Republicans Secretly Hope for Another Candidate Soon

Could the battle for the Republican nomination go all the way to the Republican convention in August? Could we see an entirely new candidate getting into the race?

One long-time Republican leader tells ABC News the answer to both questions is yes.

“If the Republican primary voters continue to split up their votes in such a way that nobody is close to having a majority, then there is a chance that somebody else might get in,” former Republican Party chairman Haley Barbour said in an interview with ABC News.

Barbour calls such a scenario unlikely, but not out of the question.

“I think the odds of having a contested convention are not good but the fact that we are where we are and there is actually a possibility, I guess this is why there is so much talk,” he said.

A contested convention would mean another six months of Republicans battling Republicans, but Barbour says that’s not necessarily bad for the party.

“It is not accurate to say that a hotly contested convention is necessarily bad,” Barbour said. “I am not saying it is necessarily good, but I don’t think it is accurate to say it is necessarily bad. Let’s just see.”

Barbour, who has not endorsed any candidate, says Mitt Romney has never really been a true front-runner.

“In our primaries the more conservative candidates have an advantage,” Barbour said. “Doesn’t mean they always win. But that is just a fact and I think Romney is showing himself to be moderately conservative. We still have a long way to go with three candidates who are to the right of Romney.”

That doesn’t mean, however, that he thinks Romney cannot win.

“In our party it is an advantage to be more conservative, but at the end of the day I think most Republicans want somebody who can beat Barack Obama,” Barbour said. “And nobody in my opinion has made that case to the Republican voters yet – Romney, Santorum, Paul or Gingrich. I don’t think any of them has made the case that ‘I am the guy who has the best chance to beat Obama.’”

Governmental Austerity Does NOT Work In Times Like These

Paul Krugman Calls it:  The Austerity Debacle  And he is right AGAIN! Unfortunately Politics and ideology trump basic economics and common sense.

Last week the National Institute of Economic and Social Research, a British think tank, released a startling chart comparing the current slump with past recessions and recoveries. It turns out that by one important measure — changes in real G.D.P. since the recession began — Britain is doing worse this time than it did during the Great Depression. Four years into the Depression, British G.D.P. had regained its previous peak; four years after the Great Recession began, Britain is nowhere close to regaining its lost ground.

Nor is Britain unique. Italy is also doing worse than it did in the 1930s — and with Spain clearly headed for a double-dip recession, that makes three of Europe’s big five economies members of the worse-than club. Yes, there are some caveats and complications. But this nonetheless represents a stunning failure of policy.

And it’s a failure, in particular, of the austerity doctrine that has dominated elite policy discussion both in Europe and, to a large extent, in the United States for the past two years.

O.K., about those caveats: On one side, British unemployment was much higher in the 1930s than it is now, because the British economy was depressed — mainly thanks to an ill-advised return to the gold standard — even before the Depression struck. On the other side, Britain had a notably mild Depression compared with the United States.

Even so, surpassing the track record of the 1930s shouldn’t be a tough challenge. Haven’t we learned a lot about economic management over the last 80 years? Yes, we have — but in Britain and elsewhere, the policy elite decided to throw that hard-won knowledge out the window, and rely on ideologically convenient wishful thinking instead.

Britain, in particular, was supposed to be a showcase for “expansionary austerity,” the notion that instead of increasing government spending to fight recessions, you should slash spending instead — and that this would lead to faster economic growth. “Those who argue that dealing with our deficit and promoting growth are somehow alternatives are wrong,” declared David Cameron, Britain’s prime minister. “You cannot put off the first in order to promote the second.”

How could the economy thrive when unemployment was already high, and government policies were directly reducing employment even further? Confidence! “I firmly believe,” declared Jean-Claude Trichet — at the time the president of the European Central Bank, and a strong advocate of the doctrine of expansionary austerity — “that in the current circumstances confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today.”

Such invocations of the confidence fairy were never plausible; researchers at the International Monetary Fund and elsewhere quickly debunked the supposed evidence that spending cuts create jobs. Yet influential people on both sides of the Atlantic heaped praise on the prophets of austerity, Mr. Cameron in particular, because the doctrine of expansionary austerity dovetailed with their ideological agendas.

Thus in October 2010 David Broder, who virtually embodied conventional wisdom, praised Mr. Cameron for his boldness, and in particular for “brushing aside the warnings of economists that the sudden, severe medicine could cut short Britain’s economic recovery and throw the nation back into recession.” He then called on President Obama to “do a Cameron” and pursue “a radical rollback of the welfare state now.”

Strange to say, however, those warnings from economists proved all too accurate. And we’re quite fortunate that Mr. Obama did not, in fact, do a Cameron.

Which is not to say that all is well with U.S. policy. True, the federal government has avoided all-out austerity. But state and local governments, which must run more or less balanced budgets, have slashed spending and employment as federal aid runs out — and this has been a major drag on the overall economy. Without those spending cuts, we might already have been on the road to self-sustaining growth; as it is, recovery still hangs in the balance.

And we may get tipped in the wrong direction by Continental Europe, where austerity policies are having the same effect as in Britain, with many signs pointing to recession this year.

The infuriating thing about this tragedy is that it was completely unnecessary. Half a century ago, any economist — or for that matter any undergraduate who had read Paul Samuelson’s textbook “Economics” — could have told you that austerity in the face of depression was a very bad idea. But policy makers, pundits and, I’m sorry to say, many economists decided, largely for political reasons, to forget what they used to know. And millions of workers are paying the price for their willful amnesia.

….. PAUL KRUGMAN 1/29/12

Nile River Water War Inevitable

Water war

Egypt’s precious Nile water is wanted by outsiders, Reem Leila reports

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An international water expert is claiming there are intensified efforts by an unnamed neighbouring country to funnel off the waters of the River Nile after approaching scarcity in its water resources. Such an assertion, says Ahmed Diab, a global expert on water, is likened to attempts by the US to revive the idea of transferring the storage of water from its current location in Lake Nasser to any of Africa’s Great Lakes in the central African continent, where the water will then pool into a giant reservoir to be sold to whichever country wants it. The use of pipelines in transporting the water would be similar to that of the movement ofpetroleum.

The availability of fresh water is a serious concern in many parts of the world. Due to the shortage of available fresh water, nearly 40 per cent of the world’s population, mainly in the developing countries, is already facing serious water shortages. And more and more nations are gradually joining the list. “Accordingly, nations might be on the verge of a water war by the end of this century,” Diab said. This is in addition to the encouragement of the long-serving scheme of trying to divert the course of the River Nile in Ethiopia. Diab maintained that the US Bureau of Land Reclamation was currently working on the scheme.

According to an official source at the Ministry of Water Resources and Irrigation (MWRI) who spoke to Al-Ahram Weekly on condition of anonymity, these plans were close to being implemented but that was before the High Dam was built. The plan was for the Nile waters to be stored in Tana Lake in Ethiopia but now, according to the source, because of the High Dam there are merits to water storage. After the building of the High Dam, Egypt has been receiving continuous, observable and constant amounts of water. “According to these three elements Egypt has a historical right to save the water of the Nile in Lake Nasser and none of the continent’s countries or any other country has the authority to violate this right. Accordingly nothing will change and Egypt’s Lake Nasser is and will be the continent’s storage area,” the source confirmed.

Diab believes that water resources in Egypt are becoming scarce. Surface-water resources originating from the Nile are now fully exploited, while groundwater sources are being brought into full production. Egypt is facing increasing water needs demanded by a rapidly growing population, by increased urbanisation, by higher standards of living and by an agricultural policy which emphasises expanded production in order to feed the growing population. The population is currently increasing by more than 1.5 million people a year. “With a population of 80 million, Egypt is in dire need of revising its water resource plans in order not to suffer any water shortage in the future,” Diab said. According to Diab, by the end of 2008 Egypt will be consuming 11 billion cubic metres of water a year which means nearly 815 cubic metres per person annually. In contrast, individuals in other surrounding countries use up only 300 cubic metres. “Egypt’s actual requirements should be only three billion cubic metres per year. The remaining amount is being wasted and shed either in the Mediterranean or in small water canals,” Diab added. This requires good management of water and coordination with the countries of the River Nile Basin as well as the establishment of joint water projects, “such as clearing waterways of grass in return for increasing Egypt’s annual share of water and increasing it from 55.5 billion cubic metres to 85 billion metres per year,” Diab suggested.

The Egyptian government has long recognised upstream development of the Nile waters as a potential national security threat and has stated its readiness to go to war to preserve its access to fresh water. As the Basin’s governments come to understand the dynamics of the population-water relationship, however, advance planning and diplomacy may win out over saber rattling and armed conflict. Recently, representatives of the 10 nations of the Nile watershed met to review past agreements and consider possible future ones related to their use of this shared natural resource.

The main objective of water planning in Egypt has been to harness the highly fluctuating Nile flows, making them available for domestic and productive purposes. The means of fulfilling this objective have been to establish over-season storage, over-year storage, and flood control. These goals were basically achieved in the 1960s following the inauguration of the Aswan High Dam.

According to a water report issued by MWRI the growing interest in the region’s water issues is encouraging, but the challenge of reconciling competing claims on the Nile will continue to be complicated by political and economic concerns. The scope for water conservation and international cooperation is large, but the competition is unlikely to find permanent resolution until the region’s population approaches stabilisation. the report stated that Lake Nasser can hold up to 162 billion cubic metres of water while the Toshka depression can absorb a further 90 to 120 billion cubic metres. At the peak of the flood season, Lake Nasser was receiving up to 750 million cubic metres of water a day. The total volume of water behind the dam currently stands at 153.91 billion cubic metres. “Increasing Egypt’s share of the Nile water and reducing the watershed are on top of Egypt’s agenda, to be discussed in the summit of African ministers of water resources within the next few weeks,” the report stated

The world’s population is currently increasing nearly 80 million people per year, resulting in an increasing demand for fresh water of about 64 billion cubic metres a year. With this phenomenal population growth, there is, in addition to the water requirements for domestic use, an increasing demand for energy generation, agricultural intensification and industrial production. As a result of the growth in the human population, the per capita water supply on the Earth was reduced to an average of 8,500 cubic metres in the early 90s, which is equivalent to 8,500,000 litres per year. According to hydrologists, if the annual per capita fresh water availability of a country goes below 500 cubic metres (500,000 litres), the country enters the category of “absolute water scarcity”.

Comparison of Mormonism to Christianity

Whether Mormons should be considered “Christians” is a controversial and rather complicated issue. Many Catholics and Protestants do not consider Mormons to be Christians because they believe the differences in doctrines are larger and more fundamental than those between Christian denominations.

On other hand, religious studies books tend to group Mormons in with Christians because: Mormons regard themselves as Christians; Mormonism emerged in a Christian context; and Mormonism shares much in common with other forms of Christianity.

Mormons also consider themselves Christians for much the same reasons as listed above. However, they consider themselves to be significantly different from other branches of Christianity. They regard themselves as neither Catholic nor Protestant, viewing both of those faiths as corruptions of true Christianity, which has been restored by Mormonism. 1

The following chart provides a quick-reference guide to the major similarities and differences between the beliefs and practices of Mormonism and mainstream Protestant Christianity. As is always the case with charts, the information is simplified for brevity and should be used alongside more complete explanations. The beliefs listed for both Mormons and Protestant Christians represent those of most, but not all, churches or individuals within each tradition.

	Mormonism	Mainstream Christianity
Religious Authority	All sacred texts equally, continuing revelations	Bible (all), ecumenical councils and creeds (Catholic and Orthodox), official papal pronouncements (Catholic), continuing revelations (Pentecostal)
Sacred Texts	Bible, Book of Mormon, Doctrine and Covenants, Pearl of Great Price	Bible (some include Apocrypha)
Trinity	Rejected – Father, Son and Holy Spirit are three distinct beings who are “one in purpose”	Affirmed - Father, Son and Holy Spirit are of the “same substance”; three persons in one being
God	Heavenly Father, who has a physical body	Trinitarian God, who does not have a body
Jesus Christ	Son of God, Savior, originally one of the spirit beings that all humans used to be (see Jesus Christ). Has a physical body.	Son of God, Word of God, God, second Person of the Trinity (see Christology)
Holy Spirit	A spirit being who is a separate being from God and Jesus.	God, Third Person of the Trinity
Original sin	Denied (see Human Nature)	Affirmed (by most denominations)
Free will	Free to do good or evil	Free will to do good is seriously impaired
Purpose of Christ’s Incarnation	Teach about God, provide a model for right living, die sacrificially for human sin	Teach about God, provide a model for right living, die sacrificially for human sin, reveal God directly to humanity
Resurrection of Christ?	Yes	Yes
Salvation	Both faith and works; works emphasized	Both faith and works; faith emphasized (in most denominations)
Second chance after death?	Yes, during a period of “learning and preparation” after death	No
Afterlife	All spirits go to the spirit world, undergo preparation, then rejoin with bodies in the resurrection (see Afterlife). The good spend the intervening time in spirit paradise, while the wicked go to spirit prison.	Souls of wicked sent to Hell, believers go to Heaven for eternity (see Afterlife). In Catholicism, many believers will suffer in Purgatory before going to Heaven.
Hell	The wicked enter an unpleasant “spirit prison” prior to judgment; after that, only the most obstinately wicked (like Satan) will be consigned to “Outer Darkness” for eternity.	Place (or state of being) of eternal torment and distance from God.
Place of Worship	Chapel or Temple	Church
Meaning of Sacraments (Chr) or Ordinances (LDS)	Ordinances are covenants between man and God and a means of grace. Some of them are necessary for salvation.	Symbolic acts commanded by Christ (some Protestant); means of grace if received with faith (Catholic, Orthodox, and some Protestant).
Sacraments (Chr) or Ordinances (LDS)	Include baptism, confirmation, the sacrament (Lord’s Supper), laying on of hands, ordination, temple endowment, and marriage sealing (see Temple Ordinances)	Two common to all denominations: Baptism and Lord’s Supper. Total of seven in Catholicism.
Symbols	No official symbol; cross is not used; the angel Moroni raising a trumpet is seen atop Mormon temples	Cross, fish and others
Holidays	Easter, Christmas, national and local holidays, birthdays, celebrations of events in Mormon history	Easter, Christmas, saints’ days, several others
	Mormonism	Mainstream Christianity

 

Will Florida Be Romney’s Waterloo…

Mitt Romney never lets you see him sweat, but he is under some perspiration-inducing pressure as he prepares to step onto a debate stage Monday evening in Tampa. Maybe that is why he had a photo op to show him washing his own clothes at the  hotel . But lets dig deeper and see if this face off with Newt and Santorum is like a high stakes poker game. Given the lack of personality  of Romney maybe he would be better to play poker than to debate again

Romney needs a forceful performance to regain the initiative after his double-digit drubbing in South Carolina at the hands of Newt Gingrich. But if the former governor gets too histrionic or too harsh, he will seem inauthentic, forfeiting the one quality—that of a steady, self-assured businessman—that has served him well.

We already know what Gingrich will do. Newt will be Newt, by turns forceful, hectoring and, by his own admission, grandiose, with a couple of condescending slaps at the NBC moderators thrown in just to protect the brand. Gingrich is a strong debater, agile enough even to turn a question about past marital infidelity into an applause line. Without the twin debates in South Carolina last week, he probably would have lost the primary.

The question now at the heart of this campaign: What’s Mitt got left?

Beyond the darts he throws Gingrich’s way, can Romney raise the level of his game in a way that forces Republican voters to reconsider him? Or is he a captive of his own limitations, a smart, seasoned, and awesomely uninspiring politician?

It would be a mistake for a media mob that has twice written off Gingrich—how dumb does that look now?—to overreact to the South Carolina results. The heavily evangelical and staunchly conservative electorate was tailor-made for the ex-Georgia congressman. Newt won’t have that advantage in the bigger and more diverse battleground of Florida, which votes Jan. 31. Mitt’s still got the money and the organization for the war of attrition ahead.

But NBC viewers on Monday will be looking at a candidate stripped of his aura of inevitability—a premise of electability that, it turns out, is central to his case for the nomination. He probably would love to skip the coming debates—the networks really control the calendar this year—but that would project a sense of panic.

Romney’s had a year to make the case to GOP voters and has fallen short. His vision of a presidential CEO appeals to the head but not the heart. Many Republican voters are mad—at President Obama, at the liberal establishment, at the media—and it is Gingrich who has skillfully channeled that anger. Newt comes armed for a knife fight, and Mitt shows up with a PowerPoint presentation. Can anyone imagine Romney calling a moderator’s question “despicable”?

Perhaps it is to Romney’s credit that he restrains his rhetoric, that he appeals to the sensible center where general elections are won. But candidates, especially primary candidates, need passion, and Romney seems a bit too calculating, even when it comes to so basic a question as releasing his tax returns. (He has a year to prepare for the question and then says “maybe”—seriously?) A more natural politician would use wit to brush off questions about his wealth; Romney’s responses seem forced and halting, his talk of pink-slip anxiety labored and ludicrous.

Undoubtedly, Romney will press Gingrich to release the details of his Freddie Mac non-lobbying contract, and papers from the House probe that led to his reprimand and $300,000 fine (though the 1,300-page ethics report is available online). But these jabs will seem like what they are, a transparent attempt to deflect attention from his own tax-return woes (Mr. 15 Percent says he’ll put out the 2010 return on Tuesday).

Romney offered a glimpse of this strategy against Gingrich on Sunday, saying in Florida that “at the end of four years it was proven he was a failed leader, and he had to resign in disgrace.”

The real challenge in the NBC faceoff, and a CNN debate later this week, is whether Romney can forge a connection with Republicans that goes beyond his Harvard pedigree and 59-point economic plan. Americans like a fighter, someone they can envision leading the charge in crisis situations, and Romney is afflicted with Dukakis disease, a competent technocrat in an era of anger.

He will, however, have one underappreciated advantage. Until now, Gingrich has been a protest candidate whose heated language rouses Republicans. On Monday night, though, the country will start looking at him as a potential president, someone who could grab the nomination and conceivably defeat Obama. As his advisers recognize, Newt still has to pass the commander-in-chief threshold, and he tends to be his own worst enemy when he’s riding high. The prospect of President Gingrich could make Romney look like a stable suitor—one who stays married after the excitement has worn off. The problem for Romney is that the party’s base remains worried about ideological infidelity.

Rick Santorum performed strongly in last week’s debates as well, but after weak showings in New Hampshire and South Carolina, his moment probably has passed. We are down to a two-man race in Florida, two contrasting characters who are selling very different versions of conservatism. Until Saturday, the overriding issue was whether Gingrich could emerge as the alternative to Romney. Now, for the first time, that question may be turned on its head.

Is Santorum a Distraction for Gingrich??

He may not have much money or a ground game to speak of in Florida but Republican Rick Santorum will not pull out of the presidential race – much to the chagrin of rival Newt Gingrich and probably to the delight of a bruised Mitt Romney.

After Gingrich scored a resounding win in the South Carolina primary on Saturday, the former U.S. House of Representatives speaker badly wants to unite conservative and Tea Party elements of the Republican Party behind him ahead of Florida’s January 31 vote.

That would be easier to do if the socially conservative Santorum slipped away, especially in the face of a well-financed

Florida campaign by Romney. But Santorum vowed to keep his shoestring campaign alive as it heads to the country’s fourth most populous state after finishing third on Saturday.

“This is a long haul,” Santorum said early on Sunday on ABC’s “This Week.”

But the former Pennsylvania senator with a penchant for sweater vests has battled from the back of the pack to a surprise win in Iowa’s caucuses and a respectable 17 percent of the vote in South Carolina.

“A few weeks ago, this may have seemed implausible,” said Jack Glaser, a professor at University of California, Berkeley. “But with his showing in Iowa and Romney’s slide in South Carolina and with the very deep flaws and vulnerabilities in both Romney and Gingrich as candidates, it is not laughable.”

Moving on to Florida, Santorum picked up on attack lines he employed against his former congressional colleague last week. He called Gingrich “erratic” and “a very high-risk candidate” who is out of step with the many Republicans on Wall Street bailouts, health policy, immigration and global warming.

At a rally in Coral Springs on Sunday, Santorum laid claim to being “the real conservative – the (Ronald) Reagan model,” and said he was best placed to win what he termed “the states that matter” – 10 or 12 swing states, including Florida, that could be key to the November general election against Democratic President Barack Obama.

“His staying around is much to Romney’s delight and possibly Gingrich’s dismay. If Gingrich had his way, he would want Santorum out,” said Ford O’Connell, a Republican strategist.

“And Romney would say, ‘Oh, don’t leave the race so soon’ … It’s like Cold War politics: the enemy of my enemy is my friend.”

Santorum could be playing off the roller-coaster nature of the Gingrich campaign, which has been declared next to dead a few times since spring, as well as Romney’s stumbles going into the South Carolina vote.

“I think he might think he has a shot. He’s one (state) for three and so is everyone else except Ron Paul,” said Chris Galdieri, a political science professor at Saint Anselm College in Manchester, New Hampshire.

Santorum is in third place in Florida with about 15 percent support, behind Romney at 40 percent and Gingrich at 22 percent, according to surveys aggregated by Real Clear Politics. Those polls were taken before the South Carolina vote.

Michael Phillips, Santorum’s state director for Florida, said the campaign had only two offices for now, in Sarasota and in Miami’s Little Havana neighborhood, but had “very engaged” volunteers.

A SHOT AT REDEMPTION

“He might not be able to raise money, he might not be lining up endorsements in Florida, but he’s probably holding out hope that if Romney has a couple more bad weeks, it’s better to be in the game than out of it,” Galdieri said.

