PeakTrader.com

[administrator]

PeakTrader said...
Wall Street helps facilitate offshoring, creating enormous value for the U.S. masses, which is why it deserves those big bonuses.

In the 1990s, Wall Street promoted revenue growth, and in the 2000s, it promoted earnings growth.

U.S. multinationals offshored goods with declining prices, high-cost goods, unprofitable goods, or heavy goods, imported them at lower prices and at higher profits, while freed limited resources were shifted into higher quality "core" goods in older industries, into emerging industries, and into industries that distributed the gains-of-trade to the masses.

Consequently, the U.S. created and captured trillions of dollars of wealth in the global economy, and leads the rest of the world combined in the Information and Biotech revolutions (in both revenues and profits).

Offshoring diversifies an economy. Facilitating unproductive or inefficient work, with a country's limited resources, may not be worthy.

When those limited resources, e.g. labor, capital, land, raw materials, energy, etc., are freed, that's when they can shift into new industries. They can't flow into new industries when they're locked in obsolete industries.

Of course, we can better help displaced workers. For example, more financial aid for fields in demand, e.g. in biotechnology (microbiologists, biochemists, engineers, etc.), particularly when the difficulty of those fields require more time to complete.

Acquiring needed skills raise living standards. Otherwise, most Americans would still be farmers, similar to China.

-------------------------------------------------------------------------------

PeakTrader said...
There aren't enough observations to be statistically significant, nothing to show causality (except the recession), ommited variable bias, etc. The article is completely unscientific. It makes climatologists look like scientists.

In the early '80s, the teenage unemployment rate was 24%, and in the early '90s, it was 23%, only slightly lower than today.

Anonymous said...
Look, don't you get it? Minimum wage laws are immoral. What right do some govt. bureacrats have to tell you that you cannot cut your neighbor's grass or wash her car or any damn thing you can think of for a price you MUTUALLY agree on.

PeakTrader said...
Anon, then labor standards are immoral, for the same reason.

When those limited resources, e.g. labor, capital, land, raw materials, energy, etc., are freed, that's when they can shift into new industries. They can't flow into new industries when they're locked in obsolete industries.

Of course, we can better help displaced workers. For example, more financial aid for fields in demand, e.g. in biotechnology (microbiologists, biochemists, engineers, etc.), particularly when the difficulty of those fields require more time to complete.

Acquiring needed skills raise living standards. Otherwise, most Americans would still be farmers, similar to China.

--------------------------------------------------------------------------------

PeakTrader said...
Economic theory does show an increase in the minimum wage can have a positive effect on teenage employment.

If a teenager's reservation wage is $6 and the minimum wage is $5, that teenager will not take a minimum wage job.

Also, empirical data show in the early '80s, the teenage unemployment rate was roughly 24%, while the non-teenage unemployment rate was about 10%, although the minimum wage didn't rise.

In the early '90s, the teenage unemployment rate was roughly 23%, while the non-teenage unemployment rate was 7%, although the minimum wage was flat.

However, today, the teenage unemployment rate is 25%, while the non-teenage unemployment rate is about 9% after the minimum wage increased from $5.15 to $7.25.

An initial review of the data suggest the teenage unemployment rate should be much higher if increases in the minimum wage has a negative effect on teenage employment, ceteris paribus.

Anyway, I think overpaid federal government workers is a bigger problem than overpaid minimum wage workers:

Federal pay ahead of private industry
March 5, 2010

Federal workers earned an average salary of $67,691 in 2008 for occupations that exist both in government and the private sector, according to Bureau of Labor Statistics data. The average pay for the same mix of jobs in the private sector was $60,046 in 2008, the most recent data available.

These salary figures do not include the value of health, pension and other benefits, which averaged $40,785 per federal employee in 2008 vs. $9,882 per private worker, according to the Bureau of Economic Analysis.

But National Treasury Employees Union President Colleen Kelley says the comparison is faulty because it "compares apples and oranges." Federal accountants, for example, perform work that has more complexity and requires more skill than accounting work in the private sector, she says.

Office of Personnel Management spokeswoman Sedelta Verble, says higher pay also reflects the longevity and older age of federal workers.

-----------------------------------------------------------------------------------

The Microsoft Millionaires Come of Age
May 29, 2005

"While the exact number is not known, it is reasonable to assume that there were approximately 10,000 Microsoft millionaires created by the year 2000," said Richard S. Conway Jr., a Seattle economist whom Microsoft hired to study its impact on Washington State. "The wealth that has come to this area is staggering."

