Planet Nasdaq is also known as the United States. It orbits around the rest of the world promising us a new economic model. One that demands the type of investigation that only the intellectual rigor of Virtual Professor H. L. Menchen could bring to bear on the subject. You recall that Prof. Menchen, though no economist, was an expert in identifying cant and bunkum. Please read on.
"The world has enough for every man's need, but not enough for every man's greed." Mahatma Gandhi.*
"The Dollar is a faith-based currency." James Grant, Grant's Interest Rate Observer.
FEEL LIKE RETIRING?: This from 23.02.04 CBS MarketWatch: If you're like 75% of Americans born after 1945, you're going to have to retire on your own, without a pension or confidence that Social Security will contribute to the retirement you've earned. Unfortunately, many people won't realize how ill-prepared they are for retirement until it's too late.
UofH: Achille had one troubled heel, P. Nasdaq has several.
1) Larry Lindsey (28.08.03) (FT) Praising American society in general, the former Fed governor and White House economic adviser wrote that: "Total '04 spend on 40m Medicaid beneficiaries will be $311bn. By contrast, the National Health Service will spend about $105bn on care for 60m Britons." He concluded that: "The US not European-style welfare state - it's an 'Opportunity society'."
UofH: Yes - the opportunity to overpay for medical costs.
And by the way Larry added: 'The Declaration of Independence makes it right and also duty of a people to throw of despotic government.'
UofH: Who's next?
(15.10.03) (Il Sole) (OECD) More on P. Nasdaq medical costs as a % of GDP they're 13.9% vs Canada 9.7% (In Luxemburg - on of the worlds richest countries they're 5.6%) That's $4,887 annually for every American vs $2,792 (on a Purchasing Power Parity basis.) (11.05.04) (FT) P. Nasdaq spends more per capita for health care than any other country. About 50% more than Switzerland one of the richest and most expensive countries in the world.
(UofH) And it's getting worse: John Kerry says average family health insurance premiums over the last four years have risen four times the increase in workers' earnings.
More on P. Nasdaq medicine: (20.10.03) (F - from Ronald Brownstein of the L.A. Times) Since Bush's arrival 9% more P. Nasdaqers have no health insurance. The total now is 43.6m (about 15% of the population). Meanwhile, in three years, total healthcare cost for employees has risen 50%!!! The Planet's annual healthcare bill is now $1.6trn. Ronald says the situation can be sorted out for $75bn.
UofH: Were the uninsured to receive genuinely full medical coverage the extra price ought to be 15% of $1.6trn, i.e., $240bn.
This on P. Nasdaq healthcare from Paul Krugman of the N.Y. Times - 17.02.04: the U.S. spends far more on health care than any other country, but this wouldn't be a bad thing if the spending got results. The real question is why, despite all that spending, many Americans aren't assured of the health care they need, and American life expectancy is near the bottom for advanced countries.
Where is the money going? A lot of it goes to overhead. A recent study found that private insurance companies spend 11.7 cents of every health care dollar on administrative costs, mainly advertising and underwriting, compared with 3.6 cents for Medicare and 1.3 cents for Canada's government-run system. Also, our system is very generous to drug companies and other medical suppliers, because — unlike other countries' systems — it doesn't bargain for lower prices.
The result is that American health care, which at its best is the best in the world, offers much of the population a worst-of-all-worlds combination of insecurity and high costs. And that combination is getting worse: insurance premiums are rising, and companies are becoming increasingly unwilling to offer insurance to their employees.
UofH: Not to mention Americans' generally poor health from advertising-induced over-eating of junk food leaving 33% obese.
(23.02.04) (F) In a recent study, Finnish authorities found that when agressively cutting a workforce [this municipal one was cut 18%] cardiovascular deaths doubled vs a stable workplace. There was also an 18% rise in illness.
UofH: David Malpass, economist at Bear, Stearns, says (06.04.04) (W) about 23% of 131 million U.S. non-farm workers lose their jobs each year. There you have part of the reason healthcare costs 50% more than in 'less-civilized' nations.
(27.09.03) (Il Sole 24 Ore) U.S. Census Bureau: @ 34.6 million the poor (family of 4 with $18,392 annual income) have risen by 1.7 million in 2002 from 2001. They are now 12.1% of Americans. In the same year the average income per family has fallen 1.1% to $42,409.
