the Air Vent

Because the world needs another opinion

A penny lost is a penny not-earned

Posted by Jeff Id on August 29, 2011

Another global warming whitewash courtesy of the whitehouse ‘economic stimulus programs’ aka green for greens. At this point, only the rock dumb or those not paying any attention at all have not noticed that the alleged stimulus programs were simply payoffs to those who contributed to corrupt politics.  Unions, friends, 501C’s who skewed the election with fraudulent votes. Obama’s QE2 program being the single worst example of mass theft in the history of mankind. No criminal in history has done more to pay off friends than Obama.Bush was dirty with the banks IMHO, but he just didn’t think big enough – or perhaps he was the pawn and the banks did what they wanted.

So people are surprised when 20 million sunk into training programs in a single city for fake green jobs doesn’t return results? It’s insane but I bet some people are surprised that this didn’t work.  None of the actual recipients of the cash were surprised though.

You wouldn’t believe how many jobs we could create with a loan of 1/5th of that money. It was given to these jackalopes without any intent of repayment during a time when small business can’t get a loan even with collateral. We have excellent books and profit, yet banks we’ve worked with for years won’t loan even one day’s income to us unless we sign personal assets on the line. Not even one day’s income for our business despite the fact that we have a substantial account at the same bank and would be borrowing a small fraction of our own money. No we don’t need the loan, but I asked out of interest again today after an entire year, and they said again that they won’t do it – doesn’t matter what our books say. I didn’t bring them with me and asked from the doorway fo the commercial loan office, because I was only interested in a blog post. Yet Obama’s stimulus gives, throws away, chucks to the wind, 20 million dollars, no strings attached to these alleged non-profit groups to stimulate the economy by weatherproofing peoples homes. Stupider than hell, and stupider is an official white house sanctioned word now.  The NYT just did  a recent article/flat lie on how banks have money to loan but nobody will borrow.

Keynesian economics have nothing to do with the plan.

I know you don’t want to hear it, but this isn’t an honest brokerage of Keynesian economics. It is about the control of votes and the control of political direction in the US long term. If enough voters are on the take, and with 50% not paying taxes we are close, those on the check writing side have all the control. Even if the payment is small. Ask Castro about what $10/month/person buys.

A US economic collapse is good for the power hungry. A small collapse is nice, but a strong healthy collapse of capitalism with the huge majority of media on their side will lead to a continuation of the expansion of these programs. Lies and sophistry will continue it and money printed will continue it until we are in the same boat as Laos.

Despite the AGW corollaries, there isn’t much time left to stop it either. People need to pay taxes when they make money. All who take money in, must pay enough tax on it so that they too pay attention.  The key to a successful future for all in this world though is to make it financially beneficial for international business to station their bases at home.  This includes the nearly complete elimination of any business tax on profits not distributedand a non-tax on any property assets maintained in the US.   Yes it will make companies leave profits in the corporation – as investments.  It will encourage companies to invest in themselves rather than distribute profit and when the huge future profits are distributed (as they will be), the tax can be taken.   Hong Kong is a perfect example of this system.

But the leftists say I’m wrong, some on the right say it is too simple and it doesn’t really work……

Photobucket - Hong Kong

A primer on Hong Kong tax.

There is a line where when a government takes too much from the public, the net result is lower quality of life for the individual.  The honest study of this line of thought is almost never discussed in modern economics.

The problems and plan are uglier than you are being told, don’t listen to me though, go to your bank and see what they want for a loan to a hypothetical commercial business you want to start.  Of course if you are black, indian, hispanic or even just female, the rules change but they aren’t good rules for them either.

Sorry for the reality.


63 Responses to “A penny lost is a penny not-earned”

  1. Mark T said

    There is a reason the normal state of human existence is poverty. Somehow even otherwise intelligent people just do not get it.

    Mark

  2. Jeff Id said

    Mark, we are just so far past the line of reasonable government and taxation that people have lost the sense of what is possible or even beneficiary. Theft from the rich to pay the poor to stay home without jobs is stupid. Life was too easy in the US, I think we will learn hard now.

  3. I wish you were wrong, Jeff, but the current level of corruption of federal programs in our country looks remarkable like those in the old USSR.

    That may not be a coincidence:

    http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.doc

    http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.pdf

    With kind regards,
    Oliver K. Manuel
    Former NASA Principal
    Investigator for Apollo

  4. curious said

    I agree about the banks/finance “industry”.

    FWIW I came across this site the other day:

    http://costofwar.com/en/

    Not sure what the % of US Gov. spend on “defence” is (?) but in the UK it is about 5%. Debt interest is about 7%. Current income and expenditure breakdown on p6 here:

    http://cdn.hm-treasury.gov.uk/2011budget_complete.pdf

  5. Another Ian said

    From the tips section at http://chiefio.wordpress.com/

    http://blogs.telegraph.co.uk/news/danielhannan/100102328/slovakia-baulks-at-joining-yet-another-bailout/

    An interesting system for tax etc!

  6. M. Simon said

    The Defense question is a good one. Until the concept “Power Vacuum” comes up. And then I ask who you would prefer to fill it if the US abdicates? The Chinese? The Russians? Pirates?

    Don’t they teach “power vacuum” in relation to WW2 anymore?

    You can spend too much on Defense. But not spending enough can cost you way more. The only way to tell for sure is to cut it enough to get a big war going.

    At the height of the Cold War US Defense was costing about 10% of Federal outlays. Today it is running 4% for fixed expenses and 2% for the current wars. Or around 6% total.

  7. Anonymous said

    The Greek saying was “we field armies during peace to discourage war.”

  8. Jeff Id said

    And then you read nonsense like this:

    http://www.foxnews.com/politics/2011/08/30/obama-faces-tight-restraints-in-crafting-jobs-plan/

  9. j ferguson said

    Jeff,
    I was never able to understand why, sometimes, our bank wouldn’t loan us money in our small business days despite more money on deposit than we needed and our home and other assets pledged. My take was that they didn’t have the cash and that our money on deposit was off doing something else.

    You are dead-on on the folly of government supported job training. We used to get job applicants as drafters (cad jockeys) who were graduates of the Miami job training program. They knew nothing off any of the things that they might be drawing and those who seemed a bit brighter and maybe trainable by us tended to flunk our descriptive geometry testlet. Test was given 2 views of something, draw a third view that was consistent with the first two.

    I lived in DC for 2 years at beginning of current marriage and encountered friend of SWMBO who was an aid to an east coast senator. i was regaled by his experience attempting to provide business advice to small businesses in his state. The most telling was his perplexity in trying to help a guy who had a bronze casting operation that dated back to his grandfather. Guy said that his Chinese competitors (this was in 1985) could ship finished product that was cheaper delivered to the customer in US than local guy’s cost of materials to make equivalent castings.

    Needless to add, our acquaintance had no useful advice other than to buy the Chinese castings and melt them for US made casting. Foundry owner agreed that it was a plan, but not a good one.

  10. Kenneth Fritsch said

    “Keynesian economics have nothing to do with the plan.”

