Archive for the ‘economy’ Category

Sir John Rose, the Chairman of Rolls Royce, on the economy

This is a quotation from Sir John Rose, the Chairman of Rolls Royce, which is something that should be considered in light of the US budget debates.

We must be realistic about the state of the UK economy. A rebalancing is necessary and there will be no quick fix to restoring public finances to some sort of sustainable balance.

To draw an analogy, if the UK was a business, the shareholders would be asking serious questions. The current model appears to be that we can grow our business by growing overhead, by applying better terms and conditions to support functions than to wealth creators, and by paying dividends out of borrowings not all of which are recognised on the balance sheet.

We are also asked to believe that service levels will inevitably suffer if the costs of delivery are reduced. This need not be the case. As any business will confirm, service levels will reflect prioritisation, proper definition of desired outcomes, concentration on reducing waste and investment in productivity.

In the UK, the debate needs to focus on how to make the pie bigger, rather than how it is sliced. We must concentrate on creating an environment where the enablers of wealth creation, which government can influence, are world class. In defining the right policies, there are many examples against which we can assess ourselves, but we must measure honestly and then take the necessary actions to be competitive. Importantly, there must be the will to apply policy consistently and over the long term.

If we get wealth creation right, distribution and consumption will follow. It cannot be done in the reverse order.

Living within your means

Thanks to Southern Beale for her 18th of May post, Americans Live Within Their Means & Other Wingnut Fantasies , which has had me thinking, but there has been an increased sense of urgency about this topic as the U.S. Economy grows closer to a possible default.  While the US is one of the largest economies in the world, it is the only one where this type of budget kerfuffle could happen.  Reduction of the Budget deficit will effect every American’s standard of living, yet people are being lulled into a bizarre sense of denial of where the current course of event will take them.

SoBeale is also annoyed by the Right Wing chant that goes along the lines of  “American families have to live within a budget, and so should the federal government”.   As SoBeale points out, this just ain’t true since the American consumer debt, which doesn’t include mortgages, is $2.43 trillion as of March 2011. Total U.S. revolving debt, which is almost entirely credit card debt, was $796.1 billion, as of March 2011. In fact, in March U.S. credit card debt increased for the second time since 2008, which the Wall Street Journal presented as a good thing:

U.S. consumers in March increased their credit-card debt for the second time since the financial crisis flared, giving a sign of hope that consumer spending could boost an economic recovery that has lost some steam.

In its monthly report Friday on borrowing, the Federal Reserve also said overall consumer credit outstanding rose, up $6.02 billion to $2.426 trillion. The increase, the sixth in a row, was bigger than expected. Economists surveyed by Dow Jones Newswires had forecast a $4.8-billion rise in consumer debt during March.

SoBeale mentions that  Jared Bernstein, who  was Chief Economist and Economic Adviser to Vice President Joe Biden and a member of President Obama’s economic team before leaving the White House to become a senior fellow at the Center on Budget and Policy Priorities writes that the  family budget analogy gets misused.

Graphic shows federal debt held by public as percentage of GDP

Anyway, the US is heading towards the Debt Ceiling showdown, which is a magnificent big of US political theatrics from a nation where political theatrics has become a nasty part of the social system.  Governments run debts when the revenues do not pay for the required governmental functions.  Economists debate the level of debt relative to GDP that signals a “red line” or dangerous level, or if any such level exists. In January 2010, Economists Kenneth Rogoff and Carmen Reinhart stated that 90% of GDP might be an indicative danger level.   Of course, the Budget “mess” is real more about spending priorities than any real crisis.  In particular, the spending on “entitlement programmes”.  The Pew Research Centre found that:

For the public, reducing the deficit is a much lower priority than preserving the benefits provided by Social Security and Medicare: In mid-June, 60% said it was more important to keep these benefits as they are, while just 32% said it was more important to reduce the deficit. Less affluent Republicans view preserving entitlements as more important, while Republicans with higher incomes prioritize deficit reduction. Democrats across income categories say it is more important to keep benefits as they are.

Of course, the usual right wing trick is to mention the word “Taxes” which causes a disgust in the average American’s mind.  This is despite the fact that the US system of taxation is one of the world’s most regressive systems.  The “Bush Tax Cuts” basically only helped the wealthy, yet they were not accompanied by budget cuts to offset the cuts in revenue, but that’s another issue altogether.

The problem is that the National Debt is not the problem as the graph showing how much of that debt is held by private entitites above points out.  There are certain words that cause people to have bad reactions, such as taxes and debt, especially if they are not aware what these really entail to the average person.  The real threat is a default on the National Debt, which is something that the founders didn’t allow.

