Thank You, Dean Baker

Not much time to post, but if you have the time, take a look at two divergent views of unemployment and recovery.  On the one hand, you have the Fiscal Times taking the extraordinarily lazy "unemployment is structural and we should expect 7+% unemployment forEVAR" and we should basically just accept that stupid, lazy, unskilled labor will never find a job again.  On the other hand, we have Dean Baker pointing out the obvious: that the same economists who couldn't see the crisis coming are (again) taking the easy way out and cannot be trusted.

Conclusion?  All this structural employment talk is a way for the elites to impose austerity and ensure that no crumbs make it down to the little folk.  Fight this idea like your life depends on it, as your livelihood just might.

Know Your Enemy

A new ad campaign by Southwest Airlines caught my attention, not because of their offering, but how they portray their competition:

So, basically, the competition is gouging customers, really fucking them over with excessive fees.  And the personification of this colossal working-over is a smirking, shameless executive calling it making an "honest dollar".  Perhaps what really made this jump out at me was that it reminded me of the radio ads I was bombarded with this summer from Administaff (ironically as my company was moving over to them):

See?  It's the scary government that's gonna come on in and kill your small business!  It's gonna regulate you into oblivion!  It's gonna... well hires us!

We have this amazing ability in this country to be romanced.  Millions of people in this country don't want any tax increases for the top 0.1% because they believe that somehow they're going to get there some day.  The biggest six banks' assets are equal to 64% of GDP (Q3 2010), but it's the government's expansion that is unconscionable.  How many Mortgage Backed Securities have teacher's unions underwritten lately?

It's My Mom's Fault!

First, my apologies to my reader(s) for neglecting the blog.  I was doing family related activities, then I got sick.  Now, back to business.

I fucking knew it.  I always had my suspicions, but now I know it to be true.  The whole global economic nightmare in which we live was my mother's fault.  When she was "grading papers", she was actually working on a union-socialist plot to crash the economy so that Cooper or Skylar or whatever trendy WASP named e mid '90s baby turning 16 in 2010 could only get the 325, not the 335xi he really wanted for his birthday.  And, you know what?  Screw her.  And worse, screw that ethnic looking guy who does some sort of labor I neither would nor could do because he gets to retire someday and he takes breaks.  Breaks!  Do you believe that shit?  Travis Fast links to (teh awesome) Naked Capitalism for this gem from the NYT:

Across the nation, a rising irritation with public employee unions is palpable, as a wounded economy has blown gaping holes in state, city and town budgets, and revealed that some public pension funds dangle perilously close to bankruptcy.

In France, they riot when cuts to pensions are threatened.  Here, we blame working people.  Unbelievable.  Now, we could leave it at that, but when you dig a little deeper, it is clear that we are paying for our assholery.

If there's one thing that's basically indisputable, it's that austerity would create more unemployment and lower wages.  As more public sector jobs disappear without the private sector picking up the slack, aggregate demand contracts further leading to slower growth leading to more job cuts... rinse, repeat.  And this effect ties in with a recently oft discussed topic: Okun's Law.  The crux here is that there is a relationship between GDP growth and unemployment and the kicker is that there is less than a one to one trade off once growth is positive.  In other words, it takes more than 1% GDP growth to erase 1% unemployment.  So, when you cut government expenditures (including those to pay employees, such as those evil public school teachers), you are cutting a significant component to GDP.  And, since the private sector is not filling that gap, austerity directly creates unemployment.  So, let's blame the unions.  Let's attack public sector employees.  And let's stock safes with canned food and cash.  But let's never tax financial transactions or invest in infrastructure and education: we don't want to end up like... France.

Thursday Morning Paradox

I've spent some time this morning being transfixed by a back and forth between Brad Delong and Chris Bertram (of Crooked Timber) who has been influenced by Tom Walker (about whom I know really nothing other than now I like his blog and I'm going to read his manuscript should I have the time).  At issue is the application of the Lump of Labor fallacy to energy efficiency.  The argument is that there is a rebound effect (or Jevons Paradox) relating to energy efficiency that would reduce or eliminate the environmental benefits of efficient construction or installation.  The thought is that increased efficiency would lower energy costs and the result would be greater consumption.