    Spending(wasting) government funds during an economic downturn is pure Keynesian economics. Paul Krugman, one of the most public Keynesian economists today, recently had an article in the NYT where he lamented not having an alien space invasion that the governments could prepare for and spend funds on. In typical Keynesian tradition, Krugman was making the point that it is the money spent and not the purpose or efficiency that counts. Krugman is too politically correct to call for a war on this planet to spend the required Keynesian funds on.

    Notice also in your linked article that a government program is seldom recognized as failure by those involved or responsible for it. Government failure is only an indication that more money needs to be allocated for the mission. Government could be wasting prodigious amounts of money on a project these days and if someone suggested shutting it down you would immediately here about the loss of numerous jobs. The prevailing intelligentsia in this country and around the world would never point to the fact that that wasted money applied elsewhere and privately could provide many more jobs.

    Jeff ID, just because Keynesian economics is very amenable to being used by politicians does not mean that it is all about the politics. Keynesian economics is what is used as a rationalization for these political actions. There is nothing new about all this either, as it has been going on for times before Keynes gave it an official credence. What is worst with the current economic mess is that if the market is not given the room to make the necessary adjustments, the Keynesians will, and are actually as we speak, making noises for another large dose of government funds and QE3.

    Note that Federal Reserve, chairman Ben Bernanke, made overtures to congress to shut the heck up about debt because the latest debate over debt could have affected the economy – in his view. Now that insinuation, in my mind, is far more intimidating than the statement that the Texas governor said about the Fed chairman not being welcome in Texas. Not a word in the MSM about the inferences of Bernanke’s remarks. Look for the Keynesian to get a freer hand with government spending and creating money out of thin air with the help of the MSM and the intelligentsia by characterizing the opposition as mean spirited with regard to, for example, victims of hurricane Irene.

  11. DeWitt Payne said

    Re: Kenneth Fritsch (Aug 30 11:16),

    Government could be wasting prodigious amounts of money on a project these days and if someone suggested shutting it down you would immediately here about the loss of numerous jobs.

    Unless it’s something that is real science like the Superconducting Super Collider or the James Webb telescope. Meanwhile colossal boondoggles like the International Space Station where the science is at the High School Science Fair level keep going on and on.

  12. The problem with Keynesian economics is not the economics but the politics. As far as I know, not once has it been followed as dictated, which is that it is used in good times not only to pay back what is owed, but to also save a significant part for the next downturn. The reason it is not implemented in the correct sense, is the last part. In an ideal situation, the pay back and then saving would cause worsening conditions requiring, the spending until it the economy was lightly regulated for economic reasons. The short-sightedness of the politicians is that the control passes from them to the economy. In such an ideal system the politics of such things as the green jobs would show up as a poor expense, just as “giving” tax breaks to the rich would prolong the amount of time and effort needed to pay back the system. Once again taking the politics out of it and deciding on an economic basis. This is why you won’t see it as a controlled implementation. Nobody wants it when it is time to pay the piper.

  13. steve fitzpatrick said

    Jeff,

    We have excellent books and profit, yet banks we’ve worked with for years won’t loan even one day’s income to us unless we sign personal assets on the line. Not even one day’s income for our business despite the fact that we have a substantial account at the same bank and would be borrowing a small fraction of our own money. No we don’t need the loan, but I asked out of interest again today after an entire year, and they said again that they won’t do it – doesn’t matter what our books say.

    Your experience is far from unique. My company carries (year-on-year average) ~$350,000 working capital in a local bank. That same bank refused (twice!) to to give us a corporate credit card with more than a $3,000 limit. They did not even consider than we typically have 100+ times that amount on deposit, and have for the last 6 years. A formal inquiry about financing the purchase of equipment (about $40,000) was flat turned down… without any paperwork ever filled out. They were “not in a position to make small business loans”.

    If Mr. Obama wants to make a difference with the economy, he should let zombie banks fail and let the banking system return to some semblance of normal. We have an entire banking system that is incapable of making small business loans, because they are carrying vast loads of non-performing housing-bubble debt… many, if not most, of these banks have been, and remain, essentially bankrupt; zombies. As things stand now, small businesses, no matter how financially sound, simply can’t get bank financing. The people who owned banks and investment houses have been treated like royalty (the Federal government has made sure they didn’t lose everything as a result of stupid investments), but the result is far worse for the economy than if those institutions had simply been allowed to fail. It’s just crazy. Mr. Obama’s complete lack of business experience (and his being in-bed with a bunch of uber-wealthy Wall Street types) makes this easier to understand. That doesn’t make it any less crazy.

  14. Jeff Id said

    Steve,

    I have a friend who has been in business for 20 years at the same location. It was a family business and he decided to buy out his siblings ownership of the building which was a 50% loan against a paid off building. He runs machines in the building which cost more than the building itself and has perhaps 10 of them. All paid off, many at the same bank in previous years. He asked for a loan against the building for his financially sound company, the bank refused without personal guarantees. Eventually he said screw you guys and wrote a check to the company himself, for which he pays himself interest. I happened to witness the bank actually asking him to borrow money two years before as he had just paid off another loan. Under what version of sanity wouldn’t someone loan money on an asset worth twice the value of the loan with a history like that. I have quite a few other stories as I’m guessing you do too.

    People don’t have a clue what is going on in business right now. Sometimes I could write a dozen posts on the same thing just so someone would catch on. The government has not one thing to do with making jobs, the government can only make the environment such that jobs can be created. When jobs are not being created, the failure is one of the government economic environment, not one of lack of government spending.

    Duh!!

  15. Alive said

    Thanks the info, Mr.
    Gambar dan logo Real Madrid

  16. ColinD said

    This has been doing the rounds here as an explanation of how a stimulus works:

    It’s a slow day in a dusty little Australian town. The sun is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit.

    On this particular day a rich tourist from down south is driving through town , stops at the local motel and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs in order to pick one to spend the night.

    He gives him keys to a few rooms and as soon as the man walks upstairs, the owner grabs the $100 bill and runs next door to pay his debt to the butcher.

    The butcher takes the $100 and runs down the street to repay his debt to the pig farmer.

    The pig farmer takes the $100 and heads off to pay his bill at the supplier of feed and fuel.

    The guy at the Farmer’s Co-op takes the $100 and runs to pay his drinks bill at the local pub.

    The publican slips the money along to the local prostitute drinking at the bar , who has also been facing hard times and has had to offer him “services” on credit.

    The hooker rushes to the motel and pays off her room bill to the motel owner with the $100 .

    The motel proprietor then places the $100 back on the counter so the rich traveller will not suspect anything.

    At that moment the traveller comes down the stairs, picks up the $100 bill, states that the rooms are not satisfactory, pockets the money, and leaves town.

    No one produced anything. No one earned anything.

    However, the whole town is now out of debt and looking to the future with a lot more optimism.

    And that, ladies and gentlemen, is how the Australian Government’s stimulus package works.

  17. Hector Pascal said

    Very interesting comments here re: small business loans.

    I live in Japan. My partner runs a small business, a manufactory plus two shops. As part of the national government stimulus package, the banks are provided with government money at essentially zero interest for the explicit purpose of funding viable small businesses.

