Saturday, July 31, 2010

More structural unemployment on the way

Based on the figures released yesterday for the second quarter, it looks like businesses continue to replace human beings with machines. According to the Times, "[t]he crucial driver of growth in the second quarter was business investment in such things as office buildings, equipment, and software." Such investment roughly doubled over that of the first quarter.

From the perspective of an individual business, it makes sense to replace a human being with a machine. Machines don't call in sick. They don't get time-and-a-half when you need them to work overtime. Once they're programmed, they just keep doing their jobs the same, dependable way, without getting bored and letting their attention wander. They don't go out for lunch and come back with a couple of beers in them.

The drawback of machines, though, is that they don't buy anything. They may create a little demand for energy, spare parts and updated software, but they don't drink Pepsi or eat Froot Loops or wear Levis or talk on cell phones. As consumers go, machines are very limited.

The more of our production done by machines, the less consumption done by our human beings. No wonder the money men are so concerned about our trade imbalance. They're going to have to sell a whole lot of their shit to foreigners because fewer and fewer Americans will have the jobs they need to earn the money they need to buy it.

Wednesday, July 21, 2010

Shorting Obama

In yesterday's Times, London hedge fund manager Hugh Hendry was quoted as follows: “If there was a way to short Obama, I would."

That got me to thinking — what if there were a way to short sell Obama? The first thing that comes to mind, of course, is a synthetic CDO of sorts. Since you don't actually have own what you're betting on, I'm sure the bright young people at Goldman could come up with something.

An easier way, of course, would be to short any enterprise that might profit from Obama initiatives — wind power facilities come to mind, for example — or just go long on big oil and big banking, since any kind of meaningful energy bill (read carbon tax) is impossible, and the banks will have figured their way around the new financial regulations well before the regulators even are in place.

Hendry, by the way, also predicts that China is "headed for a fall," which presumably would mean the Chinese would pull way back on buying our debt and transfer resources to calming the inevitable social unrest. As regular readers know, I'm not making predictions anymore — except, when I can't help myself, in the most general sense.

Right now, my gut feeling, for both Obama and the United States, is that hard times will be sticking around for quite a while.

Friday, July 16, 2010

Does Scott Brown want to be President?

Does the bear shit in the woods, and is the Pope both Catholic and hoping to protect his brother (Georg Ratzinger, former director of the scandal plagued Regensburger Boys Choir) from accusations of facilitating child abuse?

Okay, forget Georg and the boy buggering — you can research that on your own, and form your own unsubstantiated conclusions based on the wonderful "free information" of the internet. For reasons not too hard to imagine, I have plenty of doubt about anything I read on the internet. One definition of "free" is "devoid of value."

As for Scott Brown, though, all you have to do is look at him to see what an attractive candidate he can be. Hell, he's cute, winsome, and winning — and why anybody ever thought the unappealing Martha Coakley had a chance against him is beyond me. He's taking a chance, though — betting that intrinsic politico-sexual charisma can triumph over ideological (read Tea Party) nuttiness. Personally, I think it's a pretty good bet.

Brown took a big chance when he voted for the "finance reform" bill — but coming from Massachusetts, it doesn't seem like that much of a bad move. He's betting that, by 2012 or 2016, all the Tea Party bullshit will be revealed for the bullshit it is. Hopefully, he's got that right.

Frankly, though, I suspect he's more cute than smart. Listening t0 him talk on TV left me less than overly impressed regarding his general intelligence. On the other hand, this is the country that elected George W. Bush — but at least Brown will be surrounded by people from Massachusetts rather than Texas.

By the time we get some actual regulations out of the new financial reform bill, there's no telling who will be appointing the regulators. The most important question is just how toadying the toadies will be. Franklin D. Roosevelt, you may have noticed, has been dead for a long, long time.

Saturday, July 10, 2010

Ron Paul, Ron Wyden, Barney Frank, and me

It's really nice to hear of somebody willing to seriously consider cutting the military budget. The fact that a liberal like Ron Wyden, a conservative like Ron Paul, and a pragmatist like Barney Frank all can support the idea is good news. It would be better, of course, if some of the more conservative (rather than libertarian) conservatives would join in. Attention, Tea Party: please, at least, think about this idea.

Back during the Cold War, it was considered prudent to have at least three separate systems for retaliating against the Soviets in the event of a nuclear attack: land based missiles, submarine based missiles, and the Strategic Air Command. Now, Paul, Wyden, and Frank are suggesting that perhaps just two might be enough, and that getting rid of the third could put a real dent in the budget deficit. Bravo!

Needless to say, we could save even more if the United States gave up its role as the official military force of the world's multinational corporations — but I suppose that just may be a bit too much to ask.

Tuesday, July 6, 2010


Now that I'm not making predictions anymore (thank you, Nassim Taleb), what is there to do but indulge my predilection for pessimistic expectations in idle conjecture? I will ignore all the negative economic news timed to help us celebrate the Independence Day holiday (for the moment), and refer you to an editorial in today's New York Times by Yves Smith and Rob Parenteau.

Now, those guys were not exactly making predictions, but the data they cite is kind of interesting. From my negative perspective, it sounds a lot like continuing drop in demand. Drop in demand, of course, leads to deflation. (Smith and Parenteau, by the way, seem more concerned that deflation could lead to Depression than to a US take on Japan's "Lost Decade.")

Well, as an old fart on a fixed income, deflation doesn't sound that bad to me, personally — but I do have kids, and I still care about the rest of you. It follows that I kind of like Smith and Parenteau's idea for "an aggressive tax on retained earnings that are not invested within two years."

What's good for a tiny minority is very unlikely to be good for the rest of us.