Category Archives: Economics

Miscellaneous economy stuff

More Big Government

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And more interference from that Big Government.

President Barack Obama has signed is going to sign—and do his usual bragging about signing—an Executive Order requiring all government contractors to give their employees paid sick leave.

On top of that,

The White House wouldn’t specify the cost to federal contractors to implement the executive order, which Obama was to address at a major union rally and breakfast in Boston. The Labor Department said any costs would be offset by savings that contractors would see as a result of lower attrition rates and increased worker loyalty, but produced nothing to back that up.

Neither Obama nor Labor Secretary Thomas Perez produced any data to support their bald claim because they don’t have any. Their position is based solely on the arrogance of “We’re Big Government. We Know Best.”

There is, too, that Democratic Party ethos. Perez said

The Republican Party is out of step with similar conservative governments around the world.

Yeah. Someone else is doing it; therefore, it’s the right thing to do. The rightness or wrongness of the thing isn’t at all inherent in the thing. Popularity creates right. I’ll ignore the fact that Perez’ “around the world” is Europe, and that there aren’t any conservative governments in Europe.

It’s certainly true that paid sick leave has merit. However, the decision about paid sick leave is best left in the hands of the employer and his employees and prospective employees. What other countries, what other domestic companies are doing, has nothing to do with it.

It’s not at all true that every good idea must be turned into a government edict that everyone must follow. Including when the costs of this or that good idea will vary from time to time, situation to situation, company to company, industry to industry.

Especially since Americans are fully capable of acting on their own choices. We’re not as stupid as Big Government assumes us to be.

An Excerpt

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…from a VA Office of the Inspector General report.

We substantiated the second allegation that pending ES [Enrollment System] records included entries for individuals reported to be deceased. As of September 2014, more than 307,000 pending ES records, or about 35 percent of all pending records, were for individuals reported as deceased by the Social Security Administration. However, due to data limitations, we could not determine specifically how many pending ES records represent veterans who applied for health care benefits. These conditions occurred because the enrollment program did not effectively define, collect, and manage enrollment data. In addition, VHA lacked adequate procedures to identify date of death information and implement necessary updates to the individual’s status. Unless VHA officials establish effective procedures to identify deceased individuals and accurately update their status, ES will continue to provide unreliable information on the status of applications for veterans seeking enrollment in the VA health care system.

Not only is the VA not trying to take care of our vets—307,000 of them died waiting to get treatment—they’re not even troubling themselves to keep records.

We substantiated the third allegation that employees incorrectly marked unprocessed applications as completed and possibly deleted 10,000 or more transactions from the Workload Reporting and Productivity (WRAP) tool over the past 5 years.

They do, though, go to the effort of covering up their non-performance (I hesitate to say “failure to perform;” that would suggest they’re trying).

And there’s this insulting bit of vapidity from the Under Secretary for Health in response to the IG’s report (the whole letter is at Appendix D of the report at the link. It doesn’t get any better).

We regret the inconvenience and potential hardship place on applicants for health care and we are working hard to restore Veterans’ confidence and trust in VA’s systems and staff. We have and will continue to take timely and appropriate steps to improve our services to ensure we meet the expectations of those whom we have the honor of serving.

Yeah, dying while on the VA’s who gives a patootie wait list is such a potentially inconvenient hardship.

Since the VA doesn’t care, we should honor their lack of interest. Disband the VA, and use the budget dollars that would have gone to the VA in any particular year as vouchers for our veterans which they can find, in that year, their own quality care and decent hospitals.

Whose Phones Are They?

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Apple Inc’s move to make it easier to block ads on iPhones and iPads is troubling publishers and heightening tensions with its Silicon Valley neighbors.
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Putting such “ad blockers” within reach of hundreds of millions of iPhone and iPad users threatens to disrupt the $70 billion annual mobile-marketing business, where many publishers and tech firms hope to generate far more revenue from a growing mobile audience. If fewer users see ads, publishers—and other players such as ad networks—will reap less revenue.

Yeah, and? I sympathize with publishers and tech firms and…ad networks…over their loss of revenue from their ads not being viewed—about as much as I sympathize with other advertisers over the loss of revenue from their bulk snail mail brochures going unread directly from my mailbox to my trash can.

My house is my own, and advertisers have no authority, no right, to enter it to pitch their wares, or for any other reason at all, without my prior permission to come in. If I wanted to be a curmudgeon about it, I could—quite legally and morally—take steps to prevent them from entering my property at all to gain access to my doorbell. That I don’t is only because such a measure would interfere with the access to my door that my friends and those friends who are still strangers should have.

So it is with my cell phone. It’s my cell phone, not those advertisers’, and if I don’t want them to clutter up my phone with their digital brochures, then they have no choice but to comply with my wish that they not come knocking at all.

Here’s Jason Kint, CEO of Digital Content Next:

The ad-blocking problem is real and growing, and ad-blocking on iOS is only going to accelerate it.

