Archive for the ‘economy’ Category

The Swedish model

Tuesday, September 3rd, 2013

No, not this one,

not this one, either,


this one: The Swedish model for economic recovery (emphasis added)

After its crisis, Sweden reduced public expenditures by 20 percent of its gross domestic product, slashing social transfers such as unemployment benefits and sick-leave compensation. It cut its public debt in half (its debt, as a proportion of the economy, is now about half that of the United States). It cut marginal tax rates and simplified its tax code so much that nearly two-thirds of Swedes simply confirm by phone that the declaration automatically prepared for them by the tax authorities is correct. The banking system was thoroughly reformed and emerged unscathed from the global financial crises.

Structural reforms were also adopted. Successive governments deregulated one market after another and privatized as market conditions permitted. All children receive vouchers so their parents can choose private or public schools at public expense. Swedish social security became a true insurance system, rather than a pay-as-you-go one with huge unfunded liabilities as in the United States.

Sweden remains a social welfare society, and government spending still accounts for half of its economy; it finances all education and health care, as is common throughout Europe. Sweden did not dismantle the social system but, in addition to drastically reducing its costs, adopted macroeconomic and structural reforms to make it sustainable and greatly enhanced its efficiency by privatizing the delivery of many educational and medical services. The country’s guiding principle is that a successful social welfare society must be fiscally conservative and administratively efficient. This is the central Swedish lesson for the crisis countries of the euro zone and elsewhere.

Economic policies based on competition and openness, carried on a free-market economy and a high degree of government efficiency.

A model for our hemisphere.

And yes, a little Rule 5 for all is always good for catching your attention to the subject of economics, isn’t it?
Fausta’s blog: an equal-opportunity rule fiver!

Argentina: Kiss your bucks good-bye, part 2

Monday, July 22nd, 2013

Part 1: The USA is considering siding with Argentina in a Supreme Court case over the 2002 default repayments brought by a group of hedge funds.

Part 2: A New Twist in Argentina’s Bid to Dodge Its Debts
Now the International Monetary Fund may aid an effort to stiff creditors.

On Wednesday, it was widely reported that the International Monetary Fund may file a legal brief with the U.S. Supreme Court—backing the South American country against its lenders.

This is the same IMF that, after years of warnings, issued a “declaration of censure” against Argentina in February for reporting phony economic data, such as an inflation rate 15 points lower than reality. Unless it cleans up its statistical act, Argentina risks becoming the only nation since 1954 to be expelled from the organization.
. . .
Argentina’s $100 billion default is far from typical. For one thing, the country has the money to pay. For another, when it borrowed in the 1990s, Argentina gave special protections to its lenders that other debtor nations usually do not.

In short, they lied.

If creditors cannot enforce contracts, and

If Argentina gets away with stiffing creditors, one consequence will be that lenders in the future will demand higher rates for their higher risk; another is that they won’t make loans.

So, kiss your bucks good-bye.

But don’t worry about the IMF; Argentina paid the IMF in full. They got their bucks.

Argentina: 33% in poverty

Wednesday, July 10th, 2013

According to this MercoPress report, Over a third of Argentine population in poverty conditions says food and nutrition report; And, what’s worse,

At least 17.8% of the Argentine population lives in indigence conditions, taking as reference a ‘Healthy Food Basket’ which estimates family monthly needs in 3.700 Pesos which is more that five times the official stats office Indec reference sum of 730 Pesos.

Earlier today I mentioned The Troubled Currencies Project; as you can see in it, Argentina’s implied annual inflation rate of 24.60% is more than twice the official 10.34% rate.

Earlier this year the International Monetary Fund made a motion of censure over the country’s failure to comply with the fund’s rules on the reporting of statistics.

Venezuela: Runaway inflation, runaway asylum

Wednesday, July 10th, 2013

The economy gets worse by the day:
Venezuelan Inflation Surges
Inflation in Venezuela reached a new milestone Tuesday: Prices measured on a yearly basis are now rising at the fastest rate since the late President Hugo Chávez took power in 1999.

The annual inflation rate in June registered at 39.6%, the highest 12-month figure since the central bank introduced a new methodology for its Consumer Price Index in 2008.

That’s the official rate; Johns Hopkins economics professor Steve Hanke has inaugurated The Troubled Currencies Project,

For various reasons — ranging from political mismanagement, to civil war, to economic sanctions — some countries are unable to maintain a stable domestic currency. These “troubled” currencies are associated with elevated rates of inflation, and in some extreme cases, hyperinflation. Often, it is difficult to obtain timely, reliable exchange-rate and inflation data for countries with troubled currencies.

