posting responses that I otherwise can't even find. So I'm going to have to post twice, to make sure it shows up somewhere.

Apparently the problem came from changing the dates on the post, causing there to be 2 separate internet addresses for this post. Again, I'm not completely sure what happened here, but I don't think this thread can even be located from the mainpage of my blog site.

Here's the post I wrote previously:

Thanks for the reference on Naked Short Selling. From the article it appears sellers can sell stocks they don't actually have to a buyer, driving prices down in the process. Meanwhile, in many cases the stock is never delivered. It sounds like this wouldn't even be known to the buyer, until he tries to sell his shares. Even then, shares are shares, so the company owning the stock simply delivers the money for the sale of the stocks to the buyer, because they're still holding the other stockholder's shares (and money.) So this problem could be covered up indefinitely, or at least until all shareholders tried to sell their stocks. Do I have this right?

This is especially interesting to me in a somewhat related respect. I bought gold several months ago from an investment company/broker. I allowed them to hold it, until I suspected they had never done anything except take my money for it. Then I asked them to actually convert it into coins and deliver it. Of course, they charge a fee for this "conversion." The reality is, they're charging me a fee to actually obtain the gold that they claimed that they had already purchased. In other words, they weren't holding any gold at all for me. They simply had my money and had given me a piece of paper which was nothing buy an IOU for gold that they didn't even have. It took a month to "convert" the gold into coins and ship it to me. What really happened is it took them a month to find the coins at a low enough price and then buy them and ship them to me. Needless to say, they won't be "holding" anymore gold for me.

I don't consider any paper investment safe at present. At least with gold, you can actually have it in your possession, or put it in a safety deposit box. A stock certificate is nothing but a piece of paper a buyer exchanged for real cash, under the assumption that they actually can sell that piece of paper at a later date.

I already lost a lot of money in the stock market crash in 2001. When I tried to sell stocks at that time, the brokerage firm did everything possible to delay sale. They changed their own rules as to how much could be sold at one time. They sent checks from the sales of my stock to the wrong address. They put the wrong name on the checks. They even claimed they'd sent checks they'd never sent.

It wasn't until recently that I had much of an understanding about how all of this works. Money invested in the stock market is worth absolutely $0 until you've actually sold the stock. Prior to that it may completely disappear, and every maneuver imaginable can be employed to delay, or even prevent one from getting their money.

I'm not putting a penny of money into the stock market again. To me it appears to be little more than a scam. The large, rich stockholders know exactly how to game the system. They have access to far more information and can much more easily circumvent the rules than the average person. Furthermore, overall, there are very few good investment opportunities. With consumer spending being propped up by unsustainable levels of borrowing, there is nowhere for the stock market to go buy down. Like the housing bubble, it's just a matter of time.

3:12 PM  
Blogger unlawflcombatnt said...

Loosecannon,

Is there any chance you can re-post your letter on "Naked Short Selling"? It seems to have vanished, along with the link you included. And my response makes very little sense without your previous post. I don't delete any letters, unless they're advertisements. (However, I now suspect some have inadvertently disappeared, since I've changed posting dates.)

If any other letters are missing, could you re-post those as well? I would definitely appreciate that.

Apparently if I change the date listed on the thread, the letters posted from previous dates disappear, like your very last letter.

3:41 PM  
Blogger Loosecannon said...

Unlawful,

Deepest regrets on the gold paper and stock market losses.

I once lost money betting on a market i was positive would rise. The market rose, but i bought the wrong stocks. NEVER AGAIN.

I can repost the articles but not the rest of the text, but i surmise you definitely got the point of the articles.

My advice, start a new article and all should be fine. i think we more than maxed the capacity of this one

8:51 PM  
Blogger Loosecannon said...

http://tinyurl.com/7znyg

Here is the naked short selling article.

As you correctly concured this indicates that a large percentage of stock "shares" are sold without ever being received in the first place, creating virtual duplicates of shares and efecting not only the value but the demand drive.

I think the whole paper certificate marketplace is a sham anymore. As is banking.

Since your central theme is avoiding economic armagedon, I might as well just say it out loud: our financial services sectors are exposing us all to potentials for complete collapse based on a lot of what can only be called "frauds" and "confidence racketeering". The potential for meltdown is real, is larger than ever before and if it occurs the losers will be everybody.