“He’s probably thinking that Gingrich, even though he won South Carolina, is not acceptable as a nominee because of various things in his personal and political background. He might be thinking that if a bunch of dominoes fall in the right order, he could be the other alternative candidate to Romney.”

Santorum has been praised by some for recent performances in Republican debates, and with fewer candidates on the podium as the field has dwindled, his national exposure will only rise as the debates roll on.

The four Republicans still standing will debate on Monday in Tampa and Thursday in Jacksonville.

Four more debates are scheduled by mid-March, all of which could better position Santorum for whatever comes next.

“He’s angling for some political capital, whether it’s a Cabinet position or it’s a run for another office down the road,” O’Connell said. “All you need is a plane ticket to move to the next spot. So why get out when you can still be a factor in this?”

Speaking on CNN on Sunday, Santorum said he felt “absolutely no pressure” to drop out, adding that after the South Carolina vote, Romney was “no longer the inevitable candidate.”

“Our feeling is that this is a three-person race. The conservatives are polling better than Governor Romney is. The real conservative is yet to emerge and that’s me. We think we present the finest opportunity for conservatives to win,” Santorum said.

In Coral Springs, the small crowd warmed to Santorum’s message. “We feel he’s genuine, more personable – more for the common citizen than for corporations,” said Lydia Usategui, 57, a psychiatrist from Miami.

Galdieri said there was a redemptive element to Santorum’s campaign. The social conservative lost his 2006 Senate re-election bid by a crushing margin.

“Instead of being the guy who lost by 18 points in his own state, he can be the guy who made a credible run,” Galdieri said.

Poor Rick Santorum… I mean that Literally

Newt Gingrich has the momentum.Mitt Romney has the money.

Rick Santorum? He has neither at the moment.

Not that he’s going to let details like that stop him from pressing ahead in his White House quest. Or, for that matter, hurdles like scant cash in an expensive state and a rapidly disappearing opportunity to emerge as the consensus candidate of conservative voters now that Gingrich has emerged as the leading anti-Romney candidate.

“Our feeling is that this is a three-person race,” Santorum insisted on CNN’s “State of the Union.” He added that he felt “absolutely no pressure at all” to abandon his bid given Gingrich’s rise.

Still, Santorum acknowledged a hard road ahead in what he called “a tough state for everybody.”

“It’s very, very expensive. It’s a very short time frame,” he said.

The former Pennsylvania senator placed third in Saturday’s South Carolina primary.

Gingrich scored his first win, entering the Florida campaign with the political winds pushing the former House speaker from behind. Romney, who has raised mounds of cash, came in second and was ready to regroup with sophisticated political machines in the upcoming states, Florida included.

Underscoring Santorum’s challenges, he was taking a few days away from the campaign trail in Florida this week to restock his thin campaign bank accounts. He plans fundraisers in other states, leaving Gingrich and Romney with free rein in Florida, while he stops in states such as Colorado, Minnesota and Missouri. Money is a necessity in a state like Florida with numerous expensive media markets and where campaigns are usually won on TV.

That’s not a natural fit for Santorum, who has run his campaign on a shoestring and won the Iowa caucuses — albeit narrowly — by spending more than a year making house calls to voters and traveling the state in a pickup truck.

To make up ground and perhaps earn some free media, Santorum is going on the attack.

Standing in a strip mall’s parking lot here Sunday before heading to fundraising events, Santorum cast Romney as an inconsistent figure who would not be an effective foil to President Barack Obama’s re-election bid and argued that Gingrich was too “high risk” to be the Republican standard-bearer.

“Trust is a big issue in this election,” Santorum told several hundred people. “Who are you going to trust when the pressure is on, when we’re in that debate? It’s great to be glib, but it’s better to be principled.”

He also met privately Sunday with pastors and delivered a sermon at Worldwide Christian Center in Pompano Beach, where he emphasized his conservatism. Santorum, who sprinkles his campaign speeches with his Catholic faith, is banking on evangelicals to coalesce around him over the thrice-married Gingrich or Romney, a Mormon.

“Can he win? Only God knows,” said David Babbin, a voter here who works at the nearby children’s hospital and likes Santorum. “But I believe in miracles.”

Still, he noted one of the candidate’s challenges: “Rick Santorum is one of us. And that’s his biggest flaw … We live in a society that is ‘American Idol’ and Rick Santorum is not like that.”

Santorum has other hurdles beyond what even admirers call his lack of charisma.

His tough talk on Social Security and Medicare — ending benefits for wealthier retirees, cutting payments to those who don’t need them — is going to dog him here in a state of 3.3 million seniors, or 17 percent of the population. AARP estimates that more than a third of those seniors would have incomes below the poverty line without Social Security and one in three seniors rely on Social Security as their sole source of income.

Santorum didn’t mention those proposals at his first public campaign event since the primary in South Carolina.

Gingrich Claims to be Best Contrast to Obama

Emboldened by his victory in South Carolina’s Republican primary, Newt Gingrich said Sunday his hardline conservative views and confrontational style will be needed by Republicans to fight President Barack Obama’s “billion-dollar war chest” and take back the White House.

In several televised interviews, the former speaker of the House of Representatives said rival Mitt Romney was a moderate who leftRepublican voters cold and that only he, Gingrich, could go “toe to toe” with Obama.

“I think in South Carolina it began to become really clear that if you want to beat Barack Obama, then Newt Gingrich is the only person who has the background, the experience and the ability to get on the stage and drive home a conservative message with authenticity,” he said.

Gingrich’s win in South Carolina has helped invigorate his once struggling campaign and cast fresh doubt on Romney’s ability to easily cinch the Republican nomination.

Returns from all the state’s precincts showed Gingrich with 40 percent of the vote to 28 percent for Romney. Former Pennsylvania Sen. Rick Santorum had 17 percent, and Texas Rep. Ron Paul 13 percent.

Next stop is Florida, where Gingrich and Romney will compete with Santorum in the Jan. 31 primary. Paul has said he was bypassing the state in favor of states like Maine, Minnesota, Nevada and Colorado with upcoming caucus contests where he stands a better chance of picking up delegates to the party’s national nominating convention.

Romney and his supporters are dismissing Gingrich’s win in South Carolina and say his nomination would be a disaster for the Republican Party, citing his rocky tenure leading House Republicans in the 1990s and allegations of ethics violations.

“I think Newt Gingrich has embarrassed the party, over time,” said New Jersey Gov. Chris Christie. “Whether he will do it again in the future, I don’t know. But Gov. Romney never has.”

Gingrich says his views on lower taxes, less government regulation and foreign policy put him in stark contrast to Obama and that the dynamics of a Gingrich-Obama fight are much more alluring to voters.

“I think Gov. Romney’s core problem was that he governs (as) a Massachusetts moderate, which by the standards of Republican primary voters is a liberal. And he can’t relax and be candid,” he said.

Gingrich spoke on CNN’s “State of the Union,” NBC’s “Meet the Press” and CBS “Face the Nation.” Christie spoke on NBC’s “Meet the Press.”

Gingrich Courts Disenfranchised Evangelical Christians in Florida

 Newt Gingrich’s presidential hopes may rest among the pews of Florida’s ministries and mega-churches.

The former House speaker is looking to Florida’s religious conservatives to counter rival Mitt Romney’s organizational and financial might in a state where so-called “values voters” could constitute more than a third of the Republican electorate in the Jan. 31 primary.

“There’s no question Gov. Romney will always have more money,” Gingrich says when asked about his Florida campaign. But he’s quick to add that his team has between 5,000 and 6,000 volunteers. Aides say many of them are evangelicals.

Thrice-married, Gingrich may not be the obvious pick for church-goers here. But the network of religious activists he’s assembling has far greater concerns about Romney’s inconsistent history on abortion and gay rights than they seemingly do about Gingrich’s two divorces and acknowledged marital infidelity.

And that gives Gingrich an opening as he challenges Romney in the aftermath of Saturday’s primary in South Carolina, where the polls suggest Gingrich may end up winning.

Seeking to capitalize on Gingrich’s burst of momentum, one of his top evangelical backers in Florida planned to lead a conference call in the coming days with 1,000 pastors. Others are spreading Gingrich’s message in the state’s many churches and Baptist publications. And Gingrich has already lined up appearances with the religious community for next week.

“The evangelicals are not going to wrap their arms around Romney in this primary or the general election,” says John Grant, a Baptist leader and one of Gingrich’s Florida evangelical chairmen. “Gingrich is pulling these people together quite nicely.”

The power of Florida’s evangelicals depends on their ability to unite. And while they’re nearly united against Romney, they’re not wholly united behind Gingrich. Some prominent religious conservatives are rallying around Rick Santorum, the former Pennsylvania senator long known for passionate social conservatism, but generally considered a longshot in the race to challenge President Barack Obama in the fall.

Santorum is showing no signs of bowing out, especially after the final tally suggested he edged Romney in the Iowa caucuses even though there is no officially declared winner.

The continued division leaves the political power of Florida’s evangelicals fractured, just as anti-Romney conservatives have been in other early voting states all year.

“We have to figure out how we’re going to come together,” said John Stemberger, a Santorum supporter who led the 2008 push to amend Florida’s constitution to ban gay marriage.

Stemberger hoped a recent meeting of national evangelical leaders in Texas would do just that. The group held a nonbinding vote that showed overwhelming support for Santorum. But in Florida, there are serious questions about the viability of Santorum, who hired a Florida staff just last week.

Gingrich’s organization pales when compared to Romney’s, which has been years in the making. But Gingrich’s team is working to capitalize on doubts about Santorum, as well as on Texas Gov. Rick Perry’s recent exit.

Gingrich’s Florida operation is led by Jose Mallea, who managed Florida U.S. Sen. Marco Rubio’s 2010 race.

Even before Perry’s exit, Gingrich’s team had been quietly courting key staff and supporters from both the Perry and Santorum camps to boost an organization that was stood up in December.

Underscoring the challenge Gingrich faces, he has yet to run any television ads in Florida, where Romney and his allies have had the airwaves to themselves since mid-December. Mallea said Gingrich will advertise in Spanish and English soon.

Gingrich also faces renewed attention on flaws in his personal life that could turn off evangelicals here.

In an ABC News interview broadcast Thursday, Gingrich’s second wife said he sought an “open marriage” arrangement so he could have a mistress and a wife. Asked about his ex-wife’s assertions during a debate that night, Gingrich said it was false and lashed out at the media.

“I wish he didn’t have that background, but I honestly believe he’s had a real renaissance experience,” said Grant, the Gingrich supporter.

In recent years, Gingrich has publicly acknowledged mistakes, converted to Catholicism and says prayer is an important part of his life.

Gingrich’s team estimates evangelicals will represent between 25 percent and 40 percent of the Florida GOP primary electorate.

Exit polling from the 2008 GOP primary shows that approximately 39 percent of voters identified themselves as born-again or evangelical Christians. They were almost evenly split that year, with 30 percent for Sen. John McCain, 29 percent for Romney, 29 percent for Mike Huckabee and 7 percent for Rudy Giuliani.

Romney would be happy with a repeat performance. His team has organized weekly conference calls with a group of social conservative leaders it hopes will produce at least some of the evangelical vote.

But Romney is not going out of his way to appease this group. He recently declined to respond to the Florida Family Policy Council voter guide, which Stemberger organized. The guide highlights Romney’s non-answers on key social issues prominently and was emailed to 100,000 Florida evangelicals this week. It also is expected to be faxed and emailed to about 8,000 churches.

While Stemberger and Grant don’t agree on a Romney alternative, they share deep concerns about him.

“I hear that if it’s Obama and Romney, evangelicals have no place to go. But there’s a third choice: It’s called home,” Grant said.

Romney’s South Carolina Loss Shows Weakness in November

Echoing a worn adage, Mitt Romney said on Saturday night after conceding defeat to Newt Gingrich in the South Carolina primary that a longer, more competitive battle for the Republican presidential nomination would only make him stronger.

“I don’t shrink from competition. I embrace it. I believe competition makes us all better,” Romney told supporters.

That’s a standard talking point from a frontrunner who hasn’t yet locked up the nomination. But in fact, the weaknesses exposed in Romney’s candidacy by the South Carolina results and, perhaps more important, in the days leading up to the primary, are cause for concern among Republicans, including some of Romney’s own supporters.

More than one-third of South Carolina primary voters identified themselves as very conservative, according to exit polls conducted on behalf of the television networks and the Associated Press. Mitt Romney won only 20 percent of their votes, compared to Newt Gingrich’s 45 percent.

Among the 60 percent of the electorate who are evangelical Christians, Romney was able to grab roughly 20 percent of the vote, while Gingrich captured 40 percent.

These groups of voters are part of the core of the Republican Party. But it’s clear that Romney, still the favorite for the party’s 2012 presidential nomination, could enter the general election campaign without the full embrace of his party’s base. That does not put him the position he needs to occupy in order to woo independent voters in the middle of the ideological spectrum.

The soft support among the Republican base is of less concern to Romney’s high command than the narrative beginning to take shape around him–a storyline being fed by both the Obama and Gingrich campaigns. It paints Romney as a wealthy corporate raider who is out of touch with the economic reality faced by most Americans.

Team Romney is convinced, with historic trends and current data to back it up, that the antipathy toward Obama among Republicans will be sufficient to rally the party faithful around Romney in the fall. Anti-Obama energy, however, will not solve Romney’s inability to put his income tax issue to bed or to break the perception that he struggles to connect with the needs of middle-class families.

The Romney campaign is quick to point out that winning campaigns are those that survive tests like this. That’s true. A presidential nomination is never handed to the frontrunner without him (or someday her) being knocked back on his heels once or twice.

But there is a substantial difference between what’s happening with Romney and the challenges that Barack Obama and George W. Bush faced. When Obama emerged from a long and bruising battle with Hillary Clinton, he did so looking like a dragon slayer. And the body blow that George W. Bush took from John McCain came from the center, and allowed Bush to shore up his strength with the Republican base.

Yes, if Romney emerges as the Republican nominee, he will appear as a winner who overcame significant challenges. And an elongated nomination fight may improve his ability to take a punch. But those strengths will come at the expense of exposing not only Romney’s soft support among evangelical Christians and very conservative voters, but also the concern among donors and establishment figures in the party that he is being defined by not by himself and his team, but by his opponents.

China NET Exports Fell in 2011

China’s Currency reserves are no longer raising and the ATA points sometimes change faster than debating points. It is conventional wisdom that China’s export-led growth squeezes consumers at home and competitors abroad, even as it adds inexorably to the country’s huge foreign-exchange reserves. But figures released this month complicate these arguments.

China still runs a sizeable trade surplus. But its net exports fell in 2011 (in absolute terms) for only the third time since 2000, subtracting 0.5 percentage points from its growth. Thanks to home-grown spending, China’s economy still managed to expand by 9.2% in 2011, remaining surprisingly strong even in the fourth quarter. This growth owed an unusual amount to consumption (both public and private), which contributed over half for the first time since 2001. As a consequence, the share of consumption in China’s GDP edged up in 2011 after falling for ten years in a row.

The mainstay of China’s growth remains investment, on which its economy remains worryingly dependent. Indeed, when China’s critics are not bashing it for overexporting, they bash it for overinvestment in property. Its housing boom is, however, slowing markedly. China this week reported that the price of new homes fell in 52 out of 70 cities across the country in December, compared with the month before. Households are struggling to obtain mortgages; developers are finding it almost impossible to obtain a loan. The drying up of foreign funds is particularly dramatic, points out North Square Blue Oak, a research firm based in London and Beijing. Foreign capital fell by 65% in December, compared with a year earlier.

The flight of foreigners from property partly explains another unusual twist in the China story. Its foreign-exchange reserves fell in the fourth quarter for the first time since the height of the Asian financial crisis in 1998. The drop was small, from $3.2 trillion to $3.18 trillion, but also a little mysterious. China still exports more than it imports, and attracts more foreign direct investment than it undertakes. These two sources of foreign exchange must, then, have been offset by an unidentified drain.

The worry is that China’s capital controls have sprung a leak. “Hot money”, attracted by the country’s growth, may be flowing out as the property market falters. Some even speculate that China’s rich may begin to smuggle their new-found wealth out of the country en masse.

These fears are overblown, for now. Some of the drop probably reflects a change in the value of China’s euro holdings. Some does represent the departure of short-term money, but an ebb and flow of hot money is not unusual. Moreover, some kinds of hot money are more scalding than others, says Stephen Green of Standard Chartered. At one end of the thermometer, an exporter might delay the conversion of his legitimate foreign-exchange earnings. In other, warmer cases, an importer might illegally overstate the size of his purchases, so as to remit more money out of the country. Capitalists eager to take their money out also have other cards to play. Mr Green estimates that last year about $185 billion might have passed from mainland China through the VIP rooms of Macau’s casinos.

Victor Shih of Northwestern University reckons that China’s richest 1% hold $2 trillion-5 trillion in liquid wealth and property. If they were ever to smuggle that money out, the outflow would dent even China’s reserves. That would be a disaster for China’s economic management, putting heavy downward pressure on the yuan. At least China’s critics could no longer trot out another familiar accusation—that it undervalues the exchange rate.

A Brief History of “State Capitalism”

Something old, something new

A brief history of “state capitalism”

IN SEPTEMBER 1789 George Washington appointed Alexander Hamilton as America’s first ever treasury secretary. Two years later Hamilton presented Congress with a “Report on Manufactures”, his plan to get the young country’s economy going and provide the underpinnings for its hard-fought independence. Hamilton had no time for Adam Smith’s ideas about the hidden hand. America needed to protect its infant industries with tariffs if it wanted to see them grow up.

State capitalism has been around for almost as long as capitalism itself. Anglo-Saxons like to think of themselves as the perennial defenders of free-market orthodoxy against continental European and Asian heresy. In reality every rising power has relied on the state to kickstart growth or at least to protect fragile industries. Even Britain, the crucible of free-trade thinking, created a giant national champion in the form of the East India Company.

The appetite for industrial policy grew with the eating, and after the second world war intervention became a mark of civilization as well as common sense. The Europeans created industrial powerhouses and welfare states. The Asians poured resources into national champions.

This long era of state activism has left a surprisingly powerful legacy, despite the more recent fashion for privatisation and deregulation. The rich world still has a large number of state-owned or state-dominated companies. For example, France owns 85% of EDF, an energy company; Japan 50% of Japan Tobacco; and Germany 32% of Deutsche Telekom. These numbers add up: across the OECD state-owned enterprises have a combined value of almost $2 trillion and employ 6m people.

The new kind of state capitalism started in Singapore. Lee Kuan Yew, its founding father, was prime minister for more than 30 years and a tireless advocate of “Asian values”, by which he meant a mixture of family values and authoritarianism. He rivalled Beatrice Webb in his faith in the wisdom of the state. But he also grasped that Singapore’s best chance lay in attracting the world’s most powerful corporations, though he rejected the laissez-faire ideas that flourished in Asia’s other great port city, Hong Kong.

Singapore could easily have remained a tiny oddity but for a succession of earth-shaking events. The first was the oil embargo imposed by the Arab petrostates in the wake of the 1973 Yom Kippur war, quadrupling the price of oil and shifting the balance of power in the world economy. Arab governments tightened their control over the newly valuable oil companies and amassed growing financial surpluses. For them the economic shock was proof of the power of their oil weapon. For the Chinese it demonstrated the importance of securing a safe supply of oil and other raw materials.

The second event was Deng Xiaoping’s transformation of China. Deng borrowed heavily from the Singaporean model. He embraced globalisation by creating special economic zones and inviting foreign companies in. He espoused corporatism by forcing state enterprises to model themselves on Western companies. And he concentrated resources on national champions and investment in research and development. By doing all this, he plugged 1.3 billion people into the world economy.

The final event was the collapse of Soviet communism. This was initially seen as one of the great triumphs of liberalism, but it soon unleashed dark forces. Communist apparatchiks-turned-oligarchs grabbed chunks of the economy. Between 1990 and 1995 the country’s GDP dropped by a third. Male life expectancy shrank from 64 to 58. Once-captive nations broke away. In 1998 the country defaulted on its debts.

The post-Soviet disaster created a craving for order. Vladimir Putin, then Russia’s president, reasserted direct state control over “strategic” industries and brought the remaining private-sector oligarchs to heel. But just as important as the backlash in Russia was the one in China. The collapse of the Soviet Union confirmed the Chinese Communist Party’s deepest fear: that the end of party rule would mean the breakdown of order. The only safe way forward was a judicious mixture of private enterprise and state capitalism

As Romney so eloquently has stated  that there has been a frontal assault on Capitalism, we should begin this debate on how Capitalism has been  for centuries and later to discuss how it has evolved.  I do not think there is ANY candidate that does not believe we need to have capitalism at the core of our  society. It is how it has become perverted and has gone against the other cores of our society  those being humanity, equality and the protection of the health well-being and rights of all citizens of the United States is above all  … even CAPITALISM. We now must seek a balance  for all these values to peacefully coexist again.

It is my intention to bring this  need to the forefront of the rest of this presidential election cycle

Bad Day of Rain Fitting ending to a BAD week for Romney

The scene at Harmon Tree Farm didn’t feel like the usual Mitt Romney rally. Situated next to an old barn dressed up with a large American flag, there was a live band performing old AC/DC classics, including “You Shook Me All Night Long,” prompting supporters to hoot and dance.

“Shake it girl!” the band’s frontwoman called out to a wildly dancing lady in the audience at one point.

Just before Romney’s campaign bus pulled up, the torrential rain began. Some people ran for cover, to their cars and to a nearby building, while others simply stood in the rain shielding themselves with blue and white Romney for President signs.

