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Perhaps this can be our new rallying cry.
If it's a new problem, perhaps it demands a new approach. If it's an old problem, it certainly does.
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Posted: 21 Nov 2010 07:10 PM PST Defined benefit pension plans are in trouble across the country, but politicians in states like Arizona and Illinois are reluctant to tackle the problem. Voters across the country however, have taken matters into their own hands by refusing to agree to tax hikes and by voting to reduce benefits. In California, voters in eight of nine cities or counties approved measures to reduce public-pension benefits. Moreover, six new governor-elects want to kill defined benefit plans. Finally, the speaker of the House in Arizona wants a constitutional amendment to lower pension benefits. Arizona Central covers these issues and more in a pair of articles. Let's start with a look at Pension reform a difficult task. The Arizona Legislature's incoming House speaker and Senate president said lawmakers can go only so far to slow the rate of growth for the state's pension systems, which an Arizona Republic analysis found cost taxpayers $1.39 billion last year, a 448 percent increase from a decade ago.Arizona House Speaker Kirk Adams Proposes Constitutional Amendment There is much more in the article, please give it a look. Also consider House speaker unveils sweeping plans Adams plans next session to ask lawmakers to:Fraudulent Promises Need Not Be Kept Many will say we cannot renege on promises. The reality is those promises are invalid because they came about as a result of fraud. Politicians got into bed with public unions by making promises they knew they could not keep, in return for endorsements from unions to get elected. The entire vote-buying process by unions is fraudulent. No one represented taxpayers, even though public workers are supposed to be public servants. It is not at all wrong to take away promises made via fraudulent vote buying, influence peddling, and bribes. The same applies to public union wages as well. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. |
Irish Citizens Sold Down the River in "Firepower of Stupidity" Posted: 21 Nov 2010 04:32 PM PST Today the Irish Government sold its citizens into debt slavery by agreeing to guarantee stupid loans made by German, British, and US banks. Those loans fueled one of the biggest property bubbles in the world. Ireland has since crashed. Ireland Agree To Bailout Please consider Ireland Seeks Bailout as 'Outsized' Problem Overwhelms Nation Ireland applied for a bailout to help fund itself and save its banks, becoming the second euro member to seek a rescue from the European Union and the International Monetary Fund.Bondholders Should Foot Entire Bill Trichet is pissed about common sense statement by German Chancellor Angela Merkel about who should foot the bill. Actually, Merkel did not go far enough. When you make stupid loans you pay the price. Or at least you should. But no! Trichet as well as the Irish Prime Minister seem to think that Irish taxpayers should bail out the Irish banks (which is in reality a bailout of German, and UK banks that made piss poor loans to Ireland). Why the average Irish citizen should have to bail out foreign bondholders is beyond me, but I do note that the same happened in the US with taxpayers footing an enormous bill for Fannie Mae, Freddie Mac, and AIG. No matter what stupid thing banks do, prime ministers and presidents are all too willing to make the average taxpayer foot the bill for the mess. That by the way,is one reason why we get into these messes in the first place. For a full text of the actual bailout agreement, please see Government statement on request for support. I must say it is pretty boring lacking in details. Firepower of Stupidity Finance Minister Brian Lenihan bragged about the "firepower that stands behind the banking system." Yes there is firepower alright, a firepower of stupidity. Wikipedia notes the population of Ireland is approximately 4.35 million. Going into debt to the tune of $137 billion would saddle the average Irish citizen with $31,494. How long will it take to pay that back? For whose benefit? Perhaps a better question is will it be paid back? By agreeing to take on that debt, and sticking it to the Irish taxpayers who will be forced to accept various austerity measures to pay back that debt, Irish Prime Minister Brian Cowen and Finance Minister Brian Lenihan just sold Ireland down the river. For additional insight on how the crash affects Ireland, please see Ghost Estates and Broken Lives: the Human Cost of the Irish Crash Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. |