To address this, the Troubled Currencies Project collects black-market exchange-rate data for these troubled currencies and estimates the implied inflation rates for each country. The data and estimates will be updated on a regular basis. A current snapshot is presented in the table below. A time series of these data can also be viewed in graphical form by clicking on the corresponding tab for each country at the bottom of this page.

As you can see at the Project table, Venezuela’s implied annual inflation rate tops 240%, and the value of the Bolivar has gone off the cliff. Additionally,

The central bank’s scarcity index, a measure of products missing from store shelves, eased in June, registering at 19.3%, after hitting record levels in recent months. The scarcity index soared to its highest levels in April at 21.3%, before declining to 20.5% in May.

Which brings us to the subject of runaway spy Edward Snowden, who clearly hasn’t been reading professor Hanke’s work. Just yesterday Glenn Greenwald reported that

Nicaragua and Bolivia have also said they would accept Snowden but Venezuela is better poised “to get him safely from Moscow to Latin America and to protect him once he’s there,” Greenwald told Reuters. “They’re a bigger country, a stronger country and a richer country with more leverage in international affairs.”

On their part,

The Venezuelan Embassy in Moscow said it had no information on whether the fugitive NSA leaker had completed a deal that would allow him to leave the transit area of an airport in the Russian capital.

I guess Putin hasn’t put the finishing touches on getting Snowden out of the country.

Peru’s definitely not Cyprus

Saturday, March 30th, 2013

Last Tuesday in Rick Moran’s podcast I mentioned that the flight of capital from the EU might make emerging markets very attractive.

Well, look at Peru:
Peru intensifies currency fight (emphasis added)

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For the eighth time in 10 months, Peru’s central bank has raised deposit requirements on dollar-denominated accounts to stem the flow of hot money into its fast-growing economy and dampen currency appreciation.
With the sol approaching a 16-year high, Peru’s central bank said that as of April 1, the reserve ratio will rise 0.25 percentage points. The bank, which has ruled out Brazilian-style capital controls, has also been aggressively buying dollars in the spot market to slow the trajectory of the sol.

So far, its strategy has worked, with the sol weakening 1.33 per cent against the dollar this year, after appreciating 5.7 per cent in 2012.

The Peruvian bank’s struggle to rein in its currency is shared by fast-growing neighbour Colombia, which last week said it was willing to double its spending on dollars, to $10bn, this year to take some of the steam out of the peso.

Both countries are enjoying the fruits of years of prudent economic management – but rapid economic growth and low inflation have come hand-in-hand with the kind of current appreciation that makes exporters squeal.

Hmmm. . . Prudent economic management.

Are you listening, Paul Krugman?

Cyprus: Steve Hanke follows the money

Friday, March 22nd, 2013

Read his post, and check out the graph:

(click on graph for large version)

No wonder Putin’s unhappy.

This is not going to make you happy: The Government Generously Offers To Help You “Manage” Your Retirement Account. But I digress.



“It could never happen here”?

Sunday, March 17th, 2013

Tomorrow all bank deposits over €100,000 will have 10% expropriated in Cyprus, while

Goat herders, taxi drivers, et al. (what the New York Times calls“pensioners, workers and regulator depositors”) with less than €100,000 get whacked 6.75 percent.

What do they get for that? A €10 billion bailout from the International Monetary Fund and European lenders.

Roger Kimball has the story.

In Ireland, Hungary, Poland, Bulgaria and France, the governments take over citizens’ pension money to make up government budget shortfalls.

In 2008, Ambrose Evans-Pritchard asked, Argentina seizes pension funds to pay debts. Who’s next?

My fear is that governments in the US, Britain, and Europe will display similar reflexes. Indeed, they have already done so. The forced-feeding of banks with fresh capital – whether they want it or not – and the seizure of the Fannie/Freddie mortgage giants before they were in fact in trouble (in order to prevent a Chinese buying strike of US bonds and prevent a spike in US mortgage rates), shows that private property can be co-opted – or eliminated – with little due process if that is required to serve the collective welfare. This is a slippery slope.

This is only the beginning, folks.

Friday afternoon bad news dump: Record 89,304,000 Americans ‘Not in Labor Force’

Friday, March 8th, 2013

Record 89,304,000 Americans ‘Not in Labor Force’ — 296,000 Fewer Employed Since January

The Bureau of Labor Statistics (BLS) labels people who are unemployed and no longer looking for work as “not in the labor force,” including people who have retired on schedule, taken early retirement, or simply given up looking for work.
The increase marks the second month in a row, after rising in January from 88.8 million in December. Those not in the labor force had declined in December from 88.9 million in November.

The number of Americans not in the labor force increased by 296,000 between January and February, which means that the labor force participation rate, which measures workers and those looking for jobs, also fell, to a 32-year low of 63.5 percent.