UofH: If this last figure is in nominal dollars, that's a 3.3% inflation adjusted hit per family. This when the government said the GDP in real dollars was up 2.4%. Inflation adjusted that would be about +4.6%. Where did all that bounty go? Or was it there at all?
(30.09.03) (WSJE) Allan H. Meltzer of the American Enterprise Institute says there are probably many more jobs than the government's surveys capture. Though he admits they are increasingly less well-paid.
UofH: A clip on the front page of the same WSJE sites a census report that would amuse Mr. Meltzer: 2.4 million more Americans had no health insurance in 2002 compared with 2001. Meltzer also failed to mention a growing category of U.S. job holders. There are now 600,000 newly self-employed. The UofH wonders if these aren't former mid-level and middle-aged white-collar workers, too proud to declare themselves on the street.
(02.10.03) (Il Sole 24 Ore) (Bureau of Labor Statistics) In the last quarter of 2002, 7.8m jobs were eliminated while 7.7m were created. Leaving aside the latter number which seems optimistic is the light of ever-lengthening times the jobless stay on welfare, the former - extrapolated into an arc of 12-months would indicate that roughly 28m Americas or about 20% of the work force lost their jobs whereas only about 20m were picked up in the Weekly Jobless welfare claims. It's also worth noting that workers, in addition to receiving maximum 60% of their previous, net of taxes, pay while on the jobless roles (for an average 10+ weeks), are paid at least 3% less when they do find work.
(24.10.03) (NYT - Paul Krugman) Currently, 75% of those who lose jobs still haven't found new jobs when their unemployment benefits run out.
UofH: Hey! Larry Lindsey - Here's just one more advantage of the Opportunity Society.
(12.02.04) (FT - Christopher Swann) In Ohio, in 2003, the average wage in sectors that were CONTRACTING was $41,287 a year. In EXPANDING sectors the average salary was just $29,488.
UofH: Try these numbers on the c. 28 million Planet Nasdaqers probably due to lose their jobs in 2004: See above: (02.10.03) (Il Sole 24 Ore) (Bureau of Labor Statistics).
(24.02.04) (F) Gregory Mankiw, the Chairman of George W. Bush's Council of Economic advisers writes on the GSE's - Government Sponsored Enterprises - particularly on Fannie Mae and Freddy Mac who, by September 2003, were furnishing about $2.4 TRILLION in mortage loans to American homeowners. Because, Mankiw writes, Fannie and Freddie funding is perceived - falsely - to be guaranteed by the Federal Government, their cost of money is 40 basis points less than other comparable borrowers. Of this 33 basis is point is passed on to the executives running this two behemoths and to their shareholders. The homeowners enjoy the rest - 7 basis points.
UofH: And the taxpayer holding the bag for these potential financial timebombs?
B.G. Notes: 1) The Opportunity Society. (02.10.03) (FT) (Stephen Cecchetti - Prof. Int'l Economics - Brandeis University) U.S. has 220m of working age. Normally 61% work. That equals 134m jobs. Currently there are 130m. BUT: Planet Nasdaq adds 1.25% to its population each year. So, in the next 12 months, 2.75m people will join the 4m currently looking for a gig. The [Greenspan] bubble led to over-investment and over-employment. Part of the recent [Bush] tax package went to reduce the cost of capital permitting companies to substitute capital for workers.
Cecchetti's Conclusion: "If Mr. Bush and his advisers want to change the tax code again, they had better get started. Beyond that, there is little anyone can do to eliminate the job gap by next November."
(26.10.03) (NYT) P. Nasdaq immigration agents raid Wal-Mart: Mr. Zavala, the janitor in Old Bridge, N.J., said he got his job shortly after arriving in the United States, when a neighbor asked whether he wanted work cleaning buildings. Mr. Zavala, 28, said he did not know the name of his boss.
Mr. Zavala said he believed that the Wal-Mart managers knew the janitors were illegal immigrants.
"Deep in their minds, of course the store managers knew it," he said. "The other guys from the crew didn't speak one word of English. Of course they knew it, but if you asked them, they'll say `we thought they were citizens or residents.' "
Mr. Zavala said the contractor that he and Eunice, his wife, worked for paid them $400 a week each for working 56 hours. That would come to $6.25 an hour if time and a half overtime is included for all hours worked in excess of 40.