----------------------------------------------------------------------------------

Milam said...
The same topic came up on Marginal Revolution but Tyler Cowen was smart enough to realize there are many other factors which must be controlled when analyzing federal vs. Private pay, not the least of which is COST OF LIVING.

For example, most federal economist positions are concentrated in large, expensive cities like DC, NY, Boston, Philadelphia, and San Francisco. The locality pay adds a lot to salaries which are, in turn, eroded by lower purchasing power. Then they pay more in taxes because they're in a higher tax bracket.

Or perhaps they get paid more because they are actually better economists who actually consider more than one explanatory variable in an apparent relationship.

PeakTrader said...
Milam, the government's inability, unwillingness, or incompetence to reduce costs doesn't justify more government.

Titus Pullo said...
What's the comparison of pay and benefits for Fortune 500 CEO's vs Cabinet department heads? The former, like Bob Lutz of GM, get $20 million severance packages for destroying their companies and sending jobs overseas.

PeakTrader said...
Titus Pullo, top baseball players get $20 million for a bad year too.

Without unions and government (including CAFE standards), GM may be worth more than GE.

Milam said...
Funny, but I don't recall stating anywhere that this or anything else is a justification for "more government."

Where do you get the idea I want more government? Oh, you get it from the antithesis of this post which is, "Government workers get paid more, therefore there is too much government."

So taking issue with a boneheaded economic analysis about government salaries has now become fervent support for ever-growing size and scope of government. I see, I see.

And salaries of particular persons in government is not an adequate measure of "more government." Even in a limited government bearing allegiance to the US Constitution, I think we'd all appreciate highly-skilled, well-compensated government employees.

PeakTrader said...
Milam, I didn't say you wanted more or less government. I was responding to the article that shows a steep increase in government employment, and your own words on cost of living, purchasing power, and taxes.

Also, you should know government economists aren't better than private economists based on the data. However, I suspect they're better economists than the data reflect.

----------------------------------------------------------------------------------

PeakTrader said...
Keynes said we're all dead in the long-run. The problem is the long-run eventually shows up. I think, it's beginning to show up in a big way.

----------------------------------------------------------------------------------

PeakTrader said...
I'd like to know why Seth dislikes offshoring.

Would he prefer losing all jobs through bankruptcy or losing some jobs through offshoring?

He may have a valid reason. Being lied to or getting fired may not be one of them, although it can be distressing.

sethstorm said...
It has been used as a political weapon. Originally, it has been used to marginalize certain political groups. The problem is that it was indiscriminate in its impact. It harms every US citizen, not just the people who are targeted.

While good uses may exist, no implementation of offshoring has used them. There is no incentive to be honest about displacing people as long as they are not marginalized. Honesty in that regard is too expensive. It is cheaper to lie and have Legal clear things up and PR demonize the individuals.

PeakTrader said...
Seth, how does offshoring harm "every US citizen." It seems you don't view offshoring as an economic "tool" to lower prices, raise profits, strengthen firms, and shift limited resources into emerging industries. Obviously, from your comments, you believe offshoring should be banned.

If politicians can use politics as a "weapon," why can't firms? Why should politicians have all the fun?

Consumers seeking the lowest price is no different than producers seeking the lowest cost.

I don't see you attacking consumers, who demand lower prices. With so much work that needs to be done, why force people to waste their time performing unnecessary work?

----------------------------------------------------------------------------------

Scott Grannis said...
See my related commentary on this subject, to the effect that a slowdown in M2 growth is not inconsistent with an increase in inflation.

http://scottgrannis.blogspot.com/2010/03/slow-m2-growth-not-necessarily-bad.html

PeakTrader said...
Scott, I don't see your correlation between the CPI and M2. It seems, inflation tends to accelerate in an expansion and monetary policy is accommodative in a recession.

Also, I wouldn't compare 1995 to today, because we may be heading into stagflation. Accelerating inflation can be caused by pent-up demand, foreigners absorbing fewer dollars, fewer goods, including imports, etc.

Moreover, the stock market is not the economy. People are likely to buy stocks, and anything else, rather than hold dollars when the value of the dollar is eroding:

Jim Rogers: S&P Could Go To 50,000 Jun. 3, 2009

It's a bear market rally. I was going to say I don't think S&P 500 will see new highs. But I have to quickly temper that by saying against the dollar because the S&P 500 could triple from here if they print enough money and the value of the US dollar collapses, then S&P could go to 50,000, Dow Jones can go to 1,000,000.