Personally, I do not think we will have the opportunity to test this theory empirically for several years as domestic energy consumption will remain depressed due to economic factors.  Further, I think that over the next decade there will be increases in societal pressures to reduce consumption as the anti-intellectual backlash against environmental concerns abate.  This latter thought might be a bit pie-in-the-sky.  Anyway, check out the links, as you will either find them fascinating or as an excellent replacement for Ambien; valuable either way.

Estupido

I've thought long and hard, but I cannot think of an issue that conservatives handle more stupidly than immigration.  Have any suggestions?  I'm certainly no expert, but this is what I think about it.

If there's one thing conservatives hate hate hate (leaving peoples out of it), it's the minimum wage.  They want wages to clear at the point the invisible hand deems appropriate to lower the cost of doing business.  The last thing they want is the potential for upward social mobility as that would be a key to preventing neo-feudalism from taking hold.  Heck, John Galt would despise the minimum wage as it is rather unbootstrappy. 

Well, let us imagine for a moment that the millions of undocumented workers in this country magically became citizens (not that anyone is proposing this, but for illustrative purposes).  Once they stopped beheading law abiding citizens, they would become eligible for the minimum wage which is greater than that which they had been paid previously.  The result would be a dramatic hit to bottom lines.  Assume, for instance, that the net increase in wages and benefits would be $1 per hour (which is unrealistically low) and the average undocumented laborer works for 40 hours per week and 50 weeks per year.  Further, assume there are 5 million workers who would be effected.  The result is $10 billion in increased costs to business.  I believe this number is significantly low and the actual effect would be much greater.  Regardless, this situation would make some powerful people awfully angry, as well as consumers who would see higher prices for produce and other products.  And such a result would be some powerful ammunition against the minimum wage.

On the other hand, increasing the legal, recognized, tax paying labor force would change dramatically the demographics of the country, alleviating some of problems facing another favorite foe of conservatives, Social Security.  Whipping teahadists into a racial frenzy is quite the paradox for conservatives, then.  I think it comes down to what is easy.  Courting the Latino vote is more difficult than riding the racial frenzy into office in the near term.  Attacking the minimum wage can wait until after they insert more regressive taxes that will push the working class into poverty anyway.  Am I the only one excited for the 112th Congress to start already?

The Inflation is Coming! The Inflation is Coming!

There has been a lot of talk of late of interest rates going up to their highest levels since (gasp!) June and how this portends the hyperinflation Glenn Beck has been warning about ever since he realized he could make money off it.  Well, as with most right wing talking points, this one is pretty easily debunked with a little (double gasp!) thought.

Let's take a look at how these run away interests rates have performed (in this case, on the 10 year treasury bond) versus the S&P 500:

Here, you can see the interest rate appreciation (green line) has occurred almost simultaneously with a huge rally in the S&P.  Also worth noting is that we're still well below where we were this spring.  There are two conclusions to be drawn here, which are really as unspectacular as can be.  First, as bond prices and interest rates are inversely related, this is an example of money coming out of the bond market and moving into the equities market.  Money chases performance.  Second, what is evident is there is hope out there, somewhere, that the US economy (and, by proxy the world economy) is improving.  Irrational Exuberance?  Maybe.  But hyperinflation?  Not so much.

Krugman on Commodities

At risk of making this a Krugman fan blog, I will once again refer to one of his pieces, today discussing commodities and inflation in which he dispels the commodity-as-inflation myth.  He points to the fact that the commodity markets are global and prices reflect demand from emerging markets.  Here's some more proof.  First, let's look at an oil chart:

Bang!  Look at that rise, exactly as expected.  You will note that, just as Krugman explains, this is a global commodity, priced in dollars that has appreciated significantly in the last six months.  Now, let's take a look at "natural" gas (I will explain the quotes there in a subsequent post).

Gas is a domestic commodity, traded for domestic consumption only.  It can be argued that, since gas is a primary input for electricity and industrial production, it is a reflection of the current economy.  In normal economic times, one would expect to see significant seasonal increases in prices as demand increases for residential and commercial heating.  But, as Lee Corso would say, not so fast my friend!  If we were seeing the inflation the righties have been foretelling, surely we'd see a dramatic rise in gas prices.  Maybe they're just wrong, or lying.