Perry Glasser

Archive for the ‘Economics’ Category

CONSPIRACY THEORY

In Business, Economics, Economy, Finance, Political Economy, Politics, Wall Street on February 12, 2016 at 1:09 pm
Janet Yellen

Wizard-in-Chief

Dollar$, always eager to explain the inexplicable world of Finance, that realm in which Wall Street Wizards and Corporate Buccaneers run rampant in their never-ending struggle to own, pervert, master, and control Political Weasels, has developed a theory.

 

Why should Plain Money Talk  be any different from every other blog?

 FACTS

2015 saw:

  • unemployment drop to new lows,
  • minimum wage adjusted up,
  • auto sales rise to recent highs,
  • home sales rise to recent highs with no speculative bubble,
  • the cost of gasoline and heating oil sink to new lows,
  • the United States become an oil exporter.

The Fed is so concerned at all this good news that Janet Yellen has begun to tighte credit, a tactic employed to throttle growth and forestall inflation. Yes, the Wizard-in-Chief, Janet Yellen, is worried things are too good.

Some apologist is sure to point out that the second largest economy in the world, China, is hurting. Dollar$ will give that point of view some quick attention.

CHINA

China’s weakening economy should mean the cost of living in the US will drop, meaning you and I will have more money in our pockets to pay off debt or buy more stuff, everything from furniture to T-shirts at Wal-Mart. The US – China trade balance is heavily weighted toward China—the US imports far more goods from China than China imports from the US. If those good become less expensive, the American consumer benefits. This does NOT harm American business.  Maintaining profit margins at lower prices is easy to do. The cost of commodities the world over is dropping because of the slowdown in Chinese demand. Commodities are the stuff that comes out of the ground from tin to lumber and to gold, the stuff from which everything else is made. Everything should be getting cheaper. Every time Wizards predict that Apple will stop selling iPhones in Shanghai, Apple sells another few million units, but at a lesser price. With inexpensive gasoline, Citizens will be driving  to Disneyworld this year, and they will be able to afford the Mouse’s uptick in prices.

This phenomenon confounds the Wizards., who have learned that bad predictions are clickbait, and clicks drive revenues. No one watches CNN until the shit hits the fan and the shelter under the table grows crowded and cramped.

In the face of positive economic news, the US stock market should be soaring. Instead, the Dow-Jones average has stepped off a cliff in 2016, shedding 2,000 points in 8 weeks, more than a trillion dollars worth of value has been erased from the books.

THE CONSPIRACY

Cui bono?

For the past 30 years,  at every presidential election, commentators complained of the choice between Tweedledee and Tweedledum. But this year, it ain’t so.

weasel candidates in days of yore.

US Presidential Candidates Since 1964

 

This year, on the one hand, we have a wealthy, self-funded foul-mouthed injudicious narcissist celebrity never elected to anything anywhere who is much favored by people who have felt disenfranchised for a generation. On the other hand, we have a New York Jew now from Vermont who has never accepted a dime from Buccaneers or Wizards. An older man, his followers are youth because he demands payback from the banks and companies who were too big to fail and in the past 20 years have sucked the economy dry, indenturing students with education debt. On the third hand, we have a woman who is indebted to the old politics, and on the fourth hand, we have a clown car of interchangeable Republicans who lacking economic issues promise to disallow what your neighbors do in their bedrooms while coyly ignoring that for those promises to be fulfilled they will have to rollback several Supreme Court decisions by what by any account has been a conservative court.

Dollar$ sees the common threat. The two leading candidates are not in thrall to Wizard or Buccaneers. Should either get elected, the summer house in the Hamptons, the private jet, and the 10-room Manhattan  condo are all in jeopardy.

How to dissuade Citizens from voting for either?

Scare the piss out of them. Scare the piss out of them by manipulating stock prices downward. It’s only temporary, and it’s not as tricky as it sounds.

  • Claim good news is bad.
  • Threaten us with defunded pensions, evaporating college savings, and the elimination of savings toward the American Dream, a house.
  • Imply that unless Citizens vote the status quo and allow rapacious policies to continue, grass will grow on Main Street as economic activity collapses.

The stock markets should be soaring, but never forget that 90 percent of all trading is electronic and that computer algorithms engage in a global battle to take advantage of a quarter point’s worth of arbitrage. There is no longer any such thing as investor sentiment. As they now say in Wizard country, My algorithm can beat up your algorithm!

Fear is the most potent means of keeping the harridans out of the White House. Without the creation of synthetic Terror, Weasel Business As Usual will come to a halt.