Following the Path of Japan and the Madness of Bernanke Fighting Just That Posted: 21 Nov 2010 01:13 AM PST I have been saying for 5 years the US would follow the path of Japan. An interesting chart in the New York Times shows this is indeed what has happened. ![]() click on chart for sharper image Following Japan's Path, So Far In the United States, the core consumer price index, which excludes food and energy prices, rose 0.6 percent in the 12 months through October. That was the smallest 12-month gain since government calculating the figure in the 1950's. The chart shows the 12-month changes in core CPI for the US and Japan, in the years before and after housing prices peaked in each country. The above chart and commentary is from After the Fed's Action, Watching Inflation's Trajectory Since the collapse of the housing market in the United States and the beginning of the global financial crisis, the Federal Reserve has made avoiding deflation a major priority, recalling the experience of Japan after its bubble burst in the early 1990s. The Fed has set an annual inflation target of 2 percent or a little lower, but is not getting it.Major Disagreements With Times Article Although I agree with the premise "we have been following the path of Japan", I sure disagree with the undertones that the Fed can or should do something about it. Japan is now in debt to the tune of 200%+ of GDP. It build bridges to nowhere hoping to cure deflation. It is madness. All Japan has to show for massive fiscal stimulus is debt. Moreover, as soon as Japanese interest rates spike to 3% or so (Something guaranteed to happen, we just don't know when), Japan's interest on its national debt will exceed all income. This is the path the US is heading down unless we change course. Yes it will be painful, but after a world record housing party it is the height of foolishness to think there will not be a massive hangover as a huge price to pay. It is startling that Paul Krugman and other Nobel prize winning economists cannot see the foolishness of proposing we can spend our way to prosperity. Ironically, the average 12th grader can see the foolishness of it, but the average academic professor cannot. Unfortunately Congress (both Republicans and Democrats) have been unwilling to deal with the issue as well. Republicans Need to Admit US Cannot Afford to be World's Policeman Regardless of what Republicans may think, we can no longer afford to be the world's policeman. For details please see Cost of War Since 2001; Federal outlays and revenues, 1940-2015. Democrats Need to Admit Problem with Public Unions States are bankrupt because of pension promises that cannot and will not be met. Public unions have destroyed states and municipalities. State pension plans are $3 trillion in the hole. For more details, please see Interactive Map of Public Pension Plans; How Badly Underfunded are the Plans in Your State? Thus, no matter what Democrats think, we cannot afford our love affair with public unions, union wages, and most importantly, union benefits. Both parties need to rework the healthcare bill so that it contains provisions that will actually encourage lower costs and not damage small businesses. The bill as it sits made matters worse. Search for Scapegoats Avoids the Truth Somehow, some way, if you listen to Treasury Secretary Geithner and economist Paul Krugman, all of these problems are supposed to go away if only China would float the Yuan. Well none of this will go away as long as the US looks for scapegoats instead of admitting reality. That reality is we are on the road to bankruptcy and neither Keynesian nor Monetarist stimulus will help. Our problems are structural in nature and everyone needs to admit there will be no quick solutions and we cannot spend our way out of this mess. The only thing that can put the US back on track is fiscal prudence and sound monetary policy. Unfortunately, no one wants to hear the truth. Madness of Bernanke Bernanke wants prices to rise 2% a year. One problem is he does not count food, energy, or housing. Although OER (Owners Equivalent Rent) is the largest component of housing, rent and housing prices are two different things. Property taxes and sales taxes are yet another thing, and those are not factored into the CPI either. We are clearly following the path of Japan, especially if we include an analysis of housing and equity prices including the Nasdaq. Yet to the pocketbook of the average US citizen, costs are going up, wages and benefits are going down (except of course for Wall Street and public employees). Bernanke Doubly Wrong Regardless of what your position is regarding measuring inflation (prices or credit-based), Bernanke is horrendously wrong. It is sheer madness in a world of global wage arbitrage, where 14 million are unemployed, where the unemployment rate is close to 10%, to pursue a policy of attempting to force prices up, to meet some asinine idea that prices need to rise 2% a year, when to the perspective of the average consumer prices are going up much more than that, via taxes alone, let alone the grocery store and gasoline pump. Berkanke's policies are just as mad from the perspective credit. In a fiat credit-based regime, there will be no significant sustainable hiring or economic growth when consumer and business credit is collapsing. Net credit creation has been negative for 10 quarters. Bernanke is attempting to stimulate lending, and the Fed can print all the money it wants. However, the Fed cannot force banks to lend or consumers to borrow. For now, Bernanke's efforts have caused rising commodity prices, which is hurting small businesses that cannot pass on those price increases because consumers are tapped out. The net effect of the policies of this Fed and this administration is small businesses are getting crucified in a price squeeze. Thus, whether you view inflation from a price perspective, or from the proper perspective of credit expansion, Bernanke is simply wrong. His policies have failed. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. |
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When it comes to art, to human work that changes people, the mass market is a fool. A dolt. Stupid.
