Prosperity vs. Poverty

April 29, 2013

Carmen, Carmen…

By Don Kirk in Free Markets Myth, Keynesian Myth-Math, Prosperity vs. Poverty, Socialism's "intellectual suicide"

Spanish unemployment. Past 25%, and still rising, after five years of both Leftist and Rightist governments promising they knew how to end the economic debacle. Well, they created the problem so one would think they know how to solve the problem, but if a country is going to base its economic policies according to ideology, then we shouldn’t be surprised when they fail.

Currently, yields on Spanish bonds trade at 4.16%. Debt is at 110% of GDP (more than the entire economy), which means the cost of the debt has to be financed out of annual economic growth.

Oops. Spanish GDP growth is 1.5%, on a good day and after drinking plenty of Spanada wine. So, 4.16 – 1.5 = -3.66. Conclusion? Spain is being toilet-flushed by more than 3% per year by ideological economics of Leftists and Rightists, both of which are utopian and laden with myths. Watch for Spanish youth to be migrating to Latin American economies to escape the toilet-flushing at home.

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April 25, 2013

Weber Redux

By Don Kirk in Economics, Prosperity vs. Poverty, Social Regress & Social Progress

According to this 15-year chart of Europe’s economy, Europe has now double-dipped into recession. Leftists blame ‘austerity’ cutbacks on government spending for the recession; conservatives blame rising taxes choking off private investment.

Recessions are caused by a collapse in bank lending. To find the true cause of an economic recession–and how to solve the decline–determine why banks are reluctant to lend. In Europe’s case, the banks are so badly broken that they have to borrow to stay afloat, instead of lending to grow their profits.

Scary whispers from Europe suggest that the banks in France are next to need bailouts. If France fails, the Euro fails. Perhaps the idea of two Euro currencies is best: one for the productive northern nations, and one for the southern insolvent nations. Or even better, one Euro for the thrifty nations with healthy banks, and all of the spendthrift, borrowing nations with broken banks each have their own currency.

More and more, as in Weber’s analysis, it looks like there is something about prosperity in Protestantism which is missing in Catholicism, and it looks like whatever is missing in Catholicism is an economic drag upon all of Europe. France, Spain, Italy, Portugal, and Ireland, by the way, are largely Catholic. Greece is Orthodox, a form of catholic.

So, a philosopher’s question is, How do the different religions affect bank lending?

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April 15, 2013

When Flat Means Falling Behind

By Don Kirk in Economics, Philosophy of Freedom, Prosperity vs. Poverty

From Stanford Professor John Taylor’s blog, Economics One, his chart showing the disparity of income growth between the bottom 90% and the top 10% in the American economy over the past 65 years. Note that the bottom 90% of American workers have stagnant income growth for the past 45 years.

In those 45 years, 1968-2013, 18 years are under Keynesian (Fabian socialism) presidents: five years of Republican Richard Nixon, eight years of Republican George Bush II, and the past five years of Democrat Barack Obama. Now 40% does not mean causation, and the boom of the Great Moderation under Presidents Reagan and Clinton shows that far more is wrong in stagnating incomes for the middle class than simply implementing Keynesian suicidal economics. What is missing is a comparable graph of changes in productivity for the past 45 years, for both the 10% and 90%.

A structural problem is likely the cause of income stagnation in the American middle class (the 10% probably have dramatic improvements in productivity since the end of the 1982 recession, while the 90% likely do not), and the very last institution capable of correcting structural problems is the United States Congress. Perhaps as great as the increase in productivity from personal computers has been for the bottom 90% since 1982 (the year IBM introduced the PC), the increase in productivity from personal computers for the top 10% has been far greater.

If so, the separation of income growth rates between the American prosperous and the American middle class since 1982 is explained, because income follows productivity.

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March 30, 2013

Oops. A Chart of Unintended Conclusion

By Don Kirk in Free Markets Myth, Philosophy of Freedom, Prosperity vs. Poverty

From the Mercatus Center at George Mason University, the relationship in the fifty United States between levels of freedom, both personal and economic, and the two major political parties. A better chart would include corresponding state income growth rates, tax levels, and unemployment relative to the two political parties. By this chart, two of the top three wealthiest States are the least free of all fifty, yielding a narrow conclusion that the least amount of freedom gives the greatest amount of prosperity.

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February 16, 2013

Robotics

By Don Kirk in Prosperity vs. Poverty

The chart above is the percentage of American workers employed in manufacturing. For the last half-century, the percentage of industrial workers has fallen steadily. The chart below is the number of industrial workers in the economy, which has ups and downs, but mostly downs over the past thirty years.

A missing chart would show that even though employment in manufacturing is collapsing, the amount of manufacturing in the United States is still quite healthy, showing no decline over the past half-century. The difference is robots.

Robots do not need to have a coffee break. They do not require vacations, sick days, maternity leave, or pension plans. With the next generation of robots capable of maintaining robots, humans in manufacturing will nearly disappear, except for the most highly skilled. Manufacturing is now like agriculture in the first half of the last century: ever greater production with ever-shrinking number of farm workers. Less than 2% of workers are now in agriculture, yet production is near all time highs.

To be a farmer today one has to have a four year degree. Soon, to be a skilled worker in a factory, one will have to know calculus, or so Christopher Mims thinks at Quartz. With both agriculture and manufacturing employment collapsing, isn’t it likely that information technology is the next great industry to begin experiencing the dichotomy of falling employment during rising productivity? 2050 will tell.