Mr. Bingley has more.

The $9/hr unemployment act

Saturday, February 16th, 2013

This is what teen unemployment has been for the last six years:

With that dismal number, the President proposes a 25% increase in minimum salary to $9/hr. The result? The least educated, experienced and skilled will be priced out of the market.

In today’s WSJ:
The Minority Youth Unemployment Act
A higher minimum wage will hurt Obama’s most loyal supporters.

The damage from a minimum wage hike depends on the overall labor market. If the job market is buoyant, as it is in the fracking boomtown of Williston, N.D., fast-food workers may already make more than $9 an hour. But when the jobless rate is high, as it still is in California and New York, the increase punishes minority youth in particular.

That is what happened during the last series of wage hikes to $7.25 from $5.15 that started in July 2007 as the economy was headed toward recession. The last increase hit in July 2009 just after the recession ended, and as the nearby chart shows, the jobless rate jumped for teens and black teens especially. For black teens, the rate has remained close to 40% and was still 37.8% in January.

A study by economists William Even of Miami University and David Macpherson of Trinity University concludes that in the 21 states where the full 40% wage increase took effect, “the consequences of the minimum wage for black young adults without a diploma were actually worse than the consequences of the Great Recession.”

William Dunkelberg, chief economist for the National Federation of Independent Business, says that after the July 2009 increase 600,000 teen jobs disappeared in the next six months even as GDP expanded. In the previous six months, when the economy was still shrinking, half as many teen jobs were lost. The overall teen jobless rate was still 23.4% last month, which means demand for unskilled workers is low even at $7.25 an hour. Demand will be lower at $9.

As for that family Obama referred to,

But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong.

Wrong, indeed,

He left out that most minimum-wage earners are not the primary bread winner. Nearly 40% live with a parent or relative. The average family income of a household with a minimum-wage worker is about $47,023—which is far above the poverty line of $23,550 for a family of four.

Mr. Obama didn’t even tell the whole story about parents raising a family on a minimum-wage income. A full-time minimum-wage worker earns roughly $15,000 a year. But that worker also receives a cash supplement from the earned income tax credit of roughly $5,000, and many states provide benefits on top of that to reward working. That doesn’t count government benefits like food stamps, Medicaid, child care and more. According to data from the Employment Policies Institute, about two of every three minimum-wage workers also get a raise within one year.

There’s also the erroneous premise that people are forever stuck at minimum wage, when, in fact, minimum wage jobs are entry-level jobs where workers gain the experience they need to advance. More on that in the video:

The “Where did I hear that before?” roundup

Friday, February 15th, 2013

If you thought you’d heard it before, yes, you’d heard the State of the Groundhog,

Ed Morrissey points out that a minimum-wage hike is the wrong way to lift working poor, but Ed misses the point: politicians don’t want to lift the working poor. Instead they prefer doom, despair and agony if it serves their purpose,

No doom, despair and agony for Obama. After a $900 Valentine’s Day dinner, Obama’s spending a few days on Florida’s Atlantic Coast

relaxing with friends he did not identify. Mrs. Obama’s office did not respond to a question about her plans for the weekend.

[Update: Michelle’s going to Aspen.]
This will be his second vacation of the year. Back on 9/11/12 he did nothing on Benghazi, when he was President AWOL:

On the night of 9-11, after the US Embassy in Cairo was stormed, and after hearing that the US Consulate in Benghazi was under attack, Barack Obama did nothing.

After being briefed by his top security advisers at a pre-planned meeting in the White House around 5:30 PM EST, he never picked up the phone again to see how things were going. And four innocent Americans including the US ambassador to Libya, were slaughtered.

This email was sent to State Department officials, White House officials, Secret Service officials at 6:07 PM EST on 9-11, from Benghazi officials the night of the terrorist attack.

The email clearly blamed Al-Qaeda linked group Ansar al-Sharia for the attack on the US consulate.
This was before the lifeless body of Ambassador Stevens was dragged from the consulate ruins.

This was at least the third email sent to the White House on 9-11 from Benghazi.

Now that Lautenberg is finally(?) retiring – unlike the last time he retired, when he said “Just when i thought i was out, they pull me back in” –

everybody in NJ wants to be a Senator.

Why Should I Care About the U.S. Debt?

Name the party!

No biological clock for men: Cary Grant was a first-time dad at age 65, and now Steve Martin’s a first-time dad at 67.

Hugo Chavez? He’s aliiiive!

Why Was an Iranian Official Found with Millions in Venezuelan Money?

Meteorite Strikes Central Russia, Up To 500 Injured, not to be confused with the asteroid heading our way today.

You learn something new every day: Penises are called chubbies.