If you wait for the market to tell you that you're great, you'll merely end up wasting time. Or perhaps instead you will persuade yourself to ship the merely good, and settle for the tepid embrace of the uninvolved.
Great work is always shunned at first.
Would we (the market) benefit from more pandering by marketers churning out average stuff that gets a quick glance, or would we all be better off with passionate renegades on a mission to fulfill their vision?
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Sunday Funnies 2010-11-21 Dual Mandate Posted: 20 Nov 2010 10:23 PM PST Honey about your dual mandate ... ![]() The above is in response to the dual mandate of the Fed to produce price stability and maximum employment. The Fed has failed at both. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. |
San Diego Mayor Proposes Eliminating City Pensions; Public Union Concessions a New Trend Posted: 20 Nov 2010 03:03 PM PST After citizens of San Diego voted overwhelmingly against raising taxes to cover deficits, the Voice of San Diego reports Mayor Proposes Eliminating City Pensions As time runs down in San Diego Mayor Jerry Sanders' tenure, his proposals to solve the city's financial crisis are becoming more drastic. This summer, he embraced a tax hike. Friday, he proposed 401(k)-style retirement accounts for most new city employees, and in turn, eliminating their pensions.While I wholeheartedly endorse the idea of eliminating defined benefit pension plans for public employees, the mayor simply refuses to admit the truth. You cannot balance the budget responsibly unless and until police and fire unions aid in the effort. Politicians Padding Their Own Pensions Please consider Reform to Politicians' Pensions Could Go Further The U-T ran the numbers last week. To fund council members' pensions, $29,700 must be paid into the retirement fund annually. Now, they contribute $2,400 toward that amount and taxpayers pay the rest. With the Prop. D reform, the amount would increase to $6,800. If the cap is eliminated, which the council can do, the council members would be paying nearly $15,000 each year.No One Speaks for the Taxpayer The biggest problems with public pensions is no one speaks for the taxpayer. The sad state of affairs is that mayors buy votes of the teachers, police, and fire unions to get reelected. Then they create outlandish pension plans for themselves, funded by taxpayers. Voters in San Diego finally had enough. Citizens Rejected Proposition D by a margin of 63-37. San Diego voters gave a stiff rebuke to city leaders Tuesday by roundly rejecting a proposed sales tax increase, setting up a difficult choice for Mayor Jerry Sanders on whether to follow through on his threat of devastating cuts to public safety if Proposition D failed.Public Union Concessions a New Trend Meanwhile please note the start of a trend. City after city is starting to address these issues. They have to. The economy finally forced it. Expect to see major concessions by public unions in big and small cities alike as taxpayers and voters everywhere have had enough. Voters are fed up with a national unemployment rate close to 10%, with 14 million unemployed, with seeing their property taxes go up, even as the value of their homes collapse, topped by public union pension guarantees the average person can only begin to dream about. It is high time mayors of cities big and small stand up for taxpayers and not for unions who contribute to their election campaigns. The inequities must stop, and they will. Mayors who do not understand the economics and the anger of voters will soon be out of office. Although I applaud the mayor's move in the right direction (finally), there is much more to this story that shows how disingenuous mayor Jerry Sanders is. I will do a followup post shortly that will prove it. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. |
Posted: 20 Nov 2010 09:38 AM PST G-20 is over but the acrimony is not. Bloomberg reports China Assails Monetary Easing, Citing Inflation, Bubble Risks China renewed an attack on quantitative easing, citing the risk of increased prices in emerging economies, a day after the Group of 20 nations said the markets can adopt regulatory steps to cope.More Regional Yuan Trading Proposed Echoing the sentiment of Jin Zhongxia, Thailand calls on Asia to use yuan in trade. Prime Minister Abhisit Vejjajiva, fearful of the effects of the soaring baht due to massive capital inflows, has proposed the use of the Chinese yuan as a major regional trading currency.An Attack on US$ Hegemony? Is this the start of a the Yuan as a reserve currency? China may want that, but it hard to take China serious unless and until it is willing to float the Yuan. The irony in the proposal by Jin and Abhisit is they are proposing a reserve currency that is still tied to the dollar. Moreover, there are other several constraints, but first consider this UN proposal. UN Proposes to Scrap Dollar as Sole Reserve Currency A UN Report says Scrap