Thoughts Before The Alarm Sounds

      Our Congressional economic experts have finally agreed on a compromise that will enable them to raise the government's debt ceiling. That's good news, right?       Well, yes and no. Yes, because the nation will be able to keep its promises to creditors, and no, because they have just guaranteed that the longest recession since WWII will continue.      The agreement cuts government spending by more than $2 trillion over the next decade. The exact targets of the slashing ax are yet to be established, but supposedly all expenses are on the table.      If Congress cannot agree on the exact items to be cut by the end of 2011, spending cuts of $1.2 trillion across much of the federal budget, including the Pentagon, domestic agency budgets and farm subsidies, will be triggered . Many federal benefits programs, however, would not be hit by this contingency, including Social Security, Medicaid, vete...

     The decision to raise the debt limit of the United States Government should be a no-brainer, but the idiots in Washington seem to be unable to rise to that level. When a person, organization, and especially a nation makes a promise to pay, one should be able to expect that promise to be kept. Is it asking too much to assume the United States will pay your government bond when it comes due?      I find it hard to see the difference between demanding concessions for keeping one's word, and someone who takes a hostage and demands money for a safe return - both are bandits! This whole thing reminds me of little boys holding a pissing contest behind the barn.      I know there are legitimate arguments concerning government revenues and expenditures, tax reforms, entitlements, discretionary items, jobs, recession, wars, and a host of other subjects, but whether or not to throw the government into default is not one of them. Mo...

     The Consumer Price Index (CPI), which includes the price of gasoline and food, shows an increase of 2.7% over March, 2010. Gasoline at the pump rose 5.6% in March alone, and is now 27.5% higher than it was a year ago. Food is 2.9% higher than it was at March 31st, 2010.      Economists generally consider the core-CPI, which excludes energy and food prices, to be a better indicator of long-term inflation. At March 31st this index was just 1.2% higher than it was a year earlier – hardly a harbinger of runaway inflation. Unfortunately, most of us have to live with short-term inflation; regardless of what the price at the pump will be in six months, we have to deal with it today.      According to the U.S. Bureau of Labor Statistics (USBLS), in spite of a 0.6 increase in average weekly hours worked, real average weekly earnings for all employees decreased 0.4% between March 2010 and March 2011. People are working longer and ...

      A Commerce Department report Friday showed that the economy grew at an annual rate of 2.4% after reporting 5.0% at the end of 2009, and 3.7% in the first quarter of the year. Meanwhile the Bureau of Labor Statistics is reporting that there are five applicants for every job opening. Obviously the economy is slowing down.       But if that is true, manufacturers apparently are not aware of it. For the quarter, industrial spending for buildings, equipment and software increased at an annual rate of 17.0% compared with a 7.8% increase in the first quarter. If businesses are investing at an increasing rate, why are no more jobs available? There are several reasons why this is happening.      (1) Efficiency. If machines or computers can do the job that a human being was doing, that is one less worker for the same amount of production. The machine does not require a salary, payroll taxes (in many cases the manufactu...

      The Senate is set to vote on the 2,300 page Dodd-Frank Wall Street Reform and Consumer Protection Act , designed to establish much needed reform in the financial services industry. Supposedly the bill will monitor the types of transactions which led to the recent recession. With the announcement that Republican Senators Collins and Snowe of Maine, and Brown of Massachusetts would support the bill, the required 60 aye votes on Thursday seems assured. But as usual with the Senate, anything can happen.       The bill establishes a number of new government departments (Surprise! surprise!) to implement and maintain its regulations.       The new independent Consumer Financial Protection Bureau will be housed at the Federal Reserve, and will be responsible for ensuring that consumers get all pertinent information when shopping for mortgages, credit cards and other financial products. It will protect them from...