As Romney disembarked from his bus to his now familiar entrance song—”Born Free” by Kid Rock—an aide tried to shield the candidate from the pouring rain, but he pushed forward, shaking hands and waving at supporters as he took the stage in the pouring rain.

After an introduction by Nikki Haley, the South Carolina governor whose dark hair was soon sopping wet, Romney took the microphone, his face glistening with moisture but his slick hair unmussed.

“Wow! Pull out the umbrellas,” Romney declared, eying the dark skies.

Motioning to folks who were waving his campaign signs, he said, “Use those signs for what they were made for: To keep your head dry!”

“My oh my,” he bellowed, as the rain poured.

On any other day, Romney’s campaign might have tried to move his rally elsewhere. But the image of the candidate stumping in the rain for every last vote wasn’t so bad for a campaign now worried that Saturday’s pivotal primary here won’t go their way.

Romney stood on stage for nearly 15 minutes and shook hands along the soaked rope line for another 20 minutes more. His aides and closest supporters looked on, at least one admitting some anxiety about Romney’s standing among voters here on primary eve.

“I feel good,” Nathan Ballentine, a Republican state representative and one of Romney’s early supporters in the state, told Yahoo News. “But it’s going to be close… It was always going to be close.”

There has been a change in the air around the Romney campaign in recent days. When Romney arrived in the state 10 days ago, he was coming off his victory in New Hampshire and what was then a win in Iowa. On the stump today, he acknowledged for the first time that he had suffered a “slim defeat” in the Hawkeye State—a notable admission given his campaign refused to describe his phone call to Rick Santorum on Thursday about Iowa’s election results as a “concession.”

Stuart Stevens, a Romney adviser, told reporters Thursday that the campaign had always viewed South Carolina as a tough race—noting that Romney had placed fourth here four years ago. He said he expected the primary go well beyond Florida, where he added that Newt Gingrich and Rick Santorum were also waging “tough” campaigns.

In Gilbert, Romney also seemed to join in setting expectations for Saturday’s election, emphasizing to reporters that he came to the state with the odds stacked against him.

“I had a lot of ground to make up …  Speaker Gingrich is from a neighboring state, well-known, popular in the state, so I knew we’d have a long road ahead of us, and frankly to be in a neck-and-neck race at this last moment is kind of exciting,” Romney said. “I think I said from the very beginning South Carolina is an uphill battle for us.”

The candidate added that even if he doesn’t finish first in Saturday’s primary, he expects to walk away with “a lot of delegates.”

“We have a long process ahead of us,” he said.

Romney Still Front Runner in HoHum Primaries

The fundamentals of Mitt Romney’s presidential campaign are strong. Even in the wake of former House Speaker Newt Gingrich’s surging momentum in South Carolina, the fact remains that Romney is the overwhelming front-runner for the Republican nomination — and Saturday’s primary won’t do anything to change that.

That’s not to poo-poo Gingrich’s comeback. The former speaker’s recovery in South Carolina has come against all odds, including sustained attacks from a pro-Romney super PAC, a damaging tell-all interview from his second wife, a sustained push by social conservatives to unite behind Rick Santorum, and the fact that Gingrich is still running a campaign virtually bereft of the infrastructure that past serious candidates have needed to win key primary states.

Gingrich’s roller-coaster ride in public-opinion polls began its initial climb thanks to strong performances in debates in November. His revival, after a barrage of attack ads in Iowa, came thanks to two more strong performances this week and his wise decision to abandon a high-road strategy that has never been rewarded in presidential politics in favor of mixing it up with front-running Romney.

But Gingrich is living a hand-to-mouth existence, while Romney has sowed seeds he can reap later on in other states. The Republican presidential campaign is, at the end, a race for 1,144 delegates, and the former Massachusetts governor’s campaign is in a far better position to harvest those delegates in later primaries.

So far, Romney has collected an estimated 14 delegates, thanks to his performances in Iowa and New Hampshire, while Gingrich has just two. South Carolina will award 28 delegates, likely split between the four remaining candidates. The first real delegate prize comes on Jan. 31, when the winner of the Florida primary collects all 50 of the state’s delegates.

Gingrich campaigned in Florida briefly last week. Romney has competed in Florida before, and a super PAC that backs his campaign is helping to give him a jump. Reports filed with the Federal Election Commission show Restore Our Future, the pro-Romney super PAC, spent about $300,000 on mailings and $1.5 million on television in Florida this week alone; the filings suggest the television time is dedicated to negative ads focused on Gingrich.

Gingrich gets his chance to share the stage with Romney twice, first on Monday at a debate cosponsored by National Journal, NBC News, and the Tampa Bay Times and then again on Thursday at a CNN/Republican Party of Florida debate in Jacksonville. He will have to hope that once again, strong debate performances will overcome the rush of negative advertisements that has already begun.

After Florida, Gingrich’s outlook becomes even more bleak. The February calendar presents Romney with the opportunity to do to Gingrich what Barack Obama did to Hillary Clinton in 2008. Caucuses in Nevada, Colorado, and Minnesota will benefit a more organized campaign, giving Romney and Rep.Ron Paul a boost over Gingrich. The two primaries that month, in Arizona and Michigan, will take place on Romney-friendly turf; Arizona has a sizable Mormon electorate, while Michigan is Romney’s home state. By the end of February, Romney is likely to have the majority of the 274 delegates awarded to that point. Paul’s focus on caucus states means Gingrich may not even be in second place by the end of the month.

Then comes Super Tuesday, when 10 states will allocate a total of 407 delegates. With few debates left on the horizon, Gingrich won’t have the time, the exposure, or the money to build the type of national campaign Romney has already started to build (Gingrich isn’t even eligible for the 46 delegates from Virginia; his campaign didn’t submit enough valid signatures to make the ballot there).

In short, South Carolina presents Gingrich’s last real chance to be on equal footing with Romney before the race goes national. Barring a sustained surge in campaign contributions for Gingrich and a real stumble by Romney’s campaign, the reality is that the race for the Republican nod is as clear today as it was before Gingrich’s revitalization: There will be no extended fight for delegates a la Obama-Clinton, there will be no brokered convention, and Romney will be the Republican nominee. The deck is stacked too much in Romney’s favor to give Gingrich’s campaign anything more than a temporary reprieve.

Are Women Holding Back Our Economic Growth?

Admittedly the title sounds ridiculous… but is it rally?? Tell me after you read the article.

The New York Times reported earlier this month that consumer spending, while slightly up for the holidays, wasn’t as strong as many were hoping and ended up looking pretty depressed in 2011.

 Consumers’ unwillingness to open up their pocketbooks and go on credit-fueled shopping sprees portends dismal economic growth in the near future.

They have already cut back so far that there is “little room for a big increase in spending in 2012,” as the article puts it. And it reports, “Consumer spending makes up 70 percent of the economy, so until it ignites, general growth is likely to be sluggish.”

It’s no mistake that both the people interviewed for the article were women. There’s Sarah M. Manley from Minnesota, who has frozen crab legs she bought on discount stowed away for Valentine’s Day and now buys milk in plastic bags from the gas station instead of in cartons. There’s also Lynette Paudel of Ohio, who plans to drive her 2003 minivan until it breaks but was lucky enough to avoid being let go from her high school English teaching job. When it comes to talk of consumer spending, we might as well be talking almost exclusively about women. They oversee 80 percent of consumer spending, totaling $3.7 trillion. As long as they continue to suffer in the recession, the rest of the economy will sputter along.

Paudel is very lucky to have kept her teaching job. Since the recovery officially began in 2009, women have actually been losing jobs. They saw 46,000 disappear, while at the same time men made some gains, getting back 1.26 million. Women’s unemployment rate has also inched up while men saw a decline. And a large part of that trend is that women were big losers in public sector layoffs, losing 374,000 jobs. A lot of those came from public education jobs — elementary and high school teachers like Paudel.

That’s not the whole story, however. Men have also been making gains in the public sector while women lost, driven by huge job losses for administrative and secretarial positions. Men are even gaining in the traditionally female-dominated retail industry.

Even those women who are still employed are likely struggling with other factors. Housing debt is a huge barrier holding consumers back. The Times article reports, “with more than one in every five borrowers still owing more than their homes are worth, many homeowners feel too pressed to spend on much more than the essentials.”

But as the Consumer Federation of America found, women were 32 percent more likely to receive subprime mortgages than men across all product lines, even though they have similar credit profiles. Those high-cost loans, often pawned off on those who could least afford them, have led to a massive wave of foreclosures and put many homeowners underwater. And overall, women’s representation in the mortgage market has grown in recent decades — the number of single women homeowners, for example, grew by 4 million between 1994 and 2002. They’re likely to be struggling under heavy mortgage debt loads.

They also, of course, make less than their male counterparts for similar work. So while American workers’ wages have stagnated over the past three decades, women have yet to even catch up to men.

It’s likely that some of the women overseeing that 80 percent of consumer spending aren’t going it alone. Many are making decisions for their families’ spending, and if they are unemployed hopefully they can rely on income from an employed spouse. (Although in a recent poll almost a quarter of respondents had a family member who had experienced job loss.) But if consumer spending is going to continue driving the economy, and the economic recovery, what’s happening to women in the recovery period can’t be ignored. Things have been bad and show no sign of looking up.

Spain’s Difficult Task Ahead May Prove TOO Difficult

MADRID (Reuters) – Spain’s new government will push ahead within weeks on labor reform aimed at tackling the European Union’s highest unemployment rate after unions and employers failed to meet a deadline for agreeing how to modernize a rigid system that harms them both.

It is difficult to see how the reforms can help Spain’s immediate battle with a chronically-weak economy and a jobless rate that has soared to 23.5 percent in recent months, leaving some 5.4 million out of work.

But Prime Minister Mariano Rajoy drove home the need for action by releasing the latest unemployment figures two weeks early this week and says he will do what is needed to loosen up the system and enable freer job creation.

To do so the government will have to take aggressive measures to worsen wages and conditions for employees that unions warn could prompt a national strike. From what signs the government has given on the shape of the reform, on the other hand, economists say it may also fail to please employers and risks not doing enough to generate meaningful improvement.

In a speech in Malaga on Saturday, Rajoy called the headline unemployment number – equivalent to almost one in four of the economically active population – “astronomical” and said his government would “wage war” on unemployment lines.

“This is in keeping with the change of government,” Santiago Sanchez, chief economist at Juan Carlos III university in Madrid, said.

“The previous government looked for positive statistics to highlight its management (of the economy) .. and this one is rooting out the worst ones to justify its tough austerity measures.”

Elected in a landslide in November, Rajoy gave worker and employer representatives until last Friday to agree on a broad sweep of reforms as he tried to draw a line under some 18 months of largely fruitless talks. They missed the deadline.

The government also faces credit agency pressure, with Standard & Poor’s warning it could cut Spain further this year or next following Friday’s two-notch downgrade if reforms were delayed or “insufficient to reduce the high unemployment rate.”

‘GOLDEN OPPORTUNITY’

Job creation in Spain has been crippled by a stagnant economy, a tough austerity program and exceptionally generous redundancy deals. Critics say the labor market is shackled by complex and rigid agreements on collective bargaining, statutory redundancy payments and temporary contracts.

“The (labor) reform has to be thought of as a golden opportunity to change the structure of the way the Spanish labor market operates and to be a major force for higher productivity and to reduce structural unemployment,” Antonio Garcia Pascual, chief southern European economist at Barclays in London, said.

Unemployment rates were likely to rise further given Spain’s economy was set to shrink this year, he said, but reforms making it easier and cheaper for companies to hire and fire as well as giving more workers better protection would promote jobs growth once the upturn comes.

Terms and conditions for Spanish workers tend to be agreed at regional level and sometimes across industries, giving unions strong negotiating powers that they will battle to protect.

But generous permanent contracts mean firms are more inclined to hire workers on temporary ones that offer little protection.

“Collective bargaining .., is something we are particularly sensitive about,” said a spokesman for the country’s biggest union, the blue-collar CCOO, warning that major changes could provoke a general strike.

Garcia Pascual said the government could “probably” live with that. “I suspect that with 23 percent unemployment the response (to a strike call) may not be so enthusiastic.”

Gilles Moec, analyst at Deutsche Bank in London, said he expected the new laws to give firms greater freedom to opt out of collective contracts. “My understanding is that the government is ready to go there,” he said.

The government will also scale back redundancy payments for permanent staff that are among the highest in the world, favoring contracts offering a statutory minimum of 33 days’ pay for each year worked, Treasury Minister Cristobal Montoro said.

Unions are demanding 45 days’ pay and employers 20, but even the lower figure dwarfs payoffs in other countries.

In Germany, at least half a month’s pay is usual and in France a fifth, while in the United States there is no statutory requirement to award severance pay.

The heavy extra potential burden on employers in Spain means many are prepared to offer only temporary contracts that give workers little if any protection against dismissal.

A SINGLE CONTRACT

According to the national statistics institute, 26 percent of all Spanish employment contracts were temporary as of last September, and the proportion has almost certainly risen since.

For Barclays’ Garcia Pascual, the labor market will not revive until that trend is reversed.

“I think they should be bold and think about a single contract where the firing cost increases with seniority. (But) that is not easy to sell to unions or employers.”

“The best way forward would be to reduce the level of protection on permanent contracts and improve (it) …on temporary ones,” added Deutsche Bank’s Moec.

The labor reform draft is expected to be ready by early February and Treasury Minister Cristobal Montoro said it would be pushed through without a broader consensus if necessary.

The government would however “keep lines of communication open” with unions and employers in the run-up to the new legislation, a labor ministry spokeswoman said.

While angering unions, more flexibility would please domestic employers and would-be foreign investors.

“What most people want is more flexibility and collective bargaining agreements” tailored to individual companies and sectors, said U.S. ambassador Alan Solomont.

He cited the U.S. practice of linking work hours to productivity cycles, for instance in auto plants. General Motors Co operates a large assembly line in Zaragoza.

The strategy also worked well during the 2008/9 economic crisis for Germany, where unemployment fell in December to its lowest level since the country’s reunification two decades ago.

Do YOU Understand the Reason For Debt

Nobody Understands Debt

In 2011, as in 2010, America was in a technical recovery but continued to suffer from disastrously high unemployment. And through most of 2011, as in 2010, almost all the conversation in Washington was about something else: the allegedly urgent issue of reducing the budget deficit.

This misplaced focus said a lot about our political culture, in particular about how disconnected Congress is from the suffering of ordinary Americans. But it also revealed something else: when people in D.C. talk about deficits and debt, by and large they have no idea what they’re talking about — and the people who talk the most understand the least.

Perhaps most obviously, the economic “experts” on whom much of Congress relies have been repeatedly, utterly wrong about the short-run effects of budget deficits. People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now!

And while they’ve been waiting, those rates have dropped to historical lows. You might think that this would make politicians question their choice of experts — that is, you might think that if you didn’t know anything about our postmodern, fact-free politics.

But Washington isn’t just confused about the short run; it’s also confused about the long run. For while debt can be a problem, the way our politicians and pundits think about debt is all wrong, and exaggerates the problem’s size.

Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.

This is, however, a really bad analogy in at least two ways.

First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.

Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.

This was clearly true of the debt incurred to win World War II. Taxpayers were on the hook for a debt that was significantly bigger, as a percentage of G.D.P., than debt today; but that debt was also owned by taxpayers, such as all the people who bought savings bonds. So the debt didn’t make postwar America poorer. In particular, the debt didn’t prevent the postwar generation from experiencing the biggest rise in incomes and living standards in our nation’s history.

But isn’t this time different? Not as much as you think.

It’s true that foreigners now hold large claims on the United States, including a fair amount of government debt. But every dollar’s worth of foreign claims on America is matched by 89 cents’ worth of U.S. claims on foreigners. And because foreigners tend to put their U.S. investments into safe, low-yield assets, America actually earns more from its assets abroad than it pays to foreign investors. If your image is of a nation that’s already deep in hock to the Chinese, you’ve been misinformed. Nor are we heading rapidly in that direction.

Now, the fact that federal debt isn’t at all like a mortgage on America’s future doesn’t mean that the debt is harmless. Taxes must be levied to pay the interest, and you don’t have to be a right-wing ideologue to concede that taxes impose some cost on the economy, if nothing else by causing a diversion of resources away from productive activities into tax avoidance and evasion. But these costs are a lot less dramatic than the analogy with an overindebted family might suggest.

And that’s why nations with stable, responsible governments — that is, governments that are willing to impose modestly higher taxes when the situation warrants it — have historically been able to live with much higher levels of debt than today’s conventional wisdom would lead you to believe. Britain, in particular, has had debt exceeding 100 percent of G.D.P. for 81 of the last 170 years. When Keynes was writing about the need to spend your way out of a depression, Britain was deeper in debt than any advanced nation today, with the exception of Japan.

Of course, America, with its rabidly antitax conservative movement, may not have a government that is responsible in this sense. But in that case the fault lies not in our debt, but in ourselves.

So yes, debt matters. But right now, other things matter more. We need more, not less, government spending to get us out of our unemployment trap. And the wrongheaded, ill-informed obsession with debt is standing in the way.

Bain or Barack, Who Creates Jobs Today

Bain, Barack and Jobs

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America’s recovery from recession has been so slow that it mostly doesn’t seem like a recovery at all, especially on the jobs front. So, in a better world, President Obama would face a challenger offering a serious critique of his job-creation policies, and proposing a serious alternative

Instead, he’ll almost surely face Mitt Romney.

Mr. Romney claims that Mr. Obama has been a job destroyer, while he was a job-creating businessman. For example, he told Fox News: “This is a president who lost more jobs during his tenure than any president since Hoover. This is two million jobs that he lost as president.” He went on to declare, of his time at the private equity firm Bain Capital, “I’m very happy in my former life; we helped create over 100,000 new jobs.”

But his claims about the Obama record border on dishonesty, and his claims about his own record are well across that border.

Start with the Obama record. It’s true that 1.9 million fewer Americans have jobs now than when Mr. Obama took office. But the president inherited an economy in free fall, and can’t be held responsible for job losses during his first few months, before any of his own policies had time to take effect. So how much of that Obama job loss took place in, say, the first half of 2009?

The answer is: more than all of it. The economy lost 3.1 million jobs between January 2009 and June 2009 and has since gained 1.2 million jobs. That’s not enough, but it’s nothing like Mr. Romney’s portrait of job destruction.

Incidentally, the previous administration’s claims of job growth always started not from Inauguration Day but from August 2003, when Bush-era employment hit its low point. By that standard, Mr. Obama could say that he has created 2.5 million jobs since February 2010.

So Mr. Romney’s claims about the Obama job record aren’t literally false, but they are deeply misleading. Still, the real fun comes when we look at what Mr. Romney says about himself. Where does that claim of creating 100,000 jobs come from?

Well, Glenn Kessler of The Washington Post got an answer from the Romney campaign. It’s the sum of job gains at three companies that Mr. Romney “helped to start or grow”: Staples, The Sports Authority and Domino’s.

Mr. Kessler immediately pointed out two problems with this tally. It’s “based on current employment figures, not the period when Romney worked at Bain,” and it “does not include job losses from other companies with which Bain Capital was involved.” Either problem, by itself, makes nonsense of the whole claim.

On the point about using current employment, consider Staples, which has more than twice as many stores now as it did back in 1999, when Mr. Romney left Bain. Can he claim credit for everything good that has happened to the company in the past 12 years? In particular, can he claim credit for the company’s successful shift from focusing on price to focusing on customer service (“That was easy”), which took place long after he had left the business world?

Then there’s the bit about looking only at Bain-connected companies that added jobs, ignoring those that reduced their work forces or went out of business. Hey, if pluses count but minuses don’t, everyone who spends a day playing the slot machines comes out way ahead!

In any case, it makes no sense to look at changes in one company’s work force and say that this measures job creation for America as a whole.

Suppose, for example, that your chain of office-supply stores gains market share at the expense of rivals. You employ more people; your rivals employ fewer. What’s the overall effect on U.S. employment? One thing’s for sure: it’s a lot less than the number of workers your company added.

Better yet, suppose that you expand in part not by beating your competitors, but by buying them. Now their employees are your employees. Have you created jobs?

The point is that Mr. Romney’s claims about being a job creator would be nonsense even if he were being honest about the numbers, which he isn’t.

At this point, some readers may ask whether it isn’t equally wrong to say that Mr. Romney destroyed jobs. Yes, it is. The real complaint about Mr. Romney and his colleagues isn’t that they destroyed jobs, but that they destroyed good jobs.

When the dust settled after the companies that Bain restructured were downsized — or, as happened all too often, went bankrupt — total U.S. employment was probably about the same as it would have been in any case. But the jobs that were lost paid more and had better benefits than the jobs that replaced them. Mr. Romney and those like him didn’t destroy jobs, but they did enrich themselves while helping to destroy the American middle class.

And that reality is, of course, what all the blather and misdirection about job-creating businessmen and job-destroying Democrats is meant to obscure.

Keynesian Economics Vindicated

Keynes Was Right

“The boom, not the slump, is the right time for austerity at the Treasury.” So declared John Maynard Keynes in 1937, even as F.D.R. was about to prove him right by trying to balance the budget too soon, sending the United States economy — which had been steadily recovering up to that point — into a severe recession. Slashing government spending in a depressed economy depresses the economy further; austerity should wait until a strong recovery is well under way.

Unfortunately, in late 2010 and early 2011, politicians and policy makers in much of the Western world believed that they knew better, that we should focus on deficits, not jobs, even though our economies had barely begun to recover from the slump that followed the financial crisis. And by acting on that anti-Keynesian belief, they ended up proving Keynes right all over again.