"We don't know nothing about days off," said Mr. Zavala, whose hometown is Mexico City. "We don't know nothing about nights off, we don't know health insurance, we don't know life insurance, and we don't know anything about 401(k) plans."
He said that when he was arrested and taken to a detention center in Newark, immigration officials mocked him for taking a job that paid so little in a state where rents and living expenses are so high. He said that in his 16 months as a cleaner at Wal-Mart, he was given only two nights off.
He said he did not think that the contractor withheld taxes from his pay, raising questions about whether the contractor was making the required contributions for Social Security and unemployment insurance.
Misha Firer, an illegal immigrant from Russia, said he worked for three months last year as a cleaner at Wal-Marts in Ephrata, Pa., and Glens Falls, N.Y., working 90 consecutive days without having a day off.
Mr. Firer said that he earned $6 an hour, working the midnight-to-8 a.m. shift, washing, waxing and buffing floors. He said the chemicals were so strong that some workers had nose bleeds, sore eyes and skin irritations.
UofH: Temporarily at a loss for words. Does anybody have Larry Lindsey's email address? Meanwhile, Wal-Mart won't give out the contractor's name.
2) Economists Stephen Roach of Morgan Stanley (23.08.03) (FT) & Kurt Richebacher of formerly of Dresdner (05.09.03) (F) reached separate opinions about the peppy GPD growth reported for Planet Nasdaq's 2003 2Q.
Running at an annualized rate of 3.1% most economists and all stock-market investors see the number as a certain indication of future growth. However both Roach and Richebacher point out that 60% of that growth was spending on the Iraq War.
Worse: Business investment reported at a 3-year hi was blown up by 5 times due to the Hedonic Pricing of Computers, etc., based on '96 prices. More on hedonic (i.e. quality improvement) pricing later. For the moment, just keep in mind that no European government uses it in calculating GDP.
UofH: Without the benefit of the Iraq War and Hedonic IT Pricing the 2Q US GDP growth would have been - ZERO!. But - read the counter argument - just as August's weak monthly job #'s had been announced:
(06.09.03) (FT) (High Frequency Economics - Ian Shepherdson) "We know at the moment the speding is accelerating and growth is very strong. The key implication is that corporate earnings must be rocketing and that is why the stock market is less worried about job losses." 3Q GDP will rise about 5.0% on an annual rate basis.
And...Flash: (15.09.03) (FT) (Global Insight - Nigel Gault) Seems to refute the Roach/Richebacher argument saying IT growth reported was just 0.34% of which 0.1% hedonistism.This because 'the chain-weighting procedure for calculating GPD growth is designed to avoid the distrotions that arise from combining hedonic pricing with fixed weights'.
(22.09.03) (FT) Christopher Swann writes that the U.S.'s hedonic pricing adds about 0.5% to productivity growth.
3) Ed Crooks (05.09.03) (FT) - UK's Iraq troops cost c. $270k each per year -
Pentagon - US troops cost $333k each per year.
UofH: Talk about productivity!
4) US Goodyear Workers Pay $1bn for Their Own Haircuts.
The FT (16.09.03) reports that the new 3-year union contract for 19k workers 1) freezes their pay for 3 years, 2) Deducts about 1% of gross salaries to partly pay for health care, 3) Cuts workers by roughly 7%. Total cost savings for Goodyear: $1bn.
UofH: The average annual hit is about 11% - to be reduced by those workers finding new jobs (often with a close shave added for their new wages)
5) US Farm Subsidies.
The Cancun World Trade Organization talks collapsed. The FT (16.09.03) reports that the ministers from Benin, Burkina Faso, Chad and Mali claimed that 'the $3bn/$4bn a year in subsidies paid to the US's 25k cotton farmers exceeds the GDP of Burkina Faso and is three times the entire US aid budget for Africa. Meanwhile, 10m cotton farmers in west and central Africa - many living on less than $1 a day - are losing $1bna year in export earnings'.
6) US Wages to Come: (03.10.03) (Bberg) Metaldyne Corp., seeking 500 employees for $12 an hour jobs at an auto-parts factory in New Castle, Indiana, said more than 5,100 applied during a three-day job fair that ended Sunday. Applicants waited in the rain for applications. Metaldyne is hiring workers for jobs that pay veteran employees $26 an hour. ``This is not an anomaly,'' Chief Executive Timothy Leuliette said in an interview in White Sulphur Springs, West Virginia. ``This is the beginning of a restructuring of the industrial base in the United States.''
