6.10.13

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Reader Question on Robots: What are People Supposed To Do For Their Livelihoods?

Posted: 06 Oct 2013 07:27 PM PDT

In response to my post France Vows to "Save the Bookstores", Fixes Price of Books, Bans Free Shipping by Amazon, reader David writes ...
Hello Mish,

I enjoy your columns, and agree with most of your economic analyses, but I do have a question about this morning's entry regarding France and bookstores: namely, what are people supposed to do for their livelihoods if nearly everything is going to be done by computer and robotics?

This is the issue that Hollande, in his outdated, ham-fisted way--is getting at, and for the record, I don't have the answer, either.  The economy needs middle class consumers, but they in turn need money, which they can't earn without quality jobs.  In the past, technological development led to more businesses being created than destroyed.  The same was true for quality jobs.  I believe the experience of the last five years, however, has demonstrated that this linkage is impaired, if not completely broken.

Businesses and quality jobs - livelihoods - constitute the economic foundation upon which a community rests.  Socialist remedies to the problem posed by hyper-automation will fail (as have socialist agendas to any problem), but raising the issue does not make one a Luddite.

David
Plight of Bookstore Owners

First let's discuss the plight of bookstore owners. Is it really a bad thing if they go out of business?

For numerous reasons (unless you are a bookstore owner), it's a good thing, just as is was when buggy-whip manufacturers went out of business as autos replaced horses.

For every job lost by small bookstores, additional jobs are created at Amazon and online bookstores. Is the ratio 1-1? Probably not, but it does not matter.

The easily seen (alleged problem) is bookstores go out of business. The unseen benefit is people have more money to spend on other things that they used to spend on books.

Perhaps people take in an extra movie, go out to lunch one more time, pay down debts, or simply save the money for a "rainy day".

All things considered, there is a huge overall economic benefit of lower prices. Yet the Fed, the unions, Keynesian clowns, banks, and various bureaucrats want prices to go up.

Quality Jobs

Let's define a "quality job" as a job that provides sufficient income for standards of living to go up over time.

Note that standards of living go up when prices go down (assuming pay stays constant). Standards of living decline with price inflation, unless wages rise more than inflation.

And that is the crux of the problem.

As I have stated countless times, the problem is not low wages, the problem is rising prices.

And we would have falling prices were it not for the inflationary policies of the Fed (central bankers in general).

Yet, misguided fools in the state of Washington are currently pushing for a $15 minimum wage. More people will lose than gain by such a move, because prices will rise to make up the difference.

Where Will The Jobs Come From?

People ask me all the time: where will the quality jobs come from? Unfortunately, I don't know, nor does anyone else. But just because no one knows, does not imply that no jobs are coming.

One could have asked the same question right before the railroad boom-bust, right before the great depression, right before the internet boom-bust, and right before the housing boom-bust.

So here we are. Unless it's different this time, there will be another advance of some kind that is highly likely to create jobs. I cannot say what or when.

In the meantime, government and Fed policies seriously exacerbate the problem. Higher minimum wages, together with cheap money at low interest rates, and coupled with increased business costs of Obamacare all encourage businesses to shed workers as fast as they can.

Further Reading

For further inflation reading and who benefits from it, please see ...


Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Boehner on Shutdown: "This Isn't Some Damn Game"; Several Tea Party Republicans Cave-In

Posted: 06 Oct 2013 10:18 AM PDT

Here is an amusing Bloomberg TV video of House Speaker John Boehner complaining about the negotiation process with President Obama.



Link if video does not play: 'This Isn't Some Damn Game'

Video Transcript

When we have a crisis like we are in the middle of this week, the American people expect their leaders to sit down and try and resolve their difference. I was at the WhiteHouse the other night and listened to the president some 20 times explain to me why he isn't going to negotiate.

I sat there and listened to the majority leader in the United States Senate describe to me that he is not going to talk to me until we surrender. And then this morning, I get the Wall Street Journal out and it says we don't care how long this lasts because we're winning.

This isn't some damn game.

The American people don't want their government shut down and neither do I. All we're asking for is to sit down and have a discussion and to bring fairness, reopen the government, and bring fairness to the American people under Obamacare. It's as simple as that. But it all has to begin with a simple discussion.


Translation

This is some damn game, and I am frustrated as hell to be losing it.

Several Tea Party Republicans Cave-In

In spite of Boehner's frustrated bluff in the video above, he has already signaled the game is over. See Boehner Prepared to Cave-In to Obama; Reflections on the Waiting Game

And not only is Boehner prepared to cave, several tea party Republicans are prepared to concede as well. Nonetheless, Boehner insists he does not have the votes.

Bloomberg reports Some Tea Party-Backed Lawmakers Yield in Obamacare Fight.
The first cracks are appearing in the Tea Party's push to dismantle the nation's health law as three House lawmakers with ties to the movement said they'd back a U.S. spending bill that doesn't center on Obamacare.

Republican Representatives Blake Farenthold of Texas, Doug Lamborn of Colorado and Dennis Ross of Florida, all of whom identify with the Tea Party, said they'd back an agreement to end the government shutdown and lift the debt ceiling if it included major revisions to U.S. tax law, significant changes to Medicare and Social Security and other policy shifts.

Meanwhile, House Speaker John Boehner said he doesn't have the votes to pass an increase to the debt ceiling without packaging it with other provisions. There isn't enough support to pass a "clean debt limit" provision, Boehner said in an interview on ABC's "This Week" program today.

"We've tried a lot of things and used just about every arrow in our quiver against Obamacare," Lamborn, 59, said yesterday. "It has not been successful, so I think we do have to move on to the larger issues of the debt ceiling and the overall budget."

Lamborn said he would back a debt-limit increase if the agreement included an equal amount of spending cuts. He said he's also seeking a deal that includes instructions for major tax-code revisions.

"I recognize the writing on the wall," he said.

Farenthold, 51, was a conservative radio talk-show host when he won election in 2010, defeating 28-year incumbent Democrat Solomon Ortiz.

The Obamacare battle, he said, was for "another day."

"It will collapse under its own weight, especially when the young people -- who are going to be under the individual mandate -- start screaming at what they're having to pay for," he said.

Position Shift

Ross, ranked among the House's most conservative members by both the Club for Growth and the American Conservative Union, said he shifted his position because the shutdown hasn't resulted in changes to the Affordable Care Act. The shutdown also could hurt the party, he said.

"We've lost the CR battle," Ross, referring to the continuing resolution to authorize government spending, said in an interview. "We need to move on and take whatever we can find in the debt limit."

Ross, 53, is pushing for other changes, such as basing Medicare premiums on income and switching to a formula that may make Social Security beneficiaries' cost-of-living increases rise more slowly. Those would be "major reforms" that should win Republican votes.

"I'm not questioning my leadership," Ross said. "I'm just suggesting that we need to take stock of where we've come and realize what it's going to take for where we want to go," he said, adding that he still favors changing the health-care law.
Ross Translated

I'm questioning my leadership on this issue, because this game is over.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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