Category Archives: economy

Even China is losing Manufacturing Jobs

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According to economist at ASI, mass employment in factory’s is going the way of the horse and buggy:

It’s a consitent trope from those over on the mouth breathing left, that everything would just be better if we did more manufacturing in the UK. More specifically, that if we just had more manufacturing then everyone would be employed. Which would be so nice, wouldn’t it?

The problem with this is that mass employment in manufacturing just isn’t coming back. Ever.

Manufacturing output in the UK kept going up until 2005 or so (with variations for recessions, to be sure). Manufacturing output in the US is still going up and I don’t think anyone needs to be reminded that manufacturing output in China is rising. However, rising output does not mean more jobs. Not necessarily at least.

Not only are increases in productivity curbing growth within the manufacturing sector. As pointed out last may here at MCT, manufacturing as a percentage of the US and global GDP has steadily declined over the last 40+ years.

As a result, even China has lost manufacturing jobs

Yes, China is losing manufacturing jobs. The world as a whole is losing manufacturing jobs. The cause is exactly the same thing that led to the loss of agricultural jobs 80 to 90 years ago: increasing productivity in that activity.

Remember this the next time a politician rants about ‘creating more manufacturing jobs here in the US.’ Because, the only way this will happen is if the government creates subsidized works projects. Like Solyndra.

World Economic Forum cite “Severe income inequality” as largest global risk

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The Global Risks 2012 report should warm the heart of Democrats, #OWS losers and your typical socialist here in the states:

“Severe income inequality” is the biggest global risk, according to a panel of experts assembled by the World Economic Forum.

The group points to “chronic government debt” as another problem threatening the world during the next 10 years.

The report also worries about “the dark side of connectivity” with its threat of “devastating cyber-attacks”.

Global warming, failure of regulation and population growth are identified as three other top risks.

Of course, the response to these so called threats (global warming? really?) will be a call for higher taxes and more government intervention and regulation of the economy.

The report issues a stark warning that many of the safeguards put into place just are not good enough to cope with risk.

“We have to avoid using yesterday’s solutions to address today’s risks,” warned David Cole, chief risk officer of re-insurance giant Swiss Re. The aftermath of the Japanese tsunami, for example, had shown how past policies and institutions could fail to protect people in a more complex and interdependent world.

“We’ve seen examples of over-regulation, like the response to the Icelandic volcanic eruptions, or under-regulation, such as the sub-prime or eurozone crisis,” Mr Cole said.

Safeguards should be “anticipatory rather than reactive” and regulations should be “made more flexible to effectively respond to change”.

“Anticipatory safeguards.” How nanny state can you get?

Remember, Europe’s bad ideas always seem to find there way over here sooner rather than later.

Our Government Penalizing Oil Companies for Not Using a Biofuel That Doesn’t Exist

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This is absurd:

When the companies that supply motor fuel close the books on 2011, they will pay about $6.8 million in penalties to the Treasury because they failed to mix a special type of biofuel into their gasoline and diesel as required by law.

But there was none to be had. Outside a handful of laboratories and workshops, the ingredient, cellulosic biofuel, does not exist.

In 2012, the oil companies expect to pay even higher penalties for failing to blend in the fuel, which is made from wood chips or the inedible parts of plants like corncobs. Refiners were required to blend 6.6 million gallons into gasoline and diesel in 2011 and face a quota of 8.65 million gallons this year.

“It belies logic,” Charles T. Drevna, the president of the National Petrochemicals and Refiners Association, said of the 2011 quota. And raising the quota for 2012 when there is no production makes even less sense, he said.

As pointed out previously here at MCT bio-fuels, much like the green energy movement in total, makes little economic or logical sense.

Note from Thaddeus: America’s ‘underemployed’ rate equates to a staggering 15.2%

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Thaddeus McCotter (R-MI) sent me a note* today about today’s “official” unemployment numbers:

[T]he “official” unemployment rate has dipped one tenth of one percent to 8.5% in December, this rate has persisted at over 8% for 35 straight months. Worse, the misleading practice persists of excluding from the unemployment calculation our fellow Americans who despair of finding a job and are no longer actively seeking for employment. Consequently, when our friends, neighbors and loved ones who are no longer looking for work, along with those only able to find part-time work, are included, America’s ‘underemployed’ rate equates to a staggering 23.7 million Americans (15.2%).

The 8.5% number being blasted by the ‘news’ media is a complete scam.