Economics does not exist (soley) to provide a means for capital to earn dividends on other peoples trade, it exists to get bread delivered to my corner store and gas to the corner pump.

If the system stalls, we may have a robust banking infrastructure, plenty of "paper "wealth and bread in the bakery, but getting it distributed was the whole point.

We should never trust economics to the management of private enterprize. It will work, but at some point it will fail and the consequences can be like a plague.

8:44 AM  
Blogger unlawflcombatnt said...

Loosecannon,

Again, I couldn't agree with you more. It seems the focus of today's economic "assessments" is the wellbeing of investors, not the overall economy. When describing economic "growth," it appears the main determinants are corporate profits and stockholder dividends.

I'm still amazed at how the GDP calculation has so little relationship to the overall economy. A lot of this is due to the so-called "GDP deflator," which allegedly determines the real GDP by adjusting for increases in the price index. Needless to say, this "deflator" reduces the "real" GDP much less than the CPI would.

And as you have previously suggested (which I also agree with), the consumer price index underestimates the true inflation. And again, the GDP deflator underestimates it even more.

In fact, if inflation were based on precious metal prices and foreign currency prices, the calculated inflation rate would be even larger than the CPI.

Since December of 2000, Gold prices have increased 78%. Silver prices have increased 63%. Platinum prices have increased 40%. The price of the Euro has increased 40%. Housing prices have increased over 40% since that time. Meanwhile, the consumer price index has allegedly only increased 15%. The GDP inflator has increased even less.

To me it seems reasonable to assume the amount of inflation since December of 2000 is closer to 40% than it is to 15%.

Do you suppose the government is understating the true inflation rate? They wouldn't have any reason to deceive us, would they?

3:45 AM  
Blogger Loosecannon said...

Why, Unlawful, I feel like that was almost a setup!

Actually the Federal Government and the Fed reserve each have very powerful reasons to understate inflation.

Wages and entitlements are freequently tied to inflation by way of cost of living increases. Social Security is as well. Over a long period, shaving even a few tenths of a percent off of each years inflation rate has a very significant effect on the liabilities the Government accrues in paying entitlements.

And the Fed Reserve has a stated goal of maintaining an average 3.5% inflation rate.

Why should we care?

Take a calculator and enter ".966 X .966". Then press the equals key, say, 8 times in a row. The resulting figure demonstrates how much the dollar bill in your pocket has lost in value over the last ten years.

To calculate a twenty year span press the equals key a total of 18 times.

Then just for fun, try it 90 times to calculate how much the dollar has devalued since the inception of the Federal reserve in 1913.

Inflation is not the increase in prices, it is the stealth devaluation of YOUR money. It is a secret tax that serves the government and the federal reserve, at YOUR DIRECT EXPENSE.

Unless you got a 3.5% wage increase every year and an equal cost of living adjustment to your pensions and SS and an equal evaluation of your assets, you lost money.

To keep pace with the deflation of the dollar you need to register a 41% income increase every 10 years.

8:13 AM  
Blogger Loosecannon said...

Unlawful, with a few more minutes to respond to your last post:

It seems to me the prime indicators of the economy are not the DOW or the presented CPI or the adjusted GDP, or even the horizon limited employment figures.

Employment rate as a % of employable pop would be one.

Real GDP would be another.

Inflation is REALLY hard to figure acurately for the worlds reserve currency but a close proximate would be an index comparing the dollar to a basket of currencies and commodities, and a really broad and tactical CPI type of index that includes real staple goods like gasoline, heating fuels, food, durable goods, disposable goods, utilities, insurance, Taxes, and rent/mortgage payments.

Why are taxes not figured into the CPI?

Trade surplus/deficit is another key stat. As is budget surplus/deficit.

Recently the CIA changed the accounting method for GDP or Gross domestic product. A stat that is supposed to register the actual production output of a nation. The old benchmark was GDP, and china had a GDP listed as approx $1.7 Trillion/year. Then the standard was reset to "Income parity", and China's income parity was adjusted to 7 trillion/ year.

In both cases the US figure was approx 11 trillion.

A four fold increase in a single adjustment to the standard benchmark.

I don't have the slightest clue in the world what "income parity" really means (to the CIA), but it don't mean sh!t to me.