7) (08.03.04) (WSJE) Warren Buffett in his Berkshire Hathaway annual report noted that 'aside from 1983, the percentage of of U.S. federal tax receipts from corporate income taxes last year was the lowest since data was first published in 1934.'
UofH: Hey! On Planet Nasdaq, you might say it's the poor who pay taxes. On the other hand, since the federal goverment is now spending TWO TIMES it's revenues, the future improverished will be those who purchase its bonds.
8) (09.03.04) (CBS Marketwatch) - Dr. Irwin Kellner, chief economist for CBS.MarketWatch.com, is the Weller professor of economics at Hofstra University and chief economist of North Fork Bank.
Trimmed down from Dr. Keller’s report, here are some recent numbers from Planet Nasdaq: Since the end of the last recession [early 2002?] consumer spending is up 11%, corporate profits +20%. That’s almost three times the 7% rise in personal income and FOUR time faster than the 5% growth in wages and salaries. But with payroll employment DOWN 0.6% in the same period comsumer installment debt has risen 11%; counting mortgages the increase is 19%.
How much longer can this growth in household debt continue? Total consumer debt now equals 110% of personal incomes -- the highest ratio ever. Ten years ago this ratio was 85%; two decades ago, 65%.
Back in 1952 the ratio of consumer debt to personal incomes was only 30%. Since almost HALF of all consumer debt outstanding these days is based on short-term rates…
UofH: We’ll finish Dr. Kellner’s sentence: “Any Federal Reserve interest-rate hike will flatten the Planet unless there are a lot more jobs on the horizon.
9) (08.03.04) (FT) Amity Shlaes reports that an OECD 2000 study - "Programme for International Student Assessment" ["PISA"] - found that Planet Nasdaq high-school students 'did not read as well as their peers in 14 other developed nations.'
UofH: We bet they had high scores on the Ninja Turtles questions.
10) (08.03.04) (FT) Here's the OECD again: Whereas 67% of P. Nasdaqers prefer self-employment. only 7% ARE!! (vs 42% of the French and 35% of Germans). Letter writer John Schmitt of 17th Street Economics suggests that 'difficulties involved in obtaining and paying for health insurance, especially for anyone with prior health problems, are a significant barrier to self-employment, as obstacle not faced by entrepreneurs in European economies.
UofH: Hey! John!: please cc Larry Lindsey.
11) (10.03.04) (FT) This from the P. Nasdaq Center for Disease Control: About 64% of adult Nasdaqers are overweight or obese (about 400k vs 435k smokers die of fatness every year - the two total roughly 35% of all deaths. In 1970 only 46% were oversized - a veritable planet of ballet dancers!. The actual number of obese adults is 31% (about 60m fatsos). That's probably one fat reason why employers fork out an average $6,619 per worker family on health care. When topped up by the employee's contribution of $2,412 that a whopping $9,033.
UofH: Larry Lindsey, when's the last time you hopped on the bathroom scale?
12) 25.03.04) (FT) Ed Crooks quotes expatriate French professor at MIT saying things "aren't so bad" in France. By 2000 the average workers put in only 1,550 hours per year. A 21% fall since 1970. The average P. Nasdaqer toils about 41 hours per week - that's about 2,000 annually with a 2 week break.
UofH: Vive la difference!
12b) (31.03.04) (FT) John Kay, business economist and member of the British Academy has more to say about LIFE IN FRANCE. To John it's a gestalt, complete with universal comphrensive health insurance, retirement after 50-55 for anyone who feels like it. 39% of the 55-64s work vs 60% of P. Nasdaqers. For those who work, there's an average of 25 days paid holiday vs 17 you know where.
UofH: To get more of the drift read John Kay's FT article on http://www.johnkay.com/society/328
13) 14.04.04 (FT) 'American energy use makes it resemble a grimy, gas-guzzling developing economy more than a green rich nation: a dollar of U.S. gross domestic product takes one third more energy to produce than a dorr of output in Japan or western Europe.
UofH: U.S. Formula: Competitive Output = Energy Wasted + Low Wages & Worker Benefits + Unregistered Immigration.