I also received a note from all around smart guy, fellow Michigan blogger and good friend of MCT, 5etester, who pointed me to this article @ Mish’s Global Economics:

Note how the labor force has flat lined for four years even though population growth has averaged 1.5 million for the past 55 years. From 1993 to 2007 population growth was 1.7 million per year!

Thus, the labor force should not suddenly turn flat since retirements do not even come close to explaining the chart. Yet, suddenly the work force has just been frozen in time although the population continues on the same upward trend.

The work force is literally one million smaller than during Bush’s last year in office. This is statistically impossible, at least judging from historic trends.

We also are still 5.6 million people below the employment number of the peak year in 2007. So, practically speaking we have approximately 11.6 million more people unemployed than in 2007.

Be sure to click over to Mish and check out the graph illustrating the fraud being perpetrated on us Americans.

*I’m on McCotters mailing list.

Economic Snowballs

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Unsettling economic data points via Der Spiegel:

On an almost weekly basis, the reports have become more worrisome and the sums of money involved more staggering. Many are now concerned that, as 2012 begins, the snowballs will only get bigger — and roll faster:

  • There are the banks in Europe, which will have to repay about €725 billion in combined debt in 2012, including €280 billion in the first quarter alone. With the private market largely off-limits to them, the banks have had to rely on the European Central Bank (ECB) to bail them out. The ECB is now lending them fresh money — as much as they want — at minimal interest rates.
  • There is a country like Italy, which has an exorbitant amount of debt to service at the beginning of the year. About €160 billion in debt will mature between January and April; the total for the entire year is about €300 billion. The government in Rome is already having trouble finding buyers for its bonds.
  • There is the ECB, which is creating billions essentially out of nothing. On an almost weekly basis, it is acquiring bonds that no one else would buy from Portugal, Spain and Italy and, in the process, it is turning into a reluctant financier of nations. This financial aid already amounts to €211 billion.
  • There is the European Commission, whose president, José Manuel Barroso, supports the use of so-called euro bonds. These bonds, which would be issued jointly by the countries in the monetary union, would amount to an accumulation of collective debt on top of national debts.
  • There is the €440-billion euro bailout fund, of which €150 billion are already promised to Greece, Ireland and Portugal. But because this amount is still not enough, the finance ministers have decided to “leverage” the fund, a seemingly harmless term for bringing in additional lenders, thereby multiplying the volume of credit.
  • And then there is the United States, which only remains solvent because the Congress in Washington keeps raising the debt ceiling. The American government already owes its creditors about $15 trillion. Stay tuned for the next installment.

In other words, there are plenty of snowballs that have started rolling and getting larger with each rotation. Some aspects of the economic system in the industrialized countries resemble a gigantic Ponzi scheme. The difference is that this version is completely legal.

Be sure to read the rest.

Drive as if every other driver is drunk, mad or incompetent. Or all three

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Do drivers licences make us safer?

Via my favorite economic writer:

Exploiting an interesting natural experiment, the authors of that paper are able to show that we should abolish driving licences. The various States of Mexico found that bribery was impossible to avoid when attempting to gain a licence. So, to varying degrees, they changed their issuance system, some deciding simply not to have them any more. So, of course, death rates from car accidents went up, didn’t they?

Erm, actually, no, they didn’t. Those places that didn’t bother with licences any more, allowing absolutely anyone at all to get in and drive, saw no change in such death rates any different from those that had now (well, hopefully) incorruptible issuance systems.

Yes, the death rate on Mexican roads is indeed appalling: but it’s no worse in those areas that demand licences than it is in those that don’t nor vice versa. Thus drivers’ licences are not needed and we can abolish them.

You could almost call this a reverse Peltzman Effect, where removing regulation makes people more cautious in their behavior.

The basic lesson of driving is always to drive as if every other driver is drunk, mad or incompetent. Or all three. And as it turns out, when we really do recall this because no one has to take a test then we do adjust our driving habits to take account of their madness or incompetence.

Too true.

Who does Treehugger.com think they are kidding?

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The Treehugger web site is one of my regular stops on the web. It is an endless source of material to illustrate the foolishness of the radical environmental movement.

Being a frequent reader of Treehuugger, I’m used to the slant and spin they put on stories. However, when I saw this story, my jaw dropped.

Lights out in Michigan.

 
City officials are taking bold money-saving steps. Highland Park MI is cutting off and hauling away three quarters of its street lights: see Darker Nights as Some Cities Turn Off the Lights, a story published by New York Times.