In declaring Keynesian economics vindicated I am, of course, at odds with conventional wisdom. In Washington, in particular, the failure of the Obama stimulus package to produce an employment boom is generally seen as having proved that government spending can’t create jobs. But those of us who did the math realized, right from the beginning, that the Recovery and Reinvestment Act of 2009 (more than a third of which, by the way, took the relatively ineffective form of tax cuts) was much too small given the depth of the slump. And we also predicted the resulting political backlash.

So the real test of Keynesian economics hasn’t come from the half-hearted efforts of the U.S. federal government to boost the economy, which were largely offset by cuts at the state and local levels. It has, instead, come from European nations like Greece and Ireland that had to impose savage fiscal austerity as a condition for receiving emergency loans — and have suffered Depression-level economic slumps, with real G.D.P. in both countries down by double digits.

This wasn’t supposed to happen, according to the ideology that dominates much of our political discourse. In March 2011, the Republican staff of Congress’s Joint Economic Committee released a report titled “Spend Less, Owe Less, Grow the Economy.” It ridiculed concerns that cutting spending in a slump would worsen that slump, arguing that spending cuts would improve consumer and business confidence, and that this might well lead to faster, not slower, growth.

They should have known better even at the time: the alleged historical examples of “expansionary austerity” they used to make their case had already been thoroughly debunked. And there was also the embarrassing fact that many on the right had prematurely declared Ireland a success story, demonstrating the virtues of spending cuts, in mid-2010, only to see the Irish slump deepen and whatever confidence investors might have felt evaporate.

Amazingly, by the way, it happened all over again this year. There were widespread proclamations that Ireland had turned the corner, proving that austerity works — and then the numbers came in, and they were as dismal as before.

Yet the insistence on immediate spending cuts continued to dominate the political landscape, with malign effects on the U.S. economy. True, there weren’t major new austerity measures at the federal level, but there was a lot of “passive” austerity as the Obama stimulus faded out and cash-strapped state and local governments continued to cut.

Now, you could argue that Greece and Ireland had no choice about imposing austerity, or, at any rate, no choices other than defaulting on their debts and leaving the euro. But another lesson of 2011 was that America did and does have a choice; Washington may be obsessed with the deficit, but financial markets are, if anything, signaling that we should borrow more.

Again, this wasn’t supposed to happen. We entered 2011 amid dire warnings about a Greek-style debt crisis that would happen as soon as the Federal Reserve stopped buying bonds, or the rating agencies ended our triple-A status, or the superdupercommittee failed to reach a deal, or something. But the Fed ended its bond-purchase program in June; Standard & Poor’s downgraded America in August; the supercommittee deadlocked in November; and U.S. borrowing costs just kept falling. In fact, at this point, inflation-protected U.S. bonds pay negative interest: investors are willing to pay America to hold their money.

The bottom line is that 2011 was a year in which our political elite obsessed over short-term deficits that aren’t actually a problem and, in the process, made the real problem — a depressed economy and mass unemployment — worse.

The good news, such as it is, is that President Obama has finally gone back to fighting against premature austerity — and he seems to be winning the political battle. And one of these years we might actually end up taking Keynes’s advice, which is every bit as valid now as it was 75 years ago.

America, Land of the UnEqual

America’s Unlevel Field

Last month President Obama gave a speech invoking the spirit of Teddy Roosevelt on behalf of progressive ideals — and Republicans were not happy. Mitt Romney, in particular, insisted that where Roosevelt believed that “government should level the playing field to create equal opportunities,” Mr. Obama believes that “government should create equal outcomes,” that we should have a society where “everyone receives the same or similar rewards, regardless of education, effort and willingness to take risk.”As many people were quick to point out, this portrait of the president as radical redistributionist was pure fiction. What hasn’t been as widely noted, however, is that Mr. Romney’s picture of himself as a believer in a level playing field is just as fictional. Where is the evidence that he or his party cares at all about equality of opportunity?

Let’s talk for a minute about the actual state of the playing field.

Americans are much more likely than citizens of other nations to believe that they live in a meritocracy. But this self-image is a fantasy: as a report in The Times last week pointed out, America actually stands out as the advanced country in which it matters most who your parents were, the country in which those born on one of society’s lower rungs have the least chance of climbing to the top or even to the middle.

And if you ask why America is more class-bound in practice than the rest of the Western world, a large part of the reason is that our government falls down on the job of creating equal opportunity.

The failure starts early: in America, the holes in the social safety net mean that both low-income mothers and their children are all too likely to suffer from poor nutrition and receive inadequate health care. It continues once children reach school age, where they encounter a system in which the affluent send their kids to good, well-financed public schools or, if they choose, to private schools, while less-advantaged children get a far worse education.

Once they reach college age, those who come from disadvantaged backgrounds are far less likely to go to college — and vastly less likely to go to a top-tier school — than those luckier in their parentage. At the most selective, “Tier 1” schools, 74 percent of the entering class comes from the quarter of households that have the highest “socioeconomic status”; only 3 percent comes from the bottom quarter.

And if children from our society’s lower rungs do manage to make it into a good college, the lack of financial support makes them far more likely to drop out than the children of the affluent, even if they have as much or more native ability. One long-term study by the Department of Education found that students with high test scores but low-income parents were less likely to complete college than students with low scores but affluent parents — loosely speaking, that smart poor kids are less likely than dumb rich kids to get a degree.

It’s no wonder, then, that Horatio Alger stories, tales of poor kids who make good, are much less common in reality than they are in legend — and much less common in America than they are in Canada or Europe. Which brings me back to those, like Mr. Romney, who claim to believe in equality of opportunity. Where is the evidence for that claim?

Think about it: someone who really wanted equal opportunity would be very concerned about the inequality of our current system. He would support more nutritional aid for low-income mothers-to-be and young children. He would try to improve the quality of public schools. He would support aid to low-income college students. And he would support what every other advanced country has, a universal health care system, so that nobody need worry about untreated illness or crushing medical bills.

If Mr. Romney has come out for any of these things, I’ve missed it. And the Congressional wing of his party seems determined to make upward mobility even harder. For example, Republicans have tried to slash funds for the Women, Infants and Children program, which helps provide adequate nutrition to low-income mothers and their children; they have demanded cuts in Pell grants, which are designed to help lower-income students afford college.

And they have, of course, pledged to repeal a health reform that, for all its imperfections, would finally give Americans the guaranteed care that everyone else in the advanced world takes for granted.

So where is the evidence that Mr. Romney or his party actually believes in equal opportunity? Judging by their actions, they seem to prefer a society in which your station in life is largely determined by that of your parents — and in which the children of the very rich get to inherit their estates tax-free. Teddy Roosevelt would not have approved.

America’s New Class System

How Fares the Dream?

“I have a dream,” declared Martin Luther King, in a speech that has lost none of its power to inspire. And some of that dream has come true. When King spoke in the summer of 1963, America was a nation that denied basic rights to millions of its citizens, simply because their skin was the wrong color. Today racism is no longer embedded in law. And while it has by no means been banished from the hearts of men, its grip is far weaker than once it was.

To say the obvious: to look at a photo of President Obama with his cabinet is to see a degree of racial openness — and openness to women, too — that would have seemed almost inconceivable in 1963. When we observe Martin Luther King’s Birthday, we have something very real to celebrate: the civil rights movement was one of America’s finest hours, and it made us a nation truer to its own ideals.

Yet if King could see America now, I believe that he would be disappointed, and feel that his work was nowhere near done. He dreamed of a nation in which his children “will not be judged by the color of their skin but by the content of their character.” But what we actually became is a nation that judges people not by the color of their skin — or at least not as much as in the past — but by the size of their paychecks. And in America, more than in most other wealthy nations, the size of your paycheck is strongly correlated with the size of your father’s paycheck.

Goodbye Jim Crow, hello class system.

Economic inequality isn’t inherently a racial issue, and rising inequality would be disturbing even if there weren’t a racial dimension. But American society being what it is, there are racial implications to the way our incomes have been pulling apart. And in any case, King — who was campaigning for higher wages when he was assassinated — would surely have considered soaring inequality an evil to be opposed.

So, about that racial dimension: In the 1960s it was widely assumed that ending overt discrimination would improve the economic as well as legal status of minority groups. And at first this seemed to be happening. Over the course of the 1960s and 1970s substantial numbers of black families moved into the middle class, and even into the upper middle class; the percentage of black households in the top 20 percent of the income distribution nearly doubled.

But around 1980 the relative economic position of blacks in America stopped improving. Why? An important part of the answer, surely, is that circa 1980 income disparities in the United States began to widen dramatically, turning us into a society more unequal than at any time since the 1920s.

Think of the income distribution as a ladder, with different people on different rungs. Starting around 1980, the rungs began moving ever farther apart, adversely affecting black economic progress in two ways. First, because many blacks were still on the lower rungs, they were left behind as income at the top of the ladder soared while income near the bottom stagnated. Second, as the rungs moved farther apart, the ladder became harder to climb.

The Times recently reported on a well-established finding that still surprises many Americans when they hear about it: although we still see ourselves as the land of opportunity, we actually have less intergenerational economic mobility than other advanced nations. That is, the chances that someone born into a low-income family will end up with high income, or vice versa, are significantly lower here than in Canada or Europe.

And there’s every reason to believe that our low economic mobility has a lot to do with our high level of income inequality.

Last week Alan Krueger, chairman of the president’s Council of Economic Advisers, gave an important speech about income inequality, presenting a relationship he dubbed the “Great Gatsby Curve.” Highly unequal countries, he showed, have low mobility: the more unequal a society is, the greater the extent to which an individual’s economic status is determined by his or her parents’ status. And as Mr. Krueger pointed out, this relationship suggests that America in the year 2035 will have even less mobility than it has now, that it will be a place in which the economic prospects of children largely reflect the class into which they were born.

That is not a development we should meekly accept.

Mitt Romney says that we should discuss income inequality, if at all, only in “quiet rooms.” There was a time when people said the same thing about racial inequality. Luckily, however, there were people like Martin Luther King who refused to stay quiet. And we should follow their example today. For the fact is that rising inequality threatens to make America a different and worse place — and we need to reverse that trend to preserve both our values and our dreams.

Can America Be A Corporation?

America Isn’t a Corporation

By PAUL KRUGMAN

“And greed — you mark my words — will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A.”

Paul KrugmanThat’s how the fictional Gordon Gekko finished his famous “Greed is good” speech in the 1987 film “Wall Street.” In the movie, Gekko got his comeuppance. But in real life, Gekkoism triumphed, and policy based on the notion that greed is good is a major reason why income has grown so much more rapidly for the richest 1 percent than for the middle class.

Today, however, let’s focus on the rest of that sentence, which compares America to a corporation. This, too, is an idea that has been widely accepted. And it’s the main plank of Mitt Romney’s case that he should be president: In effect, he is asserting that what we need to fix our ailing economy is someone who has been successful in business.

In so doing, he has, of course, invited close scrutiny of his business career. And it turns out that there is at least a whiff of Gordon Gekko in his time at Bain Capital, a private equity firm; he was a buyer and seller of businesses, often to the detriment of their employees, rather than someone who ran companies for the long haul. (Also, when will he release his tax returns?) Nor has he helped his credibility by making untenable claims about his role as a “job creator.”

But there’s a deeper problem in the whole notion that what this nation needs is a successful businessman as president: America is not, in fact, a corporation. Making good economic policy isn’t at all like maximizing corporate profits. And businessmen — even great businessmen — do not, in general, have any special insights into what it takes to achieve economic recovery.

Why isn’t a national economy like a corporation? For one thing, there’s no simple bottom line. For another, the economy is vastly more complex than even the largest private company.

Most relevant for our current situation, however, is the point that even giant corporations sell the great bulk of what they produce to other people, not to their own employees — whereas even small countries sell most of what they produce to themselves, and big countries like America are overwhelmingly their own main customers.

Yes, there’s a global economy. But six out of seven American workers are employed in service industries, which are largely insulated from international competition, and even our manufacturers sell much of their production to the domestic market.

And the fact that we mostly sell to ourselves makes an enormous difference when you think about policy.

Consider what happens when a business engages in ruthless cost-cutting. From the point of view of the firm’s owners (though not its workers), the more costs that are cut, the better. Any dollars taken off the cost side of the balance sheet are added to the bottom line.

But the story is very different when a government slashes spending in the face of a depressed economy. Look at Greece, Spain, and Ireland, all of which have adopted harsh austerity policies. In each case, unemployment soared, because cuts in government spending mainly hit domestic producers. And, in each case, the reduction in budget deficits was much less than expected, because tax receipts fell as output and employment collapsed.

Now, to be fair, being a career politician isn’t necessarily a better preparation for managing economic policy than being a businessman. But Mr. Romney is the one claiming that his career makes him especially suited for the presidency. Did I mention that the last businessman to live in the White House was a guy named Herbert Hoover? (Unless you count former President George W. Bush.)

And there’s also the question of whether Mr. Romney understands the difference between running a business and managing an economy.

Like many observers, I was somewhat startled by his latest defense of his record at Bain — namely, that he did the same thing the Obama administration did when it bailed out the auto industry, laying off workers in the process. One might think that Mr. Romney would rather not talk about a highly successful policy that just about everyone in the Republican Party, including him, denounced at the time.

But what really struck me was how Mr. Romney characterized President Obama’s actions: “He did it to try to save the business.” No, he didn’t; he did it to save the industry, and thereby to save jobs that would otherwise have been lost, deepening America’s slump. Does Mr. Romney understand the distinction?

America certainly needs better economic policies than it has right now — and while most of the blame for poor policies belongs to Republicans and their scorched-earth opposition to anything constructive, the president has made some important mistakes. But we’re not going to get better policies if the man sitting in the Oval Office next year sees his job as being that of engineering a leveraged buyout of America Inc.

Bain and Dirty Tricks Business??

Bain The Betrayer

William Cohan has an interesting take on Mitt Romney, which is completely distinct from the policy and left/right issues. According to Cohan, who did deals with Bain during the Romney years, the company specialized in dirty tricks.

Specifically, Bain would make the high bid for a company being offered for sale — then, after the other bidders had been sent away, would start finding things to complain about, and haggle the price down. This was, I gather, a major sin, since believe it or not Wall Street wheeling and dealing requires a high level of trust in one’s personal word.

This isn’t a policy issue; it’s the kind of thing I usually try to stay away from, the supposedly character-revealing nature of someone’s personal history. But as these things go, it’s especially interesting. Would you buy a used company — or a used ideology — from this guy?

The Great Gatsby Curve

January 15, 2012, 2:34 PM

Alan Krueger, the chairman of the Council of Economic Advisers — who is not only a colleague of mine at Princeton, but gets a lot of my mail and vice versa — gave a very informative speech on inequality last week that should have received more press than it did. Much of it was stuff that inequality mavens already know, but he had one striking result that was what I suspected but hadn’t seen demonstrated: a clear negative relationship between inequality at a point in time and intergenerational social mobility.

Below is what he dubs the Great Gatsby Curve. On the horizontal axis is the Gini coefficient, a measure of inequality. On the vertical axis is the intergenerational elasticity of income — how much a 1 percent rise in your father’s income affects your expected income; the higher this number, the lower is social mobility.

As he shows, America is both especially unequal and has especially low mobility. But he also argues that because we are even more unequal now than we were a generation ago, we should expect even less social mobility going forward.

Very illuminating — and disturbing.

The Real Romney: Questions of Character and Truthfulness

COLUMBIA, S.C.–With the Republican nomination shimmering just over the horizon, Mitt Romney dominated the news at noon Tuesday on WIS, the NBC affiliate here. A flashback to Monday night’s Republican debate described it as “Mitt Romney against the rest.” A new South Carolina poll, sponsored by Monmouth University, showed Romney leading the GOP five-pack, even among evangelical voters. Sid Bedingfield, a journalism professor at the University of South Carolina, cautioned, “It’s no secret that conservatives are not in love with Mitt Romney.” And there was no break from the midday Mittathon when the newscast paused for commercials: A 30-second spot sponsored by a shadowy independent group called Citizens for a Working America PAC heralded Romney as the only Republican who could beat Barack Obama.

Barring a dramatic upset in next Saturday’s South Carolina primary or a political upheaval soon thereafter, voters will have more than nine months until the November election to contemplate Romney as the nation’s 45^th president. No White House candidate can stand public scrutiny for that long without new revelations or, at least, new theories about what makes him tick. But the contours of the Romney story are unlikely to change–a devoted son of a failed presidential candidate; devout Mormon and dedicated family man; data-driven (and maybe cold-hearted) business consultant and leveraged buyout executive; non-ideological one-term governor of Massachusetts; and disciplined right-wing presidential candidate who has been running virtually nonstop since 2007.

Assuming Romney is indeed the Republican Party’s presidential nominee, the jumping off point for all future explorations into his political and business record will be The Real Romney by Michael Kranish and Scott Helman, which was published Tuesday. The authors, Boston Globe reporters assisted by the rest of the newspaper’s staff, have written a shrewd and fair-minded biography of the cautious and unruffled front-runner, a candidate who appears to be basing every public comment and gesture on research from a PowerPoint presentation (his favorite form of briefing).

The Real Romney contains little that is likely to dominate the headlines this week or influence Saturday’s voting in South Carolina. But make no mistake, this book is important. It offers intriguing insights about Romney, who would be the first president to see the world through the prism of quantitative business analysis rather than backslapping politics. (George W. Bush, who was a year behind Romney at Harvard Business School, also had an M.B.A., but as a presidential candidate in 2000 and 2004 he campaigned as a decisive C.E.O. rather than a dedicated quant who believes that cosmic truth can be found in numbers.)

Here are some thoughts about how man in The Real Romney might govern from the Oval Office:

“It was good training for how life works. I mean, rejection of one kind of another is going to be an important part of everyone’s life.”

That was the mature Romney, running for governor in 2002, looking back on his two and a half years as a Mormon missionary in France during the late 1960s. What comes through in the Globe’s telling was the austere isolation of the missionary experience: no television, no telephone, and minimal contact with home. Just a regimented life of prayer, French studies and knocking on doors in quest of converts.

Most presidents (think Lyndon Johnson, Bill Clinton or both Bushes) have never spent more than a stray afternoon living the contemplative life. But looking ahead to the November election, it is fascinating that Romney’s missionary years have an eerie similarity to Barack Obama’s stint as a community organizer in Chicago. (Yes, their motivations were starkly different). Like Romney, who found between 10 and 20 French converts, Obama had minimal success in creating anything lasting amid the abandoned steel mills of 1980s Chicago. Although, Obama was not under religious discipline, his life in those days was monkish. As Obama wrote in Dreams from My Father, “When I wasn’t working, the weekends would usually find me alone in an empty apartment, making do with the company of books.”

Holding oneself aloof may be a Romney tradition. In a 1967 magazine profile, Life described presidential candidate George Romney as “a loner who is really close to one person, Lenore,” his wife.

“A wall. A shell. A mask. There are many names for it, but many who have known or worked with Romney say the same thing: he carries himself as a man apart, a man who sometimes seems to be looking not into your eyes, but past them.”

In this passage, Kranish and Helman are summarizing dozens of interviews depicting Romney as driven and task-oriented, congenitally impatient with the small social niceties that leaven day-to-day life. Outside his family and a small group of longtime, mostly Mormon friends, Romney tends to regard other people as data points rather than as objects of curiosity. At Bain Capital, where he made his fortune, Romney encouraged debate and disagreement within the formal structure of company decision-making. As Romney explained his management style at a 2007 conference, “Get people of different background and experience who disagree with each other and are willing to debate and argue.” This adversarial method combined Romney’s law-school training and the case-study method central to the Harvard Business School.

There is no single personality type that automatically produces successful presidents. But, as we have glimpsed with Obama, there is a downside to a leader who is swaddled in bubble wrap of his own making. Anyone elected without close political intimates (truth-tellers like Senator Richard Russell for L.B.J. or Jim Baker for George H.W. Bush) can be victimized by the sycophancy that naturally surrounds a president. Even if a President Romney were to demand candor, aides would be apt to bow to his whims and tell him what he wanted to hear. That is how it is in all White Houses, as bad news has a way of being diverted and distracted before it gets to the Oval Office.

Driving around New Hampshire in the months before the 2008 primary, Romney insisted on traveling in a personal Fortress of Solitude, accompanied only by his longtime press secretary, Eric Fehrnstrom. In contrast, most presidential candidates use drive time as a way of cementing the loyalties of party activists and picking local political intelligence. Romney did not “apply the old adage about management by walking around,” Brian Keough, who headed Romney’s 2008 New Hampshire primary campaign, complained to the Globe reporters. “If you want to know how things are going on the factory floor, go talk to the factory workers.” Unless the cameras are on, such unstructured banter is the antithesis of the Romney style.

“This start was nothing like the typical small business. It was a nearly risk-free opportunity with substantial financial backing — and a lucrative fallback plan in case of failure.”

The candidate’s more than two decades at Bain, as The Real Romney summarizes them, did not fit into either the create-jobs mythology that he pushes in campaign debates or his critics’ portrait of a gimlet-eyed cost-cutter distributing pink slips like confetti. Romney, who the biography describes as “deeply risk averse,” was hesitant to leave the structured environment of business consulting to head the company’s new private-equity arm. Ultimately, Romney the Reluctant Capitalist negotiated a sweetheart deal under which the partners at Bain Consulting would provide the seed funding to launch Bain Capital. And, if the new venture somehow went south, Romney would get his old consulting job back complete with retroactive raises. Romney, in fact, was so cautious that he concocted in advance with the firm’s founder, Bill Bain, a cover story to explain away any future failure.