    The memsahib has accounts at two different banks. We are in the interesting situation, where bank employees regularly turn up on motorcycles (the ubiquitous Honda Cub), cold calling, attempting to persuade the good lady to borrow more money at about 1%.

    The demise of Japan as an industrial nation is greatly exaggerated.

  18. Kenneth Fritsch said

    “The problem with Keynesian economics is not the economics but the politics. As far as I know, not once has it been followed as dictated, which is that it is used in good times not only to pay back what is owed, but to also save a significant part for the next downturn.”

    The reasons those economists from the Austrian school disagree with this assessment is that (1) the problem of the business cycle is related directly to the government artificially affecting the credit available for investment and the mal investments that ensue from this artificial credit condition – that in the long run is not sustainable with real savings, i.e. it sends the wrong signals to market and investors and (2) when these mal investments occur the market must eventually adjust to the real savings available and government interference in this process, as Keynesian economics would require, only prolongs the adjustment period and in the end makes the adjustments more painful.

    That Keynesian economics was initially, and remains, popular with big government politicians, despite its flaws as noted above, primarily due to the rationale that it formally provides to these politicians’ need to push for bigger government.

    Paul Krugman and other Keynesian economists are not at all concerned about the mounting debt that government interference and funding is running up and in fact many are calling for much higher deficits and government spending. These are not politicians but rather part of the prevailing intelligentsia. Have you heard any of these spending hawks talk about the cuts in spending that must occur to balance these expenditures in good economic times? I think rather that they take seriously the explanation from Keynes himself that in the long term we are all dead. I suspect they look to some future financial crisis to be used to obtain a huge tax increase and never mind what that would do the economy. Remember also that Keynes stated that Keynesian economics would work in a state controlled economy as well as a mixed one, but that it might work better in a controlled one.

  19. Kenneth Fritsch said

    Jeff ID and Steve Fitzpatrick, it appears that you are indicating that banks have an easier time making personal loans than loans to small businesses. I am not sure that I understand whether your businesses are proprietorships, partnerships or incorporated. It sounds like you are both incorporated. It also sounds like the banks prefer the collateral of personal assets over those from an incorporated small business. Is that because those assets have different liquidities in the event of a loan default?

    Banks when considering loans are apparently not valuing your small businesses as an individual enterprises but rather looking at the business climate as whole and what that portends for small businesses. Are there other sources of funding available for a small business, like issuance of stock?

    I agree with Steve’s assessment of zombie banks and letting them fail. That was and is a problem in Japan after their real estate bubble broke decades ago.

    I do not understand the low limit for a corporate credit card that Steve F noted. You need not be all that wealthy to have limits on personal credit cards up to $50,000. My sister and brother-in-law had a small business and high credit card limits, but that might have been personal credit cards.

  20. Jeff Id said

    Kenneth,

    My previous comment vanished – the moderation here really stinks. Banks are simply unwilling to take business assets as sole collateral even though they are worth multiple times the loans. They don’t care whether you owe a dime to anyone else or not. Hell, two years ago we had a revolving line of credit that the bank issued against our receivables and inventory. We used it only to generate history of borrowing and repayment. We accidentally had it paid off when the time ran out (each year) and without warning they closed the line and added the personal guarantee requirement. They previously had a lean on assets worth perhaps 30X the value of the loan but demanded personal guarantees. As one of their larger customers, we almost dumped the bank out of spite but were too busy to care and didn’t need the money. Now I’ve heard dozens of stories of the same thing. Credit cards are often linked to personal guarantees, ours are issued from the same bank and may be personally guaranteed at our business but we just use them for convenience and have set low limits for theft reasons.

  21. curious said

    IMO the personal credit cards and mortgages etc are attractive to banks as they see them as a long term revenue stream and can build a profit into the APRs. If they are lending to individuals who are employed, all they care about is maxing the share of an individual’s income they can get hold of – hence high card limits, interest only payments and the ease with which self certified high multiple mortgages got approved. And then protecting this income stream with “payment protection” plans allowed for another slice to be taken whilst customers paid for the priviledge of being stitched up. The problem with commercial lending is you actuallly need to have to have enough commercial expertise and knowledge to judge the individual case and evaluate the risk involved. Hence much easier to treat commercial account deposits as an asset to count towards the balance sheet. UK based opinion. YMMV.

  22. Jeff Id said

    Curious,

    They won’t even look at the book risk and the numbers are a lot bigger. If someone asks you for 40K against a 500K asset, for 1 year at 10% interest, would you take it?

    You get the asset if you don’t get paid, you get 10% if you do get paid. Where’s the risk? How can the bank possibly lose? Why is it that banks are so constricted that rational business decisions aren’t obvious?

    Regulation!

    Right now, US banks don’t care about the asset value whatsoever — unless you’re Warren Buffet.

  23. Kenneth Fritsch said

    Jeff, the only rational reason for what you indicate is the lending preferences for banks, that comes quickly to mind for me, is that personal bankruptcy is considered more onerous than a business one for the borrower. Also I wonder just how liquid the banks consider a business’s assets and particularly for a small business that might have rather unique assets.

    Are the current lending practices of banks for small businesses “more” normal currently and abnormal when times were good?

    I did hear Obama talk about more government spending on infra structure with the reasoning that now is the time to do it since interest rates are low for borrowing. I wonder if he realizes that if you have a large deficit/debt it might not be wise to borrow even at zero interest rates.

    I should note that large corporations have been purported to have 2 trillion dollars on the sidelines. Those corporations must not have much faith in the near term economy and I wonder if that influences banks lending practices. Could there be a disconnect between Wall Street and Main Street?

  24. Jeff Id said

    “Also I wonder just how liquid the banks consider a business’s assets and particularly for a small business that might have rather unique assets.”

    How about receivables 10X larger than the loan and a typical cash balance 5x larger? This bank won’t even look at the books unless you have personal assets you are willing to sign over. I don’t know how much corporations typically have on the sidelines, but two trillion doesn’t sound very high to me. If that is an unusually high number, it may represent the fact that banks aren’t lending so even successful businesses have to maintain their own rainy-day reserves. Hitting zero $$ with no backup is not acceptable so you can’t invest beyond a certain point. This may sound easy but when you are balancing a sales/supply chain which is months long containing a lot of zeros, it is easy to screw up. Especially in a volatile economy. It feels a lot like consensus climate science, the government tells you whatever message they want even if it is very different from reality.

  25. 20 million federal stimulus dollars in Seattle for Green jobs: 14 positions and 3 houses insulated. http://www.theblaze.com/stories/seattles-green-jobs-stimulus-success-failure/
    We also had a bridge for salmon viewing built in Bothell within 300 feet of a sidewalk that crossed the same creek. Price: 250,000 extra dollars the regional authorities didn’t know what to do with. So they built a bridge for nothing touting it as a safety issue with salmon viewing side benefits. (Sidewalk near road was a perfectly normal-wide sidewalk, not one unusuallly narrow.) This is why people would rather keep their own money, Mr Buffet.

  26. steve fitzpatrick said

    Kenneth Fritsch #19,

    My company is an S-corp. I can’t speak for Jeff, but my experience is that the banks we have dealt with are not interested at all in making loans to profitable small businesses… the question of personal assets as collateral has never come up as far as I know. One of my business associates noted long ago that banks lend umbrellas only on sunny days, and refuse to when there is even a slight chance of rain; that seems about right.

    I contrast the current banking situation with the Federal $500 million loan the solar panel company Solyndra LLC (California) received a couple of years ago, with an expectation of hiring 1,000 workers. This company was touted by Mr. Obama (when he visited them in 2010) as an example of the bright future for a “green economy”. Well, they burned through all that money (and much more) and yesterday filed for bankruptcy, laying off 1,100 workers (AP wire report). Consequence: $500 million for 1,000 jobs for two years, costing the tax payers $250,000 per job per year. What a great concept for economic recovery.

    So, profitable small companies with real prospects for growth (like mine- laboratory instruments, and Jeff’s- LED lighting), who offer the kinds of permanent jobs that everyone says the economy needs, can’t get even very modest loans to facilitate expansion, while politically favored money losers with no future suckle on the Federal teat. All, of course, funded with tax dollars taken from profitable businesses. It is just crazy. People need not wonder why job growth is slow: we have a bunch of blind idiots on the bridge, who insist on steering the boat in exactly the wrong direction.

  27. Carrick said

    My experience too, Steve. Banks love personal loans that they can get assets attached to, loans to small businesses with no assets, they aren’t interested in it at all. Whatever positive functions they serve, promoting local community growth isn’t one of them.

    The idea you give them a bunch of $$$ and they’ll distribute it as development loans automagically was just silly (TARP). Give them $$$, and they will distribute them in what they perceive to be the safest method. And that could be as simple as not even loaning the dollars, but putting them into a “rainy day” fund.

  28. Hector Pascal said

    Re-iterating. Clearly there are some very clever people here, with fantastic understanding of economic theory. The theoretical understanding boggles my mind.

    In the world I inhabit, small businesses need access to cash from time to time. Here (in Japan) the government understands this and makes funds available via the banking system.

    Above I see a litany of barriers placed in front of small manufacturers. I’m sorry, I have no higher degree in theoretical economics. I do use my hands to make things though.

  29. #26, #27 That is why such naive renditions of “trickle down” simply don’t work. An exampl of which was George W’s first stimulus in cutting taxes when economists pointed out it was a lack of demand not supply that was slowing recovery. But being a Republican paying homage to their sacred cows of the rich, did not make sure that the cuts went conmpletely to the middle class. Giving the rich, banks, and industry breaks did and would not improve the recovery. In fact, as indicated in #27, doing it incorrectly rewards the forces that are helping prevent an economic recovery and actually tends to slow a recovery. But the politics of the right and faux monetarists get little adverse eyeballing by mainstream conservatives, IMO.

  30. Jeff Id said

    Carrick,

    What Steve and I are saying isn’t about small business with no assets can’t get loans, we’re saying small business with a literal shitload of assets can’t get them.

  31. j ferguson said

    There seems to be a mystery here: Why won’t the banks lend to good risks, good customers?

    1. Are the banks in much worse shape than we are able to discover?
    2. Do the banks know, or anticipate some sort of crunch that the rest of us haven’t yet tumbled to?
    3. Is there some restriction on what they can do with the funds that the fed is making available to them for “cheap?”
    4. Are the banks trying to dig themselves out of a capitalization squeeze caused by lousy real-estate investments, many of which may still be on their books – zombie strip-front commercial which may either be non-performing or likely to become non-performing?

    Maybe more specifically, are the banks misrepresenting their actual condition in terms of exaggerating the value of their loan portfolio, and accordingly don ‘t want to take on any more risk – even good risk? Something smells.

  32. j ferguson said

    I might add, that i don’t think this situation is necessarily the doing of our national government unless their “watchdogs” are complicit in a nation-wide scheme to cover up a pending banking disaster – one that the stimuli could never be big enough to wash away.

  33. steve fitzpatrick said

    Carrick #27,
    It is not a lack of company assets, at least not in my case. The balance sheet shows company assets near half a million. I don’t think it is really a question of being very risk averse; I think it is a question of the banks being under tremendous pressure due to holding lots of non-performing assets…. they just don’t have a lot of money available after meeting Federal requirements for cash on hand (as a percentage of deposits). If you don’t have the money, you can’t make loans.

    JohnFPittman #29,
    The truly naive action was politicians forcing Fanny and Freddy to make loans to people who clearly were not in a position to ever repay them. That, coupled with a lack of proper bank oversight on risk-taking, inadequate bank reserve requirements, and the near certainty that the Feds will never let major financial institutions go under, set up the perfect storm conditions that created the housing bubble. I agree than most of the Federal response to the housing bust was ill-considered, and those programs continue to ham-string the entire economy; but politicians, being politicians, are not likely to see that. I do not wish to argue with you about the proper level of income taxes on the ‘rich’, but I will note the problem is a simple one: we have government expenditures (fed, state, local) approaching those of many European welfare states, ~45% of GDP, and growing rapidly, but taxes of ~38% of GDP. I am personally more inclined for the expenditures to fall than the tax take to rise, independent of income tax progressivity, since experience shows that politicians given more tax revenue will always increase spending to exceed that increased revenue. It all comes down to whether one believes wealth transfer is the proper primary roll of government…. and I suspect our views on that are very different.

  34. Carrick said

    Steve, the closest to an explanation I’ve gotten is that if they are your personal assets, the law is set up differently than it is for corporate assets, in the event of bankruptcy. I don’t know for sure that is true, but it’s the explanation I was given by a banker. Another is banks know what the devaluation rate for a house or car is, in the event they receive it on default of a loan. It’s a tougher call to ask how much e.g. a CO2 gas laser would go for, especially to a banker. Bankers don’t like exposure they can’t assign a quantitative financial risk to.

    I know somebody who was denied a loan to expand his business recently who’s average corporate income over the last five year exceeded $1,000,000, and the properly itself is worth over $2,000,000.

    it also could be as simple as government mandates for personal home loans is leaving them “cash starved” when it comes to providing small business loans. (Oddly they have no trouble with loans to large corporations, but there you have corporate stocks & bonds that are directly convertible to cash.)

  35. Jeff Id said

    #34, They won’t even loan small loans against large accounts receivable. It isn’t the liquidity and makes no sense I can see financially for them to say no but this is what they are doing.

  36. Kenneth Fritsch said

    Hector Pascal, I would suppose that a government could impose policies that would maintain a manufacturing presence in the world – but to the detriment of the overall economy of that nation.

    From just five years ago in Japan the following link on Japanese small businesses finding credit would appear to paint a picture similar to the US where personal guarantees were/are required. The US has a Small Business administration that does guarantee some percentage of loans to small businesses.

    http://www.forbes.com/feeds/afx/2006/10/29/afx3128039.html

    “TOKYO (AFX) – The Ministry of Economy, Trade and Industry plans to introduce as early as next spring a new type of loan for small and midsize firms that does not require the business owner to become a personal guarantor, the Nihon Keizai Shimbun reported over the weekend.

    The move is aimed at encouraging launching of businesses by entrepreneurs. Currently, most loans made to small and midsize companies require that the business owner become a guarantor, so a failed business results in his or her personal property being confiscated.”

    From the second link below it would appear that Japan uses government subsidies for green industries and headline indicates a loan drought.

    http://news.businessweek.com/article.asp?documentKey=1376-LQBLSW0UQVI901-45U862JCGVDT8DNDHS1C1PK311

    “Japan’s Shift to Solar Hinges on Banks Ending Loan Drought

    (Updates with legislation’s approval in second paragraph.)
    Aug. 26 (Bloomberg) — Japan is beginning a shift to solar energy that lacks one ingredient: bank financing.
    For lenders like Sumitomo Mitsui Financial Group Inc., a commitment to offer loans to solar ventures depends on legislation passed today that will subsidize renewable energy, part of Prime Minister Naoto Kan’s initiative to cut Japan’s reliance on atomic energy after the Fukushima nuclear crisis.”

    A more recent statement on small business funding in Japan by the new government appears to indicate that more funding for small businesses is required:

    http://www.reuters.com/article/2011/08/29/japan-economy-yen-idUST9E7JM00T20110829

    “Aug 29 (Reuters) – Japan should come up with measures to promote overseas investment, support small firms’ funding conditions and maintain jobs in the country in dealing with the impact of the strong yen on the economy, the government said on Monday”

    It also appears that small Japanese businesses rely on credit called trade credits from the larger companies they deal with. I am not sure how much that line of credit is available to US small businesses.

    In the link below it appears that the Obama administration wants to guarantee SBA loans up to 90%

    http://online.wsj.com/article/SB123716082464735499.html

    Finally, in my other life when I was dealing with foreign companies, I got the picture that small Japanese businesses were the enterprises that took the brunt of the effects of financial and business down turns and were expected by their larger trading partners to reduce costs and lay off workers that the larger corporations would not do in their organizations. The situation appeared to be similar in South Korea.

  37. #33 You find me arguing with you about the two big F’ups. Of course to me the first is having F&F make bad loans, the second F was allowing F&F to lobby those who were supposed to be regulating them and alowing/recommending actions based on political ideology than economic reality. I would argue the same about progressive taxes. It is not whether it is fair, but rather what makes economic sense. It does not make sense to tax those who create jobs, if that is what they do, and either create less jobs or worst case lose jobs. But then likewise, when starting about 1995, when for example, we had about 13 more automobile plants than demand to give tax breaks to corporations for building more industry when the problem from then till now is a softness in demand. Yet, I read constantly of Republicans claiming that taxing the rich rather than giving a break to the middle class is uneconomical, and would cost jobs. The softness of demand contraindicates that tax breaks should go to the rich. One of the intersting items in WSJ was corporations sitting on money, not investing in it or distributing it. So, as you say, independent of the progressivity or other catch words, economically, it would be viable to tax these corporations or change the law such that if it was not distributed voluntarily, it would still be distributed. One can have too much supply, and too little demand. One can give tax breaks to entities that do not help the economy, but actually reduce its viability if you listen to the monetarists. After all, whether tight money is from the government, or from government tax policy, it is still tight. Since we do not have laissez-faire, I have restricted it to government sanctioned economic therories. ;)

  38. Kenneth Fritsch said

    .johnfpittman @Post 29:

    Tax cuts are always a good idea, but the political implication of reducing taxes without also reducing government expenditures is irresponsible and every bit in the vein of Keynesian economics where we let future generations worry about the mounting debt caused from spates of attempting to spur the economy.

    When there is an economic downturn it is true that the markets have to adjust in order for consumer demand to return and government intervention in attempts to artificially increase demand will only make the situation worst. In the case of lowering taxes, it is good for the economy in the long run, but it will not have the immediate effects that the Bush/Keynesians might have expected. Actually Keynesians, being true statists, usually prefer to stimulate with direct government spending as in the most recent case – and I guess that did not work either.

    Tax cuts almost always do not decrease revenues as much as a simple calculation might project, while tax increases almost always do not generate the revenue expected by simple calculation. The obvious conclusion is that taxes are a drag on the economy.

  39. Kenneth Fritsch said

    “The softness of demand contraindicates that tax breaks should go to the rich. One of the intersting items in WSJ was corporations sitting on money, not investing in it or distributing it. So, as you say, independent of the progressivity or other catch words, economically, it would be viable to tax these corporations or change the law such that if it was not distributed voluntarily, it would still be distributed

    That is a real mouthful of statist innuendo. I have been waiting for the leftists who have been eyeing that pile of money on the sidelines to start strategizing and intimidating on how to fulfill the state’s requirements. After all we do not have laissez-faire, so I guess the implication is that there are no limits to what the state can impose.

    I thought we had a tax break on Social Security payments. How has that worked to spur the economy? The not so wealthy can save also and in fact I believe that consumption is higher with the more wealthy in a recession than for the not so wealthy. Economists pointed to the Bush rebates to the middle class as doing little to spur the economy.

  40. I only eye ball the money in the same way that tax cuts should be used. In other words changing the law or taxes so that it does not benefit to store rather than just “punishment” taxing is what I would suggest. I have been waiting for rightists to reccommend such, but alas, it appears I wait in vain. I wonder if you mean intimating rather than intimidating, since most of these, IIRC, already were recieving “corporate welfare” in the terms of tax breaks. I don’t think politicians giving them tax breaks are that intimidating, perhaps complimentary; or perhaps they just got what they paid for. ;)

    On the terms of cutting taxes and government; I agree and have agreed. However, since we have made the business of a lot of business to be part of, or dependent on government, and such a large fraction of our population depends on income from the government in one form or another, we must get business out of governement. And yes it means we need to restrict government in the business of providing income, and that does mean restricting benefits that were not paid for those who recieve them. Otherwise, the confederacy of self servers will re-create the situation we find ourselves in.

  41. Jeff Id said

    John,

    “Yet, I read constantly of Republicans claiming that taxing the rich rather than giving a break to the middle class is uneconomical, and would cost jobs. The softness of demand contraindicates that tax breaks should go to the rich. One of the intersting items in WSJ was corporations sitting on money, not investing in it or distributing it.”

    As one of the ‘rich’ who pays large tax on corporate rather than personal income, I can tell you that taxing the rich in Illinois has cost at least one job in our company by tax hikes this year alone. Soft demand is the result of less individuals having money in their hands. There is nothing about taxing the rich that makes sense under the US tax system and everything about ‘trickle down’ economics actually worked. Tax the rich means tax the business, nothing more. Evem reading ‘tax the rich’ makes me cringe.

    I suppose we will have to disagree but when I write my tax check next year for 5x my personal salary because I’m so wealthy, I have a very different opinion about ‘tax the rich’. At this point, I just wish that I could make as much as the average federal employee. Far less stress, 1/50th the workload, 1/1000th the risk and a pension plan. I could get my government job, lay off a couple dozen employees and make easy money. A couple of Eric Steig matlab classes and I’m on easy street. Certainly long term there will be payoff If I’m lucky, but there are no guarantees. Regulations, lawsuits, competition, no bank cooperation. Business is war in our market, truly a battle for every dollar.

    There aren’t many liberals running small to mid size businesses that I run across.

    Hell, business owners don’t even qualify for unemployment if the business goes under. We do get the privilege to pay the state unemployment insurance though. It is a tough world, with no easy answers but allowing people to succeed has so far provided the best result for humanity in general.

  42. Jeff, as I agree and have agreed, just taxing the rich is stupid. You tax because government needs money. However, taxing business out of business is also stupid. But taxing and tax breaks are two diferent animals, though many politicians try their best to confuse the two. I do not so much want to tax the rich, as much as make it economical that not only do they hire, or capitalise, but pay good wages as well. We not only cannot afford to tax business to bankruptcy, we cannot afford to have the general population essentially economic slaves at miserable wage rates.

    Where I would disagree are simplistic reasonings that confuses wealth creation with protection of those who are wealthy. These are also two different things. Though once again, politicians do their best to confuse to them. We do not owe as a society to sacrifice others wealth to support those who want to preserve wealth. We owe ourselves a society that encourages the creation of wealth, and the fluidity that all can sup at that table if they have the capability. Government si to make sure the oppurtunity exits in the ideal sense, or at least gets out of the way in the practical sense. But I have found business to be more effective rent seekers than the pooer and “entitled” ever dreamed of being. But this business is big business. Small businesses are given the short end of the stick even though they power more jobs. I oppose this strenuously. Though I can’t spell too well anymore. ;)

  43. steve fitzpatrick said

    Johnfpittman #42,

    We not only cannot afford to tax business to bankruptcy, we cannot afford to have the general population essentially economic slaves at miserable wage rates.

    There is a lot of painful disruption associated with international competition and the free flow of goods and services across boarders, even while on aggregate, this free flow improves economic output and wealth. People in low skill jobs in developed economies, especially in the manufacturing sector, end up having to indirectly compete with other low skill workers in countries where wages are historically (and currently!), much lower. In the long term (multiple decades) wages in poorer countries will rise (as already happening in China) and low skill workers in the USA will become more economically competitive. That does not help the millions of displaced US workers in manufacturing who will never again have available the kind of “living wage” low skill job that was once so common. Much of the growing gap in earnings between the skilled and unskilled is the result of a loss of these “living wage” jobs; it is not simply that the (usually highly skilled) rich are becoming richer. Bill Clinton, despite his many flaws, was smart enough to recognize that fact.

    I suspect we are in for a rough period politically, where there will be ever increasing demands for “greater fairness” (AKA forced wealth redistribution), which could hurt economic growth for a very long time. The kinds of practical programs actually needed (education/training for the willing and able, a greater focus on the need for excellence in educational results, incentives to hire and train the unemployed/underemployed) are not sexy, not glamorous, and do not play well with either the extreme left or right. I very much fear the electorate will be given only the “ideologically pure” options of the Federal Government imitating either Robin Hood or Marie Antoinette. Neither option really addresses the problem in a practical way.

  44. Kenneth Fritsch said

    “I only eye ball the money in the same way that tax cuts should be used. In other words changing the law or taxes so that it does not benefit to store rather than just “punishment” taxing is what I would suggest. I have been waiting for rightists to reccommend such, but alas, it appears I wait in vain. I wonder if you mean intimating rather than intimidating, since most of these, IIRC, already were recieving “corporate welfare” in the terms of tax breaks. I don’t think politicians giving them tax breaks are that intimidating, perhaps complimentary; or perhaps they just got what they paid for.

    John, I really have a difficult time following what you intend here. You need some specifics, I think.

    Pragmatic politics uses taxation (and borrowing) as a means of generating revenues for sustaining and growing bigger government, and, furthermore, politicians use the means of raising that revenue that have the least political consequences for themselves. Politicians that have the power afforded by big government can, of course, use that power to arbitrarliy tax some entities more than others. Those that consider a tax break, or lack of taxing if you will, as welfare have to assume that all income is part of the government bounty and that portion that it allows you to keep is similar to a welfare payment. Following that line of thinking and consideration of federal income taxes of the non payroll type (excluding, that is, SS and medicare taxes) we have 50% of the eligible US tax payers on welfare.

    Taxes that are used to impose what the ruling government sees as benificial in the short term for their poilitical success are particularly onerous and very disruptive of the adjustments that are required to get the economy back on track. I would suppose politically in today’s intellectual environment it simply would be too much to expect politicians, both Republican and Democrat, to admit that the government needs to get out of the away and let the economy recover naturally.

    By the way, if the state is given or has the power to invoke tax policies to get corporations to spend those trillions of dollars on the sidelines then I would suppose that it follows directly that the state could merely impose fines for not spending that idle money. If the state is given or has the power to do that, then it follows that it can impose the same fines on you and me to do what the current ruling parties of the state deem necessary for their ends. Oh, wait minute here, I guess the state has already said that it can do that by way of the recent health care legislation. If that legislation holds up under Supreme Court review, I would suggest that the state does have the power to dispense with tax codes to “obtain” the correct reactions of corporations and individuals and merely impose fines for not doing the “right” thing.

    It would also give the Keynesians another vital tool in their arsenal for spurring the economy in times like these. They might even promise to rescind the fines during good economic times.

  45. When under Reagan we went to “free” trade rather than “fair” trade, the word used for this was economic adjustment for the job loss. Many of us, I was one, pointed out that we as a nation are ill disposed towards “economic adjustments.” You are correct, what was claimed was that about “low skill job loss.” However, that is not what I and others claimed; and we were correct. We have lost not just the “low skill” set but large fractions of medium to high skill jobs as manufacturing and industry went overseas. The math is easy. We cannot afford to run our government with shrinking pools of medium wage earners and an increasing pool of poor. The government, as is, faces a severe confidence issue, if it cannot respond. The prediction was made during the Reagan admin that such sacred cows as military, social security, farmers, entitlements would not be sacrificed,and that the ill considered move to ‘free’ trade without an economic policy would be ruinous. This is what has happened. As was pointed out then and I point out again, our economy is so deeply entrenched by and into the government that the road to reducing these sacred cows is long, difficult, and is extremely disliked. That is not a description for a successful program. In that my generation was told that it would not occur as it is occurring, and social security, etc would be available to those of us who paid the most into, reneging on this deal has been called by the FedReserve as politically undoable, and cannot be undertaken without further severe “economic adjustments.” The last time this was spoken of, that I kept track, was under the Fed Chairman of Clinton who in one breath said we had to do something about SS, and in the other said it was political, and economic suicide with BAU, if we did. But jsut as it is unfair or whatever wording you want to use to describe taxes on the rich, is it not unfair to have taken this money all these years fom me and my wife and now not live up to your pledges? So I agree that we face hardship, but remember much of it was self inflicted, and warnings were sounded, and have been sounded for decades.

  46. Jeff Id said

    “But jsut as it is unfair or whatever wording you want to use to describe taxes on the rich, is it not unfair to have taken this money all these years fom me and my wife and now not live up to your pledges? ”

    First, they are not pledges by the employer or me or anyone I know. They are pledges by politicians who put together untenable programs. The money you put in was spent on your parents, just as the money I put in was and is spent on mine. Expecting to get it back for ‘fairness’ is not realistic because it was spent. Also, taxing the rich has nothing to do with ‘fairness’ from my perspective, it has to do with whether the future improves as a result of it and do we get a better or worse situation than we have. In my opinion, large reductions in business taxation and regulation (which includes the rich) will lead to an immediate revitalizing of our economy. It needs to be combined with effective corporate income tax policy which exchanges fairness (equal percentage rates for all) for lower overall rates to cause business to locate here. IMO, the economy would turn around within a few years of enacting some common sense taxation measures and the net result would be higher income, more jobs, and an unfortunately increased revenue for the US government to overspend anyway.

    Just some better bank regulations could do a lot. A huge key though would be low C and S corp taxes for invested money (expensed) and income staying within the US side of the organization – not distributed.

  47. I will not disagree as to what group made the pledges. Yet, still the pledges were made. I bring this up to show that problems we face. And to be clear, it was not just the Democrats, but the Republicans as well, made that pledge. Now, one can argue whether the Dems gave too much to the poor or the Repubs gave too much to the rich, but give that money away, they both did, either through direct as the Dems or indirect as the Repubs.

    Yes the solution is jobs. Always has been and always will be. But please note, and I did not see a disagreement, that when we went from “fair” to “free” trade, it was known there would be economic adjustments necessary. How would you grade the US Government and its politicians on their preparation for this adjustment?

  48. David JP said

    Wonderful discussion. I wish we had this kind of discussion when guest posting on health care reform proposals.

    Pledges should be judged using the same methods needed to properly evaluate temperature reconstructions. I don’t think the pledges made in the past hold up. Therefore I’m willing to make adjustments now to prevent my kids from having a worse future. And yes I’m irritated that my folks generation didn’t get this adjustment done in their day. :-)

    Ultimately I place the blame on the government, meaning upon the Constitution (or more precisely, its flaws). Since it’s impossible to expect any human (past, present, or future) to have perfect knowledge, the solutions should involve using the one thing that is absolutely right about the Constitution: the amendment process.

    And, while searching for our answers I think we should be always asking: what is the goal? And I think Jeff answers that in #46 with:

    “it has to do with whether the future improves as a result of it and do we get a better or worse situation than we have”

    But I must be way off on the ‘Goal’ because reading the news these days leaves me completely confused with the decisions made by our present batch of leaders.

    Regarding business taxes, would it help the ‘Goal’ to tax a company (large or small) LESS if:

    -it pays profit sharing dividends?
    -easily allows owners/shareholders to set pay ratios and make such ratios public information?
    -gives customers a choice on call center location? (or at least makes public where the center is located)
    -conducts independent and public surveys on customer satisfaction?
    -etc………

    What does a complete list look like for the desirable (ideal) company? Can that be agreed upon? Probably not. Which leaves me with the unhealthy feeling that we are heading towards our: Captain Cook meets the natives moment.

    Its not possible to have every company/business be a perfect efficiency monopoly. But I think the government should help us strive to be such (mostly by getting out of the way).

    With my reading of history, it seems to me that we are still a long ways away from that point. So, whats new?

  49. It is my impression that the climate scandal is coming apart today, as decades of government deception are being exposed today on PhysOrg.com:

    http://www.physorg.com/news/2011-09-media-condemn-wikileaks-disclosure.html

    http://www.physorg.com/news/2011-09-wikileaks-published-cables-internet.htm

    http://www.physorg.com/news/2011-09-wikileaks-mystery.html

    Deception in government science since Henry Kissinger met Chairman Mao secretly in 1971:

    http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.pdf

    a.) Weakened our national security,
    b.) Undercut principles of democracy,
    b.) Made a mockery of scientific principles,
    c.) Destroyed confidence in world leaders, and
    d.) Produced the Climate-gate record of 30-years of deception.

    http://joannenova.com.au/2010/01/finally-the-new-revised-and-edited-climategate-timeline/

    Exactly as President Eisenhower warned might happen in his 1961 farewell address:

    With kind regards,
    Oliver K. Manuel
    Former NASA Principal
    Investigator for Apollo

  50. Kenneth Fritsch said

    “Yes the solution is jobs. Always has been and always will be. But please note, and I did not see a disagreement, that when we went from “fair” to “free” trade, it was known there would be economic adjustments necessary. How would you grade the US Government and its politicians on their preparation for this adjustment?”

    Most economists would agree that free trade is a positive for a nation’s economy regardless of what their trading partners do. True free trade lowers prices for consumer goods and the consumer then has more money to spend in other areas and that can create jobs. Looking at only one part of the equation can be very misleading to the overall effects of free trade. Manufacturing jobs, that are so lamented for the reductions that have occurred in that area of jobs, are going away regardless of trade policies because manufacturing has and will continue to be more automated and productive, and, in fact, manufacturing jobs world-wide have decreased over the years. Nobody outside a Luddite would lament the replacing of backbreaking and/or dull manufacturing jobs with more technical ones.

    http://investing.curiouscatblog.net/2006/04/07/manufacturing-jobs-data-usa-and-china/

  51. Mark T said

    I think you need to consider how many Luddites there actually are in the world, Kenneth. ;)

    Mark

  52. Kenneth Fritsch said

    I think the references to Social Security and the need for more jobs in the same breath points to the basic problem of the Ponzi scheme like financing of SS. It has been based on a large ratio of employed paying into the system and a smaller number reaping the benefits. That concept was never made for a realistic program just an easy grab for political power and funds to use out of the “Trust” funds. It has been well known and also been tested in court that congress through SS legislation has never made a legal pledge to the public, and, in fact, could legally cut- off/reduce the payments any time they want. In my view, it is beyond naive to trust government pledges and promises about anything.

  53. Yes, it has been looked at and it is true that Congress can cut off or reduce payments anytime they want. It has been stated in testimony to Congress about 1996 that unless we did something starting in 1996, SS would face insolvency starting 2015 or later depending on the balance of outlays and income.

    Yes, back breaking jobs are going. However, as production increases the number of jobs tend to stay the same. So, yes, if you look only at one side of the equation you can be mislead. Just as not looking at the loss of jobs here in the US while jobs are gained in China can be ignored. But free trade does not necessarily mean job loss. And if money goes further, then that is good. But if you don’t look at both sides of the equation and consider such things as economy of scale, that trade means you have to have something to trade, you will have traded your jobs for a temporary buying power that dimishes with the loss of manufacturing base, This is what is occurring presently.

    So by all means lets look at both sides of the equation.

  54. Kenneth Fritsch said

    John Pittman @ Post 53:

    The U.S. remains, by far, the world’s leading manufacturer, as measured by value of goods produced. US manufacturing productivity has increased by leaps and bounds in the recent past. That, of course means less jobs in manufacturing. Higher productivity world-wide means less jobs in manufacturing. It means we can increase our standard of living by paying less for those manufactured goods.