14) 17.05.04 (NYT) Today's editorial says the P. Nasdag prison system: "has grown tenfold over the last 30 years and now jails people at eight times the rate of France and six times the rate of Canada." There's more: "
The nearly 12 million people who pass through the corrections system each year are often subject to violent attacks by other inmates, and prisoner-on-prisoner rape is endemic. Drug-resistant strains of tuberculosis, easily transmitted in tight spaces, have become a common problem. Illegal drugs ferried in by prison employees — and used by inmates who share needles — have made prison a high-risk setting for H.I.V. infection and most recently the liver-destroying hepatitis C." And this: "
A recent study by the Correctional Association of New York found that nearly a quarter of inmates assigned to disciplinary lockdown — confined to small cells 23 hours a day — were mentally ill. Their symptoms worsened in isolation; nearly half had tried to commit suicide. Dissociated and sometimes violent, these people are dumped onto the streets when they finish their sentences."
UofH: So Abu Ghraib is no scandal - just part of "democracy" exported to Iraq.
P.S.: Here's the Financial Times take (21.05.04) California: 'Since 1980 the number jails has almost double (though facilities are holding almost double the population they were designed for) and the prison population has increased more than six-fold to more than 160,000.'
15) 10.05.04 (FT) Martin Wolf writes that rich country farmers receive SEVEN times the subsidies of aid to poor countries.
UofH: P. Nasdaq farmers lead the way in dumping subsidized agricultural products on world markets greatly damaging 3rd-world farmers.
(12.05.04) (W) (Griffin, Lubik, Stephens & Thompson - Brian Wesbury) "inexplicably, as late as Nov. 15 2000, the Fed was still warning that the threat of inflation was greater than the threat of recession. Just six weeks later, on Jan. 3, 2001, the Fed cut interest rates by 50 basis points at an emergency meeting as it became apparent that a recession was under way. [Officially pegged at March 2001]. (12.05.04) (FT) Editorial: "The seductive opium of of ultra-low U.S. interest rates is about to be taken away. It is time to see if the world can get by without interest rates at crisis levels."; Opinion by John Kay: "In the U.S, in the years to come, disruptive changes in economic policy [will be] the consequence of inept management."
UofH: Among other 'disruptive changes': the Fed is attempting to socialize the stock market in order to underpin P. Nasdaq's shaky retirement structure. More of this later.
(21.05.04) (Il Sole-24 Ore) At 9 million barrels per day, P. Nasdaq - with 4% of the world's population - consumes 45% of its gasoline.
UoH: Note Italy's 'Il Sole' has the largest daily circulation of any financial newspaper in Europe.
Joseph Lieberman: FT 25.05.04: Using “present value” accounting – something company pension funds do but the Federal government doesn’t – the unfunded liabilities for Medicare and social security pensions are $72trn. The gap is rising by a further $2trn each year. This doesn’t include the annual general budget deficit.
UofH: P. Nasdaq’s GDP is about $11trn a year and the annual general budget deficit is about $450bn. Taxes anyone?
Paul Krugman: NYT 01.06.04: Under Mr. Bush the Treasury Department has stopped releasing information on the distribution of tax cuts by income level. Estimates by the Urban Institute-Brookings Institution Tax Policy Center, which now provides the numbers the administration doesn't want you to know, reveal why. This year, the average tax reduction per family due to Bush-era cuts was $1,448. But this average reflects huge cuts for a few affluent families, with most families receiving much less (which helps explain why most people, according to polls, don't believe their taxes have been cut). In fact, the 257,000 taxpayers with incomes of more than $1 million received a bigger combined tax cut than the 85 million taxpayers who make up the bottom 60 percent of the population.
UofH: The Title of Krugman’s article “Nibor Dooh” is Robin Hood spelled backwards: The rich taking from the poor.
David Kay: FT 26.05.04: Americans appear to believe they can spend themselves richer. This is a kind of con game encouraged also by the Beltway and the Fed. It’s resulted in a stock market – America’s pension fund – with a valuation more self-congratulatory than real. Referring to bubbles in general, John Kenneth Galbraith created the bezzle – the increment to wealth that occurs during the magic interval when a confience trickster knows he has the money but the victim does not understand he lost it. The gross national bezzle has never been larger than in the last decade.