What should not be lost in the campaign debates over Romney’s activities at Bain is how adroit an investor he was. According to a private analysis of Romney’s record conducted by Deutsche Bank, Bain Capital made money on roughly half of its investments. “Overall, though, the numbers were stunning,” Kranish and Holman write. “Bain was nearly doubling its investors’ money annually, achieving one of the best track records in the business.” Bain Capital tended to concentrate on the industries that 1950s auto executive George Romney might understand: makers of wheel rims and photo albums. For all of Romney’s political boasting about helping launch Staples, Bain invested only a paltry $2.5 million in the company before selling its interest after three years for $13 million.

Romney’s greatest business triumph had nothing to do with creating new companies, and everything to do with saving the Bain brand. In the early 1990s, the eight original partners, who pre-dated Romney at Bain Consulting, wanted to cash out. The company foolishly borrowed $200 million to buy back their holdings just as the 1991 recession hit. With Bain Consulting on the cusp of bankruptcy, Romney was brought in from the sister firm down to the hall to devise a rescue plan. The Romney solution inflicted a heavy dose of pain on all concerned: the original partners had to give up $100 million in equity; nearly 20 percent of Bain’s worldwide work force were laid off; the compensation for the remaining business consultants was cut; and creditors were forced to take 80 percent on the dollar. But Bain survived and eventually prospered. It was, in the words of Kranish and Helman, “the very definition of the kind of ‘turnaround’ for which Romney would claim expertise.”

“My usual approach has been to set the strategic vision for the enterprise and then work with the executive vice presidents to implement that strategy.”

Those were Romney’s words to a group of state legislators in 2003, a few weeks after he was sworn in as Massachusetts governor. In the annals of governing, it is hard to imagine a more maladroit way of courting independent legislators than likening them to executive vice presidents in a Romney-run enterprise. This disdain for politics had its virtues. Romney as governor ran a virtually scandal-free administration in which patronage took a back seat to merit. And although it would be a tad embarrassing to stress this point on a debate stage while other Republicans are threatening activist judges, Romney’s judicial picks as governor were shaped far more by merit than ideology.

The unanswered question in The Real Romney is how much has this relentless businessman learned about how politics really works in his decade as governor and presidential candidate. As Kranish and Helman tell it, after his failed 2008 presidential bid, “Romney closely analyzed the campaign … he wallowed in the data, crunched the numbers and evaluated the results thoroughly.”

It is hard to imagine another politician analyzing defeat in such a systematic manner. It is also hard to capture the essence of politics through such a bloodless exercise. Romney, in fact, brings to mind Louis Armstrong’s immortal response to the question of what is jazz: “If you don’t know, don’t mess with it.” Maybe these days, Romney knows. Or maybe the Republican Party is embarking on a grand experiment to test whether business methods can really succeed in the political arena–and, ultimately, if Romney is lucky, in the White House.

Egypt’s Future Uncertain

Monday November 28,2011 is supposed to be the start of Parliamentary elections and the  first real step in creating a democracy in Egypt. But the question that begs to be asked and no one seems to have the courage to ask it .. “Is Egypt ready for this First Step”.

Unfortunately I believe the answer is a resounding NO!

DO NOT misunderstand me.. I feel democracy is important for every country to have in one form or another… but to form a democracy today with the world pressuring and watching and trying to influence the direction of this process…  well it is not like what we had in the United States when we were a colony to the British…  The we were like all other countries fledglings looking for a way to  become a democracy… and even then it took years

I mean no offence to any Egyptian when I say I do not think you understand democracy yet… the voice of the people is supposed to be the voice of all the people and not just those who sing and chant and make demands  without understanding the process and the frailness of what lays before them…. a process that is  complicated by those who act lilt children in making loud demands and expecting them to be carried out

Yes the impatience is understandable.. but you have gotten what you want..  Freedom from the oppression of the Mubarak regime.. but not all the people who served under Mubarak are bad or evil.. and as such when you throw everyone out you end up with no  one who can help in this delicate and tedious process.. it is like throwing the baby out with the bath water.. it is childish and foolish and  will bring its own new set of problems and unrest in the future.

One need only look at the chaos that is still taking place in Libya to understand…. even on Morocco there is a growing fear of the changes that may take place. In Egypt you have Coptic vs. Muslim and rich against poor.. and you have a growing influence of a group that has already lied to you when they said they would only go for 40% of the parliamentary seats and now are running in practically 100% of the Parliamentary elections throughout Egypt. This rush to democracy… or at least the democratic process has not been thought out well… there is danger in rushing… yet few acknowledge this.

The people elected in this round and in Round 2 on December 16,2011 will be those who draft a NEW constitution .. will it really represent democracy.. or will it foster a new and menacing form of autocracy based in  religious fundamentalism and not freedoms of ALL the citizens of Egypt.. for is the result is not equality for EVERY citizen of Egypt then it is not democracy and you become like the Jewish State of Israel who have little tolerance for anything non Jewish in its country… 

YOU WILL BECOME WHAT YOU HATE about others… 

The people of Egypt must be aware of this possibility… and so far no one has had the adequate courage to speak and  demand these total freedoms that are the hallmark of a democratic society. 

Who will raise to the occasion and make Egypt a proud nation and unite it…. so far I have seen very few willing in doing so.. and fewer still in those that want such people to speak up… instead there are demands like a child would make for change without transition.. chaos will ensue and or that there will be no second chance… there will be decades of angst and frustration over the process BECAUSE it was not planned properly… and not only the PEOPLE of Egypt will be to blame.. but so will the rest of the western world for their arrogance in pushing Egypt to do what it is not yet ready to do in an appropriate and  orderly way. 

Flight of capital… brain drain and chaos…. is speed really worth the  damage that Egypt will suffer for the sake of a few loud  protesters who have no plan only frustration and anger??

Stocks STILL 30% OVERVALUED even with the 512 point drop

This is NOT for the weak of heart, it is for the pragmatist who will evaluate more dispassionately then those who invest on hope.

The DOW dropped 512 this past Thursday.

And that’s on top of the several hundred points it dropped last week.

The S&P 500, a broader market measure, is now down more than 12% off its recent peak.

So what does that mean?

Is it a “buying opportunity”?

Over the short-term, who knows? If this carnage keeps up, a panicked Ben Bernanke will probably rush to announce some huge new quantitative easing program. Or Congress will quickly rethink its recent commitment to “austerity” and announce trillions of new spending. And those initiatives might boost stocks for a while.

The bigger picture, however, is less encouraging. Even after the recent plunge, stocks are still about 30% overvalued when measured on “normalized” earnings–which is one of the only valuation measures that works.

Specifically, even after the crash, stocks are still trading at 21X cyclically adjusted earnings, as we can see in the following chart from Professor Robert Shiller from Yale. Over the past century, stocks have averaged about 16X those earnings. So we’re still about 30% above “normal.”

In recent months, eager to suggest that stocks are “cheap,” most analysts have talked about the market P/E ratio relative to next year’s projected earnings. And relative to those earnings, stocks do seem modestly “cheap” (12X, or something).

Unfortunately, measuring stock values against next year’s projected earnings has a couple of flaws. First, no one knows whether those projections will materialize. Second, and more important, those projected earnings assume that today’s near-record-high profit margins will persist.

Over history, corporate profit margins have been one of the most reliably “mean-reverting” metrics in the economy. When margins get extended to super-high (today) or super low (2009) levels, they generally revert toward the mean. This radically changes the PE ratio.

And measured on average profit margins, not today’s super-high margins, the stock market is still expensive.

Sadly, this doesn’t tell you anything about what the market will do next.

What this PE ratio does tell you is that stocks still have lots of room to fall–30%, just to get back to normal, much more than 30% if they “overshoot.”

And it also tells you that long-term returns are still likely to be sub-par.

Through history, one of the most reliable predictors of next-10-year returns is the valuation level at the beginning of the period. Today’s valuation level is not as high as yesterday’s. But it’s still higher than average.

fundamentals?

Prices and earnings.

Stocks appear reasonably priced when measured against this year’s expected earnings, but this year’s expected earnings aren’t normal earnings. They’re earnings inflated to near-record high profit margins.

In the past, whenever we’ve had unusually high profit margins, we’ve eventually returned to normal profit margins (and below). This mean-reversion has hammered earnings growth–and, with it, the stock market.

Is that absolutely for certain going to happen this time?

Of course not. Nothing’s ever certain.

But the only reason it won’t happen this time is if “it’s different this time.”

Those of you who have had the misfortune to live through the last three stock-market crashes–and any of the stock-market crashes before that–know why “it’s different this time” are described as the “four most expensive words in the English language.”

Now, bulls will argue vociferously (in a variety of ways) that it IS different this time. And you should always be happy to listen to those arguments. But given that, with respect to profit margins, it has NEVER been different this time, you should view all such arguments with serious skepticism.

Importantly, of course, profit margins and price-earnings ratios tell us NOTHING about what the stock market will do this week, this month, this year, or even next year. They’re just not good short-term market indicators.

What profit margins and price-earnings ratios have told us in the past, however, is what the stock market’s long-term returns are likely to be. And today’s combination of near-record high profit margins, combined with high P/E multiples (on normalized earnings), suggest that long-term stock returns are likely to be lousy.

Does that mean you just just dump all your stocks tomorrow? No.

Doing anything to an extreme with respect to portfolio management is almost always a recipe for disaster, especially when you’re managing your own money (as opposed to someone else’s money, which is what most money managers manage).

And in the current environment, when a decade or more of high inflation seems a distinct possibility, the last thing you want to do is get caught holding only cash or bonds.

So, as ever, you should maintain a diversified portfolio of multiple asset classes, including stocks, bonds, cash, and real-estate. If the stock portion of that portfolio has inflated massively in the past two years, however, you might want to consider rebalancing.

And, for planning purposes, you shouldn’t expect the stock market to deliver anything close to its long-term average return of 10% a year.

Note that only 5 times in the past 60 years have corporate profit margins approached the levels they’re at today. And note what happened each time thereafter. (They regressed to–or below–the mean.)

When corporate profit margins are expanding, profits grow faster than revenue, and stock multiples usually expand (stocks track profits over the long haul).

When corporate profit margins are shrinking, profits grow more slowly than revenue, and stock multiples usually contract.

there is always a possibility that we’re in a “new normal” in which profit margins will keep expanding for years, if not forever. (Well, okay, not forever. Even the biggest bull would be forced to agree that, at some point, profit margins have to stop expanding, or profits will get bigger than revenue.)

Based on the history of the past 60 years, however, this seems unlikely. At several points in the past 60 years, it looked like profit margins had hit a new normal, only to see them collapse to the mean. And the odds are that the same thing will happen this time.

What could bring profit margins down?

Any of a number of things:

• Increasing commodity prices, which companies might not be able to pass through to end users

• Higher taxes, as federal and local governments try to balance their budgets

• Higher labor costs, as weak-dollar policies raise the cost of foreign manufacturing

• Deflation, as companies are forced to compete by cutting prices because consumer demand remains weak

• Recession. No one’s talking about a double-dip now, but that doesn’t mean we won’t eventually get one. And have a look at what corporate profit margins have done in past recessions.

If corporate profit margins stay at today’s high level for the next several years, the only way the stock market will deliver strong returns is if the market’s P/E ratio continues to expand. Again, it’s possible that the PE ratio will do this, but very unlikely.

It’s also  possible that the market’s PE will stay elevated (or get even more elevated).  But it’s more likely that the PE ratio will also regress to the mean.

In today’s market, in other words, we have both extremely high profit margins and abnormally high PE ratios. In all previous history, both measures have tended to regress to–and beyond–the mean.

Ravings of a Radical Republican

<em>This post is so important to me I am putting on at least 2 of my blogs. it is a work in-progress and NOT complete... my emotions and passions are so great on this that I  want to jump into the computer and bad some gigabytes into bits and bytes...  I can not reasonably finish my diatribe   at this time.. but this should give a good indication as to  what I am going to say</em>

<em>This post is so important to me I am putting on at least 2 of my blogs. it is a work in-progress and NOT complete… my emotions and passions are so great on this that I want to jump into the computer and bad some gigabytes into bits and bytes… I can not reasonably finish my diatribe at this time.. but this should give a good indication as to what I am going to say</em>

I have been a Republican my entire life. I have disagreed with my party on things like NAFTA and other trade related issues because I believed it was not good for the COUNTRY and would hurt employment.. which I think I an safely say it has. AS part of the global economy we have catered only to big business and said what we are doing was good for the consumer… OK we had lower prices because other countries could produce cheaper then we could.. but that has left this country vulnerable to things like a housing bubble and financial shenanigans that have brought this country to its knees.

I could be labeled a liberal Republican.. but more like a ultra conservative Democrat…. I guess because I believe in fairness and the human condition too much for my fellow republicans.. and that this country is not a conglomeration of BUSINESS.. but in fact a nation of PEOPLE. This COuntry is being driven into a civil war of the classes and the only thing we talk about is political positioningI am shoked that many of my fellow Republicans an be so bllind to the social problems faing this country. and I am surprised that many of the politiccians and republican pundents have not had their toungs turn black and fall out of their mouths for the lies they insist on telling to American people
to wit: 2 trillion dollars held by corportions ar not being spent because of concern over taxes.. that is utter BS… Theyy say cutting taxes will incentivize people to invest and hire more people.. THAT IS BS

over 70 percent of the US Economy is CONSUMER spending.. but if the unemployed/underemployed now at 16 PLUS perent ar not spending there is no demand for goods and services hence no company will hire even if you cut the tax rate to zero for everybody.

What this country needs more than anything right now is JOBS.. and historically in economic times like these those jobs are created by the FEDERAL government (not state Governments as they have a different role) Federal government is NOT like a household or a business… it does not operate under the same principals..

but with the federal debt soo high how an the federal government generate jobs if it is already broke.. the answer is heresy to Republicans .. well SOME (the most vocal) Republicans. we NEED MORE revenues!!

THE ONE PLACE THE vast MAJORITY OF Americans AGREE ON IS THAT A HEDGE FUND MANAGER WHO DOES nothing TO CREATE JOBS OR BUILD COMPANIES BUT MAKES MONEY solely ON TRADING IS not ENTITLED TO BE TAXED AT 15% WHILE MAKING HUNDREDS OF MILLIONS OF DOLLARS. while the staff employees are paying 30-40 percent in taxes.

We need to differentiate between types of Capital Gains .. ONE year investment gets lower taxes.. and short term investments pay the most taxes.. Short term investment for MOST things produces nothing (one notable exception being housing flippers who refurbish the houses to resell.)

The stock market is soo volatile BECAUSE of these hedge fund managers flipping stocks all day long and on trading platform not available to the average individual investor. UNLESS you are buying an IPO you are not helping the company whose stock you buy and sell.. you are helping yourself or the person you are buying from.. you are contributing NOTHING to the greater society. Hene you should have no tax breaks or special rewards for doing that.

Had the recent Washington Fiscal Fiasco and BS over what should have been a straight up clean bill on the debt ceiling (we are only one of 2 countries in the WORLD hat have a debt ceiling ) but had these “supposed negotiations” included REVENUES and the JOB creation by investing in the Infrastructure projects we so desperately need in this country I have no doubt that S&P would NEVER HAVE DOWNGRADED THE CREDIT Worthiness if the United States. I BLAME the TEA Party for our problems today.. and fault the Republicans for allowing a minority to shove BS down our throats and for not having the courage to do what was RIGHT.. instead my fellow Republicans catered to these radicals and did what was politically convient for them. I have no respect for my Republican Politicians who subjugated themselves to such antics and who failed the UNITED STATES and the Amerian People they are sworn to represent and defend.. and for what benefit … for political advantage? …and at what cost the least of which is your soul . .

Sorry Fellow Republicans but it is the United States GOVERNMENT and ONLY the United States Government that can start to truly bring this economic boondoggle to and end and start a real and true path to prosperity.. although I caution each and every reader.. we cannot go back to the 4-5 6 or 7 years or even longer.. those days are over UNLESS we do ONE more thing… and that will have to be a separate post… but that other thing will both help us, the housing market (BUT NOT NECESSARILY NEW HOME CONSTRUCTION) AND WILL FIX OUR DEBT PROBLEM FOR A TIME BEING WHILE WE GET REVENUES TO SUPPORT OUR OBLIGATIONS. One thing is for sure however.. what I propose is nothing less than heresy and against most Republican ideal solution

I have been a Republican my entire life. I have disagreed with my party on things like NAFTA and other trade related issues because I believed it was not good for the COUNTRY and would hurt employment.. which I think I an safely say it has. AS part of the global economy we have catered only to big business and said what we are doing was good for the consumer... OK we had lower prices because other countries could produce cheaper then we could.. but that has left this country vulnerable to things like a housing bubble and  financial shenanigans that have brought this country to its knees.

I could be labeled a liberal Republican.. but more like a ultra conservative Democrat.... I guess because I believe in fairness and the human condition too much for my fellow republicans.. and that this country is not a conglomeration of BUSINESS.. but in fact a nation of PEOPLE.  This COuntry is being driven into a civil war of the classes and  the only thing we talk about is political positioning

I am shoked that many of my fellow Republicans an be so bllind to the social problems faing this country. and  I am surprised that many of the politiccians  and republican pundents  have not had their toungs turn black and fall out of their mouths for the lies they insist on telling to American people

to wit: 2 trillion dollars held by corportions  ar not being spent because of concern over taxes.. that is utter BS... Theyy say cutting taxes will incentivize  people to invest and hire more people.. THAT IS BS

over 70 percent of the US Economy is CONSUMER spending.. but if the unemployed/underemployed  now at 16 PLUS perent ar not spending there is no demand for goods and services hence no company will hire even if you cut the tax rate to zero for everybody. 

What this country needs more than anything right now is JOBS.. and historically in economic times like these those jobs are created by the FEDERAL government (not state Governments as they have a different role) Federal government is NOT like a household or a business... it does not operate under the same principals.. 

but with the federal debt soo high how an the federal government  generate  jobs if it is already broke.. the answer is heresy to Republicans .. well SOME  (the most vocal) Republicans. we NEED MORE revenues!!

THE ONE PLACE THE vast MAJORITY OF Americans AGREE ON IS THAT A HEDGE FUND MANAGER WHO DOES nothing TO CREATE JOBS OR BUILD COMPANIES BUT MAKES MONEY solely ON TRADING IS not ENTITLED TO BE TAXED AT 15% WHILE MAKING HUNDREDS OF MILLIONS OF DOLLARS. while the staff employees are paying 30-40 percent in taxes.

We need to differentiate between  types of Capital Gains .. ONE year investment gets lower taxes.. and short term investments pay the most taxes.. Short term investment for MOST things produces nothing (one notable exception being housing flippers who refurbish the houses to resell.) 

The stock market is soo volatile BECAUSE of these hedge fund managers flipping stocks all day long and on trading platform not available to the average individual investor. UNLESS you are buying an IPO you are not helping the company whose stock you buy and sell.. you are helping yourself or the person you are buying from.. you are contributing NOTHING to the greater society. Hene you should have no tax breaks or special rewards for doing that. 

Had the recent Washington Fiscal Fiasco  and BS over what should have been a straight up clean bill on the debt ceiling (we are only one of 2 countries in the WORLD hat have a debt ceiling ) but had these "supposed negotiations" included REVENUES and the JOB creation  by investing in the Infrastructure projects we so desperately need in this country I have no doubt that S&P would NEVER HAVE DOWNGRADED THE CREDIT Worthiness if the United States.  I BLAME the TEA Party for our problems today.. and fault the Republicans for allowing a minority to shove BS down our throats and for not having the courage to do what  was RIGHT.. instead my fellow Republicans catered to these radicals and did what was politically convient  for them. I have no respect for my Republican   Politicians who subjugated themselves to such antics and who failed the UNITED STATES and the Amerian People they are sworn to represent and defend.. and for what benefit ... for political advantage? ...and at what cost the least of which is your soul  . . 

Sorry Fellow Republicans but it is the United States GOVERNMENT and ONLY the United States Government that can  start to truly bring this economic boondoggle  to and end and start a real and true path to prosperity.. although I caution each and every reader.. we cannot go back to the  4-5 6 or 7 years or even longer..  those days are over UNLESS we do ONE more thing... and that will have to be a separate post... but  that other thing will both help us, the housing market (BUT NOT NECESSARILY NEW HOME  CONSTRUCTION) AND WILL FIX OUR DEBT PROBLEM FOR A TIME BEING WHILE WE GET REVENUES TO SUPPORT OUR OBLIGATIONS.  One thing is for sure however.. what I propose is nothing less than heresy and against most Republican ideal solution

We Should NOT Expect a Change in our Economic Condition Soon

When you see a dramatic change in the DOW it is nothing particular that causes it  but it is a reflection of the amount of speculation that is built into the current pricing. I believe the fair value of the DOW today is around 8000 +/- 300 points… even then I may be generous in the event that the FED will increase interest rates eventually and IF Consumer spending creates demand the amount of investment on plant/Equipment and labor will significantly affect  the EPS  and dividends thus a double whammy on stock prices.

I have frefained in making predictions sine 2009 because of the illogical actions by the government and the Quantitative Easing. IF QE 3 takes place then we should NOT expect a major change just a continued extension of the current  maket.

I am preparing a piece to publish soon .. one that will be considered economic heresy.. but that is the type of planning I do.. OUT of the norm and changing the Paradigms that  contribute to the problems. Radical for some.. but NOTHING that has been tried so far gives me any indication that it will solve the dilemma we are in economically

Special report: The “shorts” who popped a China bubble – Yahoo! News

Special report: The “shorts” who popped a China bubble – Yahoo! News.