The United States has had public debt since its inception. Debts incurred during the American Revolutionary War and under the Articles of Confederation led to the first yearly reported value of the National debt as $75,463,476.52 on January 1, 1791. The US had the option of honouring this debt or defaulting and chose the path of honouring it. The founders knew full well if they failed to honour the government’s debt obligations that it would impact the national economy. Unfortunately, those who wish to claim legitimacy by incorrectly following the founders’ “ideals” are more than willing to choose the opposite course of action.

Ultimately, is this all theatrics? Section 4 of the 14th Amendment to the US Constitution states:

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

Could that offer a way out of the current budget mess? Or is the US looking at creating one of the worst economic disasters through its ignorance?

Time will only tell if reason will prevail. I have to admit that I am not terribly optimistic about the situation. There are too many people to blame for this happening. I can sound off, but I do not have the power to influence policy, which makes me somewhat blameless. I have done what I can to sound the warning, but like the warnings of climate change, I think they will go unheard.

See:

Center on Budget and Policy Priorities
Policy Basics: Deficits, Debt, and Interest
Economic Downturn and Bush Policies Continue to Drive Large Projected Deficits
Critics Still Wrong on What’s Driving Deficits in Coming Years
How the Right exploits single issues and manipulates religious faith to direct workers into voting for candidates who are a threat to their economic interests.

Holy Astroturf, Batman!

This photo has been reblogged from Liberals Are Cool and Look At This Fucking Teabagger

If we listen to the USMSM (which includes US Public broadcasting), the “Tea Party movement” is truly a viable, grassroots movement rather than astroturfed horseshit.

2,000 people were expected at a Tea Party rally in South Carolina, just 30 showed up after Donald Trump cancelled his appearance with Gov. Nikki Haley (R), according to the Columbia State. The picture above from the rally is truly priceless for showing how much the “Tea Party” is a creation of US MSM.

The problem is that US MSM refuses to acknowledge the progressive viewpoint. How many people have heard of “the People’s Budget” proposed by the Congressional Progressive Caucus for Fiscal Year 2012? Instead of heading on a crash course for a US Default, the “the People’s Budget” eliminates the deficit in 10 years, puts Americans back to work and restores our economic competitiveness while protects Social Security, Medicare and Medicaid and responsibly eliminates the deficit by targeting its main drivers: the Bush Tax Cuts, the wars overseas, and the causes and effects of the recent recession.

Why do we hear about the Tea Party initiatives, but not the “the People’s Budget”? Might it have something to do with US MSM being controlled by a few large corporations?  They even control “Public Broadcasting (USPM=US Public Media)” through underwriting so that even that avenue may provide more in-depth coverage than Fox News,  USPM is nearly as biased as Fox when it comes down to coverage.

See also:
6 Tips For Spotting Astroturf
The Corporate Accountability Project
Look At This Fucking Teabagger

Welcome to the new workplace!

Hey, get hired at your old job as a temp for half the salary and twice the hours!

YEEHAA!

Posted 23/06/2011 by lacithedog in economy, employment, job market

Redistributing the wealth.

Top 12 countries-Total number of high net worth individuals in 2010

The Guardian has an article called “World’s wealthiest people now richer than before the credit crunch” which points out that while governments are cutting services around the world, the rich are getting richer.

The world’s richest people have now recovered the losses they suffered after the 2008 banking crisis. They are now richer than ever and there are more of them than before the recession struck: nearly 11 million. In the world of the well-heeled, the rich are referred to as “high net worth individuals” (HNWIs) and defined as people who have more than $1m (£620,000) of free cash. According to the annual world wealth report by Merrill Lynch and Capgemini, the category of “ultra-high net worth individuals”, the number of people with assets of at least $30m has climbed 10% to a total of 103,000, and the total value of their investments jumped by 11.5% to $15tn, demonstrating that even among the rich, the richest get richer quicker. Altogether they represent less than 1% of the world’s HNWIs, they own 36% of HNWI’s total wealth.

The Truth About The Economy In 2 Minutes

Former Labor Secretary Robert Reich said he could explain the problems with the economy in less than 2 minutes, 15 seconds—and he did it with illustrations to boot.

As he said, he was a smaller, more efficient Secretary of Labour! I couldn’t agree more.

Posted 16/06/2011 by lacithedog in economics, economy, Robert Reich

How’s that trickle down working?

Spot the disconnect–

One Million Apply for 62,000 Jobs…with McDonald’s

The world’s biggest restaurant chain reported that it received one million applicants for open positions, which resulted in 62,000 people gaining employment. Another 900,000 plus were turned down.

Throughout the country, the dearth of job opportunities prompted huge numbers of people to ask Ronald McDonald for employment. In Florida, for example, 100,000 applications were submitted for about 4,300 positions. In Chicago, more than 75,000 job-seekers vied for 2,000 openings.

CEO pay packets hit pre-crisis amounts