And now that the fedearl reserve is not even going to announce the currency creation figures, well all of these stats are increasingly irrelevant.

"Enron accounting, meet the US government, and I see you already know Mr Federal reserve".

7:50 PM  
Blogger unlawflcombatnt said...

Loosecannon,

That's incredible information about the upward revision of China's GDP. I was very well aware of the previous figure of $1.7 trillion, because I had used it in several posts. Do you happen to have a reference for this upward revision?

I also wanted to revisit inflation. I definitely believe that the CPI underestimates inflation. Using precious metals or the price of the Euro as indicators of inflation, the rate would be much higher. As you previously stated, the price of gold has gone up tremendously since Bush initially took office. The gold price has increased 78% since December of 2000. Other precious metals have seen similar increases. Silver has increased 63% in price during that time, platinum has increased 40%. Palladium and Rhobidium have increased even more in price. (Rhobidium has actually increased over 140% in price during the last year alone.) Though some of this increase may be attributable to increased demand for precious metals, due to lack of other investment opportunities, much is still attributable to inflation. The Euro has increased 47% in price since July 2001. Home prices have increased anywhere from 65% to 135%. When prices of so many measurable items have increased this much, it certainly suggests a higher rate of inflation than the currently stated 15% measured by the CPI.

9:55 PM  
Blogger unlawflcombatnt said...

Loosecannon,

I checked out the earlier link you posted "http://tinyurl.com/dy3rt." It was extremely interesting, though somewhat depressing. I'd like to see a breakdown on how our unfunded liabilities went from $20 trillion in 2000 to $43 trillion in 2004, and rising to an estimated $50 trillion by December 15th of this year. I've always felt the Bush junta were nothing more than "economic" terrorists, but I didn't realize they were this bad. (And they're still pushing to make the tax cuts permanent.)

The article also provided the name of the nation's comptroller general, David Walker. I did a search for his name and ultimately found an excellent reference on public debt, intragovernmental debt, and how the whole process works. One of the more remarkable aspects of the article is that it is put out by the government. (Most government publications are deliberate attempts to obscure information, not convey information.) You may have read this article before, but I'll post the link anyway. GAO Report There are about 8 pages of fairly direct explanations of foreign debt, publically held debt, and total debt. It can be found under the sub-heading "Agency Comments." Most of the article is written by David Walker. If the Bush administration knew how much truth is being disseminated in this article, they'd fire him on the spot. (Walker apparently missed the talking points memo stating facts are "created," not discovered.)

Walker states that "Given the size of the projected deficit, the U.S. government will not be able to grow its way out of this problem--tough choices will be required." Is anyone in the Bush junta listening?

You stated earlier it could be too late. You might be right. Bush has dug us a hole that will take years, if not forever, to get out of.

1:54 PM  
Blogger Loosecannon said...

Unlawful,

You brought up several points about inflation, none of which I can help you resolve, but poerhaps I can add more confusion.

First the data about China's GDP was from the CIA factbook

http://www.cia.gov/cia/publications/factbook/geos/ch.html

Which currently lists the GDP of China at 7.2 trillion. But the site has been revamped twice in the last 3 months.

The long standing index listed was GDP.

Then the indez was changed to Purchasing power parity at which point the figure quadrupled.

Then it was recently relisted as "GDP (purchasing power parity)".

You can guess what purchasing power parity is, Maybe. I can't quite figure out what adjustment was made, but I have a clue.

Meanwhile the figures for the US and Japan did not alter at all through the index evolution, and most nations I was familiar with changed very little.

I suspect the Purchasing power parity is in fact a direct comparison of the ability to purchase similar goods in China and the US specifically at X price, multiplied by gross output in dollars.

Now to your points:

Exactly my thinking, with so many dollars chasing a shrinking number of attractive investment opps what is a dollar to do?

Well Gold is usually involved in a pairs dance with the dollar that says when one goes down, the other goes up. and vice versa. And to a much less constant rate that would be true of lots of real commodities like land.

But the excess liquidity adds an unknowable confusion to the mix. Are investment dollars fleeing the dollar driving up the euro, or just buying as many euros a possible because they seem like good investments. Same for gold.