China has engaged in economic warfare for many years now. Fraud in these companies should not be a surprise. Africa has been a prize for China in its economic policies and now Brazil is seeing such huge activity by China it is overwhelmed by them and will take years to see how China has hurt them more then helped them in growth.

This Article only touches the tip of the iceberg that is China.

Although I have been silent on economics and China the last 2 years I believe NOW is an appropriate time for me to bring more posts on where we are and what the USA in particular should do… and why it may never get done thus prolonging this economic boondoggle we are in.

Stay tuned for more in the near future.

What is a non-traditional Strategic Planner?

What is a nontraditional Strategic Planner?

The easy answer is one that does not use the same format as Boston Consulting Group or Booz Allen. But that is too easy. See the large firms are often brought in to help boost someone else’s plan or to Design and implement a Management Information System. But who challenges the Top Management of Major Companies today. The short answer is almost nobody. And the reasons are as obvious as fear and as subtle as brown nosing.

A NON traditional Strategic Planner can come in many forms but for the sake of this post… and of course to bolster my own work,,, I would like to share with you my approach to Strategic Planning.

Let’s start with a simple idea. Often the problem that a person or company thinks they are facing is not really the problem but a symptom. There are other times that the problem is misstated. But realizing that the core issues are not being addressed is an afterthought most of the time.

Then there is the failure to see the future with greater accuracy. A bold statement given that NO ONE can see the future but we can predict with greater accuracy the further we extend our information sources outside of the Core Business.

In deciding a future for a company it is always important to identify issues affecting the employees, the Supplies and the Customers.

The Non traditional approach will see what is happening in these entities world and what is the potential that their business or behavior will be affected. Not just stopping there but going even further as to what may be happening in the Communities from Local to National to International and then what is happening in Technology outside of your core.

The purpose of this extensive network information gathering is to provide not only data for current operations but to see where the future may  be affected by those external forces.

One need only look at Facebook’s phenomenal growth and now Facebook is facing n uncertain future in how to grow as the number of subscribers is flattening out and they look to Apps to grow or to change the paradigm in how their growth is measured.

Changing the paradigm is always an interesting way to change the future of a company… the Companies that are most successful do this on a regular basis and are leaders. The rest are followers and will grow or decline in response to how quickly they can adapt.

But there is another approach that is often over looked. When companies/ organizations or even societies face uncertain futures the Questions that are posed are usually a knee jerk reaction to a change in environment. WE HAVE A PROBLEM they say… but as I said above the problem they state is usually just a symptom and if treated as the sole problem does not address what is really going happening.

Sometime the problems are “unsolvable” in the context that they are presented. This is where my favorite technique is used the most and to the greatest advantage,

“IF YOU CANT SOLVE THE PROBLEM YOU ARE FACING YOU ARE FACING THE WRONG PROBLEM”

The second part of this is also appropriate in evaluating if the supposed problem is really a problem or just a symptom

“CHANGE THE DEFINITION OF THE PROBLEM TO COME UP WITH WORKABLE SOLUTION”  

This also opens the door to not only being an industry leader but ancillary business with limited windows of opportunity and fabulous returns on investment.

A Practical Example;

Egypt: a Country of 80+ million people that depend on the Nile River.. There is a nearly a century old Treaty brokered by the British that dictated the amount of water that must flow to Egypt from the riparian Countries (those upstream and on the Blue and White Nile Rivers). This was not just for the use of the Egyptian people but to prevent the salty water of the Mediterranean from moving up the Nile River and contaminating Fresh water (potable water) supplies.

Most of these countries are breaking the treaty for various reasons. The most egregious of these is Ethiopia which claims the water as its own for purposes of Industrial, Hydro Electric, Dams, Commercial, Agricultural and human consumption without regard to Egypt’s critical needs. Adding to this siphoning off of water is the study by Egypt that even with all the water previously guaranteed by the treaty it would have water shortage problems by 2016.

The PROBLEM that is stated is that these riparian countries must release the water to Egypt. In all frankness that will not happen. Egypt has said it vies the taking of this necessary water as an act of war, and they appear to be justified. But WAR in a conventional manner is not a resolution to the problems Egypt really faces.

Some have suggested that Egypt use Desalinization plants that consume power that is still in short supply in Egypt and if Fossil Fuel is used then the huge cost is difficult to bear for the industrial nations of Europe and North America let alone Egypt Egypt has authorized a nuclear power plant they hope will help but it does not sole the REAL PROBLEM.

From my statements above you know that I have attempted to redefine the problem. The problem is how much water flows through the Nile River. You may at first say that is obvious and given the current attempts to resolve the problem as most see it (that being the Riparian countries excessive use) that there is little hope of getting more water to the Nile. But you would be wrong in assuming that the above listed actions are the ONLY methods of getting water to flow in the Nile.

There is another way to bring water to the Nile… and yes I have found it… but I will not give it away at this time. This is how I do strategic planning… not only can I bring more water to the Nile for less than 500 million US Dollars but I can create and sustain 10’s of thousands of new jobs in the process. These jobs go a long way to improve the economy of Egypt and to foster greater stability as well. Basically this plan addresses several of Egypt’s needs at the same time.

How can Egypt pay for this… that answer is simple as well. With the exception of maybe 5 million dollars upfront the Entire project can be paid for with no other funds from Egypt or loans Guaranteed by Egypt or even by giving away things to outsiders. Others will pay if for no other reason than peace

This is the type of strategic planning I do. Find issues that appear to have no solution redefine those problems, devise a strategy that will not only address that particular problem but also other problems in the environment, incorporate other “benefits” into the solutions presented, and just as important find the economic benefit that pays for the solutions as implemented. It is a NON traditional manner of Strategic Planning… but something I think should be more main stream in all areas of business, government and society.

To be a truly effective Strategic Planner we must look beyond the reality presented to see if that is truly the reality. Challenge the conventional thinking and come up with creative but executable methods that incorporate benefits that are far reaching assure a future positive outcome.  It is not easy although it may appear to be. It takes a mindset that is not rigid, is flexible, and a think tank type approach. Simply it takes thought and creativity which few have today.

I am not soliciting business as I turn down 50 times more projects then I take on because most who seek my skills are not really looking for ideas they are looking for approval for their own. I am very very selective and of course expensive… but I generate returns far greater than most as I believe the economic realities demand profits in one way or another.

I am better in explaining things in person then I am in writing… as is the case for many my mind is usually faster than my fingers but I hope I was able to at least give you food for your thought processes

Craig Eisele

2009 Economic Predictions by Craig Eisele

2009 Economic projections by Craig Eisele

Note: the following is MY opinion and how I see the economy… it should not be considered investment advice or factual as to the actual performance of the US and Global Economies in 2009.

If you do not want to hear bad news I strongly suggest you stop reading at this point and read a good fiction book….or watch Kudlow on CNBC who is more of a cheerleader then as realist…. Although a caution as to the rest of the CNBC team as they seem to realize more the current economic realities.

One of the greatest threats we face is Deflation during this recession… WHY?? Because the economic definition of a DEPRESSION is Recession accompanied by Deflation… BUT do not expect the government to say we are in a Depression until it is either over or is so evident that denying it would be fruitless. The government is afraid to start any panic as to the true severity of this crisis we are in and as such will try to protect the citizens as long as possible from the hard realities.

Before this economic crises is over I believe that we will see history actually show that we have or will have had entered into a Depression…. The only question is: for how long.

In the United States approximately 70 percent of our economy is based upon Consumer spending…  as such Particular attention will be paid to that segment of the economy.

Estimates so far are that at least 70,000 retail locations are expected to close in 2009. Personally I see that number even higher and expect over 100,000. Thus higher unemployment will occur.

Personal savings rate will continue to be negative throughout the year with rare occurrence of it turning positive.

Over all the consumer is being hit with rising prices from the Summer 08 Oil Prices and those prices have not come down in tandem with Oil. Corporations are struggling to meet cash flow needs and turn profits for their shareholders and as such are reluctant to lower prices.

Credit will not loosen very much in 2009… Credit card companies will continue to reduce credit limits (2 Trillion dollars so far) and will raise interest rates on balances even for the slightest blemish or down grading of your credit. Keeping your credit cards in the back of a drawer and NOT canceling them is advisable.

Expect Congress to address these issues in Credit Card operations and policies in 2009 in an attempt to protect consumers a bit better… but high expectations for relief should be discouraged because of the powerful lobbying teams of Banks and other financial institutions. Result Consumers will and should pay down more of their debt and spend less thus creating Consumer slow down in spending in 2009.

Oil Prices will NOT stay low for long. Oil Producing Countries need the revenue for their own countries economies…. Demand may be down globally but the minimum necessary price is 45 dollars a barrel while countries like Venezuela, Iran, Russia etc require upwards of 70 dollars a barrel to keep their domestic programs going and to maintain their economies. Expect Oil close to or above 100 dollars a barrel by the end of 2009 based upon the needs of the Oil Producing Countries.

Job Loss and fear of Job Loss with hamper Consumer Spending even farther. This includes areas like housing and Auto sales as well.

Credit availability for Housing will be tight for many years to come. Impeccable credit and a hefty down payment  of 20 percent or more,will be required as it was over a decade ago. The result will be a continuing deflation in Housing prices and no bottom expected until mid 2010. These expectations of losing money on a new home purchase will also keep many buyers on the sidelines.

Credit will also suffer because of continued required write-downs by Mortgage holders and those holding the Mortgage backed securities. Expect the Foreclosure rate to keep high thus flooding the market with additional homes. This credit problem will be further exacerbated by rises in Commercial Mortgage defaults. Particularly in Retail Commercial properties.

The measure of companies with retail locations in terms of profitability will be changed. MOST leases no Commercial Property like retail are triple net… meaning that the tenants are responsible to paying a pro rated share based upon occupancy of leased space for Utilities, Taxes and maintenance. The additional burden placed upon them buy the loss of other retailers coupled by decreasing sales will cause more stores to close. Currently the VACANCY rate in retail locations is at 8.2%. That will continue to rise throughout 2009.

Commercial Mortgages are often done with long amortization rates meaning 10 to 30 years mortgage payment rates, with a balloon payment (the full balance of the Loan) due after 5 years. As properties increased in value and occupancy rates were high and credit was readily available this was not a concern. Today, however, those criteria for refinancing can no longer be met by most mall operators or owners of other retail properties. Even the Commercial office space Market will be effected.

Loss of retail also usually has a negative effect in Commercial Office space… and even the A class properties are now feeing the potential problems growing. Expect an increase in “services” oriented companies across the USA and several hundred thousand jobs lost as a result, many of which do not and will not qualify for unemployment compensation to help them.

The stock markets will continue to act in a volatile and irrational way. Over reaction to perceived good news and bad news will move the market in triple digits and randomly. If you are brave and can wait 10 years or more for profits then now is the time to buy select companies that may recover faster as the economy bottoms and flattens in 2010.

Federal funds rate will not be increased for the first half of 2009, but may have a slight increase of 0.25 to0.50 in the second half of 2009 and into 2010 as the dollar weakens and the need to strengthen the dollar increases.

The need to have safety for cash will continue to hold the Treasury Bonds yield down to hover at or near zero as banks are not considered safe enough and consumers are fearful.

Bank Write offs will continue and the biggest shocks to the market will be in Commercial backed mortgages as well as increased Credit Card default rate as climbing interest rates and lack of credit availability will force consumers into decisions that will not factor most creditors.

Housing prices will continue to decline throughout 2009. Lack of demand and increased inventories by those underwater on their mortgages and those foreclosed upon homes, and the lack of credit and the return to the requirements of old with 20 percent or more down and verifiable rations of income to mortgage payments as well as HIGH credit scores… all combined will be a continued drag in the housing market and will even affect places like New York City on 2009 through at least the first half of 1020.

Retirees will delay their retirement and the “equity” they thought they had in their homes and the devastation to their retirement funds will be so bad as to force more people to work longer and will contribute to the lack of available jobs for younger people.

Unemployment will rise to double digits…. Most likely to around 11 percent official and 17 percent unofficial Unemployed people will number more than 18 million people.  Currently the Unemployment are has gone over 7.2%. I expect that before we flatten out that number will grow to close to 11 percent. Currently the number of those unemployed is over 6 million…. but those numbers a skewed to those who qualified for unemployment and or are seeking employment actively.  The REAL number of unemployed is substantially higher if the number of those underemployed, working only part time, or who have given up looking for work are included. The number of long-term unemployed (those jobless for 27 weeks or more) rose to 2.6 million in December and was up by 1.3 million in 2008.

Bankruptcies will hit all time highs both for individuals and Businesses.

The Auto Industry: This is the hardest to predict in some ways. BUT… Knowing that credit is hard to get to purchase an automobile, and that demand is down because individual consumers are feeling the economic pinch and are concerned about their declining home and retirement values, and compounded by job uncertainty will make any recover of the Auto Industry in general almost impossible in 2009. While most of us abhor the idea that the “Big Three” in Detroit may declare bankruptcy. I see no choice especially given the legacy costs of pensions and health care that hurts their price competitiveness. Premium prices for things like the Chevy VOLT or other fuel-efficient cars will not me tolerated by a price sensitive consumer market in these economic times. Therefore the demand that Auto Makes produce these cars, while admirable, is not productive to the automotive industry recovery at this time.

The result of the above will be continued declines and flattening of the Auto sales, which of course, contributes considerably to the GDP of the United States. A downward spiral that cannot be stopped without bankruptcy to protect those companies and jobs till the economy flattens out and hopefully and gradually raises enough to spur more automobile sales.  Bottom line…. expect one or more of the Detroit 3 to declare bankruptcy in 2009.

GDP Contraction 5 % or more: I hope this is self evident given what I have already written…. the ONLY way this will not happen in 2009 is if we devalue our dollar by printing more money…. but that results in hyper inflation and higher prices which would artificially make our GDP that much higher.

Federal budget deficit of 1 trillion and growing to possibly 2 TRILLION as the need for spending like the years of Roosevelt in the New Deal Era increases and as the concession to business for tax rates being the same or even lower taxes are made and the revenue for the US Government continues to decline from Lower profit, less payroll tax income and growing social programs to assist the impoverished. The NATIONAL DEBT will run higher than 12 trillion dollars UNLESS the government prints more money…. but that will further weaken the value of the US dollar. A delicate trade off that has to be dealt with in 2009.

LOWER corporate taxes and/or Capital Gains in a declining economy will NOT spur employment or Investment in Pant or equipment. The only people who will possibly benefit are those who own stocks in those companies. And even then the benefits will be minimal. Worse the Down side is lower revenue for the government in a time when spending must be increased to spur economic recovery.

Globally expect more instability in under-developed countries. Poverty, starvation and generally declining conditions in these countries will give rise to radical idealists who will create chaos and instability in those countries. Antagonistic behavior towards those industrialized countries that are seen as culprits in this economic crisis will be the most villianized. Terrorism abroad will increase in response to the frustration and need to blame someone increases.

Currency fluctuations will be as common as weather changes during 2009. 30-day moves can exceed 15 percent and daily moves may be as much as 5 percent. Thus this will make international business more volatile and difficult to conduct.

Parity with Euro and British Pound is possible given the currency fluctuation at this time only a 10 percent difference exists between the 2 currencies. Briton will continue to decline as the full effects of their new economy that was built on the financial sector and debt continues to play out.  France and Germany have yet to feel the real impact of what is happening globally and as such have been the prop to the Euro over the last year. The EU’s efforts to prop up Eastern European Counties with bailouts will have little effect on the full impact of the global recession. Ultimately the Euro will have to decline in value.

Weaken of the dollar … then strengthen and weakening. The Japanese Yen, the Euro, and the British Pound with fluctuate so much that any stability for the dollar will have to come from the USA itself. However that appears unlikely until the USA takes drastic steps to stem the bleeding and ultimately devalues the dollar.

EU predictions Italy and possibly Spain: I expect al least Italy to go back to the Lira and to try an peg the Lira to the Euro to allow it to re-enter the EU Euro denomination Currency in a few years. This will be necessary as the Italian economy and the EU regulations are in conflict and Italy cannot meet the EU demands for economic reform to satisfy the EU regulations. Spain faces the same situation.

France and German Social programs will be the downfall of these economies. With a global recession and decline in local economies the demand for these generous programs will go to an all time high and will send them into a deeper recession as they struggle to balance budgets and stem spending.

China will see continued decline in growth based upon the global economy. It is unclear if their domestic consumption can make up for the downturn. It may now feel the effect of the lack of a substantial Middle class and sustainable consumer base

India is just now feeling the effects, and as global outsourcing to India shrinks, and the allegations that the financial accounting is being doctored by some to keep showing profits surface. The “middle class” is mostly dependent on the global outsourcing in areas of IT and calling centers, which are declining rapidly. India will experience a recession that is severe and has potentially serious consequences on its economic stability.

It seems inevitable that the United States Government will be forced in 2009 or early 2010 to print more Dollars, to buy its own debt and to pay for spending programs as debt is not being bought by most companies or countries or even individuals. Hence a devaluation of the dollar… expect Euro and Pound to follow and a period of hyper inflation accompanied by higher interest rates when that happens.

I was reluctant to write this piece as I hoed to see more indications that things would improve…. However, that has not happened and the result is a significant delay in my predictions.

I hope I am just a pessimist.. however at this time I think I am more of a realist in how things are at this point in time. Things CAN change.. and my predictions can be totally wrong. But for that to happen requires political will and individual determination….And I see no signs of that at this time.

Regardless of whether you agree or disagree with my assessments made her.. YOU must decide for your self what you need to do if this scenario does take place… or if it does not. These are things the way I see them and should NOT be taken as factual or advice to anyone.

Craig Eisele

2009 Economic projections by Craig Eisele

Note: the following is MY opinion and how I see the economy… it should not be considered investment advice or factual as to the actual performance of the US and Global Economies in 2009.

If you do not want to hear bad news I strongly suggest you stop reading at this point and read a good fiction book….or watch Kudlow on CNBC who is more of a cheerleader then as realist…. Although a caution as to the rest of the CNBC team as they seem to realize more the current economic realities.

One of the greatest threats we face is Deflation during this recession… WHY?? Because the economic definition of a DEPRESSION is Recession accompanied by Deflation… BUT do not expect the government to say we are in a Depression until it is either over or is so evident that denying it would be fruitless. The government is afraid to start any panic as to the true severity of this crisis we are in and as such will try to protect the citizens as long as possible from the hard realities.

Before this economic crises is over I believe that we will see history actually show that we have or will have had entered into a Depression…. The only question is: for how long.

In the United States approximately 70 percent of our economy is based upon Consumer spending…  as such Particular attention will be paid to that segment of the economy.

Estimates so far are that at least 70,000 retail locations are expected to close in 2009. Personally I see that number even higher and expect over 100,000. Thus higher unemployment will occur.

Personal savings rate will continue to be negative throughout the year with rare occurrence of it turning positive.

Over all the consumer is being hit with rising prices from the Summer 08 Oil Prices and those prices have not come down in tandem with Oil. Corporations are struggling to meet cash flow needs and turn profits for their shareholders and as such are reluctant to lower prices.

Credit will not loosen very much in 2009… Credit card companies will continue to reduce credit limits (2 Trillion dollars so far) and will raise interest rates on balances even for the slightest blemish or down grading of your credit. Keeping your credit cards in the back of a drawer and NOT canceling them is advisable.

Expect Congress to address these issues in Credit Card operations and policies in 2009 in an attempt to protect consumers a bit better… but high expectations for relief should be discouraged because of the powerful lobbying teams of Banks and other financial institutions. Result Consumers will and should pay down more of their debt and spend less thus creating Consumer slow down in spending in 2009.

Oil Prices will NOT stay low for long. Oil Producing Countries need the revenue for their own countries economies…. Demand may be down globally but the minimum necessary price is 45 dollars a barrel while countries like Venezuela, Iran, Russia etc require upwards of 70 dollars a barrel to keep their domestic programs going and to maintain their economies. Expect Oil close to or above 100 dollars a barrel by the end of 2009 based upon the needs of the Oil Producing Countries.

Job Loss and fear of Job Loss with hamper Consumer Spending even farther. This includes areas like housing and Auto sales as well

Credit availability for Housing will be tight for many years to come. Impeccable credit and a hefty down payment opf 20% or more, will be required as it was over a decade ago. The result will be a continuing deflation in Housing prices and no bottom expected until mid 2010. These expectations of losing money on a new home purchase will also keep many buyers on the sidelines.

Credit will also suffer because of continued required write-downs by Mortgage holders and those holding the Mortgage backed securities. Expect the Foreclosure rate to keep high thus flooding the market with additional homes. This credit problem will be further exacerbated by rises in Commercial Mortgage defaults. Particularly in Retail Commercial properties.

The measure of companies with retail locations in terms of profitability will be changed. MOST leases no Commercial Property like retail are triple net… meaning that the tenants are responsible to paying a pro rated share based upon occupancy of leased space for Utilities, Taxes and maintenance. The additional burden placed upon them buy the loss of other retailers coupled by decreasing sales will cause more stores to close. Currently the VACANCY rate in retail locations is at 8.2%. That will continue to rise throughout 2009.

Commercial Mortgages are often done with long amortization rates meaning 10 to 30 years mortgage payment rates, with a balloon payment (the full balance of the Loan) due after 5 years. As properties increased in value and occupancy rates were high and credit was readily available this was not a concern. Today, however, those criteria for refinancing can no longer be met by most mall operators or owners of other retail properties. Even the Commercial office space Market will be effected.

