Posted tagged ‘Fewer People Working’

Some Econ. Homework

June 22, 2016

The Fed Has Whiffed Again: Massive Monetary Stimulus Has Not Helped Labor, by David Stockman, at davidstockmanscontracorner.com. The Feds injection of 4 Trillion electronically printed dollars into the economy hasn’t produced a return worth that kind of “investment”. Fewer workers working fewer hours means less is being produced. Just because you print money doesn’t mean goods and services are being produced. It only means goods and services are being demanded by using money not backed by any production. Say’s law is being shown to be true.

“Say’s Law can be explained in the following terms:”

1) “The way that a buyer demands a good is by supplying a different good.”

2) “The supply of one type of good constitutes the demand for other, different goods.”

3) “The source of demand is production, not money. Money is only a temporary parking place for past production.”

“In the modern economy with division of labor, most of us demand goods when we supply our labor. I work as a software engineer. I supply my labor writing computer software. And from that supply I am able to demand other goods, such as coffee.”

Pity The Poor Central Bankers: Playing Masters Of The Universe Is No Longer Fun, by Charles Hugh Smith, at oftwominds.com. Here is an excerpt from the article: “Central Banks can create free money for financiers, but they can’t move the needle of the real economy, except to distort and cripple it with perverse incentives to gamble borrowed money on malinvestments and skimming operations…….as former Master of the Universe Ben Bernanke noted: “higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending (that) will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

I guess former Master of the Universe Ben Bernanke has never read Say’s Law: “The Source of demand is production, not money. Money is only a temporary parking place for past production.

Printing money distorts the pricing system. Market discovery of prices (not Fed manipulated prices) is how information about how much to produce and consume is transmitted to producers and consumers in a free market. The interest rate is the most important of these discoveries, because interest rates coordinates production across time. We live in a world where resources and capital have misallocated for the last decade plus. The cure is to quit printing money and allow the market to set interest rates. What are the odds?

The Fed Pours Water On The Job-Growth Hype, by Ryan McMaken, at mises.org. The administration and the media has been telling us how good the economy has been doing. I guess the Fed hasn’t received the memo. The Fed would normally raise interest rates if the economy is doing well because it would be afraid of it overheating.  The Fed will adjust its monetary policy to weather they think the economy is too hot, or too cold, or just right. The fact that the Fed has raised the interest rate once by a 1/4 point since they lowered it to near zero in 2008 tells us everything about what the Fed thinks of the economy. So where has most of the $4 trillion in printed money ended up? If you say in the financial markets to prop up asset prices, in order to help banks, go to the head of the class. Do you think these false stock prices can stay afloat without more printed money???

Central Banks Are Wrong About Inflation and Deflation, by Frank Shostak, at mises.org. Let’s go to Murray Rothbard writing in Man Economy And State for the definition of inflation and deflation.

ROTHBARD: “The process of issuing money beyond any increase in the stock of specie, may be called inflation. A contraction in the money supply outstanding over any period, (aside from a possible net decrease in specie) may be called deflation. Clearly, inflation is the primary event and the primary purpose of monetary intervention. There can be no deflation without an inflation having occurred in some previous period of time.

Movements in the  supply-of-goods and in the demand-for-money schedules are all the results of voluntary changes of preferences on the market. The same is true for increases in the supply of gold or silver. But increases in fiduciary or fiat media (printed money) are acts of fraudulent intervention in the market, distorting voluntary preferences and voluntarily determined pattern of income and wealth. Therefore, the most expedient definition of inflation is one we have set forth above: an increase in the supply of money beyond any increase in specie.”

The absurdity of the various governmental programs for “fighting inflation” now becomes evident. Most people believe that government officials must constantly pace the ramparts, armed with a huge variety of “control” programs designed to combat the inflation enemy. Yet all that is really necessary is the government and the banks (nowadays controlled almost completely by the government) cease inflating. The absurdity of the term “inflationary pressure” also becomes clear. either the government and banks are inflating or they are not; there is no such thing as “inflationary pressure”.

CONCLUSION

Let’s not be fooled by the “Masters of the Universe’ when it comes to monetary policy and interest rates. With a little bit of reading on the topic, you could come up with the policy for fixing our economic problems. That policy would be to quit electronically printing counterfeit money and allow the market to set the interest rates. The solution is very simple but it is not easy. Why?  Because of the Fed’s previous inflationary policy, the resulting recession that would occur when we implement the cure would be politically difficult for politicians and the Fed to let happen. They have been trying to keep the correction from happening since 08, but at some point economic reality will correct all the Feds previous money printing, and it won’t be pretty.

