The real Power of Markets

I read the literature of this Post, and some of the work behind it. I am confused by it, because I recognize the real failure of State Planning. It cannot foretell the future! The Counterpoint intrudes that the Markets actually set the Production Schedules of the economy. They respond to the amount of Production materials available, and combine those materials with the desire to possess the materials for Production, and thereby set the Production Schedules. This might seem like a ludicrous idea to Some, but is the reality!

Markets not only set the Production Schedules, they also assign reality to Consumer Demand. This later is not only Consumer desire, but the ability to pay the Cost of supply of that desire. My grandfather wanted a new Cadillac all his life, and never had one. The entire issue was the Price on the vehicles. He settled for Fords. Why? Much of the material Cost of the vehicles were the same, but levels of Production and amount of Consumer desire was translated into Consumer Demand by Price. It is these two equations exposed which define the success of Markets.

Economic models never account for future demands placed upon the economy, while Markets automatically assess the alteration of viable Consumer Demand immediately. Materials can shift over the period of a day from one endeavor to another. Consumer products can rise or fall within an hour; check the entirety of Gasoline pricing and arbitrage. Markets were the first computers of the human race, and will undoubtedly last the longest! lgl

Essential Truth

I should like this Post, but I don’t. Deep Seal Drilling is not business as usual just using machines. There is already immense pressure at point of interconnect when there is 5000 feet of seawater on top of the operation. Foundation pins need to radiate out from the drill hole from the immediate base to about 8 times the distance presently utilized. Inner circle pins should have 120 depth into the bedrock, while exterior pins should have a depth of at least 60 feet; this simply to keep the base frame from being blown out. There should be a pressure transfer system where outlying pins blow before interior pins. Blow-Out Preventers should be tied to the foundation pins–separate to the connection of those pins to the base frame. These Preventers should be securely bolted to the base frame, but with breakaway bolts to where the foundation pins absorb the pressure upon breakage, the Preventer serving as a Cap upon Blow-Out. The Whole should be surrounded by an independent secondary Pipe funneling blown material to the surface. The surface should already be surrounded by a bumper system to prevent Oil spillage from spreading. The secondary Pipe should end 30 feet below ocean surface to prevent Oil geysers which could escape the bumper system.

Please retain unlimited liability. We are already getting sufficient drill holes in our oceans under the current system, and I would not enjoy anything which would multiply that number of drill holes without all due caution; a factor which will become apparent with a cap on liability. The Oil industry is too profitable for unlimited liability to forestall Oil recovery, and I want the small companies to be mightily afraid to enter into Drilling without a big pockets parent able to handle liability damages. Freezing out the minor supplies of equipment will only force the majors to develop their own equipment, a function which will improve compatibility of equipment in Service and Function. There is real Need to understand that minors are in this arena to draft off the Profits of Oil; I feel no Call to supply this many Management teams with high Salaries and Bonuses, when it comes at a Safety Cost to overall performance.

Every Consultant in any business arena survives by placing the Management of the businesses they service at the head of the feeding trough. I am not accusing Kopits of any attempted propaganda, just the natural inclination to serve his Clients. They want higher Profits and lower liability. I simply do not like his Clients as much as he does. lgl

As the Earth quakes beneath Us!

I would like to start out by answering a Question put to me in my incomplete, inadequate manner which is my nature at work. The Question asked was How saved taxation in the Past could possibly affect the tax impact of higher taxation in the future. Let Us first start with the normal 97% whose Incomes only matched the inflation rate in the past decade. Some sensible economist somewhere estimated the return of taxes to these Income Earners would reduce the growth of GDP about 1.2%: correct estimate who knows for sure. Revival of the 2000 taxation for those who made the 8% per year gain in the last decade would reduce the GDP about 0.7%. There are Those, including the Obama administration, who believe revival of taxation for these Income Earners are worth the only digital loss of GDP; faced with the Savings in federal debt contracted.