Problem for whom? Not for the property owners. We’re not your piggy bank.

I don’t often agree with Apple, but on this question I say a hearty well done.

PRC Local Debt

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The Standing Committee of China’s National People’s Congress imposed a 600 billion yuan limit on the direct debt local governments are allowed to run up this year, the official Xinhua News Agency said late Saturday. That would be on top of 15.4 trillion yuan on debt owed by local governments as of the end of 2014, Xinhua said.

That works out to about $2.5 trillion in total local debt across the country. There’s no word on how the NPC, or any other part of the central government, intends to enforce that limit. No more fudging the economic data by the locals, perhaps? That’s where it would have to begin. But then what? Fire the local government employees—or better, enroll them in one of Xi’s reeducation programs? Terminate local services? Raise taxes? Some more?

But there are loopholes.

The caps don’t include indirect liabilities, which officials said totaled 8.6 trillion yuan (roughly $1.3 trillion), according to Xinhua.

In addition, the central government has expanded a local-debt refinancing program that allows local governments to swap their high-interest debt for low interest central government debt. Don’t ask who sets the central government’s bond rates. Do think, though, about the financial liability being laid off onto Chinese “taxpayers” across the country from those locals.

And

Separately, lawmakers will remove a 75% cap on banks’ loan-to-deposit ratios on Oct 1, Xinhua said on Saturday.

Boy, howdy, are there loopholes.

Interest Rates

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…and the Fed’s manipulation of them. Sober Look has six thoughts on the matter (though they don’t couch it in terms of manipulation), and so do I.

  1. While the Fed officially talks about not being focused on the currency markets, the recent dollar rally should give them some food for thought. The global “currency wars” have sent the trade-weighted US dollar to the highest levels in over a decade. This will continue to put pressure on US manufacturing (and even some services sectors) as US labor and other costs of production rise relative to other nations.

Not that much. Manufacturing, per se, hasn’t been that big a deal for our economy this century, for all that it’s making a useful comeback lately. Too, the “currency wars” are a response to the PRC’s revaluation and have mostly played out. Most importantly, the “highest levels in over a decade” isn’t all that high, even in relative terms. This is a factor that’s largely irrelevant.

  1. Commodity prices, led by crude oil and industrial metals, hit new multi-year lows, reigniting disinflationary pressures. Note that the Bloomberg Commodity Index is at the lowest level since 2002.

To the extent this is applying any pressure at all, it’s a deflationary one—and so a reason to raise interest rates, an inherently inflationary move, since rising interest rates are intrinsically inflationary.

  1. Driven to a large extent by commodity prices as well as economic weakness in China, US breakeven inflation expectations are declining sharply as well.

This is another who-cares concern. The breakeven inflation rate is the difference in yield on Treasury debt and TIPs of the same maturity that makes an investor not care which he buys; he gets the same yield. Both Treasury and TIP rates vary with market pressures (or would were the Fed not artificially suppressing rates), and so the only effect here is lag between one moving and the other moving to compensate.

  1. Some point to the recent stability in “core inflation”, with CPI ex food and energy remaining around 1.8% and providing support for a less accommodative policy. However the main driver of this stability is the rising cost of shelter. Core CPI excluding shelter is below 1% (YoY [year-on-year]).

One of the Fed’s dual statutory mandates is price stability, and the Fed has defined the inflation rate safely consistent with that to be 2% inflation (YoY). Inflation has been below that for lots of years because the Fed has artificially suppressed interest rates instead of letting them answer to market forces. As noted above, rising interest rates are inherently inflationary; if we’re to get to the Fed’s 2% target, interest rates need to be allowed to rise to levels historically consistent with 2% inflation.

  1. The biggest argument for a rate hike is the expectation of increasing wage pressures. US labor markets continue to improve and at some point – the argument goes – wage growth will accelerate. However, we haven’t seen much evidence for wage pressures thus far, as average hourly earnings continue to grow by about 2% per year (nominal). With the recent dollar strength, US corporations will speed up shifting production abroad – especially Mexico, limiting wage growth in the United States.

Sober Look is, in the main, right on this. Which puts the thing in the who-cares category. Sober Look does expand on this by worrying that stagnant wages coupled with higher interest might start to price renters out of their rented homes. An interest rate régime consistent with the Fed’s target inflation rate won’t present that risk though. What will present the risk is a separate problem of the Fed’s creation, and that’s the enormous inflationary pressure it’s created with its excessive money printing since 2009.

  1. Finally some at the Fed have been concerned about bubbles forming in the financial markets. In recent weeks however, the markets took care of that, as a healthy dose of risk aversion returns to the markets[.]

As they say. And so this is a who-cares item.

In sum, my thoughts center on sticking to a plan and a rate rise/release is necessary for one reason or another. Raise the rates/let them float (at least a bit more) in September as planned.