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  • Is An Economic Recovery In Sight? 3 comments
    May 12, 2009 2:26 PM

    Hard times are no fun ,even for people with secure jobs and good incomes and miserable for those with no jobs and few savings. It is natural to want a recovery and want it soon.

    Unfortunately, there are some big negatives to contend with.

    1. Taxes and rumors of taxes: almost every day there are either announced increases in taxes or fees or other charges or threats of increases from cities(eg NYC) or counties(eg Montgomery County, MD)or states(eg California) or the Federal Government( including the Postal Service) or reductions in the quality of municipal, state and federal services. These depress already nervous consumers and small/medium businesses while creating more uncertainty for investors. More risk aversion and cash hoarding or flight to tax shelters is a consequence.

    2. Increased regulations : again almost weekly there are either new regulations being implemented or drafted or threatened on businesses of all kinds. Regulations are not cost free. The cost of compliance for small/medium businesses, which create a clear majority of jobs in the US, is non trivial in terms of money and scarce owner or executive time. Ths creates a hostile business climate, whose cumulative effect can be quite material.

    3. National resource misallocation via Stimulus and Intervention programs:government is not external to the economy. It has no free or magical resources of its own. The more resources the government commandeers and allocates as it sees fit, the more distortion in the economy and less resource availablity(and higher resource costs) for private enterprise. A disproportionate burden from this misallocation falls on entrepreneurs, young people just entering the labor force and ,yet again, on small/medium enterprises. Distortion impedes both healthy recovery in the short term(i.e beyond a few months) and creates structural liabilities in the mid to long term.It also makes people doubt economic fairness and justice, which, in turn depresses investments and risk taking.

    4. Shrinking global trade:the global economy cannot grow if global trade is still shrinking. The US is not an autarkic economy---indeed it is highly integrated into the global economy----so unless the world grows, especially ,our chief trading partners, the US cannot have sustained or high quality growth. Protectionism is also increasing worldwide. Growth at the expense of others has never been an enduring model. The more it succeds in the very short term(and it does) the more it fails in even the realtively near term.

    5. Rising oil prices: oil prices have risen by  over 50% this year. For American consumers and businesses and government operations, this price increase is exactly equivalent to an unrebated increase in excise taxes. In a shrinking economy a universal  excise tax increase of this kind is a clear negative and erodes both consumer confidence and the will to spend on non-oil goods and services.

    6. Increasing geo-strategic risk: everyone who was hostile to the US a year ago is still hostile and often more hostile. This is manifestly true of Iran and its proxies and clients, North Korea, Venezuela, Islamic terrorists worldwide, and even Russia. Moreover the ranks of failed states have not been reduced. Somalia and Sudan are still failed states that harbor a growing number of violent and predatory groups, Afghanistan is no closer to peace and may have regressed, Pakistan is more not less unstable than 6 months ago, Yemen is heading towards becoming a failed state, Nigeria is becoming less not more reliable as an oil exporter, Drug  cartel driven lawlessness is increasing in Mexico while oil production is falling. No one risk is major but the cumulative effect can be quite substantial. Rising and multiple geo strategic risks are not conducive to either expanding world prosperity or US economic growth. Each risk imposes a cost that must be paid explicitly or implicitly.

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Comments (3)
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  • suppose
    , contributor
    Comments (45) | Send Message
     
    Mexico's precipitous oil production decline as it has for will continue until it is only a drip!
    The reasons of this are:

     

    1-Mexico has not put any significant part of their oil earnings into upgrading their production or exploration in years.
    2-Mexico nationalized their oil industry in the 1930's and have not permitted any foreign oil companies to explore.
    3-PEMA, the National oil company is unionized and have far more employees than needed to run the company and is politically leveraged, much akin to the UAW in the US.
    4-Mexican society has always been rife with corruption and bribes. It is part of their culture.
    5-Illegal drug production and export to the US and Western countries has become Mexico's biggest business.

     

    It is a miracle Mexico has not erupted into Civil War and I would expect this in the coming five years, at the latest.
    15 Jun 2009, 05:49 PM Reply Like
  • Jason Rines (iThinkBig)
    , contributor
    Comments (2231) | Send Message
     
    Love your stuff, I encourage you to post your comments as discussions on theburningplatform.com . Monday we will be releasing a business opportunity for Citizen Powered Media, normalizing the blogosphere. My company funded TBP and Raging Debate. The site is four months already gets 50k monthly unique visitors.

     

    Regards,

     

    Jason Rines
    9 Jul 2009, 05:40 PM Reply Like
  • Sold At The Top
    , contributor
    Comments (69) | Send Message
     
    User 353732,

     

    Sorry for trying to contact you through comments... but

     

    Can you email me at: soldatthetop@gmail.com
    11 Jul 2009, 10:04 PM Reply Like
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