O the horror!

 

PARANOIA STRIKE DEEP

In Business, Economics, Economy, EDUCATION, Finance, Political Economy, Politics, Wall Street on January 27, 2016 at 5:20 pm

WIZARD OF FINANCE

Suppose the financial community is conspiring to collapse the stock market.  I mean, just suppose.

Heavens to Murgatroyd! Why would they do that???

Glad you asked.

Since the only reason financial Wizards do anything is for more profit, Dollar$ in a fever of dread will outline the conspiracy scenario for you.

Dollar$ notes that Republicans Weasels, who represent monied interests, have no issue on which to run for the America presidency. They can manufacture some issues, but the American economy have just enjoyed:

  • plummeting energy costs
  • record automobile sales
  • the lowest unemployment in a decade
  • a rising minimum wage
  • rising home sales
  • a strong dollar
  • and the completion of a tax year that allowed investors to book profits with a Dow-Jones Industrial Average at an all time high.

Now that the record-breaking year is over, it is time to hammer stocks and terrify Citizens. Citizens  who believe the economy and the stock market are the same thing are sadly vulnerable. If the Wizards and Buccaneers can delude enough Citizens into believing the United States is in trouble, they might not vote for a Democrat!!!

screwed1

Citizen

There is no rational reason to think the US economy is troubled. Nor is there something called “market sentiment,” that outmoded fiction contradicted by the fact that 90 percent of all market volume is done by computers at the speed of light. Market perturbations are in fact a contest among algorithms.

Nor is the charade fooling the Fed—which refused to raise interest rates again today. Grass will not be growing in the streets of every American village any time soon. There is not coming financial collapse.

We are not even in the midst of a contraction.

What we’ve got is a bunch of rapacious bastards willing to endure paper losses for a half year in hopes of assuring future revenues and the continuation of the financial environment that enriches very few by squeezing the rest of us.

Call me paranoid.

GREEK DEBT and ANTI-SEMITISM

In Economics, EDUCATION, Finance, Political Economy, Politics on August 2, 2015 at 10:45 am

It is a fundamental understanding of Dollar$ that the only purpose a weasel has is to continue life as a weasel.

Greek Weasel

Greek Weasel

As predicted by Dollar$ a week ago it took 3 days after the Greek people vehemently rejected European demands for austerity for the Weasel-in-Chief Greek prime minister, Alexis Tsipras, to reverse what he told Greek citizens, the same folks who elected him thinking they had one thing but who, in fact, had another.

Running out of co-conspirators at which to point his finger, Tsipras, fired a few Lieutenant Weasels and went back to the grim business of promising austerity in order to joyfully continue spending other people’s money on a lifestyle that include pensions at 60 and tax evasion as a national sport.

Reality sucks.

MEANWHILE BACK IN THE STATES

The rending of garments has nevertheless continued apace for American progressives, a crowd that when facts do not fit the narrative invent new facts.  Vowing solidarity for “poor Greece,” the victim-state, is a progressive necessity required by Left-ish mythology, that state socialism has to work but does not because of a conspiracy of bankers and capitalists who first give you money you requested and then—O Horror!—expect it to be paid back. Equally miserable is the sad fact that people whose chief knowledge of Economics is having defaulted on a car loan and mismanaging credit card debt think that international finance and their own incompetence are one and the same thing.

The goddam nerve of some those money-lenders!

First, they wait for you to ask for money; then they structure a deal that is so smart and so devious, that all the national bankers and economists of Greece were fooled.

WE’VE HEARD THIS BEFORE

Dollar$ writes to inform the naive that the legs on that canard are rooted in anti-Semitism. The cunning that condemned Shylock now condemns Goldman-Sachs, those Jewish New Yorkers who when they are not undermining the world economy to line their own pockets are championing godless communism. When you read the phrase international bankers on the Internet, make no mistake: the writer means world Jewry.

Dollar$ has always been puzzled by the alleged partnership between Jewish communists and Jewish bankers. The fact that the goals of such groups are antithetical does not stop the fascist minded American Left. Why not? It never stopped it before.

When you bear in mind that Hitler founded a party of National Socialists, and it will all remain clear.

My Debt, Your Debt, Greek Debt

In Economics, Political Economy, Politics, Wall Street on July 17, 2015 at 6:40 pm

Wearily, Dollar$ emerges from semi-retirement with the vague idea of dispelling some of the more blatantly moronic opinions surrounding the current Greek debt crisis.

