Mish's Global Economic Trend Analysis |
- Bernanke Warns of "Rapid and Painful Response to a Looming Fiscal Crisis"
- Are Teachers "Special"? Is Anyone? Why?
- China's Borg Assimilation Strategy Part II: the "Honeytrap" the "Lamprey" and the "Mushroom Factory"; Seduced by China
- New York Mayor Seeks Pension Overhaul; New Jersey Governor Tells Unions "Sue Me" Over Pension Cuts
Bernanke Warns of "Rapid and Painful Response to a Looming Fiscal Crisis" Posted: 03 Feb 2011 03:36 PM PST Bernanke was yapping away with reporters today, bragging about the "expected" action in the stock market while dissing inflation concerns and ignoring Fed expectations that did not happen such as falling treasury yields or improvements in housing. Please consider Bernanke dismisses inflation concerns, says unemployment to take several years to get back on track The economy is poised to grow more rapidly this year, Federal Reserve Chairman Ben S. Bernanke said Thursday, dismissing fears that rising fuel prices will trigger broad-based inflation. But he stressed that it will still take several years before the unemployment rate comes down to normal levels.Rapid and Painful Response to a Looming Fiscal Crisis I suggest Congress should listen to one of the few things Bernanke has ever said that made any sense. The correct Congressional response is to take Bernanke at his word and not raise the debt ceiling. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Are Teachers "Special"? Is Anyone? Why? Posted: 03 Feb 2011 12:23 PM PST In response to New York Mayor Seeks Pension Overhaul; New Jersey Governor Tells Unions "Sue Me" Over Pension Cuts I received yet another email stating a line I frequently hear, that some occupations are "special" and need protection. Here is the exact statement: "I think that teachers are special and must be separated out in this debate and protected." Ironically, if anyone is "special" in the student-teacher relationship, it is the students (and those who cannot protect themselves), not the teachers! With no disrespect to teachers or any other profession, no one is "more special" than anyone else. People who believe they are special are a huge part of the problem. Everyone wants their group protected at the expense of everyone else. Every group has their own excuse why they are special. It's one of the reasons we are in this mess. The person who emailed me has decidedly biased opinion (his wife is a teacher). I also hear it from police think they are special because their lives are on the line. However, stats show that agricultural work is far more dangerous than police work. Fishing and roofing are of the most dangerous professions of all. Should fisherman, roofers, and agricultural workers get "special" pension benefits? It is time to stop kidding ourselves and admit that no working class is more special than any other class. Correcting Outrageous Pensions Having laid sound rationale that no one is special, I recognize there are many teachers and others whose pensions are not that large. It is generally police, fire, administrators, and politicians whose pensions are most outrageous. I have already proposed a solution to that problem: Tax pension benefits above a certain level, take the money out upfront, and put it back into the pension plans to make them solvent. Many police, fire, school administrators, now collect $75,000 pensions and up. Worse yet, many retire at age 55. There are many who receive well in excess of $100,000 a year annually, then continue to work as contractors. This is preposterous. First, the retirement age needs to increase to some realistic level, preferably pegged to the same level as the SS retirement age, but certainly no sooner than age 62. Next, we should tax excessive pensions heavily. I do not know what the precise point, but it should be set at a level that will make the pension plans solvent in a reasonable period of time, say 10 years, with a reasonable discount rate of the lower of 5% or the long-bond yield. As a side note, from this starting point in Case-Shiller PE ratios, 5% is actually far too generous. Higher Taxes Will Not Fly The alternative to my proposal is bankruptcy or default. Higher taxes will not fly. People have had enough of higher taxes that go to ungrateful union members who think they are entitled to "special" benefits the average person can only dream about. It is very important for unions to see that. Bankruptcy vs. Default In bankruptcy, a judge may very well smack everyone equally. In a default, (Pritchard, Alabama is a good example) no one may get anything at all. In case you missed it, please consider Alabama Town Defaults on Pensions, Breaks State Law; Renewed Calls For San Diego Bankruptcy; "Prichard is the Future" The dubious honor of being the first city in the nation to completely default on pension obligations goes to Prichard, Alabama. The city has sought bankruptcy protection twice and is flat broke. It faces a choice of paying to keep city services like police and garbage running or pay pensions. It selected the former.Vallejo Wins Right to Unilaterally Change Contracts Vallejo, California went bankrupt and won the right to unilaterally change contracts. I discussed that situation in Vallejo Bankruptcy Plan Offers Unsecured Creditors 5-20%; JPMorgan CEO Forecasts More Municipal Bankruptcies; Bernanke Will Not Rescue Cities Benefit Haircuts Coming Here's the deal. Like it or not, benefit haircuts are coming in one of four ways.
