Category Archives: political economy

As Predicted

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Early on in the Progressive-Democrat Biden-Harris administration’s mandates and other pushes of our nation’s car and truck assemblers* to stop producing ICE vehicles and switch over to producing battery vehicles exclusively, some folks were predicting that the transition from ICE vehicles to battery vehicles would be a net “green job” loser rather than grower.

Stellantis now is living that prediction.

On Friday the auto maker announced plans to lay off 2,450 workers in Michigan as it ramps up electric-vehicle production. As consolation, the laid-off workers will receive a generous parting gift.

The fact is that battery cars and trucks have fewer parts and so need fewer employees to assemble them. Upstream, battery vehicle components have fewer parts, and so upstream component manufacturers need fewer employees to make them. Look for those component manufacturers to reduce their hiring needs and then to start laying off employees that are no longer needed.

My added prediction: with the electricity grid becoming more unstable with the accelerating Biden-Harris administration and Progressive-Democrat-run State governments pushes to “green” energy production in parallel with their push to shut down fossil fuel-powered electricity generation, our national power grid is becoming more unstable. That instability, coupled with our industrial base dependency on our power grid and with the expected battery vehicle very large demand on that same power grid, will lead to downstream layoffs as those industrial companies’ ability to produce becomes increasingly hampered and those companies begin their own sequence of layoffs.

*Too much of the components which car and truck companies operating in the US use are manufactured overseas and imported for these companies to be considered manufacturers.

Yes and No

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The Wall Street Journal‘s editors opened one of their Friday editorials with this:

On taxes and spending, he [Minnesota Progressive-Democrat Governor and Progressive-Democratic Party Vice President nominee-in-waiting Tim Walz] has sought to outdo California progressives and is making Illinois look like a model of fiscal discipline.
Ms Harris is slipstreaming behind the Biden Administration policies and refusing to lay out her own policy agenda. This makes Mr Walz’s record as Governor over the last six years all the more revealing as a window on the duo’s plans for the country.

It’s certainly true that Walz’s behavior as governor is demonstrative. It is, though, not entirely “all the more revealing” of a Harris-Walz profligate tax and more profligate spend policy, should they get elected. The editors make that clear in their own words, for all that they seem not to recognize that: Ms Harris is slipstreaming behind the Biden Administration policies.

Harris is not at all “refusing to lay out her own policy agenda.” The Biden-Harris policies are precisely the policies she’s intent on continuing, and that extends far beyond economics. Harris, and Walz beside her, are intent on continuing the Biden-Harris open borders policy, and they’re intent on continuing the Biden-Harris policy of speaking loudly while carrying no stick at all regarding our nation’s most dangerous enemies, Russia, the People’s Republic of China, and Iran.

Harris’ slipstreaming is her statement, if not in so many words, of the policies she intends to pursue in a Harris-Walz administration.

Foolishnesses

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There were two by Bank of Japan managers in the Wall Street Journal lede regarding the BoJ’s interest rate moves.

A week after Japan’s top central banker shook up global markets with comments about raising interest rates, one of his deputies walked them back Wednesday and promised not to raise rates when markets are unstable.

The lesser of the two foolishnesses is that walkback of the BoJ’s statement that it was about to raise interest rates. The increase was both correct and necessary sooner rather than later. The deputy never should have been authorized to walk that commitment back. The BoJ simply should have stopped talking about the raise, having said it was coming. It should have simply done the raise at the appointed time.

The larger foolishness, though, was that subsequent commitment. It’s a promise that no one in the BoJ has any hope of keeping, or the BoJ will never raise interest rates. Stock markets are always unstable.

The stock market’s equilibria—moving sideways for a time—are unstable; it takes no particular event or perceived event to bump the market into a rise or a drop. Rises in the market are not stable; it takes no particular event or perceived event to bump the market into a short- or intermediate- or long-term fall—or into another supposedly stable sideways move. Falls in the market are not stable; it takes no particular event or perceived event to bump the market into a short- or intermediate- or long-term rise—or into another supposedly stable sideways move.

Timing the market is a money losing move; even when central bankers try it. All timing does is mitigate losses, at the expense of long-term gain, but even that presupposes some measure of stability. Long-term gain sacrifice as the price to pay for mitigating losses often is useful for those individuals who must preserve the wealth they have—they’re retired, for instance, and have no other income—but sacrificing long-term gain is a bad move for a nation, whose citizens need long-term growth for the sake of their own and future generations.

If central banks want market stability, such as may be available within a band of inflation around a target rate, they must generate that more-or-less availability by setting their nation’s interest rates at levels historically consistent with their nation’s inflation goals and then leave those rates alone and live with the natural volatility of a free market.

They’re At It Again

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Never mind Progressive-Democrat President Joe Biden’s mantra of “building [America] from the middle out and the bottom up. Here, in a nutshell, is Progressive-Democrat Vice President and Progressive-Democratic Party Presidential candidate Kamala Harris’ proposed economic policy:

Building up the middle class will be a defining goal of my presidency[.]

Biden’s execution of his mantra favored wealthy special interests, vis., green lobbyists, buyers of expensive battery cars and solar panels, and on and on.

Harris has dropped all pretense of carrying a single copper penny about the poor, which has been all too typical of the Democratic Party and its evolution, today’s Progressive-Democratic Party. They yap about the poor, and then they do nothing.

It Needn’t, Though

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The Wall Street Journal headline makes a prediction, and the subheadline adds to it:

Market Selloff Upends Fed Rate-Cut Calculus
A further slowdown in the labor market could lead to a larger half-point rate cut next month

It needn’t, though, and if Federal Reserve Chairman Jerome Powell and his Board of Governors make such a move, they’ll be ignoring history.

Inflation is right next door to the Fed’s goal of 2%\yr; the delta between today’s inflation and that target is in the region of noise around the signal.

The stock market is down a bit, even if sharply: for all the steepness of the drop over the last few days, it’s still only down 6-ish percent, not even a correction level.  The market also is irrelevant.

Historically—and history did not begin with the dot com bubble burst—Fed benchmark interest rates that have been consistent with 2% inflation have been in the 5% region. That’s where the Fed is now, and that’s where our economy’s inflation is now.

But wait—unemployment has risen to 4.3%. I say, so what. That level, and the increase over the prior month and especially the past year, plus, certainly bear watching. However, the increase is off historic lows for unemployment, and the present level remains consistent with full employment, which is another of the Fed’s statutory goals.

It’s time for the Fed—for Powell and his BoG members—to say so on both matters, and to say they’re now going to sit down, be quiet, and let market forces—this time, meaning private economy forces—do their trick unfettered by artificially, and arbitrarily, set government-managed interest rates. Who wins then? Our private economy, with both stable pricing and stable business cost of money—interest rates.

Other major winners would include the stereotypical widows and orphans, and old folks, and anyone else who depends in significant part on fixed income, which is to say interest-driven, instruments.

I repeat myself, but this bears repeating.