There are all manner of weasels infesting the world, not those cute critters, but the kind who live for re-election. As a refresher, Dollar$ asks readers to remind themselves on the sole priority that exists in democratic weaseldom–say anything, no matter how vague or false because relinquishing power is too horrible to think of.

Fat Eddie on the left.

Fat Eddie on the left.

This may be why it takes all of 48 hours for Alexis Tsipras, Greek’s Weasel-in-Chief, to reverse himself on what to do about Greek debt. You let citizens vote, you rouse the rabble, and then you renegotiate with the European Wizards on Wizard terms and screw your citizens.

GRIM TRUTHS
Economics is called the grim science for a reason.

One of the more grim truths of Economics is that when you get a loan, you gotta pay the money back.  Dollar$ learned this lesson from his old buddy, Fat Eddie, who spent many of his days on a park bench in the sun lending money at interest to longshoreman on the Brooklyn docks. Occasionally, for free, he’d share wisdom with callow youth.

I had a hot horse at Aqueduct. I wanted $100. The animal was going to go off at 20-1.

“I can pay you back tonight.”

“No kid. I like you. I appreciate your enthusiasm, and I even agree the horse looks good. But have you considered how you will get me my money and 5 points interest if the horse loses?”

“The horse is a lock.”

“What if he comes up lame? The jockey falls off? Or the horse has a heart attack?  Steps in a gopher hole? It’s a horse, for crissakes.”

“You can have my bicycle as security.”

“What am I gonna do with a freaking bicycle? Get outta here. Do something wholesome. Play blackjack in the park. Roll dice in an alley. Roll a drunk in an alley. Something wholesome. Are the poolrooms closed? Just get outta here.”

So as he slapped the back of my head, I learned my lesson from from Fat Eddie. No one wants to do business with a dead-beat.

It is bad for business.

DEBT
There are two kinds of debt, consumer and capital. Idiots crying for Greece and its screwed population do not know the difference, possibly because they are long-term debtors who have never experienced anything other than being a consumer.

  • Consumer Debt is money borrowed to purchase goods that will be consumed.  Nothing amazing there, right? You consume, bread, gasoline, shoes, and sealing wax. Once it is consumed, it is gone. If you do not have a source of income, you will eventually find paying back consumer debt impossible. Credit card companies will call you at odd hours. Your bills will be handed over to collectors. The road to a happy life requires that you NEVER assume consumer debt you cannot pay back by the end of a month. Credit cards issued by banks charge rates that make would Fat Eddie blush. The only exception is if you are temporarily embarrassed and the kid needs eyeglasses or new shoes. The key is the word temporarily. If your situation is not temporary, you really need either public assistance or a new job. We live in America. If you have to go bankrupt because you cannot pay back, the court will protect you from shylocks and collection agencies. You get a fresh start. No one is happy, and you will not be able to borrow dime #1 for several year, but you can get out of a jam. We no longer populate debtor’s prisons.
  • Capital Debt is money borrowed to make more money. You might hear it called “leverage.” If you are a going concern–a business or have a decent job–CAPITAL DEBT IS A GOOD THING! Why not pay 4 percent on the expectation you will make 8%? Sure, there is risk, but it is the kind of risk even Fat Eddie can respect. Your house mortgage is an asset  that will likely increase in value, Your car enables you to work beyond walking distance from where you live. Your education is a definite asset that will pay off many times what it costs to borrow–provided you do not borrow $150,000 to become a basket-weaver. A bank may be persuaded to loan you  the capital you need to start a business if the bank thinks the business can generate enough profit to sustain you, your employees, and still pay off the interest. If the bank thinks all this is true, the bank will throw money at you.

GREECE

Since 2001, Greece has borrowed money for capital investment, a step required for admission to the European Union and all the expected blessings of a single European currency.

Alas–Greek weasels confused Capital and Consumer debt. Instead of making its citizens more productive, a stratagem that would allow the debt to be paid off, duly elected weasels enforced a low retirement age. Since collecting taxes is nowhere popular, Greek weasel leadership looked the other way as tax evasion became a way of life for the people of Greece. The repeated bailouts were a vain hope by Europe that Greece would understand it was not a teenager with Daddy’s credit card, but a going concern responsible to its citizens and the international community.

Like Fat Eddie, the lenders want their money back. What is German going to do with a frigging bicycle? There are no assets waiting to be confiscated. This is a sovereign nation, for crissakes. No one is showing up to repo the Parthenon.