Those are the options. The status quo does not work. In terms of fairness, (assuming fairness is one of the goals), those with the most outrageous benefits should be the ones to bear the brunt of the reform. Think that will happen in bankruptcy court, when the judge has his benefits to protect? A properly set tax level on excessive benefits combined with changes in retirement age and contribution levels should be sufficient to protect the benefits of most of the members. If unions stopped insisting on what they cannot get and instead focused on something viable, union members should endorse the above proposals (alternatively, any other proposals that fix the problem with raising taxes or putting the public at risk). Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 03 Feb 2011 09:41 AM PST As noted in China's "Borg Strategy" Seeks to Assimilate all Known Technology, China will stop at nothing to "assimilate and absorb" technology. China used those exact words in a lengthy document on procuring technology. China also uses the "Honeytrap" method, the "Lamprey" method, and the "Mushroom" method of acquiring technology. The "Honeytrap" method was featured in the James Bond film 'Quantum of Solace' with double agent Honeytrap. History of the Honey Trap In the History of the Honey Trap, Foreign Policy Magazine has five lessons for would-be James Bonds and Bond girls -- and the men and women who would resist them. In a 14-page document distributed last year to hundreds of British banks, businesses, and financial institutions, titled "The Threat from Chinese Espionage," the famed British security service described a wide-ranging Chinese effort to blackmail Western businesspeople over sexual relationships. The document, as the London Times reported in January, explicitly warns that Chinese intelligence services are trying to cultivate "long-term relationships" and have been known to "exploit vulnerabilities such as sexual relationships ... to pressurise individuals to co-operate with them."Five Lessons
The Telegraph discusses the "Honeytrap" method, the "Lamprey" method, and the "Mushroom" method in Chinese use honeytraps to spy on French companies, intelligence report claims The use of honeytraps to extort information and the placement of spying interns are among the techniques employed by Chinese spies in their industrial espionage operations, according to leaked French intelligence files.The Spy Who Loved Me In The Spy Who Said She Loved Me, Slate asks and answers the question: Are "honey traps" real? Are honey traps real, or are they found only in James Bond movies?Seduced by China Every company in the world has visions of grandeur when it comes to China. They all think they will be the one to make hundreds-of-billions of dollars marketing their product to the roughly 1,331,460,000 Chinese (2009 World Bank estimate). A few companies will have success for a few years, but probably not in any revolutionary technologies. For example, GM gets set to roll out China brand GM, Honda and Nissan Motor Co. are creating unique brands for the world's biggest car market as they try to boost sales in China's interior, where incomes rose almost 11 percent last year. The cheaper nameplates will help them compete on price against local manufacturers without diluting their cache among Chinese buyers, said John Zeng, an industry analyst at J.D. Power & Associates in Shanghai.Please forgive my skepticism, but it will be interesting to see how long this remains a "win-win" situation. Then again (also forgive my cynicism), given those are low-budget, low-technology cars, perhaps the setup lasts for a while, if for no other reason than to allow China to tout such "win-win" successes. Here's the question on my mind: For every "win-win" success, how many companies will end up victims of the "Honeytrap", the "Lamprey" or the "Mushroom" as China marches down its stated path to assimilate all worthwhile technology? Addendum: I made a blatant typo that spellcheck did not catch in one of the subtitles in my last post on Pension Overhaul. It was a context I do not use or condone and has been corrected. Apologies offered to anyone offended. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
New York Mayor Seeks Pension Overhaul; New Jersey Governor Tells Unions "Sue Me" Over Pension Cuts Posted: 03 Feb 2011 03:17 AM PST New York Mayor Michael Bloomberg is in a bed of his own making. When he took office in 2002 pension costs took 1 out of 28 revenue dollars. Today the cost is 1 out of eight dollars. This is what happens when you buy union votes to get elected. Now Bloomberg is scrambling to undo the damage he caused, and the unions are not happy about it at all. Please consider Bloomberg Seeks a Sweeping Overhaul of City's Pensions Mayor Michael R. Bloomberg proposed sweeping changes on Wednesday to New York's costly pension system, seeking to save billions of dollars by fundamentally altering long-established rules that have awarded generous retirement benefits to municipal workers and have deepened the city's financial hole.Cheer the Ideas, Not the Man Typically, politicians only do the right thing by accident or when the public (or necessity) finally demands it. In this case, necessity finally knocked some common sense into the mayor. While I can cheer Bloomberg's proposals, it is much tougher to cheer the man. He helped make this mess and is only reacting now because he has to. As recently as a year ago, he was still singing the wrong tune, making untenable deals that could not be honored. Nonetheless, at long last, Bloomberg is on track with many of those ideas. Yet, for all the whining the unions are going to do, there is not a single thing in Bloomberg's proposal that can be considered hardball. Hardball From New Jersey Governor Chris Christie Those looking for hardball can find it here: Christie Says 'Sue Me' as Pensioners Challenge Cuts New Jersey Governor Chris Christie said he doesn't mind breaking promises to pensioners to close a $10.5 billion budget deficit -- even if they sue.Fraudulent Contracts I back proposed legislation in Congress to allow states to go bankrupt. Such legislation will not happen until after the next presidential election, but it is the right approach. If you don't have the money you can't pay it. It's as simple as that. Moreover, unions better get used to that idea, especially at the city or county level. Otherwise many of these cases will end up in bankruptcy court for sure. There are a couple of issues people keep throwing my way. The first is "fairness". Excuse me but what exactly is moral or fair about hiking taxes on those barely scraping by to give unjust rewards to someone else. Moreover, there is nothing fair about dumping this problem on generation X or Y either, many deep in debt, fresh out of college, with no job and no benefits at all. Besides, there is no blood to give. Companies go bankrupt all the time. Ask GM or United Airlines what happened to them. They had a contract too. Fairness aside, I consider the contracts to be fraudulent. Public unions coerced, bribed, and threatened Armageddon if they did not get their way. They also bought the votes of corrupt politicians. To top it off, the unions got into bed with administrators working out raises that often went up for each of them, usually in sync. No one was ever looking out for the taxpayer. Thus, it is hard for me to feel sorry for, or beholden to those screaming about fairness or contractual obligations. Indeed the fair thing, is to default and work it all out in bankruptcy court just as United and Delta did. Addendum: I made a blatant typo in one of my subtitles above It was a context I do not use or condone and has been corrected Apologies offered to anyone offended Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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