Land it seems to me has always been the most stable investmant of all but I suspect 50% of current land prices is the direct result of investment dollars desparate for a home, and perhaps with the qualifier "anywhere but in dollar denominated instruments".

I think it is an increasing uncertain question.

The point to keep solid on is that land, food, metals, real goods like aluminum and copper have an inherent value that money and paper (and less than paper) certificates do not have.

It may be worth considering evaluating everything against a basket of durable commodities for the forseeable future if you really want an index of merit.

I would add:

gasoline retail LA

Gold
Aluminum
Copper

Average home price bangor Maine, Seattle WA, Dallas TX

Wheat, corn, Bushel

Brent Crude

Nat gas Boston MA

to that list, any suggestions?

5:47 PM  
Blogger Loosecannon said...

Great Link to the GAO data and article, UNlawful.

The GAO is the most reliable info source on most any topic that they decide to tackle. No idea how they stay above the fray. But they do so consistently.

A real score, i will study it for a week or so and see what I can turn up.

BTW, Immediate hard copy material, things frequently disappear on the web.

In cyberspace, history is constantly re-written.

7:24 PM  
Blogger Loosecannon said...

http://www.lifeaftertheoilcrash.net/Home.html

A Must, Must read

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4:25 AM  
Blogger unlawflcombatnt said...

Loosecannon,

Thanks for the link to the CIA information. It's a pretty good overview of most nations' economies.

I also noted their understatement of U.S. inflation of 2.5% for 2004. Every source I can find puts it over 3%, including the Bureau of Labor Statistics.

Regarding inflation, I would include rental rates as another marker. With home ownership allegedly increasing, you might expect rental rates to understate inflation, if anything. Rental rates in the LA area have increased 25% since 2001. That's roughly twice the reported increase in the CPI. I don't know what the increase has been nationwide, but I suspect it's closer to 25% than it is to the CPI.

There's an excellent article about inflation from a site called "Financial Sense." It explains many of the tricks the government has used to lower its calculated inflation rate. The link for that site is The Core Rate.

11:29 AM  
Blogger Loosecannon said...

Unlawful, that was a GREAT article.

So many thoughts, so just gonna skim them.

How i could read that and not get jogged into "conspiracy to defraud" is beyond me.

Then there is the real inflation figures that one could project from that piece. The piece indicates that real inflation has been 33% over the last 5 years. (figured according to a 5 year accumulated figure).

And the currency creation figures begining in 94', ooooh boy.

But the BIGGEST hit is the decline of accounting standards or the incline in accounting corruption in the past 10-11 years.

The figures are all cooked and cooked BIG, in every sector, every firm, every institution. Hell the Feds own figures are so cooked they no longer release M3 numbers.

This can't last!

This is the rah before the shit offers a sweet and enduring kiss to the fan.

Credit economy, negative savings, incomprehensible debt.

It is already over and only the gold will remain once the corrections take their toll.

If interest rates stay the same defaults are soon to mount/ if interest rates fall the economy seeks another bubble, rocketing us to an even more precarious perch.

THIS IS THE FUN SIDE of economic disaster.

Next comes the slap in the face!

Humans are so stupid.........

BIG, BIG thanks Unlawfull, and i hope you are well prepared, we all walk the plank together in this one.

8:16 PM  
Blogger unlawflcombatnt said...

Today's Consumer Price Index decline of 0.6% is very deceiving. With the exception of energy prices, the Consumer Price Index went up for all individual items. The ENTIRE decline is accounted for by a drop in fuel prices. The so-called "core" rate of inflation is actually rising (it excludes fuel costs, along with food costs.) Below is a list from Briefing.com of the individual price increases:


Category............... Nov.... Oct.... Sep.... Aug.... Jul
All Items............. -0.6%.. 0.2.... 1.2..... 0.5..... 0.5
Food&Beverag... 0.3..... 0.3.... 0.2..... 0.1..... 0.2
Housing............... 0.5..... 0.9.... 0.4..... 0.2..... 0.4
Equivalent Rent.. 0.2..... 0.1.... 0.1..... 0.2..... 0.2
Apparel................ 0.2.... -0.4.... -0.1.... 1.0.... -0.9
Transportation.. -4.8.... -1.3..... 5.1..... 2.2..... 1.5
..New Vehicles... -0.1..... 0.5..... 0.4.... -0.5.... -1.0
..Motor Fuel..... -16.0... -4.4.... 17.8..... 8.2..... 6.1
Medical Care....... 0.6..... 0.5..... 0.3..... 0.0..... 0.4
Recreation........... 0.0.... 0.2...... 0.4.... 0.3...... 0.1
Educ&Commun.. 0.4.... -0.1...... 0.7... -0.1...... 0.2
Other.................... 0.3..... 0.1..... 0.1.... 0.2...... 0.6
Tobacco.............. 0.4.... -0.1..... 0.7.... 0.6...... 1.1

