I am constantly amazed at how sitting political leaders and naive citizens think that the government can create jobs. If the government could create jobs why would we ever tolerate any unemployment?  Either the leaders are economically ignorant or liars.

If you only read one economics book I recommend ‘Economic in One Lesson’ by Henry Hazlitt. Hazlitt was not an economist, but a reporter and he wrote this book in 1946.  This passage explains why the government is incapable of creating jobs without sacrificing at least the same number of jobs from the private sector.

This is what is immediately seen. But if we have trained ourselves to look beyond immediate to secondary consequences, and beyond those who are directly benefited by a government project to others who are indirectly affected, a different picture presents itself. It is true that a particular group of bridgeworkers may receive more employment that otherwise. But the bridge has to be paid for out of taxes. For every dollar that is spent on the bridge a dollar will be taken away from taxpayers. If the bridge cost $10 million the taxpayers will lose $10 million. They will have that much taken away from them which they would otherwise have spent on the things they needed most.

Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $10 million taken away from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of that project. More bridge builders; few automobile workers, television technicians, clothing workers, farmers.

This sounds so logical and obvious that I fail to understand why anyone would swallow the government promises to create jobs.

Random thoughts

GM’s effort to target Toyota’s  customers  in the midst of their record recall notice seems in poor taste, especially in light of the record amount of taxpayer money that is now supporting GM.  This is like the arrogant rich kid who brags about being  smart when he was just lucky enough to inherit daddy’s money.  Kudos to Honda for expressly rejecting this tactic and Ford for just making money without taxpayer funds.   This is a big debit to GM’s karma account. Remember how many Toyotas are manufactured in this country.

Has anyone ever heard a peep from this administration about the government’s  responsibility for the economic crash, or do we just keep adding to the list of corporate demons?  First the oil companies, then insurance companies, then the health care providers and then the banks and financial institutions.  I need oil companies, insurance companies, health care providers and banks because they provide stuff and  services I need and want. I wish I could say this about the government .

After reading and writing about the financial crisis, I realize that the best analysis is devoid of political and partisan scapegoating.  The causes  were multiple and extended back more than 25 years. While much is clear in hindsight, at the time there were seemingly rational reasons for every stupid step toward the cliff.  How do smart people make such stupid mistakes?  One small stupid step at a time.

I have observed that there is an innate sense of trust on the social networking sites, especially Facebook.  We have connected with people we haven’t seen in decades, and there is an instant sense of trust.  Rules of etiquette on Facebook are unwritten but seemingly obvious just the same.  I wonder if the hours we spend on Facebook comes at the expense of television viewing.

With a more substantial majority than either party has enjoyed in decades and control of the White House, the Democrats have failed to pass any of the legislative initiatives other  than the stimulus package early in 2009(and the absurd cash for clunkers program) . It seems that either the bills they are trying to pass stink or that they must be incredibly politically incompetent.

During the 1970’s the sudden and enormous wealth of the Arab World as a result of the oil cartel OPEC, made everyone think they would rule the world. Raising oil prices as a result of the US aid to Israel during the 1973 Yom Kippur War (disproving the myth that we only fight for oil), the oil shieks were reported on lavish shopping sprees at Harrods’s in Great Britain handing out 100 dollar bills as tips.

In the 1980’s the Japanese were in the ascent. They bought the Pebble Beach Golf Club, and management consultants tried to copy the Japanese miracle as Japanese cars spelled disaster to the Detroit auto industry.

In the 1990’s the Japanese bubble burst and they have yet to recover.  We refer to their lame policies to reignite their economy as the lost decade. The 1990’s was the American decade. The dot.com boom, the internet industry, billion dollar hotels in Las Vegas, stunning victory in Desert Storm, and a budget surplus showcased American economic strength.

The first decade of the millennia was the Chinese decade. They discovered capitalism, hosted the Olympics, began to develop a middle class, and began an industrial growth that fueled a boom in commodity prices. But the Chinese economic growth was fed from the top down, not from the bottom up the way an enduring capitalist economy develops. While we saw our banks crash as a result of revaluing inflated assets, such market adjustments are prevented in China and their banking system in more vulnerable than their government allows to show.

Who will dominate the new decade?  India.

India’s capitalism is more bottom up.  British rule has left in place institutions of property rights and law that are essential to developing capitalism.  Like China, India has cultural shackles to grow out of, but they may be more ready for capitalistic growth than the northern neighbor.

My best performing stock of 2009 was Tata Motors, the GM of India (the old non government owned GM); up over 230%. (Suntrust was the second best.)

We are entering India’s decade.

In  the American Metal  Market magazine Commercial Metals Company’s (CMC) metal fabrication division noted a drop in earnings to a $’17.3 million LOSS  in the most recent fiscal  quarter (three months ending Nov 30) from a profit of $66.6 million in the same period a year ago. Tonnage is down 32% and prices are down 34%.

Most metal fabricators are seeing similar results.  This highlights my previously stated point that our primary economic problem is not lack of credit but a lack of profits. Entire lines and companies are being mothballed until there is some uptick in construction and there is simply too much inventory to see this happening anytime soon.

For a few months I received auction notices for large fabrication shops about every week.

Imagine the impact of Commercial Metal’s report multiplied by thousands of companies.   My eyes tell me unemployment is getting worse, while the Bureau of Labor Statistics tell me it is getting better; I believe my eyes.