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February 14, 2013

Berlusconi in Babeland

By Don Kirk in Economics, Ethics, Prosperity vs. Poverty

Former Italian premier Silvio Berlusconi

This is Silvio Berlusconi, three-time former Prime Minister of Italy, now making a political comeback to be Italy’s next Prime Minister. Slick and suave at age 71, he is famous for his personal wealth and his conservative politics. Are those hair implants and hair coloring? If so, no doubt the latter is to put on his best appearance for the bevy of beautiful very young Italian women he is also famous for ‘squiring.’ He obviously has a strange kind of conservatism.

According to The Telegraph today, EuroStat just announced that Europe is now in a ‘double-dip’ recession. England and France were already in recession, but now Germany’s drop in GDP pushed the entire Euro area into economic decline. Italy? No one can really say if Italy was ever out of recession during the past six years.

Mr. Berlusconi’s “strange kind of conservatism” was on display this week when The Hindu newspaper in London reported yesterday that he defended the practice of Italian corporations bribing foreigners to win contracts to sell Italian made goods and services. To hear Mr. Berlusconi tell it, bribery is routine and endemic all over the world, so Italian CEO’s must bribe in order for their companies to be competitive in the world markets. He is quoted as saying bribery is not a crime; the business executives are simply paying “commissions” on the contracts which then provide jobs to Italian workers.

I’ve said it before and it should be said again: Just as there is no longer such a thing as a natural famine, there is no longer such a thing as a natural recession. Ever since the 20C, governments create famines, and I am increasingly coming to believe that governments create recessions. Regardless of the government, regardless of the culture, regardless of liberal or conservative ideology, the occurence of recessions is correlated with the level of official corruption, whether the ‘corruption’ is commissions on contracts in Italy or ‘bribing’ voters in America. Someone at a noted university needs to do a rigorous study on whether it is official government interference in the economy during our post-industrial era which is creating economic recessions.

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January 14, 2013

Anti-Freedom Anemia and Stagnation

By Don Kirk in Economics, Philosophy of Freedom, Prosperity vs. Poverty

It’s more than interesting that the world’s second largest economy is not included in this graph from The Economist. China’s growth is so large at above 7% that it doesn’t even fit on the graph which tops out at 4%. Also, these numbers are not real growth, that is, growth minus inflation. Japan’s new prime minister is jawboning the central bank to inflate to 2%, which turns the already marginal growth in Japan into negative growth. If inflation is factored into these growth projections, ‘Europe area’ has negative growth in 2013.

Why are Australia and Canada doing so well? It could be, that as natural resource economies in the Pacific, their sales of raw materials to China will see them have positive growth this year, and any inflation in raw materials prices would only work to benefit Australian and Canadian export earnings.

As for the United States, well, at 2% growth and 1.8% inflation, real growth will come in at an anemic .2%, or .002 in 2013. Another year of economic stagnation; not negative, but only marginally positive. “Anemic,” is the best description; “stagnant” is just as good. Will it surprise anyone when the 2012 numbers come out, that the United States level of Economic Liberties continues to slide down the slippery slope toward 2nd world status? In the philosophy of freedom, the trend direction and level of Economic Liberties overwhelmingly correlates with economic growth.

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December 24, 2012

The Coming Collapse

By Don Kirk in Economics, Keynesian Myth-Math, Prosperity vs. Poverty

From Dr. John Taylor’s blog, Economics One, the new Congressional Budget Office chart of 213 years of U.S. government debt and Dr. Taylor’s restoring their original long-term forecast, conveniently left out of their recent projection. The ghost of Christmas future warns with a bony pointed finger.

The collapse of Greece, not incidentally, came when government debt reached 300% of GDP. The CBO projects that under present trends we reach 300% in 2050, which perhaps explains why their new charts leave out anything after 2045.

This chart predicts the collapse of the American economy in thirty-five years, yet we will continue to vote for Keynesian Republicans and Democrats until they have bankrupted us. The closer we come to 300% debt to GDP, the more the dollar will erode. As the dollar erodes, inflation will soar. As inflation soars, interest rates will rise. As interest rates rise, the economy will slow even more and the debt costs will accelerate. We call this economic theory ‘Keynesian Fabian socialism,’ otherwise known as “death spiral” economics.

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December 6, 2012

Confucius Said…

By Don Kirk in Democratic Capitalism/Democratic Socialism, Economics, Prosperity vs. Poverty

The comparative rates of growth and decline of GDP and employment in the top and bottom five of the world’s 300 largest cities, courtesy of the Brookings Institute by way of the ‘Markets & Data’ blog of the Economist magazine. It’s interesting that the collapse in real estate in Las Vegas during the two years of the Great Recession has wiped out the superior economic growth of Sin City’s 27 year boom.

It’s more than interesting that China’s 32 year boom continues. Pundits and critics obsess about China’s recent ‘slowdown,’ but clearly the “slowdown” is to rates of growth that every other nation in the world would love to have. Greece and Spain should import some Chinese thinking about increasing their economic liberties by regional deregulation (1979), establishing enterprise zones (1980), and accepting peasant self-direction in agriculture (1978).

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October 30, 2012

Euro Propaganda Unemployment

By Don Kirk in Economics, Prosperity vs. Poverty

From The Economist magazine, a chart of unemployment in Europe. Just as in the U.S., European governments report the smallest measure of unemployment, even though the actual number of unemployed is much higher. Light blue is the reported jobless; dark blue is the more accurate measure. If we put the U.S. “propoganda rate of unemployment” in this chart, it would be located above Great Britain and just below the Euro average.

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