Special Indices
Core................... 0.2%... 0.2.... 0.1..... 0.1...... 0.1
Energy............... -8.0..... -0.2.. 12.0..... 5.0...... 3.8
Services.............. 0.5...... 0.7.... 0.4..... 0.2...... 0.4




This information can be found at: Briefing.com-CPI

It's worth pointing out that food prices increased 0.3% (annual rate of 3.6%), apparel and equivalent rent increased 0.2% (annual rate of 2.4%), medical care increased 0.6% (annual rate of 7.2%), and education increased 0.4% (annual rate of 4.8%).

ALL consumer prices, except for transportation, are increasing. The reported decline in prices is due exclusively to the record decline in fuel prices. Despite this artifactual decline in prices, consumer buying power is declining, and "real" wage increases are lagging behind price increases.

2:40 PM  
Blogger unlawflcombatnt said...

Loosecannon,

I heard about the exclusion of M3 yesterday, but was unable to find any references. Do you happen to have any references you could send me?

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6:13 AM  
Blogger Loosecannon said...

http://www.321gold.com/editorials/chapman_d/chapman_d_112305.html

There you go Umlawfull, a good article published by 3 2 1 Gold.

The M3 report is critical to keeping track of the agregate money supply. Without it the FED has an unlimited liscense to print currency, produce stealth inflation, and lend at it's own disgression.

This liscence is compounded by the fact that the Board of presidents of the FED are responsible for setting their own reserve currency requirements.

As of march the transparency of the worlds reserve currency is history.

I don't know who the FED is trying to kid.

In reality the fed reserve banks have already stopped using the dollar as the reserve currency and are in fact relying on a basket of currencies of which the dollar is one.

I suspect that the FED and BIS now feel they have monetized and monopolized and counter leveraged currency accounts sufficient to be failsafe under any circumstances.

But I also have serious concerns that the absurd degree of currency creation and debt is a designed mechanism to protect central banks from an economic collapse. (which doesn't mean thge collapse won't happen, it just means that Central banks of the BIS are fortified against loses)

Speculation, it is way over my head.

8:48 AM  
Blogger Loosecannon said...

http://tinyurl.com/ajwlb

Second link to same article

8:50 AM  
Blogger unlawflcombatnt said...

Loosecannon,

Thanks for the great links. I'll have to get back to you after reading them.

On first glance I did notice a disturbing trend.

Consumer Debt has increased 123% since 1995.
Business Debt has increased 97% since 1995.
GDP has increased 67% since 1995.

Again, this doesn't seem like a sustainable trend. Our alleged economic "growth" is being increasingly financed by deficit spending. It's still unclear to me what is actually "growing" in our economy. It certainly isn't real wages.

1:58 PM  
Blogger Loosecannon said...

Unlawful, what is growing is the money supply.

Think about who that serves.

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Blogger Rachel said...

Sad to say I just got back from a dart tournament and decided to log in and do some surfing. I love your blog. It had some very good laughs. I am doing a paper on adjustable info mortgage rate and have been downloading information for the last two hours. I don�t know how I came across your blog but I am sure glad I did. It has set me back a little because I have spent the last 2 hours reading your archives. If you don�t mind I would like to add you to my favorites so I can back again and read some more. Well I need to get back to adjustable info mortgage rate. I am almost finished with it. Great job.

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All I can say AWESOME blog! The other half and I just got back from Home Depot and I needed a huge break. I am working on a project right now that is based on adjustable fixed mortgage rate rate. I have literally been on-line for 4-5 hours doing research. Even though your blog really isn�t on the same page as adjustable fixed mortgage rate rate I am certainly glad I came across your blog. There are a ton of great view points on this blog. Well I think I can here the kids calling in the background. I put you in my web favorites and I will certainly come back and visit. If you want to take a peek at my site you can find me here at adjustable fixed mortgage rate rate. I update my site very frequently.(as time permits!) Again, awesome job blogging and I will be back again soon!