The first statistic could quite possibly be concrete in nature, because it would seem only a natural rise in Income for Labor through the time sequence. I have already suggested a reduction of Sales and Property Taxes by federal program to courteract this effect. The advanced rise in Income for the highest Income Earners does not seem entirely natural, where they earned an approximate 40% ungraded, or 52% graded increase in Wealth over Inflation during the Period of the last decade. This leads me to doubt the last statistic, as I believe there will be no economic disincentive to the increased taxation until the highest Income Earners fall to a relative position equivalent to the normal Income growth of all Labor under inflation. It is only a pretense that such Income levels will reduce their economic efforts because of the taxation; they will increase their efforts to make back the added taxation.

The Obama administration is rumored to be contemplating reduction of tax expenditures now on the books. I find this to be an exceedingly grand idea, and long in delay. It not only eliminates much of the chicanery from the tax system, but will do much to return the higher Income Earners to a normal pattern of Income growth based upon Inflation. I would like here to say that an actual normal pattern return of the higher Income levels will not actually be an economic disincentive even if attained (doubtful); it would require a 3.2% loss to the lower Income Earners for such an economic disincentive to be realized—my numbers, so of course in dangerous territory! lgl

Life in the Fast Lane

I was talking to some of my friends last Week about letting the Bush Tax Cuts expire. I stated then, right or wrong, that they could expect about a 5% increase in Personal Income tax, and about a 7-8% increase in Capital Gains tax. A lot of people claim this added taxation would be bad for business, but I seriously doubt it. The reason I doubt it stands as these Individuals have opportunity to attain higher maximization of their Income with due diligence–they work a little harder–and the fact that Government debt pulls as much or more of Investment capital from the Market as they would contribute to that capital. Menzie Chinn may provide a more balanced look at the entire Question, but ultimately doubts that removal of the Tax Cuts will have much impact.

I would like to approach the problem in a different manner. The people to be taxed once more did very well in the past decade. One can find many estimates on how well they did in actual fact what with the inflation rate being what it was, but I assume they achieved a growth rate in their Income and Capital Gains of about 8% per year before scaling for Inflation. I may be vastly wrong because I do not follow long-term inflation, but cannot imagine that the Inflation rate was over 40% for the Period; this meaning that these Income levels did about twice as well as the inflation rate, so that their Incomes are about half again as large as in 2000 after inflation.

It is clear that they are first paying more today than they were in 2000 even with the Tax Cuts. It is also clear that if the Tax Cuts expire on schedule, there would be an incredible lengthy period before they would have to pay an equal taxation to what they would have paid, if the Tax Cuts were never implemented in the first place. An astute economist could insist that the tax impact of Bush Tax Cuts expiration could not be accounted as added taxation until the new taxation had replaced the foregone tax revenues over the Tax Cut period. The wondrous element here may be that this will be what the markets will also account, and there will be no tax impact until the previous Income Gains fall back into normal alignment with lower Income sectors. If this is the Case, then the Tax Cut expiration would be a benefit, with no impact on the economy, lower Interest rates as Government debt is not assumed, and it would propel these Income levels to maximize their Income potential. lgl

Never ask me for Links--See!

I would like to say that I have read David Stockman, and agree with much of what he had to outline. Menzie Chinn, though, has a much more illustrative Post, and clarifies the status of the last Recession. I do not exactly perceive his great rebound in Investment, especially as much of it was the importation of capital goods. His sidekick blogger, James Hamilton, also has an interesting Post, and my only comment must be the Question: How long can they expect to generate side-paper Profits in a real term declining economy? They will have to eventually insist on the foreign paper trade insisted upon by Arnold Kling simply to prevent US Imports from becoming unapproachable.

I will now turn to this Work by Calculated Risk. The sum of $771 billion of net inequity carries no unmanageable element, if the debt is quickly sent into receivership. Carrying deadweight is the most precarious factor in such debt, with no one able to get a Restart. Homeowner, Bank, and SWAP have no chance to Write-Off and regalvanize. It becomes a debt slavery with too easy escalation in a scenario of degrading capital. We need more than to rewrite Paper.