This excess inventory of buildings and housing was created before this administration, and the hardest thing to do at this point is nothing, but this is probably the best long term solution.  Efforts to prop up prices while inventory is still too high will only kick the problem down the road.

One idea would be tax credits for demolishing old buildings. This goes against my grain of economic common sense, but it would solve a problem of oversupply.

Obama is now pressuring the banks to make loans to stimulate the economy.  Yet again we have the government creating a crisis and then blaming the private sector.

The banks are in the business if making loans. They should not be encouraged to make reckless loans; that is what fomented the crisis to begin with.  Fannie Mae and government pressure to extend housing loans to unqualified buyers was the core cause of the melt down.

Businesses are not growing and expanding because they cannot get loans, but because they cannot make money.  Part of this is because of gross over building in the construction market, largely as a result of misguided Federal policy. Largely it is because of the uncertainty from the pending Union Card Check Bill, Cap and Trade, and the pending health care reform.

Tax increases, the expiration of the Bush tax cuts, threatened increases in the estate tax, and higher capital gains taxes are all major job killers.  None of this is the fault of the banks.

The destruction in home values which was a common source of collateral for many small business loans,  is a result of government policy.

Businesses do not borrow unless they perceive the risk environment to be favorable.  Every step to take more of the profits makes the incentive to take a risk and create a job less favorable.  If the president wants to know why unemployment is still high and business growth is so slow he doesn’t need a meeting with the banking industry, he needs a mirror.

By preventing assets from reaching their market levels, the administration risks making the recession last longer than it should.

The uncertainty in all of the radical bills proposed in the first year has businesses behaving like a deer in the headlights.  They are afraid to invest in such an uncertain environment, yet many cannot afford to close. They cut expenses as much as they can and hope they can hold on until the market turns.

They see a poor risk/ reward proposition and thus refrain from growing, and they refuse to die. They are neither living nor dead.

We are in the middle of a Zombie Economy.

We tend to look at the increase in prices as inflation, but in a situation of fluctuations prices go up and down.

What if prices should be going down 3% but instead we see prices increasing 3%.  We see a price inflation of 3%, but it is really 6%.

How realistic is this?  Recent CPI numbers are down and such CPI adjusted payments as Social Security should be going down, or at least not going up.  But according to out president seniors should still get an increase. He proposed an increase for the misfortune of not having to experience a misfortune.

If you get a zero increase in payment when your cost of living has actually declined then you have in effect gotten an increase. Declining wages which we are esperiencing is very deflationary.

American economists and policy makers live in the fear and the shadow of the Great Depression and its devastating deflation.  European policy makers fear the runaway inflation that destabilized Europe prior to WW II.

With massive debt and government spending that is crowding out private borrowing, many wonder where the inflation is.

Perhaps it is just hidden.

“More than that, no country in the world, not even Germany, would respond “proportionately” if some nonstate militia started rocketing their towns from across some border and killing German citizens.  If a government could not get the state from whose territories the rockets were being fired to take responsibility for ending the threat, then it would have no choice but to silence the threat itself.  Why do German intellectuals, journalists, and politicians expect Israel alone to act differently?  And why do they, of all people, insist that the use of force must always be a last resort in any political confrontation among states, when that kind of thinking is exactly what allowed Hitler to cause the Second World War? Germans frequently talk like Neville Chamberlain at Munich, when they ought to realize that it was Winston Churchill who was right: the readiness to use force in an appropriate and judicious manner is not what causes wars; it is often what prevents them.”

Adam Garfinkle in “Jewcentricity”

I just completed a 600 mile drive from Bloomington, Indiana after visiting with my daughter at IU for her birthday.  Some thoughts on the ride home:

America is obese.  As a rule I pick a restaurant by looking at the patrons and thinking if I want to look like them in ten years.  That would eliminate just about every country breakfast stop including Cracker Barrel and the fast food joints that proliferate on the exits. I miss finding some local decent food. It is all corporate chains. I do tend to favor Waffle House when I am on the road, but I wish they would get some real butter instead of that Country Crock substance, and some real maple syrup even if they charged more for it.

Maybe because the men are too fat to see their own schmucks, they seem unable to hit the urinal. There is a reason we do not put these in our homes.  I can only guess that most of the highway lard asses just spray in the general direction to mark their territories before actually putting any of the urine in the urinal.  I have yet to see a bathroom without a trash receptacle so I do not understand why there is gum and cigarettes buttes in the urinal, except that they must feel entitled once they have marked their general area.

Most of us are sanipeds. That is a word I made up for people who use their feet to lift the toilet seat in a public restroom.  They should make toilet seats with a tab on the side to make it easier to lift the seat with your foot.

Self service gas pumps are a great idea. I am old enough to remember attendants.

Satellite radio is a godsend to road travel.  With satellite radio I actually prefer to drive 9-1/2 hours to Bloomington than to drive to the Atlanta airport, fly to Indianapolis, rent a car and then drive an hour to Bloomington. It maybe takes 2 or 3 hours longer to drive, but I have a comfortable seat and my own space (My wife, Debbie, joined me.) I can also haul stuff much easier and just throw it in my car.   I like to travel but flying is a miserable experience for me.

Channel 105 on Sirius is all Monty Python. A little Bloomberg, a blues station, then Classic Vinyl Rock station, the Eighties, Raw Dog Comedy and then …. whatever.  I even sought out liberal talk radio to get some balance in my life. The one I found was some woman from New York and was laced with profanity. