Tag Archives: Economics

Don’t Worry Argentina, We Ain’t Crying

29 Aug

This is a story on Reuters;

Argentine leader’s image falls as inflation soars

Apparently Argentinian President Christina Fernandez’s popularity is half of what it was a year ago, now at 30 percent.

Funny thing what seizing industries for nationalization and pumping government money into markets will do for the rate of inflation, which for Argentina is now around 20 percent.

Of course this isn’t new for the Argentines as they long had one of the most up and down economies in the world.

Still it’s strange that having had so much experience in the matter they haven’t actually learned anything apparently.

Despite achieving incredible growth through the 90’s as the result of privitization and deregulation, they still were crushed by their debt load when the economy crashed thus depreciating the value of their currency.

Argentina is a prime example of what happens when A) debt overwhelms a nations ability to pay for it. Unfortunately like many other nations, Argentina suffers from the forced IMF and World Bank deals that were forced down it’s throat that have since created more problems for it(as it does in the other cases as well) and B) they are finding out that simply making obstructive rules to level the playing field for the people who are doing (government assigned) jobs they are not qualified for is nothing but a hindrance to real economic production.

The good news is that Argentina is a nice place to visit (I once had a college professor who was originally from Argentina). As long as inflation keeps going up, it will be cheaper to travel down there and have a nice steak dinner for the price of Mcdonalds.

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Time to redefine “Recovery”

1 Jul

Reason.com has a fun article up called 42 Straight Months of Stupidly Optimistic Official Predictions About Economic Recovery.

If you can’t tell from the title, the piece is a collection of statements made in recent years about the “pending” economic recovery, the quotes come from many sources including President Obama, Tim Geithner, Ben Bernanke, and various news outlets.

Here’s some of my favorites;

March 15, 2009: Federal Reserve chairman Ben Bernanke: “We’ll see the recession coming to an end probably this year.”

July 14, 2009: Secretary of the Treasury Tim Geithner: “The force of the global recession is now receding.”

November 13, 2009: Secretary of the Treasury Tim Geithner: “We are seeing growth resumein the United States.”

March 15, 2010: John Cassidy, The New Yorker: “Economists are still debating what it was thatended the financial crisis and turned the economy around. It is inarguable, though, that Geithner’s stabilization plan has proved more effective than many observers expected.”

April 27, 2010: Vice President Joe Biden: “I’m absolutely confident that the policies that we put in place are sending the economy and the American public in the right direction.”

July 21, 2011: Obama spokesman Jay Carney: “That’s why he is focused every day, he wakes up every day and goes to sleep every night thinking about the fact that he will not rest, he will not cease in his efforts to grow the economy and create jobs until he knows that every American who’s looking for a job can find one. And that will undoubtedly remain true throughout his first term.”

March 9, 2012: Ezra Klein’s WonkBlog, The Washington Post: “There are also some reasons to think this recovery can sustain itself through 2012. Ever since the recession ended in mid-2009, the U.S. private sector has been consistently hiring workers.”

Have a little courage and tell the truth

June 8, 2012: President Barack Obama: “The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government.”

Tim Geithner got out to a fast start in the first few years of the administration with a plethora of embarrassing remarks, while The Bernanke has been pretty cool and casually confused evenly across the race. But it’s the big man himself, President Obama, who’s taken the lead down the backstretch, though Jay Carney is just a length behind. VP Joe Biden however….I believe a different set of standards apply for him.

What’s the definition of insanity again?

10 May

Doing the same thing over and over again and expecting different results. That sounds about right.

Robert Barro over at the Wall Street Journal gets it. His opinion piece, Stimulus Spending Keeps Failing, show’s what a disaster these repeated keynesian programs are.

Once a comparatively low public-debt nation, Japan apparently bought the Keynesian message many years ago. The consequence for today is a ratio of government debt to GDP around 210%—the largest in the world.

This vast fiscal expansion didn’t avoid two decades of sluggish GDP growth, which averaged less than 1% per year from 1991 to 2011. No doubt, a committed Keynesian would say that Japanese growth would have been even lower without the extraordinary fiscal stimulus—but a little evidence would be nice.

While the whole article is good in itself and mentions the path’s taken by Germany and Sweden as a successful alternative to the other nations of the Eurozone and the United States. The key point of the article is that keynesian economics simply don’t work.

Nope, not Ben Bernanke, just suburban mom

Why this needs to be explained repeatedly and to almost no effect is the mind-blowing part. When you create a problem by doing one thing, how you can come to reason that doing more of the same thing will solve the problem? You simply can’t spend your way into so much debt as to create a recession and then expect to buy your way out of it.

Do you tell someone with lung disease to switch to unfiltereds? Do you tell someone with diabetes to gorge on Pepsi and Oreos? Do you tell an alcoholic to swim some laps in a vat at the Budweiser brewery? No, No, and No.

Any mildly intelligent person knows that in order to fix a problem you have to first eliminate the cause. Once this is done you create an effective and healthy plan that allows for a smooth transition from the reckless ways of before to a responsible sustainable future. It’s not easy and it’s not automatic, but nothing worth keeping ever is.

UPDATE: Just read a similarly voiced post at rhymes with cars and girls. The use of Fast Times at Ridgemont High metaphor just did it for me.

We’re going down; Mayday, Mayday!

2 May

Yesterday was May Day, who knew? I thought May didn’t officially kick off til cinco de mayo. Then again with the lack of success, I suppose that’s true.

In the United States, May Day, was supposed to be seized with both hands by the Occupy Wall Street movement and thrust into the face of America as a sign of impending change. No longer will the workers(beneficiaries perhaps?) sit idly by while the government hands out money to your neighbor but not to you.

Now that the sun has risen on May 2nd, what’s next? Nobody knows. Even CNN says May Day fizzled in an opinion piece by Amitai Etzioni. However can something really “fizzle” if nobody expected it to “sizzle” in the first place?

The comments section on the article perhaps best summarize the point of view of the average American towards Occupty. The following comment was posted by avoidsheep

The occupy movement no longer exists…it’s primarily just a bunch of entitled, iphone carrying Phish fans trying to live in the 60’s….no objective, no goals, no understanding.

Precisely. A mix of college kids and aging hippies happy to feel relevant again, have gotten together to pat each other on the back for having the same complaints, but don’t provide any actual solutions to the problems they’re protesting. The simply cry that there’s a problem in the system, but don’t take any responsibility to fix it. Rather they trust that the people who they are complaining about, will gladly provide the solution and fix it themselves.

They simply fail to realize that putting work in someone elses hands, offers no guarantee to ensure it actually gets done. From Etzioni;

This time? If the past is any predictor of the future, the deliberately nonhierarchical Occupy Wall Street movement, with its fuzzy messages and vague goals, is not going to leave a major mark.

But it’s not that the Occupiers are adrift at sea without a light to paddle towards. The light exists, but it’s in the opposite direction from what they think. Again Etzioni;

The tea party has a sharply edged message and has used its considerable following to elect public officials, who in turn have affected public policy. For instance, they prevented the GOP leadership from compromising with Obama on raising taxes in exchange for cutting entitlements and government outlays. And the tea party put deficit reduction on the top of the political agenda

See what clearly defined goals and viably provided solutions can do to a problem. The predicament that Occupy find itself in, is that it wants to be a counter-culture movement, fighting against “the man”, but they simply don’t see that there’s a way to achieve the desired results without putting off the very people you are appealing to for help.

Interestingly as the Occupy crowd calls for more workers rights, The Economist put up this chart on unemployment rates. (H/T to Zerohedge)

Two interesting things to note from this chart. First, that the numbers are fudged since the chart puts the United States at the incorrect 8-9% media use figure, instead of the 14-15% honest unemployment rate. Second, that the nations with the highest rates of unemployment growth and GDP shrinkage, are in fact the heavily socialized EURO states that have essentially walked right into the current recession due to government largesse and citizenry benefits of a royal-scale.

They weren’t wrong to want the best for their citizens, they were just wrong for not understanding the basic math to understanding whether or not that was a legitimately sustainable option. If the governments can’t figure out how to measure sustainability, it’s not likely that the recipients of such generosity will understand the economics of what’s causing them to lose their not so hard-earned benefits.

The tuition is too damn high!

22 Apr

President Obama addressed the nation on Friday. He spoke about the need for a college educated population for the United States to recover and that the cost of that education was now to high and more money must be spent in order to make it more affordable.

Where to start?

Do more Americans need college degrees? 30% of Americans over 25 have a Bachelors degree and a further 10% have an Associates or similar degree. 40% of the population has a degree and that’s the highest it’s ever been, but apparently in order for the United States to grow that number must be higher.

And for what? As of the first Quarter we had a 14.8 percent total-unemployment rate. 88 million Americans are unemployed, while only 64 percent of Americans have a job. Do they really need an education or would they be better off in a climate that gave them a job instead?

Fact is we need more qualified people in certain fields, but those fields aren’t likely to see more students just because more people are going to school to for free. Just because we need more engineers and IT professionals doesn’t mean we can get them with a snap of the fingers. Kids that weren’t taught math in primary school aren’t just going to turn into engineers. Rather than more graduates what the United States needs is more apprenticeship style education and certification programs. Make it easier for more people to prepare directly for specific work and then make it easier for them to get jobs by getting the government out of the hair of businesses.

Then theirs the simple economic question the President fails to understand. To be fair, it’s one of those really tough Econ-101 principles. Supply and Demand. The President seems to think we need to place more importance on education and fails to realize it’s already the biggest consideration and as such college enrollments have increased accordingly. The more people who want to go to college, the more demand there is and when there is more demand, the price goes up. Therefore it’s safe to assume that by giving more money away by the billions to help even more people go to college isn’t in fact going to help the situation.

It’s really quite simple, which is probably why it’s completely misunderstood by politicians.

Brazil attempts a squeeze play

19 Apr

There’s an informative story over at BrazilianBubble.com.

Margins Squeeze: Like China’s JAC Motors, BMW sales also drop 30% in Brazil after IPI tax measures

As Brazil added a tax on imported cars, sales fell on some imported brands by 30%. That’s good news for domestic auto production in Brazil you say? Yeah probably, but that’s not the point to take away from the story.

“Car sales fell 30% due to the IPI raise,” Dornbusch said to Bloomberg. “We’ve partly compensated it by raising prices 15.9% in average, with BMW and dealerships absorbing the rest.”

BMW raised the price of it’s vehicles nearly 16% in order to offset the tax increase. Tell me again how raising taxes doesn’t affect the common person? Oh that’s right, they always have.

Lawyer dog gets it, why can't your Senator?

It’s so simple it’s not even a rule, it’s just plain common sense, don’t pay for something if you don’t have to. Government tells business to pay more, business tells customer to pay more.

Any tax increase is a sign of contempt and stupidity and any politician associated with them should be tossed out of office at the earliest convenience. Only two things come from tax increases. You lose more money and the government has more money to waste on useless junk.

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The original story can be found at Bloomberg.

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