    Perhaps you are harkening back to the days when unionized manufacturing jobs were protected by trade restrictions and the lack of foreign competition. Those days are gone forever. To the extent the government has attempted to soften those blows to losses of US manufacturing jobs, the longer it will take for the necessary adjustments to occur to reincorporate those losing jobs back into the labor force. Workers are going to have to become more mobile and states are going to have to do more to encourage businesses to locate were workers are available. The state I live in, Illinois, has a very unfavorable business climate and politicians that are singularly concerned with growing government even in the face of drastic impending deficits.

  55. Nope, remember what the free trade economists predicted: That as we traded, more wealth and more demand would occur, such that there were actually more manufacturing jobs. The only thing I am harkening back to is what was predicted. So did the economists fail due to automation? I would point out that automation was ongoing long before we went to free trade. Did demand go down? No, the recent results indicate that demand is growing world wide. People like to spend and acquire. So, the question remains, did the US Government fail in its basic function with respect to jobs. I would say most definitely, and the Repubs are as much to blame as the Dems. As far as mobile goes, perhaps you think it does not cost to move, perhaps you think that there are jobs unfilled due to no one moving. If so, your thinking is incorrect. The stats from the economists indicate that there are more persons looking for jobs than jobs available.

    So, if the free trade guys were right, less cost means more buying power, and if people spend, more jobs. Well we have done that. Where are the jobs? We definitely have good purcahsing power and you can’t claim we don’t spend. Hell Bells, we use credit and spend more than we earn. So, where are the jobs that the free traders claimed that would be created?

  56. Jeff Id said

    John,

    When the free trade laws were enacted, I predicted that the average US wage would have to drop to create balance. In order to do that, we lose jobs until
    Earth employees all make similar wages. Why anyone wouldn’t see that as obvious is beyond me. This was something which should have been done slowly to pull the rest of the world up while giving them some competition rather than all at once which would pull us down. It’s obvious and stupid but so much in politics is IMHO.

  57. I agree Jeff. It is just that Reagan and the free traders got such softballs thrown at them, and people think Reagan’s policies were so great, without realizing that many of the problems we are suffering are from his policies. The Dems are no better with the Keynesian and how they don’t follow up when times are good, as in raise taxes AND cut benefits. They just use it as an excsue to spend more. Not much choice between the two: “Do you want to fry or burn?”

  58. Jeff Id said

    John,

    We’re two feet into the fire now. Slash regulation and taxation, allow corporations to keep profit, drill as many holes in this sphere as we can and let the technology rip. My guess is that we go forward as a species and the rock on which we live has more than enough eco-inertia to prevent us from seriously endangering the world for a long time to come.

    Show the world what we have learned about being free to make your own choices.

    I’m dreaming of course.

  59. Kenneth Fritsch said

    “So, if the free trade guys were right, less cost means more buying power, and if people spend, more jobs. Well we have done that. Where are the jobs? We definitely have good purcahsing power and you can’t claim we don’t spend. Hell Bells, we use credit and spend more than we earn. So, where are the jobs that the free traders claimed that would be created?”

    The critiques of free trade talked about a calamity and jobs disappearing down a blackhole. Did that happen? You seem not to remember that before the recent economic downturn our unemployment rate was at historically low rates and for an extended period of time. The recent downturn is not attributed to free trade so what is it exactly that you are talking about. If you are talking about unionized manufacturing jobs that were lost because we are required to compete globally I believe we agreed that those are not coming back and in fact the world is and will continue to lose manufacturing jobs because of productivity increases that are required to increase standards of living. We have a long way to go to have completely free trade in this country as free trade is not a trading consortium with favored trading partners; it is with all the rest of the world.

    You seem to be proposing some kind of protectionism without ever being specific – so what is your plan? I would hope that you remember well the Smoot–Hawley tariff bill back in the Depression era that is credited by economists on all sides of the political spectrum for making the depression worst.

    http://en.wikipedia.org/wiki/Smoot-Hawley_Tariff_Act

    There is much more that could be done to unfetter the US entrepreneur and business to make the economy better, but trade restrictions would be a major step backwards and particularly just to satisfy some populist notion about the good old days that were not really all that good by today’s standards. Standards of livings have increased and people of even modest means have access to labor saving, entertainment, communication and medical devices that were not even dreamed about a few decades ago.

    By the way if you are out of job and with no job prospects in your neighborhood for the foreseeable future it is a hell of lot more expensive to not move. Many of our poor ancestors moved across the ocean for jobs and a better life.

  60. The only time, IIRC, that I pointed out that unions performed a useful economic service was in the destruction of the robber barons and by extension into and past the Great Depression, by increasing economic effeciency. I do not necessarily disagree with you about trade restrictions now, but rather ask that we grade the performance. I would state that if the best we could do is trade restrictions, then why not? Further, a good case can be made that the only time that the Dems followed Keynesian in good times was under Jimmy Carter and that Reaganomics was only successful because the Dems finally did what they were supposed to do. Perhaps you have heard how popular that was? Though I doubt, unless you read the fine print, you realize that by executive order by Ronald Reagan in 1983 removed the GAO from using Generally Accepted Government Auditing Standards (GAGAS). So the “truth” of the situation we find ourselves in is that Jimmy Carter was an economic hero and Reagan and the “free” traders slipped one on us claiming their version of economics was correct when in actuality it is likely that it was actually using Keynesian correctly taht powered the economic upturn under Reagan. So I would state that I do not know for sure that the kind of protectionism you think I am proposing would not work. My belief is that the data is ambivalent to either position. Thus, I think one should do what is economically justifiable; even if it means increasing taxes, especially on the rich, “fair” trade rather than “free” trade, whatever works.

  61. Brian H said

    Post #8 is robo-spam.

  62. Kenneth Fritsch said

    John, you really present nothing on this discussion of free trade to which I can respond. You mention Reagan and Carter, both of whom made decisions far out of the realm of my politics, but that is not what we were discussing; it was free trade and hopefully separate from partisan politics.

    I suspect you have forgotten or do not care about the export trade and the importance of that segment of the US economic activity to our economic well being. Imposing “fair trade” would result in retaliatory trade restrictions from other nations to the US. You, like so many who yearn for the good old days, always seem to see trade restrictions as one way street and never look at the other side of the equation which is exports and the jobs affected there. Trade wars also do not help other relationships with foreign countries and from an historical perspective can lead to shooting wars.

    I would suppose we could get those unionized higher paying manufacturing jobs back by imposing tariffs so we could all pay more for manufactured goods in the US and lower our average standard of living. Maybe even federally subsidize some of those manufacturing operations with the proviso that they pay higher wages – just like in the good old days. If our relations with other countries deteriorated to point of our feeling we needed a bigger military (that is already way too big) we could increase that federal budget and manufacture more military machinery. We could get a government campaign going that encouraged citizens to buy American just in case the tariffs did not discourage some citizens from continuing to purchase foreign goods. The signage for such a campaign would provide manufacturing jobs – so all is good.

  63. M. Simon said

    Let me esplain it: lending money increases the requirement for the bank to hold assets. The assets they currently have are not real. Which is why they won’t sell property they own. It would have to be marked to market.

    Which is why you hear stories of people living rent free in foreclosed properties. The “assets” are worth more to the bank on the books than they are to the market.

    Insanity to be sure. But there you have it.

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