Mish's Global Economic Trend Analysis

Stand!
Tax Plans of Hillary Clinton vs. Donald Trump: Which do Clinton Supporters Favor?
Milton Friedman Accurately Explains the Immigration Problem in US and Europe, Government, Taxes, and Economic Freedoms in General
Why Are Mules Stubborn? Why Can't Blind Jackasses See?

Posted: 05 Oct 2015 08:24 PM PDT

Reader Dean emailed me today in response to a couple of recent articles I wrote regarding US policy in Syria.

Dean disagreed with the tone of my articles, stating a belief the US needs to "take a stand".

I back his "take a stand" suggestion 100% and offer this specific proposal.

The Stand

Admit the US is largely responsible for the huge mess in the Mideast.
Welcome Russia's help in solving it.
Welcome Iran's help in solving it.

Time to Self-Assess

There are many who believe the US should never apologize for anything. And that is precisely the attitude of the playground bully.

It is the weak-minded fools and the feeble hypocrites who demand everyone else to admit their mistakes while never accepting they own.

The US has one hell of a lot to apologize for in regards to the current Mideast crisis. Admitting that 50 years from now when those who created the crisis are long since dead will do no good. Admitting responsibility now will help.

There is no Chamberlain, nor modern day Hitler involved here. The harder demagogues try to play the Hitler/Chamberlain the sillier they look.

This is not about appeasement in any form. It's about a realistic self-assessment of who created the mess in order to move forward in the best manner.

Sly Stand

Link if video does not play: Stand! Sly and the Family Stone

Signs of Weakness

It's not a sign of weakness to admit mistakes. Rather, it's a sign of weakness to not do so. That's my stand.

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Mike "Mish" Shedlock

Tax Plans of Hillary Clinton vs. Donald Trump: Which do Clinton Supporters Favor?

Posted: 05 Oct 2015 12:20 PM PDT

Here is an amusing video that reader Curt shared with me moments ago. It's about tax plans of Hillary Clinton vs. Donald Trump.

Link if video does not play: Hillary Supporters Like Trump's Tax Plan.

Mike "Mish" Shedlock

Milton Friedman Accurately Explains the Immigration Problem in US and Europe, Government, Taxes, and Economic Freedoms in General

Posted: 05 Oct 2015 10:52 AM PDT

In previous articles I summed up the immigration problems in Europe and the US as the direct result of an "unlimited demand for free services, free shelter, and free food".

Let's tune into what Economist Milton Friedman has to say about Illegal Immigration.

Also consider Milton Friedman Quotes.

Friedman on Governments

Governments never learn. Only people learn.
If you put the federal government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand.
A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.
One of the great mistakes is to judge policies and programs by their intentions rather than their results.
Nothing is so permanent as a temporary government program.
I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible.
Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.

Friedman on Free Trade

Underlying most arguments against the free market is a lack of belief in freedom itself.
Well first of all, tell me: Is there some society you know that doesn't run on greed? You think Russia doesn't run on greed? You think China doesn't run on greed? What is greed? Of course, none of us are greedy, it's only the other fellow who's greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn't construct his theory under order from a bureaucrat. Henry Ford didn't revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you're talking about, the only cases in recorded history, are where they have had capitalism and largely free trade. If you want to know where the masses are worse off, worst off, it's exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.
When unions get higher wages for their members by restricting entry into an occupation, those higher wages are at the expense of other workers who find their opportunities reduced. When government pays its employees higher wages, those higher wages are at the expense of the taxpayer. But when workers get higher wages and better working conditions through the free market, when they get raises by firm competing with one another for the best workers, by workers competing with one another for the best jobs, those higher wages are at nobody's expense. They can only come from higher productivity, greater capital investment, more widely diffused skills. The whole pie is bigger - there's more for the worker, but there's also more for the employer, the investor, the consumer, and even the tax collector. That's the way the free market system distributes the fruits of economic progress among all people. That's the secret of the enormous improvements in the conditions of the working person over the past two centuries.