The knuckleheads who blame the banks for having seduced Greece into loans it cannot pay want to remember Fat Eddie. No one wants to lend money to a deadbeat. It’s bad for business.

What Greece needs is a weasel overhaul, not debt forgiveness.

DEFLATION, OIL PANIC, AND THE SKIDS #2

In Business, Economics, Economy, EDUCATION, Finance on January 8, 2015 at 10:05 am
imagesHI5F8ZBL

Is the past our future?

 

 

Dollar$ gazes at the skid in oil prices and asks:  Does the precipitous drop in oil prices presage a worldwide deflationary spiral? Is the world economy contracting so as to calcify economic activity?

In a word: No.

No one will be selling apples on the street any time soon.

 

Oil.

Oil is a commodity, which is to say, like lumber, cattle, gold, and copper, it comes out of the ground to be used to create more sophisticated products like jet fuel, gasoline, nylon, and plastic. Like all commodities, oil’s price is strictly set by supply and demand, a fact less true for many goods and service where supply and demand can be artificially manipulated.

Hatless in the cold.

Hatless in the cold.

Slide11-1024x767

The entire Marketing industry, Prevaricating for Profit,  is devoted to creating false demand. When in 1933 Clark Gable wore no undershirt, the men’s underwear business went into a tailspin. John Kennedy in 1960 insisted on wearing no hat when he spoke at his presidential inauguration; the men’s hat industry has never recovered.

To be sure, hats and undershirts are not commodities. Their worth changes as a matter of fashion, not supply and demand.

OPEC

OPEC is the international oil cartel that has controlled oil’s supply for a generation, but the game changer is a recent innovation. Fracking, it turns out, is cheap enough and ideal in north central United States and southern Canada.

The cartel is losing its grip. The US is going from oil importer to oil exporter. To compete for those petro-dollars, OPEC and especially Saudi Arabia can no longer manipulate supply, but pumped as much as it could. Supply soared. Oil has become a glut on the market.

But at $40 per barrel, fracking becomes uneconomic.  Make no mistake, OPEC would like to see a price for oil that once again leaves OPEC as the only game in town. If that means bankrupting oil exporters not part of the cartel, such as Russia, so be it.

Bye-Bye Putin!

Winners in a Price War

It’s an old-fashioned price war, nothing more. As with all price wars, consumers benefit. Estimates put as much as $1,500 per year in the pockets of ordinary American citizens.

Never forget that the US economy is consumer driven—we like to spend on stuff because we are blessed to be in a places where there is stuff to buy. Expect discretionary products to fly out of stores. That new refrigerator is coming home soon.

The demand for stuff made in the USA will increase in the USA; expect hiring. Elsewhere, not so much because that strong dollar will make US goods seem expensive.

When you read dry-mouthed dire predictions of European disaster because hard-working Germans are tired of supporting spend-thrift Greeks, remember that the GDP of Greece is about 25 percent of New Jersey’s GDP. The drama is interesting, but the world economy is not going down any drain in Athens.

Since the US is an oil exporter, the US dollar grows stronger every day. Would you rather own dollars or euros?  You can’t pay for US oil with euros–it’s really not a choice. For the American consumer, tourist destinations overseas that were prohibitively expensive last year are going to seem to be on sale. Book the flight! Greece needs you money!

Big US oil consumers can lower their prices and still make big profits. Airlines and cruise lines will soon compete on price, instead of competing on service.

Losers.

What’s that Binky? You ask who are the losers? You ask why the stock market plummets with  the price of oil?

Well, oil companies aren’t happy. Along with Big Oil  the losers are the very rich, the institutions and people that had been positioned to enjoy high oil prices. Sheiks and hedge funds are madly selling to gather cash, the better to buy US stocks  when they believe oil prices have bottomed, which will be about $43 per barrel which is where OPEC can comfortably reinstate its hegemony. Much higher than that, and North Dakota gets rich–again.

So the stock market plunge does not presage a deflation spiral, but it seem that for a while we can expect a new set of winners.

DEFLATION, OIL PANIC, AND THE SKIDS #1

In Business, Economics, Economy, EDUCATION, Finance on January 7, 2015 at 12:59 pm

Ever aware that Dollar$ primary mission is to educate and only occasionally pontificate, let’s talk about prosperity, gloom, and deflation.

Economic activity is based on expectations. You buy your new car because you expect you will need it before the old jalopy breaks down completely; you buy health insurance because you expect you will someday, somehow, need it; you buy baseball tickets in January because you expect to go to  the game in April.