I will give this Gift to the wonkish within the Reader. I would advise the Reader, though, not to read this material if there exists no pressing Classroom assignment. I have never been in favor of Cap-n-Trade, far preferring a booked simple Carbon Tax rate with resplendent supplement to actual needy recipients. I enjoy the flat Carbon tax over the progressive Carbon tax as it allows the easiest entrance into industry, and the greatest pressure to expel Carbon exhaustive users by maintenance of a normalized Pricing structure; something that a progressive Carbon tax system could never attain. Cap-n-Trade will always bring entrance issues, and a Profit hedge for heavy Carbon use. lgl

And you thought you knew what Draconian was!

I wonder sometimes if Paul Krugman may not need a little further education in economics. I specifically do not agree with Paul Ryan just about across the board. I definitely want to return the Tax rates to the pre-Bush 2000 settings. I definitely want to boost the fed fund’s rate. I want Business and Bank to have to work harder to make their Profits under higher taxation. They definitely cannot afford to stand idle, when and if it costs more to do so, and what Profits there are become taxed at higher rates. Like Ryan, I believe that Banks and Business will work harder if compelled with some degree of distress. I have to tell the two Pauls that there will be little incentive to achieve greater things, if the Businessman and Banker can sit still while the Profits roll in. The Question becomes How do We get this hard work out of them?

Paul Krugman believes We only have to supply more Cash, while Paul Ryan sees need only for Tax Cuts. I believe both are failed policies. Neither gives Business or Banking any desire to increase Profits in the face of declining Consumer Demand. It is time to take measures to both increase Consumer Demand, and to propel the work ethic of Bankers and Business. We need massive Hiring by the Government of Minimum Wage labor to increase the Income flow of Households, and higher Taxes on Banks and Business. This is the policy I have adopted, and wish that Government leadership would do the same.

I would go totally Socialist, to the befuddlement of no one, and pass legislation into law which states that all Corporate salaries and benefits must be tied to the Employment numbers. The law would simply state that if the Unemployment is higher, the Corporate leadership Salaries and Benefits must be lower by the same percentage. There is no attempt to impose a much higher taxation, just Jail time if the law is not maintained. One would need a base year from which to operate, and I would suggest the previous Employment High in the last Boom. And you people thought you knew how to build a totalitarian State. lgl

National Health Care

I do not like the tone of this article, but like some of the information in it. It becomes obvious there remains an overuse of both medical facilities and drug proscriptions. I favor a national health care system, but one where there are serious restriction of patient demand for services. The best Option for a sensible plan is one which insists the any Patient or Household parent must have paid 8% of the previous year’s registered Income of themselves in medical service expense before government contribution, double that amount with two contributing Incomes. Proscriptions will be treated separately, with a necessary expenditure of more than 1% per month of previous year’s Income before government contribution, multiplying by the number of contributory Incomes in the Household.

There will be some who question my settlement on 8% of previous Income, when health care Costs are effectively higher. This is foretold by the relative statistical amount of Income utilized prior to the advent of Medicare and Medicaid. We get the American Households back to paying the traditional amounts for medical care first, then We turn to control of the entire health care system; one which shows excessive economic Profits to the benefit of no one. We will let the traditional Conservatives still purchase health insurance, but allow them only 4% against the amount due for the registered Income through such premiums for health insurance. This means they must still prove a full 4% loss of Income directly from medical service Cost before any national health insurance benefit will be granted.

This may seem like a wildly inappropriate health program to Some. It must be recognized, though, that this lands medical Costs squarely in the Patient corner. No one will achieve an appreciable advantage by alternate source of financing health care services from government activity, and it makes national health care insurance a viable concern. It will also present great pressure on the health care industry to economize on their medical provision, and hold down Costs; as every major medical treatment will require negotiation with Government-controlled evaluation of the real Cost of medical procedures. I hold this to be the only method to bring the health care industry into viable integration with the rest of the economy. lgl