Friedman on Kennedy

In a much quoted passage in his inaugural address, President Kennedy said, "Ask not what your country can do for you -- ask what you can do for your country." It is a striking sign of the temper of our times that the controversy about this passage centered on its origin and not on its content. Neither half of the statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society. The paternalistic "what your country can do for you" implies that government is the patron, the citizen the ward, a view that is at odds with the free man's belief in his own responsibility for his own destiny. The organismic, "what you can do for your country" implies that government is the master or the deity, the citizen, the servant or the votary. To the free man, the country is the collection of individuals who compose it, not something over and above them. He is proud of a common heritage and loyal to common traditions. But he regards government as a means, an instrumentality, neither a grantor of favors and gifts, nor a master or god to be blindly worshiped and served. He recognizes no national goal except as it is the consensus of the goals that the citizens severally serve. He recognizes no national purpose except as it is the consensus of the purposes for which the citizens severally strive.

Friedman On Drugs

See, if you look at the drug war from a purely economic point of view, the role of the government is to protect the drug cartel. That's literally true.
Now here's somebody who wants to smoke a marijuana cigarette. If he's caught, he goes to jail. Now is that moral? Is that proper? I think it's absolutely disgraceful that our government, supposed to be our government, should be in the position of converting people who are not harming others into criminals, of destroying their lives, putting them in jail. That's the issue to me. The economic issue comes in only for explaining why it has those effects. But the economic reasons are not the reasons.

Mish Comments

The war on drugs, the war on poverty, US drone policy, collective bargaining of public unions, tariffs and protective subsidies, and the war on freedom (perversely labeled as homeland security and NSA anti-terrorism) have all taken huge tolls on the US prosperity.

Mike "Mish" Shedlock

Why Are Mules Stubborn? Why Can't Blind Jackasses See?

Posted: 04 Oct 2015 11:58 PM PDT

Here's my theoretical question for the day: Why are mules stubborn, and why can't blind jackasses see?

I ask that question in regards to a few recent news articles. One is on Japan, one the US, and one on emerging markets with various overlaps in between.

Let's start with Japan.

Brink of "Technical" Recession

The Financial Times reports Japan on Brink of Technical Recession.

Japan is on the verge of a technical recession after data on industrial production raised the prospect of a second consecutive quarter of negative growth. Industrial production for August — a crucial input into gross domestic product — unexpectedly fell by 0.5 per cent on the previous month after a 0.6 per cent fall in July.

"It's likely we're already in technical recession," said Masamichi Adachi, senior economist at JPMorgan in Tokyo, who forecast an annualised contraction of 1 per cent in the third quarter after 1.2 per cent in the second.

In an interview with the Financial Times this week, Mr Abe's economic adviser, Etsuro Honda, said additional fiscal stimulus was an "urgent task", while an increasing number of analysts expect the Bank of Japan to expand its monetary stimulus at the end of October.

Last week Janet Yellen, US Federal Reserve chair, implicitly criticised the BoJ's policy, noting in a speech: "I am somewhat sceptical about the actual effectiveness of any monetary policy that relies primarily on the central bank's theoretical ability to influence the public's inflation expectations."

The BoJ has a wide range of policy options for further easing. It could increase the rate of asset purchases from the current Y80tn ($670bn) a year; expand the range of assets it buys; or use communication tools to signal how long it will keep monetary policy loose.

IMF Warns of New Financial Crisis

The Guardian reports IMF Warns of New Financial Crisis if Interest Rates Rise.

The debts of non-financial firms in emerging market economies quadrupled, from $4tn (£2.6tn) in 2004 to well over $18tn in 2014, according to the IMF's twice-yearly Global Financial Stability Report.

This borrowing binge has taken business debt as a share of economic output from less than half, in 2004, to almost 75%.

With the US Federal Reserve expected to raise interest rates in the coming months, the IMF warns that emerging market governments should ready themselves for an increase in corporate failures, as firms struggle to meet sharply higher borrowing costs.

That could create distress among the local banks who have bought much of this new debt, causing them in turn to rein in lending, in a "vicious cycle" reminiscent of the credit crisis of 2008-09.