Must Reads For The Week 1/17/15

January 17, 2015

 

The pen is mightier than the sword...

 The pen is mightier than the sword… (Photo credit: mbshane)

THE HIGH COST OF GREEN

NYC Mayor De Blasio Just Banned Another Common Product, by Phil Hall, at thefederalistpapers.org. He is banning Styrofoam, which is used in such things as Styrofoam containers for food by restaurants and packing peanuts used in shipping and storage. De Blasio said, “…We have better options, better alternatives,……and those alternatives will soon become more plentiful and will cost less.” The Mayor apparently understands the concept that a greater supply reduces the price. But does he understand that if there is a lower cost better product it will be supplied by the market. If you ban something, obviously the next best lower cost alternative will take the banned products place. Oh the cost of being green.

Unrealistic Offshore Wind Project Gets Plug Pulled, by Phil Hall, at thefederalistpapers.org. National Grid and NStar ended contracts with Cape Wind because it missed the Dec. 31 deadline to obtain financing for the project. Even with the Federal Government willing to provide a $150 million loan, backed by your tax dollars, they couldn’t scam the private sector into financing the rest of the project. At least the Government didn’t mandate the wind farm be built. Voluntary exchange in the market just saved the tax payer $150 million. (Read more here, Cape Wind Is Dead at masterresource.com.)

EPA New Methane Regulations Aimed At The Fracking Industry, by Michael Casey, at cbsnews.com. Since shutting down Federal lands to the fracking industry didn’t stop shale oil production, the administration is going to use EPA regulations to try to put the fracking genie back in the bottle. This is just like the administration’s ‘war on coal’. The administration’s war on carbon based energy is really a war on American citizens. Even though economic reality will eventually win against Government central planners, the cost of the interventions will be paid.

THE STATE OF THE ECONOMY?

Yes Some Companies Are Cutting Hours In Response To Obamacare Mandates, at economicpolicyjournal.com. Employers are capping workers hours in response to the Affordable Care Act’s employer mandate. Another example of Government regulations hurting the people it’s trying to help.

Business Closures Now Out Number Business Start Ups, by Jim Clifton, at gallop.com. For the first time in 35 years the number of companies going out of business was higher than the number of business start-ups. This is due to economic forces correcting for the interventions into the market by Federal Government regulations, and the Feds artificially low-interest rates and electronically printing counterfeit money.

Labor Participation Rate Drops To 38 Year Low; Record 92.8 Million Americans Not In Labor Force, at zerohedge.com. Production creates wealth and consumption destroys what has been produced (wealth). Is an economy growing when the number of people who are producing is shrinking even though they are still consuming.

THE DYNAMISM OF THE MARKET

3D Printed Model Heart Helps Doctors Save A Little Girls Life, by Anthony Domanico, at cnet.com. This 3D scaled replica of this 4-year-old girl’s heart helped doctors plan for surgical options that may not have been possible without 3D printing technology.

Man Saves Wife’s Sight By 3D Printing Her Tumor, by Sara Breselor, at makezine.com. This husband, with no medical background, used his knowledge of 3D graphics and printing to save his wife after she was misdiagnosed by doctors. He 3D printed a model of his wife’s skull and shopped it around to neurosurgeons until one agreed to try a different kind minimally invasive procedure rather than actually cutting open her skull, lifting the brain, and removing the tumor. He has unknowingly pioneered a new way of medical diagnosis.

The Left’s War On Uber, Sharing, And The Poor, by Andrew Syrios, at mises.org. This article shows some of the new businesses models like Uber, Lyft, RelayRides, FlightCar, Airbnb, Kickstarter, and Prosper, that are competing with status quo business models. The status quo businesses are lobbying Government to get rid of their new competators instead of spending their time trying to provide a better product or service for their customers. Economic forces, not Government, will decide who wins.

LET’S LIGHTEN IT UP A LITTLE BIT

Venus Williams And The Best Ball Boys In The World, at youtube.com.

Top 10 Things That ‘Will” Happen In 2015, at zerohedge.com. I don’t think so.