Who does Treehugger think they are kidding? Highland Park (a very liberal city near Detroit) doesn’t care about the environmental aspect of removing lights. the truth of the matter is highland Park can’t afford to pay their electric bills, and the utility cut a deal with the city to reduce their $4 million unpaid electric bill:

Crews have removed about 1,400 streetlight poles from Highland Park as part of a settlement that allowed the impoverished Detroit enclave to avoid paying $4 million in unpaid bills going back several years.

DTE Energy Co. has replaced about 200 lights with newer models on street corners, but most neighborhoods remain without streetlights, The Detroit News reported today. The Detroit-based utility said work is expected to be finished by Oct. 31.

DTE spokesman Len Singer said the utility began removing light poles in August rather than just cutting off the power, to avoid lawsuits and confusion. The utility is under no obligation to power communities that don’t pay their bills but wanted to maintain some service, he said.

Yep, the evil power company has been working to help Highland Park resolve its problem for years.

Interesting Graphs: Unemployment in The Obama Era

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First up is the now famous projected unemployment rate with and without stimulus legislation / spending graph with actual results plotted.

While this is damming to the liberal spending agenda on its own, it doesn’t tell the entire underemployment story.

Via American Enterprise Blog:

The real unemployment rate. The official (U-3) unemployment rate is 8.6 percent. But the labor force has been shrinking as discouraged workers have been disappeared by government statisticians rather than counted as unemployed. But what if they weren’t? What if the Labor Department added those folks back into the numbers? 

You get this:

So much for Liberal economic policies.

h/t Instapundit.

Hope and Change: Gas cost 8.4% of average families gross income (or nearly 18% of take home pay)

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I guess the CNBC guys are catching up to motorcitytimes on gas prices. If you are a regular reader of MCT, you would’ve read about the bite gas prices are taking out of American’s family budget 6 months ago.

Since it is near the end of the year, it makes sense to revisit the subject.

It’s been 30 years since gasoline took such a big bite out of the family budget.
When the gifts from Grandma are unloaded and holiday travel is over, the typical American household will have spent $4,155 filling up this year, a record.

This ‘holiday’ crap is like nails on a chalk board to me! It’s called the Christmas season you goofy lib!  Enough of my ranting.

The CNBC paragraph continues:

That is 8.4 percent of what the median family takes in, the highest share since 1981.

This statement is misleading, because as pointed out previously here at MCT, the 8.4% figure is for a families gross pay and not their TAKE HOME PAY.

Paying for gas today is eating up nearly 9% of the average American’s PRE TAX income. Considering the average American who earns $50,000 will pay nearly 50% of that income on taxes (Federal, State, property, sales tax etc.) the net income bite on that gas bill is more like 18%.

Getting back to the CNBC article:

Gas averaged more than $3.50 a gallon this year, another unfortunate record. And next year isn’t likely to bring relief.

In the past, high gas prices in the United States have gone hand-in-hand with economic good times, making them less damaging to family finances. Now prices are high despite slow economic growth and weak demand.

That’s because demand for crude oil is rising globally, especially in the developing nations of Asia and Latin America. But it puts the squeeze on the U.S., where unemployment is high and many people who have jobs aren’t getting raises.

Sure, global demand is up. but, the real reasons petroleum prices are going up are twofold. One, we have slowed production and exploration here at home especially in the Gulf of Mexico. Secondly, oil is a commodity and with our government’s recent policy of ‘quantitative easing’ (a.k.a. printing money) it now takes more dollars to purchase a barrel of oil. With stagnate or shrinking wages due to high unemployment, this is creating a big sting to consumers and business.

The second half of the misery equation, the “but it puts the squeeze on the U.S., where unemployment is high and many people who have jobs aren’t getting raises” part our intrepid CNBC is lamenting, is closely related to high oil prices.

If we developed our own domestic energy resources (coal, natural gas and oil) it would do wonders for our economy. Reliable, inexpensive energy is the foundation of any modern economy. As posted here at MCT in April, 2010, an excerpt from a Pravda op-ed:

That brings us to Cap and Trade. Never in the history of humanity has a more idiotic plan been put forward and sold with bigger lies. Energy is the key stone to any and every economy, be it man power, animal power, wood or coal or nuclear. How else does one power industry that makes human life better (unless of course its making the bombs that end that human life, but that’s a different topic). Never in history, with the exception of the Japanese self imposed isolation in the 1600s, did a government actively force its people away from economic activity and industry.

Even the Soviets never created such idiocy.

2012 can’t get here fast enough.