"Shocks to the corporate sector could quickly spill over to the financial sector and generate a vicious cycle as banks curtail lending. Decreased loan supply would then lower aggregate demand and collateral values, further reducing access to finance and thereby economic activity, and in turn, increasing losses to the financial sector," the IMF warns.

Its economists find that the sharp increase in borrowing has been driven largely by international factors, including the historically low interest rates and quantitative easing unleashed by central banks in the US, Japan and Europe, as they have sought to rekindle growth in the wake of the sub-prime crisis.

Meanwhile, Back in Chicago

In Chicago, Mayor Rahm Emanuel wants to hike taxes to counter falling tax revenue thanks to corporate business flight.

Businesses and individuals alike are exiting the region because taxes and the business climate are too unfriendly.

I discussed this setup in Obama's "Model for US" Plant Moves to Canada; Mish's Model vs. Obama's Model.

ZIRPs Make Credit (and Prosperity) Scarce, Not Plentiful

The Capitalist Advisor explains ZIRPs Make Credit (and Prosperity) Scarce, Not Plentiful

After misleading markets for months, with the claim that it would finally raise the near-seven-year-old, near-zero Fed Funds rate in September, the Fed last week reneged, on the grounds that the global economy was too weak for it. A rise of merely 25 basis points can undermine global economic growth? That's silly – and no less so than the claim that the Fed's zero-interest rate policy (ZIRP) has "stimulated" economic (or credit) growth. All major central banks have imposed ZIRPs in recent years; economic growth has been weak not despite ZIRPs but in part because of them.

Credit to Washington now exceeds credit to non-financial business, by $2 trillion. Which one produces wealth?

No wonder the expansion of the past five years hasn't been vigorous; but of course Keynesians applaud deficit-spending booms and national debt buildups, as means of saving and stimulating the economy, when all else fails. Things would have been far worse, they say, had government credit not displaced business credit. Yet economic growth was both steady and more robust in the decade after 1995, when credit for business expanded relative to credit for government.

Why then are so many other monetary central planners taking this ruinous road and staying on it, exit after exit after exit? Because they're central planners; it's what they do. Stupid, stubborn things.

Consider: Japan already has had a ZIRP for fifteen years, amid prolonged stagnation; the U.S. has had a ZIRP for "only" seven years; if the Fed were to match the duration of the Bank of Japan's idiocy and stubbornness, it would persist with a ZIRP until at least 2023. That's a lot of U.S. economic stagnation to (not) look forward to.

Questions of the Day

Why does the IMF support the very low rates that brought about the conditions it now seeks to fight?
Why does Chicago Rahm Emanuel propose tax hikes when tax hikes are the problem?
Why can't president Obama, like Rahm Emanuel understand why businesses move out of countries and out of states?
Why do economists in general, central banks in general, and the Bank of Japan specifically, all support policies that have been a proven failure in Japan for decades?
Why cannot any of the above see that debt is the problem and more debt and measures that foster more debt cannot possibly be the solution?

Because They're Mules or Blind Jackasses

The circuitous answer to all the above question is "Mules are stubborn because they are mules, and blind jackasses cannot see by definition."

A Point About Credit

By the way, I would like to point out one aspect of that excellent article by the Capitalist Advisor they failed to mention but I am confident they understand.

Although credit liabilities of the federal government have risen above non-financial businesses, the latter is expanding sharply for precisely the wrong reason: Corporations have gone on a debt binge, not for business expansion, but rather to buy back their own shares at obscenely overvalued prices.

It is impossible for this to work out well, so it won't. ... Except of course for the CEOs and executives who cash out all their stock options every month and park the money in US treasuries.

Reflections on Income Inequality

Those who whine about income inequality, notably Janet Yellen and various Fed members, ought to take this into consideration. But they won't. In fact, they can't for three reasons.

The Fed consists of a group of central planners.
Central planners do stupid things.
They won't change because central planners are more stubborn than mules, and as blind as blind jackasses.

The central planners and blind jackasses are in firm control. Those in academic wonderland as well as most mainstream media are aligned with the mules and jackasses to strengthen that trend.

Mike "Mish" Shedlock

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Monday, October 5, 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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