Loss of retail also usually has a negative effect in Commercial Office space… and even the A class properties are now feeing the potential problems growing. Expect an increase in “services” oriented companies across the USA and several hundred thousand jobs lost as a result, many of which do not and will not qualify for unemployment compensation to help them.

The stock markets will continue to act in a volatile and irrational way. Over reaction to perceived good news and bad news will move the market in triple digits and randomly. If you are brave and can wait 10 years or more for profits then now is the time to buy select companies that may recover faster as the economy bottoms and flattens in 2010.

Federal funds rate will not be increased for the first half of 2009, but may have a slight increase of 0.25 to 0.50 in the second half of 2009 and into 2010 as the dollar weakens and the need to strengthen the dollar increases.

The need to have safety for cash will continue to hold the Treasury Bonds yield down to hover at or near zero as banks are not considered safe enough and consumers are fearful.

Bank Write offs will continue and the biggest shocks to the market will be in Commercial backed mortgages as well as increased Credit Card default rate as climbing interest rates and lack of credit availability will force consumers into decisions that will not factor most creditors.

Housing prices will continue to decline throughout 2009. Lack of demand and increased inventories by those underwater on their mortgages and those foreclosed upon homes, and the lack of credit and the return to the requirements of old with 20 percent or more down and verifiable rations of income to mortgage payments as well as HIGH credit scores… all combined will be a continued drag in the housing market and will even affect places like New York City on 2009 through at least the first half of 1020.

Retirees will delay their retirement and the “equity” they thought they had in their homes and the devastation to their retirement funds will be so bad as to force more people to work longer and will contribute to the lack of available jobs for younger people.

Unemployment will rise to double digits…. Most likely to around 11 percent official and 17 percent unofficial Unemployed people will number more than 18 million people.  Currently the Unemployment are has gone over 7.2%. I expect that before we flatten out that number will grow to close to 11 percent. Currently the number of those unemployed is over 6 million…. but those numbers a skewed to those who qualified for unemployment and or are seeking employment actively.  The REAL number of unemployed is substantially higher if the number of those underemployed, working only part time, or who have given up looking for work are included. The number of long-term unemployed (those jobless for 27 weeks or more) rose to 2.6 million in December and was up by 1.3 million in 2008.

Bankruptcies will hit all time highs both for individuals and Businesses.

The Auto Industry: This is the hardest to predict in some ways. BUT… Knowing that credit is hard to get to purchase an automobile, and that demand is down because individual consumers are feeling the economic pinch and are concerned about their declining home and retirement values, and compounded by job uncertainty will make any recover of the Auto Industry in general almost impossible in 2009. While most of us abhor the idea that the “Big Three” in Detroit may declare bankruptcy. I see no choice especially given the legacy costs of pensions and health care that hurts their price competitiveness. Premium prices for things like the Chevy VOLT or other fuel-efficient cars will not me tolerated by a price sensitive consumer market in these economic times. Therefore the demand that Auto Makes produce these cars, while admirable, is not productive to the automotive industry recovery at this time.

The result of the above will be continued declines and flattening of the Auto sales, which of course, contributes considerably to the GDP of the United States. A downward spiral that cannot be stopped without bankruptcy to protect those companies and jobs till the economy flattens out and hopefully and gradually raises enough to spur more automobile sales.  Bottom line…. expect one or more of the Detroit 3 to declare bankruptcy in 2009.

GDP Contraction 5 % or more: I hope this is self evident given what I have already written…. the ONLY way this will not happen in 2009 is if we devalue our dollar by printing more money…. but that results in hyper inflation and higher prices which would artificially make our GDP that much higher.

Federal budget deficit of 1 trillion and growing to possibly 2 TRILLION as the need for spending like the years of Roosevelt in the New Deal Era increases and as the concession to business for tax rates being the same or even lower taxes are made and the revenue for the US Government continues to decline from Lower profit, less payroll tax income and growing social programs to assist the impoverished. The NATIONAL DEBT will run higher than 12 trillion dollars UNLESS the government prints more money…. but that will further weaken the value of the US dollar. A delicate trade off that has to be dealt with in 2009.

LOWER corporate taxes and/or Capital Gains in a declining economy will NOT spur employment or Investment in Pant or equipment. The only people who will possibly benefit are those who own stocks in those companies. And even then the benefits will be minimal. Worse the Down side is lower revenue for the government in a time when spending must be increased to spur economic recovery.

Globally expect more instability in under-developed countries. Poverty, starvation and generally declining conditions in these countries will give rise to radical idealists who will create chaos and instability in those countries. Antagonistic behavior towards those industrialized countries that are seen as culprits in this economic crisis will be the most villianized. Terrorism abroad will increase in response to the frustration and need to blame someone increases.

Currency fluctuations will be as common as weather changes during 2009. 30-day moves can exceed 15 percent and daily moves may be as much as 5 percent. Thus this will make international business more volatile and difficult to conduct.

Parity with Euro and British Pound is possible given the currency fluctuation at this time only a 10 percent difference exists between the 2 currencies. Briton will continue to decline as the full effects of their new economy that was built on the financial sector and debt continues to play out.  France and Germany have yet to feel the real impact of what is happening globally and as such have been the prop to the Euro over the last year. The EU’s efforts to prop up Eastern European Counties with bailouts will have little effect on the full impact of the global recession. Ultimately the Euro will have to decline in value.

Weaken of the dollar … then strengthen and weakening. The Japanese Yen, the Euro, and the British Pound with fluctuate so much that any stability for the dollar will have to come from the USA itself. However that appears unlikely until the USA takes drastic steps to stem the bleeding and ultimately devalues the dollar.

EU predictions Italy and possibly Spain: I expect al least Italy to go back to the Lira and to try an peg the Lira to the Euro to allow it to re-enter the EU Euro denomination Currency in a few years. This will be necessary as the Italian economy and the EU regulations are in conflict and Italy cannot meet the EU demands for economic reform to satisfy the EU regulations. Spain faces the same situation.

France and German Social programs will be the downfall of these economies. With a global recession and decline in local economies the demand for these generous programs will go to an all time high and will send them into a deeper recession as they struggle to balance budgets and stem spending.

China will see continued decline in growth based upon the global economy. It is unclear if their domestic consumption can make up for the downturn. It may now feel the effect of the lack of a substantial Middle class and sustainable consumer base

India is just now feeling the effects, and as global outsourcing to India shrinks, and the allegations that the financial accounting is being doctored by some to keep showing profits surface. The “middle class” is mostly dependent on the global outsourcing in areas of IT and calling centers, which are declining rapidly. India will experience a recession that is severe and has potentially serious consequences on its economic stability.

It seems inevitable that the United States Government will be forced in 2009 or early 2010 to print more Dollars, to buy its own debt and to pay for spending programs as debt is not being bought by most companies or countries or even individuals. Hence a devaluation of the dollar… expect Euro and Pound to follow and a period of hyper inflation accompanied by higher interest rates when that happens.

I was reluctant to write this piece as I hoed to see more indications that things would improve…. However, that has not happened and the result is a significant delay in my predictions.

I hope I am just a pessimist.. however at this time I think I am more of a realist in how things are at this point in time. Things CAN change.. and my predictions can be totally wrong. But for that to happen requires political will and individual determination….And I see no signs of that at this time.

Regardless of whether you agree or disagree with my assessments made her.. YOU must decide for your self what you need to do if this scenario does take place… or if it does not. These are things the way I see them and should NOT be taken as factual or advice to anyone.

Craig Eisele

7500 DOW Possible??

The simple answer is YES!!!

I know I wrote in December 2007 that I expected a 9,000 DOW and believed that an 8,000 Dow is where I said it should be… but 7,500 is panic and that is what I am seeing around the world… people are afraid… plain and simple.

DO NOT sell you 401K or other funds now… it is far too late for you to do that… your best bet is to hold on and try to read and watch something other than economic news… at least until AFTER the election.

I am working on my economic predictions for the rest of 2008 and 2009… and in some cases even into 2010. I should release that November 5 or 6, AFTER the Elections… there is nothing good in store… except that we will know more about where our Government is taking us… and at least THAT will restore some stability to the financial markets in the USA and give a good indication of the future of the economic health of the Country.

You will see great swings in the market… mostly down for now… but you will get high upswings as well… do not take any of these seriously at this point… we really are at about the right pricing given the full economic data….

Additionally you will see a more bad economic news and then a few good pieces… but overall it is glum out there… so stop reading things like this and others and concentrate on what is important to you.. your life and your family… the rest will settle out soon… just not as soon as you would like.

Craig

NOTE:  This is MY OPINION. I make no assurances of this actually being the way the market will go. You should do your own research and make your own informed decisions!!!

I am FURIOUS at What is Going On!!!!

AND I AM NOT TALKING ABOUT MY EX-WIFE… and this is the last piece of levity you will see in this post!!!

This is a FIRST Draft… it is NOT my final draft of this post… I need to edit it but am pressed for time yet felt that the timely publication should help stimulate some debate as we all seem to be overwhelmed with so much happening so fast.

I have not been in Washington D.C long… but it appears that I could not have come at a more dramatic moment…. And what is going on infuriates me. I was going to write a piece in the Presidential race (and maybe even make a dispassionate prediction) but for now this Financial Crisis is more important and I feel it needs to be addressed immediately.

Simply, I am furious at our government taking over AIG and Fanne Mae and Freddie Mac…. Things have gotten so bad since that the hundreds of billions of dollars put up for them are not even being added to this current 700 to 1 trillion dollar action.

Now I read the following:

A little after 7 PM Saturday night (September 20, 2008) a Treasury “Fact Sheet” was released that sought to give the administration more flexibility, with an expanded definition that could include foreign banks. I quote:

“Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.”

See the Yahoo News report from Politico:

http://news.yahoo.com/s/politico/20080921/pl_politico/13690;_ylt=Anm5.jWbo72bCnhyicEpvVBh24cA

Bailing out any foreign bank or entity with US tax payer funds is wrong… AIG was example with bond holders (136 billion for China alone) being bailed out and with preferred stock holders being “saved” and common stock holders getting wiped out… and AIG was a profitable company in most of its operations…. worse more than half of AIG business was NOT in the USA!!! In essence a nationalization of a private company I would not be surprised if this is challenged in Court especially after this new round of bailout money.

Compare what the new regulations of the stock market with regards to short selling to a ball game with half players taken off field in the middle of the game because one team (a disliked team) was winning… or in this case right … don’t tell me the crap about naked short sells… ONLY 1% of ALL shorts were naked…. Worse… the “market Makers” who assure the liquidity of the stock in a company use shorts to help in their moving the buyers and sellers of stock… they are a necessary part of this market, and even they were hurt by this short sighted action by the SEC.

The run up of stock prices was NOT because the companies got better over night… it was mostly because short sellers (those who believed that the companies were not as healthy as the Wall Street Bulls said) were FORCED to buy stocks to cover their market positions that believed the market would continue to go down.

Additionally, the planned Federal Guarantee of Money Market Funds… could cause run on banks as bank deposits are only insured to 100,000 dollars and there is concern that the Federal Deposit Insurance agency responsible for making sure depositors get their money back does not have sufficient money to cover most of the banks that are in danger of failing.

The COST: the final “bailout” is shaping up to be about 3 TRILLION dollars… that money had to be “printed” (meaning the fed has to increase the money supply by that amount…. Which can be done by a few keystrokes on a computer) …… This amounts to a DEBT of $10,000 to $30,000 PER HOUSEHOLD. Worse it weakens the buying power of the dollar and will cause inflation probably in the double digits. Add to this that the Fed wants to pay interest to banks on their mandatory “reserve” they keep means that we are now paying banks to follow the law at a COST to taxpayers that is yet undetermined.

With higher inflation there will be higher interest rates… which also hurt every American.meaning mortgage resets will SUPPOSED to pay higher interest rates and also means that less people will be able to afford mortgages.

Personally I feel that since financial institutions ONLY make money by lending (if the FED does not give interest) then LET the Financial markets and the overall market place determine the value of these “financial instruments” that the US Government wants us the tax payers to foot the bill on… let the FREE MARKET REIGN… and let things work out themselves. Federal intervention in either Monetary of Fiscal Policies in the free market not only doom a free market by changing the rules in the middle of the game… but do nothing for the tax payers in the United States and mostly serve foreign interests.

I am actually sick to my stomach with what is going on here in the USA…. I feel that greed, corruption and politics are destroying this country and the adage that the rich get richer while the poor get poorer seems to be true today… the bailout ONLY serves the financial companies and foreign entities that hold this debt… while it is argued that the American citizen would be hurt worse if this was not done I find it untrue and the rhetoric is only being done to “sell” this to the American Public. I really find that the interference in a Free Market is untenable and irresponsible… let those that have done wrong pay the price… not the average citizen…. This is just plain wrong!!!

Craig’s Diatribe on the USA and Global Economy (# 2)

June 6, 2008

This blog entry (number 2 in a series) is to try and express my viewpoints on the current state of the USA Economy, my predictions for the future and how we are no longer a localized economy but now are part of a GLOBAL economy.

Where are we NOW? Commodity Prices:

Before I go into the Global Economy for Commodities and Fuel/power Prices I need to say that a LOT (maybe as much as one third in some cases) of the increase of Costs is from the weak dollar … as such, most of this post is dedicated to the supply and demand issues of the global econony.

The has been great interest in Oil prices… as well as there should be… I talked about Oil being in our everyday life before… as a commodity…. But I need to address some misconceptions about what the general public believes about the Price of Oil today.

First: OIL IS A COMMODITY… that means the prices are subject to supply and demand…. There is NO QUESTION that China and India play a significant role in the new use of oil… as a fuel and as a commodity for other applications…. This is a result of the rest of the world using those countries for lower prices thus bring in more Currency (Money) into those countries and lifting them out of the poverty (and to satisfy our own greed for more at lower prices and greater profits) that we saw them suffering from… now that we have awoken the sleeping giant, so to speak, there is no putting them back to sleep. They will continue to demand oil and other commodities at an ever increasing rate of consumption.

We have been duped into believing that “Speculators” are to blame for higher prices… if South West Airlines is a speculator then you are right… but the reality is that it is GLOBAL DEMAND that pays these exorbitant prices we are seeing… and as I said before… there is NO GOING BACK.

IF we produce more oil it will only keep up with the demand worldwide. While it may make us less dependent on oil for our own needs the prices we will pay in the USA will be based upon WORLD PRICES… not our domestic (USA) production. To believe otherwise is just foolish. Additionally, currently we are importing only about 30 percent of our domestic needs.

We are not entitled to lower fuel prices… it is what it is and we will not sell for less than the world price unless we become a socialist society and subsidize our oil… and that will never happen… or at least I hope we will never become a socialist country. Our sense of entitlement is what is causing a great many problems for us in this country today… and it needs to be put into proper perspective.

Many Americans want to know why China or India Consumption of oil is hurting us here… it is simply business…. I business you do not want to hear about but at least need to understand….The companies that drill for oil are not federal Government Oil Companies… they are in the business to make money… the basic model of Business is that thing called supply and demand… Because I drill and pump crude oil in the USA does not mean that I am obligated by any law to sell it in the USA… as a businessman when I get something out of the ground I can sell it to the highest bidder…. If the USA does not want my product but someone in another country wants it… then I am entitles to sell it to any country (with few exception) I want to … THAT IS BUSINESS. To expect that I should sell it to you at any cheaper price is unreasonable… and bad business… and since these companies that do pump crude oil have other people who own stock (real ownership) of their companies… then they have a legal (fiduciary) obligation to maximize profits for their owners… remember again… we are NOT a socialist Country. Additionally to punish me for selling at the market price with a windfall profits tax is unreasonable… you may not like my profits… but they are legitimate and are mine… additionally I will increase prices to compensate for the “surcharge” tax on my profits.

If we really want Oil Companies to become energy companies then we need to develop incentives to foster the Oil Companies to become “Energy Companies” release in the Fall of 2008….

As I said you did not want to hear that… but those are the basic facts of life today, as we know them! Painful is it not?? Yet this has been the standard model of capitalism for hundreds of years and is not going to change anytime soon.

The same is true of cheap food and household energy use and even in other commodities like gold and Steel and copper (used in your wiring I might add) (I will address health care in another post… and you will NOT like what I have to tell you there either).

The ONLY way of getting a better price is to strengthen the dollar… but our past practices in our country have caught up with us and now we have financial troubles with Credit availability (after years of easy credit) and even with interest rates low we are not able to get the benefits of those cheap rates. Yet is we raise interest rates to fight the higher costs (also known as inflation) we will cause greater harm to the overall economy… the government and the Federal Reserve are in quite a conundrum and there is no quick fix to this problem of a stringer dollar… so do NOT anticipate things getting better quickly.

As bad as things are now they will get better based upon what has already happened… and I fear for many Americans with the Winter Heating Season just ahead (yes we are actually almost there and it is only the beginning of summer) as any American who drives to work and makes less than 40,000 per year per household will find themselves financially in the red (to me this is the new Poverty level in the USA). Elderly Americans on fixed incomes will suffer the most and the Cost of Living adjustments are not accurately reflection the actual increase of cost on the average family… and how can they when the supposed US Index for the Average hourly wage is over 17 dollars an hour…. That shows how skewed the Inflation indexes are by the number of “high wage” earners there are in this country… it is, simply, out of control.

In a future post I will give the bad news … I NOW expect oil to reach 250 dollars a barrel by sometime in 2010… unless the dollar gets better fast…. However with the choices for president and the policies I see coming down the road… that may not be able to be done (remember the discussion on Fiscal and Monetary policy and the effects). Hence 5 dollar a gallon gas will be cheap by comparison…

Corn Prices :

When we find other uses for Commodities outside the normal and regular use we create a demand for additional supply of that commodity. Corn, however, has had a double whammy effect. Yes I am talking first about Global Demand… Most of us think of corn as a food product for our table in many different forms…. Many of us forget that beef and chicken and even pork is raised for slaughter through the use of “feed corn” for them to consume to get these products…. Now also remember that farmers have limited amount of land to use… they also want to get the most out of every acre of land they farm… and currently feed corn is a great provider of revenue.

AS we increased the standard of living for impoverished countries like India and China… they consumption patters changed…. Meaning they now eat more of the Meats I described above…. Those meats also require the feed corn to produce. …Hence demand for feed corn went up and farmers produced more feed corn as a result.

The second whammy was the production (and subsidy by our government) of Ethanol. This non-food use for Corn drove the demand beyond the normal supply and demand curve and as we have seen dramatically increased prices… while the effectiveness of using Ethanol is being debated and alternatives are being developed this demand will not come down and prices will remain high.

What has surprised me about this is, that it was not expected by so many people…. Using a food in a way that is not a food product would naturally increase the demand for that product. As a note…. using Sugar Cane for ethanol will also raise food prices… yet the government may be more willing to do this because of the health consequences of sugar (yes gaining weight).

Corn prices are a direct result of GLOBAL DEMAND and the traditional supply and demand pricing but in a global context.

Energy Costs:

Generally we think of energy as the gasoline we put into our cars. This is true but we consume electricity in ever greater quantities then ever before. Heating, Air-conditioning, lighting TV’s Computers… ALL requiring Energy…. Energy is derived from many sources… Nuclear is being touted as a future provider of energy to wean us off of fossil fuels… but the COST to produce which is said to be low… will NOT reflect in lower prices to the Consumer…. The pricing index will show that they will sell this energy at lose to the same price as Coal or Diesel or natural gas plants… this seems to be the case with Hydro electric now. OLD power plants, are increasing prices, because of consumption, they are not lowering them. Yes the prices of oil and Coal have a lot to do with the international (Global) demand… and the prices have been going up dramatically…. So while we like to think we are better off with “alternative Fuels” and Alternative generation facilities” we are kidding ourselves if we think that will reduce our costs by very much at all… Making electricity… the production of power is a business and as such they obligation is to get the highest price for the product as possible. WE are not entitled to lower power costs!

Electricity is a produced commodity from a natural resource commodity…. At least for now.

Post #3 will be about credit, housing prices and maybe the stock market and Global Currencies

If you have been reading these posts… I will eventually get to the part where I make recommendations for the future… but I still need to explain more about where are are and how we got here.

Craig Eisele

Craig’s Diatribe on the USA and Global Economy (# 1)

June 6, 2008

This blog entry is to try and express my viewpoints on the current state of the USA Economy, my predictions for the future and how we are no longer a localized economy but now are part of a GLOBAL economy. It is part one of a series.

Economic models are nothing more than a theory of how things work… while those theories have been fairly accurate on the last 2 or 3, or even 4 decades our understanding of the way in which the USA economy (as well as the global economy), works is in need of revision.

The USA used to be the master of its own destiny… no more!!!

Where to begin?? This could be a complicated entry and I do not want you the reader (especially if you are a novice) to get lost…. So here I go….

Americans, for the most part, have lost their direction over the last 15 or 20 years…. I cannot and will not blame the politicians… although they should share some of the blame… but we as individuals, need to accept responsibility for where we are today (at least mostly). What do I mean by this?? Well we became a society that never foresaw that our spending (consumption) patters were too great. We felt wealthy and even entitled to an ever increasing and higher standard of living. We disregarded the warnings of our grandparents and great parents who lived through the “Great Depression” years.

We did not save! We used our equity on our homes for newer cars, the latest technologies, and what we determined to me our “God Given right” to a vacation and other rewards for working so hard. We failed to save and invest wisely and gambled on stocks and the future value of our homes to be our savior in the years ahead. We thought about the future in lose terms but never really took the risk too seriously. We always believed that our life style would never be reduced but would continue to rise. WELL … If you still believe that you are in for a great shock… as our quality of life and our life style is never going to be the same. We are no longer masters of our own destiny and must now participate in a global society…. And these facts, my friends (and foes) are the mere facts of life today, which we have not yet accepted.