Benjamin said...
Well, inflation or deflation?

In SoCal, commercial property is selling for one-half to sometimes one-quarter peak levels. Some smaller warehouses are holding up okay, but that's about it.

Should not a monetary inflation boom shoot property prices to the moon?

I sure hope so, but I don't see that happening for many years.

I think the Fed needs to pump even more money into the economy. I would fly a fleet of 747s and drop billions of Ben Franklins down on America.

We have created a Frankenstein financial system--we have our infrastructure, our factories, our subsidized farms, our human capital--but we can't make it function at full speed. It is stupid.

We should be working harder to pay off debts, not working less.

How do we get everyone working harder?

PeakTrader said...
Benjamin, yes, there's been too little money chasing too many assets and goods. Congress decided it's better to destroy excess assets and goods (by creating idle resources) rather than refunding U.S. households (e.g. a $5,000 per worker tax cut for 150 million workers or $750 billion).

Also, I may add, the excess capital is being destroyed, e.g. government spending $1 for something worth $0.50.

bobble said...
PeakTrader:". . . rather than refunding U.S. households (e.g. a $5,000 per worker tax cut for 150 million workers or $750 billion). "

it's not quite that bad. 37% of the stimulus is tax cuts ($288 billion)

what you should be in fear of is deflation.

PeakTrader said...
Bobble, the American people aren't fooled. Taxes were raised on most people in the middle of the recession, by federal, state, and local governments, and much of the tax cuts are a year too late and targeted towards a small percentage of the population. Government cut and raised taxes at the same time. If you had a $5,000 tax cut, you'd know about it:

Poll Reveals Most Americans Don't Know They Got a Tax Cut
February 12, 2010

Here's the poll question: "In general, do you think the Obama Administration has increased taxes for most Americans, decreased taxes for most Americans or have they kept taxes the same for most Americans?"

The answer:
• 24 percent of respondents said they INCREASED taxes.
• 53 percent said they kept taxes the same
• And 12 percent said taxes were decreased.

Of people who support the grassroots, "Tea Party" movement, only 2 percent think taxes have been decreased, 46 percent say taxes are the same, and a whopping 44 percent say they believe taxes have gone up.

U.S. inflation has already accelerated over the past year:

February U.S. and Canadian inflation rates stayed within an acceptable band
March 23, 2010

In the U.S., medical care services were +3.7% year over year and medical care commodities were +3.5%. The U.S. all-items index (+2.1%) is rising faster than the core rate (+1.3%). Energy (+14.4%) is contributing mightily to the increase in the U.S. all-items index. Year-over-year gasoline prices in the U.S. were +36.8%. New vehicle prices in the U.S. advanced at the same rate as in Canada +3.5%. Used car and truck prices, however, lurched forward by 14.1%.

Also, I may add, health care inflation may eventually rise like inflation in the used car market after Cash-for-Clunkers. When banks start lending again, and households pay-down more debt, inflation may accelerate.

-----------------------------------------------------------------------------------

lgstarr said...
Democratic Rep. Maxine Waters, along with Jesse Jackson, helped defeat Wal-mart's bid to build a store in her (35th) district, which includes Inglewood, in Apri, 2004.

The next month, interestingly, Rev. Jeremiah Wright helped defeat Wal-mart's bid to build stores in South Chicago:

The 8,500-member Trinity United Church of Christ on the South Side became a center of opposition to Wal-Mart, and its leaders directly linked the store's attractive low prices to its low-paying jobs. "Whenever price means more to you than principle," wrote Trinity's pastor, the Rev. Jeremiah Wright, in the church newsletter, "you have defined yourself as a prostitute." Wright charged that Wal-Mart's backers among the City Council and the black religious community were "pimping" black residents and their economic hardships.

PeakTrader said...
Some people believe Walmart pays its suppliers too little (the same people who shop at Walmart for lower prices). However, suppliers will not sell below costs. So, prices will not fall too low. Instead, only the most efficient suppliers will survive.

Walmart should allow the politics in the South Side of Chicago to play out. If they decide to allow a Walmart store to open, then Walmart should string them along and wait for appropriate concessions. If Walmart doesn't get them, it should continue to string them along without opening a new store.