Balance means stable prices.

Balance means stable prices.

Prosperity

Shared expectations influence supply and demand, and therefore influence prices. If International Widget (IW) expects to sell many widgets in the forthcoming year, it will hasten to make more widgets, perhaps borrowing money to increase productivity. Under the expectation of prosperity, IW may hire more workers, and if long-term expectations are high, IW may even build a brand new, more efficient widget plant.  If widget demand increases even beyond IW’s ability to create supply, the widget shortage will drive the price of widgets higher. IW will respond by increasing volume and price, reap profits, pay dividends, employ yet more people, give key employees wage increases, and the Buccaneers who direct IW may pay themselves  bonuses that look like telephone numbers, including area codes. They will buy Caribbean islands or condos in Manhattan.  The spiral upward is called an inflationary spiral; rising prices are not terrifying if wages and employment keep pace.

Gloom

saupload_The-Deflationary-SpiralBut suppose IW’s best leadership expects the market for widgets is spiraling downward. Perhaps there are insurmountable problems in the supply chain. Perhaps bankers are unwilling to part with loan money for fear of never getting paid back. Rather than pay people for playing pinochle while their widget machines stand idle, 10 percent of the IW workforce is fired. The Manhattan condo market freezes, and the IW private jet makes fewer flights to the Caribbean. The price of widgets will plunge because the people who use widgets know that to meet the slowdown, IW will cut prices and hope to make up in volume what they are losing in price. The spiral down is called deflation; falling prices are not terrifying if they are gradual and do not continue for any great length of time.

The gloom and prosperity scenarios are the ordinary stuff of economic life, but Dollar$ readers only need to bear in mind that in both cases today’s economic decisions are made based on expectations of tomorrow’s conditions.

The Past

The general tone of American economic life for more than 20 years has been cautious optimism because the range of change in economic life has been modest, sure, and steady. Sure, there have been bubbles and crashes, but there is a reason that in 20 years the Dow Jones Industrial Average has risen 400 percent, from roughly 4,000 to today’s levels well above 16,000. Call it the Goldilocks Economy—it’s neither too hot nor too cold, but is just right.

Home invader and thief, but she knows what she likes.

Home invader and thief, but she knows what she likes.

But America has suffered an extended deflationary spiral, a decade’s worth in the 1930s called The Great Depression. Despite interest rates at virtual zero for most of a decade, from 1992 to 2000, Japan has been in a deflationary spiral.

Playing the expectations game, in an inflationary spiral you spend or invest your money as fast as you can. After all, everything will probably be more expensive tomorrow. It’s best to buy your house, car, 100 shares of IW, or personal jet today.

But in a deflationary spiral, the expectations game makes cash King. What fool would spend a dollar today when the cost of the item tomorrow will be $.90?  But wait… suppose it will drop to $.75? Or $.60?

Where’s my Magic 8-Ball when I need it?eight_ball

What Now?

Does the slide in the price of oil herald of worldwide deflation?

Dollar$ will weigh in soon.

IT’S BOOM TIMES IN AMERICA

In Business, Economics, Economy, EDUCATION, Finance, Personal Finance, Political Economy, Wall Street on December 23, 2014 at 8:58 pm

Dollar$ is back after an absence: the rarest thing is cyberspace is a blog with nothing to say. But it is time.

Many a financial prognosticator makes a living by predicting gloom and doom. People like a good scare. The problem is, this is no time to be terrified.

Things have never been better. There, I said it.

The oil price war going on between OPEC and the US is about market share. Oh, and be sure to understand it is a price war. Sweaty Wizards will call it a collapse in the market, but OPEC and the US are going toe to toe to own exports to China and Europe.

The beneficiary of this price war are Citizens. We are usually screwed, but we also put gasoline in our SUVs and warm our homes in winter.

It’s boom times in America. That’s no equivocation. It is fact.

Citizen

Citizen

Once again innovative technology befuddled Malthusian nitwits. We are not running out of natural resources before next week. Movies based on this mythology, notably the Mad Max series with Mel Gibson, were based on the popular notion that civilization would collapse for lack of energy resources. It had to be true. Didn’t Tina Turner sing about it?

Thomas Malthus, an early Wizard, in 1798 predicted the world would eventually starve because while population increased geometrically, food supplies could only increase arithmetically.

Ponder that as you sink your teeth onto your next pizza. Get it gluten-free, if you must, and but note no people driving are dune buggies across the desert and warring for women except in the wanker fantasies of adolescent boys.