dollar as sole reserve currency. A new United Nations report released on Tuesday calls for abandoning the U.S. dollar as the main global reserve currency, saying it has been unable to safeguard value.The Market Dictates Reserve Currencies Short of reestablishing gold as a mechanism for forcing trade balances to be kept in sync, the whole idea of establishing new reserve currencies by decree or agreement is potty. How can you dictate what currencies a country should hold, or if they hold any at all? Does one size fit all? Look at the acrimony out of G-20. Think there is going to be an agreement on using SDRs? Reserve currencies cannot be set by decree or even by agreement. There are market constraints and mathematical constraints. Function of Math Some maintain that commodities are priced in dollars so dollars must be held. Nonsense. To the extent that countries trade with each other and not the US, there is no need to hold dollars at all. The Yen is freely convertible to dollars so is the Euro. One does not need dollars to buy oil or copper. Currencies are fungible. With a couple mathematical caveats, any country is free to hold whatever it wants. One mathematical constraint is there are not enough New Zealand dollars (or Australian dollars or Canadian dollars, etc) to go around for everyone to expect to buy oil in any of those currencies. However, there are enough New Zealand dollars to go around to support all existing trade with New Zealand. Why Are Countries Piling Up US$? The second mathematical constraint relates to trade imbalances. The US runs a trade deficit as well as a budget deficit partially financed by foreigners. Our dollars go overseas, month after month, year after year. The reserves pile up over time as a function of basic math. To the extent Asian countries trade with China, then sure, a buildup of Yuan reserves is possible. However, given the US trade deficit dwarfs the trade deficit of every other country, it will be tough mathematically to make a dent in the buildup of US dollar reserves relative to other reserves. Sure there will be periods of fluctuations in reserves are there are now, but the trend towards higher reserve levels is essentially mathematically forced by trade imbalances. In addition to trade imbalances, one must also factor in hot money inflows of US$ into China, Brazil, and other places. Those countries hold reserves to accommodate an eventual exodus of hot dollar inflows. That is the third constraint. Note that Bernanke's QE has had such an impact that countries are resorting to capital constraints to stop the inflight of dollars. Mathematically, whoever has the biggest trade deficit and hot money outflows on a sustained basis will see the biggest amount of reserves pile up elsewhere. It's as simple as that. Thus, all this talk about SDRs and using the Yuan or the Yen as major reserve currencies is complete silliness. As it stands now, any reserve currency changes will be dictated by math, not decree. Want to cure global trade imbalances? It's quite easy. Go back to the gold standard and have the political will to balance the budget. Nothing else will work. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. |
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There's plenty of controversy about the new full body scanners that the TSA is installing at airports, and plenty more about the way some TSA agents are handling those that choose to opt out.
The heart of the matter comes from the fact that the TSA often doesn't understand that it is in show business, not security business. A rational look at the threats facing travelers would indicate that intense scrutiny of a four ounce jar of mouthwash or aggressive frisking of a child is a misplaced use of resources. If the goal is to find dangerous items in cargo or track down Stinger missiles, this isn't going to help.
Instead, the mission appears to be twofold:
1. Reassure the public that the government is really trying and
2. Keep random bad actors off guard by frequently raising the bar on getting caught
The challenge with #1 is that if people believe they're going to get groped, or get cancer, or have to wait in line even longer on Thanksgiving, they cease to be on your side. Particularly once they realize how irrational it is to try to stop a threat after it's already been perpetrated. (Imagine the havoc if someone had a brassiere-based weapon...)
And the challenge of #2 is that the cost of raising the bar gets higher and higher.
Smart marketers know how to pivot. I think it's time to do that. Start marketing the idea that flying is safe, like driving, but it's not perfect, like driving. If someone is crazy enough to hurt themselves or spend their life in jail, we're not going to stop them, and even if we did, they'd just cause havoc somewhere else. So instead of spending billions of dollars a year in time and money pretending, let's just get back to work.
The current model doesn't scale.
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