Thursday, June 23, 2011

My View

Random ruminations from your resident curmudgeon...

Since 2008, our country has engaged in the most stimulative monetary policy in history. According to the Keynesian economic precepts that guide our our government economic policy, this action should have stimulated the economy and generated the addition of new jobs. Has that happened? No. Over the past three years, we have lost over 7 million full time jobs, wiping out every job gained since 2000. Real job losses are greater, as an additional 3 million unemployed have stopped looking for work. Further compounding the problem is that 5 million jobs have completely disappeared from the economy, mostly in the manufacturing sector. Today, total payrolls in this country are 131 million employed, less than it was at the beginning of 2000, even though our population has grown by 30 million during that period of time. 20% of all men that are of working age are unemployed. The headline unemployment rate is touted to be 9.1%, but the problem with that number is that it does not include individuals that want full time work but are working part time to fill an economic need in their family, nor does it include those who have stopped looking for work. Include those individuals and the real unemployment rate is 16%. We are running a risk of creating structural unemployment in our country- unemployment that will become permanent because of a total loss of jobs. It is incumbent on Washington to seriously evaluate and remove the impediments to job creation in this country if we are going to reverse these troubling trends.

It's probably too much to hope that the my good cholesterol will be a positive influence on my bad cholesterol.

Buried inside of the fiasco known as Obamacare is a "1099 reporting provision" that requires businesses to collect tax information on any vendor with whom they do business and report it to the IRS if the total is over $600. This is an onerous provision for any company in the U.S. that is doing business, so onerous in fact that Congress repealed it earlier this year for U.S. companies. However, they did not repeal it for foreign companies that do business in this country. Like so many laws that Congress passes, there are unintended consequences. This provision, know as FATCA (Foreign Account Tax Compliance Act), is creating an abundance of headaches for foreign firms, notably foreign financial institutions. For instance, according to Financial Times of London, one of Asia's largest financial groups is considering organizing its operations so that could stop buying and handling U.S. Treasury bonds. The implications of an action like that are horrifying for our country. If foreign institutions deem it too cumbersome to handle our debt in the form of Treasuries, who will buy them? This measure was projected by the Obama administration to generate $100 billion in new tax revenue each fiscal year. According to the Congressional Joint Committee on taxation, the measure will realistically generate $870 million a year, 91% less than projected. If we have to induce foreign institutions to buy those securities because of burdensome tax reporting requirements, we will see interest rates rise. Significantly. And this will be another crippling blow to our economy.

I believe in sharing the road with other drivers. They can have the part behind me.

Ben Bernanke, Chairman of the Federal Reserve, recently gave a rather rosy forecast about our economy. He described what we are experiencing as a "soft patch" from which our economy will emerge fairly quickly. I would beg to differ. According to the Economic Cycle Research Institute (ECRI), the long leading indicators of global growth are slowing rapidly. The ECRI is pretty good at detecting changes in the business cycle, and while they are not predicting another recession, they do say that the growth in our economy will be persistently slow and lower than normal. Manufacturing is usually the sector of the economy that is hit first and hardest, but according to ECRI, the slowdown has spread to numerous sectors of the economy. How bad is it? To achieve full employment, our economy must add 150,000 NEW jobs per MONTH. We are on pace to add 54,000 new jobs this YEAR. To say that our economy is weak is an understatement and a blinding flash of the obvious. And the rosy forecasts from policy makers are out of touch with reality.

I AM doing something with my life. It's called "screwing around".

And that, my friends, is my view.

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