Frack!

Frack is not a profanity left over from Battlestar Galactica.

Now it happens that fracking to withdraw oil from shale is a process more expensive than simple drilling, so if you were a Saudi Arabian sheikh and terrified that the US was about to once again become an oil exporter, you’d be hoping to squeeze those Allah-be-damned cowboys in North Dakota out of business. You’d drive the price down. You’d drive the price down by producing more oil than the world needs. You’d create a glut of dead dinosaur juice and put it on the open market at prices not seen in a decade.

You’d not-so-incidentally screw over Iraq and Iran, two places where fundamentalist loons pack their asses with C4 and wish they had atomic bombs for atomic bums. It’s not polite to say ill of those loons, but no one expects Saudi Arabia any time soon to invite fundamentalists into the holy cities of Mecca and Medina. Since Iran and Iraq have nothing to offer their populations, they feed them a steady diet of hatred for Israel, far less nourishing than building an economy, but also far easier. The chief exports of the region–other than petroleum–are pistachio nuts.

You accept a little civil unrest to stay in power, so instead of throwing the rascals out, the legions of unemployed fire automatic weapons into the air, lately killing each other in a contest to see who is crazier to keep 21st century mores away from people who have never experienced the Enlightenment, keep their women kept covered, and, because vagina’s are dangerous and mysterious, still ritually mutilate their daughters.

The OPEC strategy is to make fracking too expensive. Pump oil, pump more oil, keep pumping oil. The cost of a barrel of liquid dinosaur has dropped 40% in months!

Meanwhile, the US consumer will pocket about $500 per year not being spent on gasoline. They’ll spend that cash at restaurants, Disneyworld, at the movies, maybe buy that new refrigerator—all those products called consumer discretionaries. We will enjoy this for a while.  Cruise liners should be lowering prices; so should airlines. Buy stock—don’t be a dope. It’s boom times in  America.

Wizards, a timid lot for whom equivocation is a habit, at first believed the drop in oil was the harbinger of evil, the precursor of worldwide deflation. They advised the very rich, the kinds of people who throw billions at hedge funds, to sell. If everything was about to get cheaper, you’d want cash, too. World markets wobbled, but quickly recovered.

Wizards are still advising caution, but anyone attuned to Wizard-Speak will note how often the words, if, may, and perhaps show up in Wizard epistles. “Yes, we at Binkwater Investments are fairly sure that if the markets don’t go down, they may go up. Make your check payable to Binkwater! Subscribe to our newsletter!”

Deflation is indeed evil, but note, too, that Wizards hate the US Weasel in Chief. That sumbitch won’t deregulate! There’s money to be made, dammit, and just because we nearly bankrupted the world economy in 2007, that sumbitch won’t forgive and forget!  Wizards would choke before publically taking note that  the US economy is just grew 5% in a single quarter, faster than any time in the past eleven years, that employment is going up, and that consumers have all just gotten a bonus in the form of cheap oil. The stock market is at record highs.

It’s hard to find bad news for American investors.

True, the US economy is moving in the opposite direction of the rest of the world. China’s growth rate is slowing; Japan’s is still flat-lining, Europe may be in trouble.

In other words, the market for oil is adjusting to world economies that need lower prices while the only place in the world offering significant growth and low risk is the United States.

Call it American Exceptionalism.

ESCAPE THE STUDENT DEBT TRAP??

In Business, Economics, EDUCATION, Finance, Personal Finance, Wall Street Journal on June 14, 2014 at 10:04 am
St Milton, Nobelist  in Economics, Doyen of the Right.

St Milton, Nobelist in Economics, Doyen of the Right.

Finding new ways to pump money into education as Miguel Palacios seeks to do in today’s Wall Street Journal, is no more than leaning on the bicycle pump with greater vigor to inflate the tire. We saw it in real estate with substandard loans: now we are seeing it again with financial schemes that do little more than bleed profit from students ill-equipped to endure debt no matter how it is structured. Income-share agreements a la Milton Friedman will not rescue higher education until higher education rescues itself, and higher education will not rescue itself until it has incentive to do so. Friedman’s idea was fine, 5o years ago, but the pump today is attached to a balloon already stretched to contain trillions. How much longer can it inflate?

First, let’s address the proliferation of “professionalized” administrators whose experience of classrooms is nil, and let’s limit their compensation to a single-digit multiple of teaching personnel. We can do this at any US school accepting US money—which is all of them, public and private. Should any private school express horror, all it needs to do is stop accepting Federal funds in the form of student loans: then the Trustees can then pay a president anything they wish.  If it is good enough for Harvard, it is good enough for Oral Roberts University.