UofH: P. Nasdaqers – It’s head-scratch time: how to bail out of the bezzle?
David Ignatius: Washington Post (WP) via WSJEurope 27.05.04: P. Nasdaqers squander energy. ‘A year when America was fighting a war in Iraq would have been an ideal time to ask the country to sacrifice a bit, to reduce its dependence on oil from the Middle East. Instead, the Bush administration let SUV nation roll on.’
UofH: David has more: ‘What we are seeing in the market is a result of clever policies in Saudi Arabia and dumb ones in the U.S.’. As the the UofH sees it: no sacrifice is too little for P. Nasdaqers. JFK – where are you?
(29.05.04) (FT) DC: Salamander Davoudi: Author Alan Elsner “Gates of Justice” says U.S. prisons match certain Abu Ghraib brutalities. ‘Nearly 2.1m people are held in U.S. prisons today – an incarceration rate five to 10 times greater than that of any other democracy.’
UofH: This is our “Take Two” on U.S. prisons. See 17.05.04 (NYT) above. Shame’s the name for the system.
(29.05.04) (FT) Letter from Tom Brown of London: ‘Gerard Baker has deluded himself into believing there is a narrowing gap between U.S. and U.K. cultures brought about by a common language.
There are massive entrenched difference between the societies and their values, whereas the lack of a common language in Europe leads some monolingual Anglo-Saxons to presume social and political differences between, for example, the Germans and the British, which scarcely exits compared with the transatlantic gulf.
Europeans don not (ordinarily) carry guns, do not routinely executre prisoners, don not have Chapter 11 bankruptcy proceedings, monster homes, cars that guzzle fuel on the U.S. scales, virtually universal male circumcision nor – above all – an appalling level of economic inequality between the super-rich and a working class whose real living standards have scarcely risen in 30 years.
Europeans generally have “socialist” medical, educational and welfare systems that enjoy a broad popular support, as do higher income tax levels, and are among the reasons for superior life expectancy and public health in much of Europe. Europeans are deeply attached to their railways and don regard public transport as something only for social outcasts.
European societies are humanist and secular in their predominant values while organised relgion plays a role in U.S. society otherwise only equalled in Muslim societies. As for popular culture, it is scarcely as if the reception of Harry Potter and Coldplay in the U.S. indicates some unique cultural tie: what is probably more telling is that the English original version of Harry Potter sold out in Germany even before the German translation was ready.
The U.S. and U.K. – as well as other European countries - should enjoy strong relations but it is delusion that “they are just like us”, when it is obvious they are startlingly different.’
UofH: A partial rebuttal of Tom Brown’s letter by Ernest G. Bentsen, Marlboro NJ was published in the FT on 05.06.04. We still tip our hat to Tom Brown.
(07.06.04) (FT) This from Jeffrey Sachs who runs the Earth Institute at Columbia University. The gist is that P. Nasdaqers are 3 Sers – that is in alphabetical order: Selfish, Short-sighted and Stingy. Sachs argues, inarguably, that lowering world poverty would be good for everyone. A standard was agreed in Monterrey in 2002 whereby ‘the G8 and other signatories urge “developed countries that have not done so to make concrete efforts towards the target of 0.7% of GDP as official development assistence.’ P. Nasdaq, According to Sachs, in the 3 years of the Bush tenure, has hiked military spending 1.5% of GDP ($150bn) and cut taxes and astounding $750bn while ‘remaining the world’s stingiest donor at 0.15% of GDP.’
UofH: Come on Humvee Heaven: throw your weight around for the right cause.
(08.07.04) (WJSE) The OECD has measured the change in per-capita annual hours worked in major developed nations between 1970 and the end of 2002. It seems P. Nasdaqers now work 20% more hours than 32 years ago whereas the French work 23.5% LESS! Much of the rest of the world is taking it easier, too. The Germans: -17.1%, Japanese: -16.6%, the Italians: -10.1%. Closer to home, Canadians only lifted working hours by 16.8% or – since the UofH enjoys playing with statistics – 16% less than their American cousins.
UofH: More leisure time means more time to raise the next generation properly. So here we have confirmation of why there are 8 times more P. Nasdaq birds jailed per capita than in France. See above #14) 17.05.04 NYT.
* Keep an eye out for an occasional UofH [bracketted intrusion]