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Well I just got back from karate and I am so tired. I am currently doing some research for school and stumbled across your blog. Which cracks me up really. The internet can certainly bring you in the wrong direction. Even though your blog is not completely related I think your doing a great job. I have read back through the archives and lots of people make some very valid points. Well I have been on-line forever it seems. I need to continue to plug away at adjustable modified mortgage rate. If you have the energy swing by our site. I try to update my site weekly and maybe you will see something you like. I already snagged your URL and put it in my favorites. If you do not mind I will be back again. Great job! Sincerely adjustable modified mortgage rate.

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Anonymous Jacqueline said...

I checked out this blog after following a link from another blog at the Rescue American Jobs website. Unlawfulcombatant - very interesting creen name. I like it!

You have restated the Demand - side economics argument that I and many others have been bashed on ruthlessly for championing. The only thing I notices in reading each one of your commentaries here from yourself and the other posters is the fact that another thing that skews the economic picture is the "unemployment statistics".

Currently, anyone not able to collect unemployment for whatever reson is NOT inclued in the unemployment figures. I went for 4 1/2 years without getting ANY chances for a job due to age discrimination and during that entire time I had NO income at all whatsoever on which to live and repay my student loans. Was I counted among the "unemployed"? Absolutely not. I am not the only one in this boat (although having plenty of company doesn't make me feel any better about being poor and having no economic security or even the fair fighting chance to obtain any security).
The facts and figures are skewed and distorted in just about every aspect of our economy.

Furthermore, many people with educations have been economically left out due to age discrimination to the point where the ONLY jobs availableto us are commissions-only paid insurance sales jobs where we have to buy fidelity bonds and E & O - just to be allowed to work selling insurance. We also must be able to pay for things like office equipment, utilities and the Internet. Ever try to make enough just to be able to live working in a commissions-only paying "job" with NO affordable health insurance benefits and not enough money to pay for even the most basic medical and dental care?

In sum, there is NO economic justice. You can do "all the right things" and still come up short shrifted. I am living proof of that. Most people can't afford to go to medical school or law school. Even if EVERYONE could get funded for such educations, we can't all be doctors and lawyers. Now most people can't even afford to go in for a plain vanilla bachelors degree.

When you have factors like age discrimination weighing heavily on people's chances for ever becoming financially stable - never mind having enough money to be able to afford to buy gold or have any type of savings, you have a situation where the ONLY thing growing besided unjustifiable obscene wealth of corporate CEO's is the unjustifiable poverty of those of us who make less than $25,000 per year and who are being unjustly excluded from getting even the tiniest slice of the economic pie at all.

The job market environment is more like the Serengeti Plains of Africa where anyone who is not in the top 20% income brackets are like antelopes just trying to survive and not be made into lunch for a lion or hyena, or succumb due to drought and starvation. It is a macabre game of musical chairs where there are far too few chairs for most to get a seat and of those chairs that exist, they are wobbly or broken.

The voo-doo economics of supply-side proponents have caused this work environment to develope into the Serengeti social Darwinist playing field that we have now. Eventually, this will filter up through the food chain and adversely affect even those with the highest status jobs - like doctors.

2:02 PM  
Blogger unlawflcombatnt said...

Jacqueline,



Thanks for your excellent comment. I completely agree with you. (And even doctors are being squeezed, which many don't realize.)

I'd stongly encourage you to post your comment at my forum as well-EconomicPopulistForum

Your views are just like most of us on the forum. People need to hear more true stories such as yours. It's not all about the stock market. It's about regular people like you and I.

My suggestion on buying gold was in lieu of putting any extra money in the bank, stock market, IRAs, or 401Ks. Obviously a person can't put money away if they're barely making ends meet.

My suggestion on gold buying was modification of the suggestion by Joel (Hirschhorn) at my forum on how consumers could exert power over Corporate America by not spending. My suggestion was to put any of that "non-spent" money into gold coins, not the bank. You can sell the gold later when you need it, and it will probably be worth more than the dollars you spent to buy it to begin with.

Thanks again for your comment.

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