Second, let’s reconsider what we want higher education to be. Do we have the courage to stop equating “education” with “training?” Are our children empty vessels to be filled so they may take their places at the machine, or do we want to train our children to be thinking leaders?

Third, outsourcing job training to prospective employees has to stop. “Hit the ground running” is a metaphor drawn from images of troops dropped into combat from helicopters, but business leaders whose strategic horizons rarely extend beyond the next quarter have to close their copies of Sun Tzu and stop thinking of employees as conscripts. At these prices, youth will eventually not enlist. When that happens, business throughout America will go into a death spiral. Who will be buying the goods and services when an entire generation is already so underwater no one can borrow to buy houses and cars? Before we demand that youth borrow tens of thousands of dollars to mold themselves to a vision that business itself will discard in a heartbeat, and before telling laid-off employees to “retool,” let’s see the return of ad that read, “College grad wanted. Will train.”

Another productive college grad.

Another productive college grad.

Fourth, scrub campuses clean of cruise ship personnel, those pleasant folks who for 10 months each year deliver non-teaching services to students. They account for more payroll than all teachers. Can’t a campus go forward without offices devoted to diversity, racial and ethnic education, and the rest of the panoply of politically correct educational goals with no cognate in the real world? Can an academic year pass without barbecues, fairs, or Frisbee competitions?No wonder kids are lured into majoring in Women’s Studies or Conflict Resolution: they’ve gotten the notion that such careers exist.

Finally, for those of us who demand American employees be competitive and fear they are not, consider the long view on American education. Literacy meant mandatory education through 6th grade, then 10th grade, then 12th grade. Do we have the vision to acknowledge that American prosperity and security at this time requires a population that can access education through the 14th grade? Are we brave enough to say it? — education is an entitlement because it promotes a public, widespread good.

The question is not whether we can afford it, but whether we can continue to pretend that we cannot.

STUDENT DEBT – THE NATIONAL ROAD TO PALOOKAVILLE

In Business, Economics, Economy, EDUCATION, Political Economy, Politics on May 7, 2014 at 11:05 am

Buccaneers, those captains if industry who have offloaded their training costs to trainees, are sending themselves and the United States on a one-way trip to Palookaville.

If we create a generation that cannot afford new housing, cannot afford new cars, are unable to purchase or  enjoy the fundamental goods and services our economy provides, hesitate to marry, delay child-bearing, we will arrive in Palookaville.

The American economy is choking itself to death, and is doing so at the expense of youth.

The Crisis

Evidence that we face a crisis abounds. Dollar$ does not have to work hard to make the case. Student debt is now greater than all credit card and mortgage debt, surpassing a trillion dollars.

student tuition earning Fortune Magazine

student tuition earnings
Fortune Magazine

 

Dollar$ does not imagine this calls exclusively for a financial remedy.

Yes, for a decade and more, the cost of higher education rose faster than any other sector of our economy. Policies pump money into Education with no incentive on Education to reduce costs. Administrators proliferate, non-teaching personnel pop up faster than toadstools in Oregon after rain, the teaching-productivity of professors decline.

But blaming the greed of higher education for the debt crisis is like complaining that ticket prices at sports events are too high because professional players are overpaid.

This is America: wages and compensation are set by markets, and the rule of markets is whatever the traffic will bear. Every CEO loves that rule.

Mortgage and Students

Consider: when money was pumped into the mortgage market, the resulting balloon and eventual collapse rocked the world economy in ways from which it has still not recovered.

The similarities between that mortgage market and the market for student debt are breathtaking—quasi-government agencies, favorable loan rates, and loose regulation.

But there is a difference: a mortgagee can walk away from real estate and leave banks owning worthless property, students cannot walk away from their education. They get to keep what is in their heads.

In fact, we have passed laws that safeguard student debt — not students — even in bankruptcy.  Should a former student go broke, they can seek financial relief in Bankruptcy Court, but no court will release anyone from student loans.

The only way out of student debt is death.

So with apologies to followers of Senator Elizabeth Warren, other well-intentioned Weasels, and the legions of Wizards ever-eager to brew a new potion of loan and grant combination to foist on youth, Dollar$ maintains the solution is not to make higher education “affordable.”

The solution is to champion higher education as an entitlement.

Education must be free.

The Platform

Access to two years of higher education is a right of every citizen.