HOW DID WE GET TOM THIS POINT???

That answer is very complicated…. But lets examine some basics:

1 Commodities: There are two types of Commodities. One that we basically get from the earth in raw form and then convert to materials we use in our daily life…. Oil, Coal, Water, Natural Gas, Metals etc…. then there are those the we grow and raise… food stuffs primarily… the most basic being things like corn, wheat and rice…. Basics in almost every countries diet.

Commodities cost money and energy to produce… when we start importing and exporting those commodities then we have a currency exchange…. One country’s money in exchange for another’s for the buying and selling of those commodities. These “prices get higher the more “value” we add to each commodity…. For instance…. Refining oil into lubricants or heating oil and even more personal into plastics and Synthetic fabrics like Polyester and rayon etc.

We add even more value when we change those plastics into use for appliances, electronics, automobiles and so on… combining commodities to make products that end up in homes and offices, and to a lesser extent in factories where they are used to make “end user” products

Simply we as the consumer are at the end of the “value added” chain of events and must pay the final price ….. This does not include the “disposal Price” when we have to get rid of our “old things”.

REMEMBER: Supply and Demand economics is real… but NOT as important in the United States Economy alone… meaning that the Supply and Demand pricing models are now based on World Wide Demand and not just what is demanded in the USA… we ARE a global society now.

The “global economy” comes into play when we realized that much greater profits could be had by using another countries labor to add the value. Clothing was one of the first things that was “outsourced” and the Amalgamated Clothing Workers of America: fought hard to keep their jobs from going overseas… but obviously they were no supported very well in their protests.

We then subjected ourselves to the mandates of the WTO (World trade Organization) and had to negotiate trade agreements with various countries to keep the balance of trade in some order. However by doing this we lost more control over our destiny then anyone would imagine even to this day. Simply we cannot protect our own companies or workers that function in the USA because it is now against international law that WE agreed to (OK… this blame goes to the Politicians).

One needs to look only at the stocks that did well the last 6 to 9 months and see that MOST of their profits came from overseas…. More on how this is possible later….

Our thirst for MORE PROFITS, and the false belief that what was good for Wall Street was good for America is seriously being challenged… but it is to late to unwind the situation we now find ourselves… George Sorros calls for a new paradigm… maybe that is where we are already and have now acknowledged it… or at least told the average American.

Now the pressure has been on the Federal Reserve and the US Government to make things better… but they really cannot, and we need to stop thinking they can. These institutions CAN however reduce the amount of FUTURE pain that the average American is feeling.

There is a concern that the pain is now gone from “Wall Street” to “Main Street” with the focus on BUSINESS… but most Americans are now feeing it on “MY STREET” something that is being ignored. Business seems to be what we are most interested in, and for that the average person will continue to bear the brunt of this economic condition we are in… because … if you read above… the CONSUMER is the one who is basically the END USER… WE pay the final price for this.

OK… enough of the basic economics lesson for toady…. Later I will write about where we are and the CURRENT economic Condition that ALL of us need to be aware of… not the HYPE that the TV and other media wants us to see and hear… but realities

After that I will write on what we can do for the FUTURE… how we can survive… not thrive… in the downturn that is here and will continue for some time…. Practice advice that IF I AM WRONG… will never hurt you but only make you better off in the future.

Oil Prices. The Dollar value in the world, an Energy and commodity prices will be discussed. I know people are looking at the stock market after what happened on Friday June 6…. And especially they are looking at OIL PRICES… and there is a lot of attempts to LAY BLAME…. And to say it is speculation… our congress has tried to find a “culprit” to blame… and I firmly believe it is not the “Speculators” it is really because we are in a “GLOBAL ECONOMY” that these prices are raising…. That is why I have decided to write this post… so the average person will understand What has happened, what is going on and Where we are going ….. it is very important to knowing what to do in the future and to see how we are not in control of our destiny as we have been in the past and how we are really a global society now … whether we like it or not… and there is no turning back!!!

Post note: I know that this blog has been used for my promotion of Africa Development…. I am still working on these as well… I have been silent for some time for a variety of reasons… but I have not stopped working on these projects

I have also decide that now that BOTH parties have selected their nomine for President of the United Staes… NEITHER of which can make our lives like they were…. that the time was right to discuss our economy .

Additionally I was going to discuss the Housing Crisis in America and the weakening dollar and what the Federal reserves actions have been….but I do what to do that later… but please remember that the Federal Reserve is in charge of MONETARY POLICY… meaning the banking and Interest rates and to control the growth of our economy . There is considerable discussion taking place as to the Bear Sterns intervention by the FED and if is was a way to intervene in the Financial markets…. which was NOT disctated by their mandate from Congress… they are to be independent politically… but they a have limited authority… CONGRESS and the Executive Branch of Government has the responsibility for FISCAL Policy.. that means raising or lowering taxes and the borrowing of money to finance the government operations.. they can help or hurt the economy of the USA in general by the amount of money and the number of :jobs” they create within government. Sometimes those policies may appear to have a socialistic view point… but that is a discussion for another time…. just remember to keep the FED (Federal Reserve) and the FEDERAL GOVERNMENT as two distinct entities that try to work together and yet should never be able to influence each other in keeping the economy stable… also more on interest rates and why Mortgages are so hard to get today in a later post.

For the accuracy of my predictions I invite you to read my other posts on the US Economy at

http://craigeisele.wordpress.com/2007/12/10/my-predictions-for-2008-for-the-us-economy/

and

http://craigeisele.wordpress.com/2007/12/25/more-2008-predictions-from-craig-eisele/

African Aid… Is It Really Aid Or Just Makes Us Feel Good??

African Aid… a study in inefficiency

OK… maybe I am not going to actually do a study… most of my data is allegoric (from stories). But it is a reality that Aid to Africa is not efficient for many reasons that are solvable.

When aid is given with strings attached such as the mandated use of the donor counties personnel or equipment and supplies then it is not aid to Africa it is aid to the Donor Countries’ manufacturing or consulting firms. Expert costs can be triple or even quadruple the cost of the same services in the Donor Countries because of travel, housing (to the donor countries standards) and high salaries of Donor country employees sent to Africa.

I have traveled to Africa frequently and have been in approximately 20 countries in the continent. While Greed, fraud and corruption do exist, it is the cost of goods and services that donor countries provide that takes a great deal of the AID that is supposedly given. Cash sent to most African Countries is subject to redistribution because of other more pressing needs. And sometimes the Strings on the aid have profound negative effects on other parts of the recipient African Countries economy and existing farming or manufacturing enterprises. There is an article in this blog about Namibia and Angola and the Cattle ranching that has been devastated by some of those strings to aid there.

I understand that Donor Countries want to try and maximize benefits to their domestic enterprises when giving aid… but competition for those aid funds can significantly reduce costs and maximize the benefit of the AID to the recipient countries.

Let me move to a different part of this issue… the raising of funds for Aid Organizations. Former President Bill Clinton has stated (paraphrased) that if there was profit to be made in solving global poverty then there would be no global poverty…. But that statement is based upon a false premise… that global poverty can be solved… I am adamant on this.. GLOBAL POVERTY CANNOT BE SOLVED…. Not in my life time… and not even in this century… poverty will always be with us as long as we are a society that functions on money… someone will always be at the bottom of the scale and hence we will always have poverty. This is a fact of life that cannot be dismissed out of hand. (Please note I am not tackling the issue of the measurement of poverty or its definition at this time… maybe later)

What we can do is significantly reduce poverty by revamping and reorganizing the AID that is given and the manner in which it is given.

People think that AID is free… it is not… every aid organization has to raise funds.. that take time, personnel and money… however we can make guidelines on how much of the aid given is actually used for those ongoing fund raising and strategizing efforts as well as the Organizations basic operations and expenses.. For this I am in favor of a sliding scale ranging from 3.5% to 20% depending on the total amount raised per year. This is not include the actual administration of the project (for which I feel not more than 20 % should be allocated to non-resident administration of the ACTUAL Project)

From personal experience:

I have been forming a new NGO (Non-Government Organization) and NPO (Not for Profit Organization) called the Africa Genesis Project. The mission is to “rehabilitate” the sub Saharan “trade routs” in this region. The studies have already been done showing the benefit in trade for the respective countries (a cost benefit analysis). But it does not even begin to show the increase in employment, local economies and the attraction to FDI (Foreign Direct Investment) that would accompany such a project.

The Cost for this is fast approaching 50 BILLION US Dollars. Is that a lot of money?? Yes it is… but in comparison to the 60 Billion dollars in aid for AIDS in Africa than this is smaller and brings more advantages (in my opinion) and allows the aid for AIDS to be delivered more effectively and efficiently to a greater number of people. I agree with the need for AIDS assistance… but I also know that the people of Africa need more.When it costs only 1,000 dollars to send a container to a Kenya Port but 10,000 dollars to take it inland at twice the time and takes 5 days to repair the truck afterwards,… this is an abomination and the extra costs are something the Africans cannot afford.

Roads bring JOBS, and jobs bring economic prosperity and that in turn brings peace and stability to Africa!!!

But how can we raise such amount of funds for the overall rehabilitation of Africa?? If ANYONE expects that Africa can finance this with its current economic situation and with the Debt that it already has, then that person is not fathoming the realities of the condition of Africa and worse is dismissing the prolonged suffering of hundreds of millions of people in Africa. Further it has allowed countries like China to take advantage of this situation to give “no string” loans that continue to exacerbate the problems in Africa.

The ONLY way to really help Africa is one MASSIVE injection of Aid that can transform most of Africa into a productive society. That aid can ONLY come from Governments around the world. That raises a major problem in how to even start such a fund raising effort to implement this project.

My calculations indicate I need 50 million dollars to START this project and 500 Million Dollars to continue to promote and administer the Africa genesis Project over 7 years.

Why so much?? One word answer… POLITICS!!!

I cannot even get an appointment with my own congressional or senate representative in the United States to present this project… and the form in which I presented is not in “proper form” with the relevant brochures and packages needed to promote such a massive project. Multiply that effort with my need to approach the governments of the United Kingdom, France and the rest of the EU, Japan. Australia, Canada, and the Middle East as well as many other countries, (as this is a global issue requiring a global solution) then you start to see not only the massive size of the Africa Project in Rehabilitating these trade routes, but the Global Efforts needed to see it though. And the ONLY way is to hire (at a significant cost) “Consultants” (lobbyists) who can effectively get this project into the hands of those who can make it happen in their respective Governments.

The Africa genesis Project will Guarantee that 96% of ALL money raised for the project will be spent directly on the project and not on fundraising, promotion or administrative expenses of the organization itself. Further that NO Distribution will be to any government organization UNLESS that Organization has actually performed or is performing real work on this roads project. Simply ONLY those actually working on the Road Project will be paid and 80 percent of ALL work must be by Local African Companies and using African employees.

We realize that a lot of Equipment must be purchased for this project. It is expected that Caterpillar and John Deer will receive about 500 million dollars each for equipment and spare part orders… HOWEVER WE MUST be able to negotiate process to reduce costs and maximize benefits to AFRICA. We will NOT tolerate paying even list, let alone OVER list as Caterpillar and John Deer have indicated in my limited discussions with them. The same for every other manufacture and supplier of other equipment, materials and supplies… COSTS will be PARAMOUNT in our vigilance to assure that this work can be done UNDER BUDGET. It is though our “lobbying” efforts that we will make sure that any “strings” attached to the aid given by donor countries for domestic purchases allow us to make bidding and negotiations fair practice in our efforts to supply this project. We cannot allow unfair profits (windfalls) to accrue to anyone on the backs of Africa and its people.

And yes, even I need to get paid, as I am not independently wealthy. So for those of you questioning that, I assure you I am NOT working for free and expect compensation that is reasonable for a project of this size. However I will note that I already know that there are many problems and issues that will need to be addressed on a project this size that will NOT be in the budget … hence my “compensation” will mostly be used for the resolution of those issues and to support the Africa Genesis Organization in its endeavors. Fist Aide Stations, water well drilling, education assistance and the like are just some of those things that are NOT in the Budget for this project and need to be taken care of but NOT from the 96% of the funds that were donated and are to be used ONLY for the Road rehabilitation project as already identified.

If you are a regular reader of this blog you know I have proposed creating a “backbone” infrastructure project that would transverse Africa as well as circumnavigate the Entire Continent, that would end up being approximately 70,000 Kilometers in length. This “backbone would have a 4 to 6 lane modern highway, an Electric Power line transmission, a railroad, and Fiber Optics and Oil and Gas and water pipelines, ALL TO BE FINANCED AND OPERATED BY PRIVATE (non governmental) INVESTMENT. This Investment could approach 1 trillion dollars over 10 to 15 years.

My plans for Africa my be grandiose to some… but a real vision was needed to solidify the continent for economic, and political and peace issues and the overall heath and welfare of the people of Africa… this is my mission… to transform Africa into a place where aid is not needed as much as it is now, and to improve the human sprit of all Africans.

Craig Eisele

Caterpillar Video on the Benefits of Road Construction in Africa

This may be a PR piece by Caterpillar for their benefit… nonetheless it is also a good PR piece for those who espouse the Highway building as necessary infrastructure for Africa. Madagascar may be an island but it is the same story on the Continent of Africa.

Click here: 

Caterpillar Madagascar Video

or cut and paste:

http://www.cat.com/cda/layout?m=8703&x=7&f=177263#/madagascar/

Clothing Prices Poised to Rise Dramatically

Most of the people who read this will not remember the oil embargo of the Early 70′s when lines at the gas stations stretched for blocks on end.

What many who do remember will have forgotten is the increase in clothing prices. Why? Well at the time “polyester” was the “miracle” fabric of the day. In fact most synthetic fibers used in clothing are made from OIL. And as we all know Oil prices have increased dramatically.

According to today’s farm planting reports being released, farmers are going to plant less cotton this year. Cotton is the other significant component of clothing. Hence when the next harvest of cotton is made there will be higher prices. Higher because of the amount of cotton available… but also higher because of the demands moving from high priced “synthetics” to “lower priced” Cotton. But as I have already indicated Cotton will also cost more.

The lower value of the dollar around the world will also begin to have this effect on Clothing manufacturing and prices. While the price of labor is cheaper abroad generally, the exchange rate of the dollar for the foreign countries currency is declining against them and they will be forced to raise their prices to pay their people and to sustain profits.

That means it will cost more to buy clothing not just for yourself but for your children. That means a tighter budget and that dreaded word “Inflation”.

It is not just your clothing that will cost more. The cost of plastics has yet to be passed on completely to the consumer goods market. And all you have to do is look at that commercial showing everything disappearing because of no oil… now you just have to increase the price because the oil will be available but will cost more.

We have yet to see the real cost of this inflation from Oil Prices to Aluminum to Steel and Copper. These are commodities that have built our “modern” society and are critical to our society as we know it.

I am not trying to scare you about the future. I AM trying to warn those of you who care about the future and urge you to take appropriate steps to be prepared for these inevitable events as I do not see an easing of this anytime in the near future.

Outragous Costs of Domestic transport in Africa Shows Needs that Can Be Addressed by Private Enterprise.

The two arms of Coega, South Africa’s newest port, extend into the Indian Ocean in graceful arcs. These breakwaters — one is 2.6 km long, the other 1.3 km — are built from thousands of dolosse, huge, oddly-shaped, 30-ton concrete blocks that interlock. They are designed to protect the vessels that, when the port is fully operational in 2007, will use this facility to ship manganese, iron ore and other South African products to China, India and the rest of the world. The government-funded Coega Development Corporation (CDC), which is building an industrial zone on 11,000 hectares of farmland next to the port, likes to think of the massive complex on South Africa’s southeast coast, 20 km from Port Elizabeth, as a symbol of industrial Africa flexing its muscles. “If you want to change lives and the history of this continent, you need to develop infrastructure,” says Vuyelwa Qinga-Vika, spokeswoman for the cdc. “We’re not going to advance if we don’t even have the roads to bring medicine to the rural areas. We’ve got to start building.”

The call to construction is ringing out across Africa. Infrastructure is the new buzzword, pushed by leaders from South Africa’s Thabo Mbeki to Senegal’s Abdulaye Wade. It’s also a key topic at this week’s World Economic Forum (WEF) meeting in Cape Town, where political and business leaders from Africa will meet with heads of some of the world’s biggest companies to discuss, among other things, how Africa’s priority infrastructure projects can boost growth. According to a Gallup International survey commissioned by the WEF, Africans “focus more heavily on economic issues than do citizens in other parts of the world.” One in three Africans fear a failure of the economy compared to just one in five globally.

Despite a commodity boom that pushed growth to 5% in Africa last year, the continent’s leaders want better infrastructure to win more business. The New Partnership for Africa’s Development (NEPAD), an African initiative that aims to lure $64 billion in annual investment by tackling bad governance, ending conflicts and making the continent more business-friendly, has put improved infrastructure near the top of its to-do list. “There can be no meaningful development without trade,” reads NEPAD‘s infrastructure action plan. “And there can be no trade without adequate and reliable infrastructure.”

The need is as obvious as it is urgent. Africa’s roads and railway lines, ports and power grids are neither adequate nor reliable. Outside of southern Africa and Mauritius, much of the continent’s infrastructure is crumbling or nonexistent. Consider the Democratic Republic of Congo. You could fit France, Germany, Italy, Norway, Spain and Britain inside it, and the country is packed with timber and minerals, yet it has only a few thousand kilometers of paved road and 10,000 fixed telephone lines, and produces about the same amount of power as Albania. In other war-torn countries, such as Somalia and Sierra Leone, public buildings have been destroyed by years of fighting. Corruption and mismanagement have left public utilities in places such as Cameroon and Nigeria run down and inefficient.

The lack of infrastructure deters many companies from investing — and drives up costs for those that do. The World Bank estimates that to ship a container from Baltimore in the U.S. to Tanzania costs about $1,000, but to transport that same container from Tanzania to neighboring Burundi costs $10,000. “In many countries, companies have to generate their own power, dig for water, pay heavy distribution and telephone charges,” says David Hampshire, chairman of Diageo Africa, one of the continent’s biggest marketers of beer and spirits. “All these costs add up, and they end up being paid for by the consumer.”

To attract more investment, Africa has drawn up plans to spend billions over the next few decades. Zambia and Burkina Faso, both landlocked, want to build new rail lines through neighboring states to improve their connections to the sea. In East Africa, the Kenyan government and the rebel movement in southern Sudan plan to build a new railway track — at an estimated cost of more than $4 billion — from Sudan more than 1,000 km south to Rongai, Kenya, about 170 km northwest of Nairobi, where it will connect with the existing line to the Indian Ocean port of Mombasa. That notoriously inefficient harbor, along with some half a dozen others around Africa’s coast, is set to undergo a massive expansion and modernization program over the next few years.

The next decade may also finally see the completion of the Trans-Saharan Highway from Algeria to Lagos, Nigeria. Equally bold is the West African Gas Pipeline, which will tap natural gas from the Nigerian oil fields in the country’s southeast and then run almost 700 km along the coast with links to power plants in Lagos, Benin, Togo and Ghana. The most ambitious plan is for a massive dam on the lower Congo River which would eventually produce more than twice the power generated by China’s controversial Three Gorges scheme — enough to sell electricity across the continent as well as export it to Asia and Europe. But that project is at least 20 years away.

Surprisingly, funds for new projects aren’t lacking. Africa’s richest countries are eager to build. South Africa’s government, for instance, is funding the new Coega port and industrial zone. “Private business is not too keen on putting money into infrastructure, so the government has said it will take the lead,” says Lionel Billings, manager for Coega’s enterprise development and investor interaction. Rich donor nations in the West often help finance schemes in poorer countries, as does the World Bank. A growing number of private and foreign government-backed infrastructure funds based in Europe and the U.S., such as AIG African Infrastructure Fund and New Africa Infrastructure Fund, are also supplying capital.

The problem is confidence. Financiers, whether private or public, need projects that they can rely on. “We’ve got liquidity we’re embarrassed about,” says Keith Palmer, chairman of the London-based Emerging Africa Infrastructure Fund and vice chair of the U.K. investment bank NM Rothschild & Sons Ltd. “But there’s a lack of well-structured, creditworthy opportunities.” Business leaders cite numerous hurdles to investment: corruption, political instability and African governments’ lack of capacity to run huge projects and reluctance to hand over control of projects to the private sector. Richard Laing, chief executive of the Commonwealth Development Corporation, Britain’s agency for investment in the developing world, says the problem is dealing with African governments which have “an unwillingness to let go and a lot of distrust.”

There’s also a catch-22: Africa needs investment and improved infrastructure to develop, but finds it hard to attract the capital such projects need without more development. Thormählen Schweisstechnik, a German company that last year won the right to construct and operate for 25 years the planned railway line from Southern Sudan to the Kenyan coast, is already running into problems with the Kenyan government. Klaus Thormählen, head of the company, says, somewhat euphemistically, “the decision-making process [does not] maintain its dynamics during the times of our absence.” A spokesman in the Kenyan President’s office says that Kenya backs the scheme and is working with the German company to make sure the line is built.

Back at Coega port, a huge crane lifts another concrete block into position. The dock area, which was constructed behind a dam wall, has now been flooded, and is awaiting its first ship. “One of the things that will make it meaningful for South Africans is to see the first businesses set up here,” says Qinga-Vika. “It may just be concrete and steel and new roads, but this is a symbol of hope that we’re doing something to turn this city and continent around.”