This is no money giveaway, though the usual Blue Meanies will choke on it.

The program is necessary for the preservation of our democracy, the maintenance of our standard of living, and to liberate forthcoming generations from a lifetime of debt.

In 1944, The United States passed the GI Bill, which promised every veteran free tuition and living costs while in school. Who among us would call that bad policy?  The United States embarked on a rising tide of growth that benefited every economic class.  The lesson was plain: general education benefits us all.

If Buccaneers tell us the United States is engaged in economic war, why are we taxing only youth in our war effort?

Why do the same patriots who grouse that in terms of education “America is falling behind,” insist that the cost of keeping educational pace with the rest of the world is one that must be borne by students?  When did accruing debt to the point of guaranteeing a lifetime of indentured servitude become an act of patriotic obligation?

Why do the same Buccaneers who grouse they cannot find sufficient employees with the “right” job skillset insist that the cost of training be borne by trainees who are speculating about what higher order skills will be needed in the near and distant future?   When did the phrase “will train” drop from the language of employee recruitment?

 Dollar$ calls for free higher education through the 14th grade.

 

MINIMUM WAGE LAWS: THE BIG BUCCANEER BIG LIE

In Business, Economics, Political Economy, Politics, Uncategorized on April 30, 2014 at 12:11 pm

Big Lie Propaganda embraces the idea that the more preposterous a lie and the more it is repeated, the more likely some fools will be bound to believe there is something to it.  After all, they can’t keep saying such bullshit unless it is at least partially true, right?

The current debate on minimum wage is a case study in Big Lie operation.

This Weasel is so terrified of exposure, it is disguises as a  mongoose.

This Weasel is so terrified of exposure, it is disguises as a mongoose.

THE WEASELS

Owes allegiance only to profit

Owes allegiance only to profit

Weasels, who only live to be re-elected, are running in small circles trying to figure out which way to go on the minimum wage issue. On the one hand, Buccaneers will be displeased should they vote or utter words that might displease their Masters; on the other, a LOT of people in the service economy–the same economy those Buccaneers created–get to vote.

What’s a poor Weasel to do?

Go for votes or go for the money?

Weaseldom is no easy life.

 

FACTS

As John Cassidy has eloquently shown in The New Yorker, there is no relationship between minimum wage and unemployment. None. Not a scintilla.

Nor is there any negative relationship between unemployment among teens and any rise in minimum wage: in fact, the opposite seems to be the case according to research conducted by John Spenser.

There will be lies often repeated. That just makes them Big Lies. It does not make them true.

LOGIC

Let’s suppose you won and run a Mom-and-Pop store in a strip mall, party goods, perhaps. You employ 4 local people kids at 30 hours each, a total of 120 hours each week of sales and service employees. You deploy them as you need them. Two of them are smart and honest enough that they operate the register when you do not.

You do not hire 3 full-time employees working 40 hour weeks. For one thing, if you do, the Fed is going to require you to offer benefits you cannot afford. For another, you are smart enough to know your employees come and go: they graduate from high school and go off to college or, if they are older, they want and take long vacations when the grandchildren are in town.  Anyone in the demographic middle is, as you know, looking for a 40-hour-week job, and will give notice in a heartbeat.

You wish them well, and you consider your cost of training a rolling cadre of new employees a cost of doing business.

So if the minimum wage rises, will you fire anyone?

Of course not. If you have the brains of a carrot, you are not employing anyone out of some charitable impulse. You are in business to make money, not employ people.  You run your business with as few people as possible.

Will you endure less profit to meet a new law?

No, you’ll raise prices here and there.

It won’t matter if you have competitors: they are in the same boat.

If you have huge competitors, they may be able to endure the new wage with less profit for a while longer than you, but ultimately they, too, will have to follow suit.  You cannot compete with Wal-Mart or Target on price, buy you can kick butt as a matter of service.

WHY THERE IS RESISTANCE

Buccaneers are aware that they own most Weasels, but that Weasels have to be re-elected, so they issue solemn warnings of ruin and destruction if the 16-year-olds at McDonald’s get a 25% raise. Most Buccaneers have trouble envisioning any time beyond the next quarter, anyway.

At issue is only how large a profit can be made without any raise in prices.

Do you know anyone who will pass on the fries if the price goes up a nickel? Me neither.

The Weasel-Buccaneer Dance will go forward, and wingnuts on the right will see the Death of Democracy in the debate.

Try to ignore that crap. It’s been decades since we saw a minimum raise hike.

It is time.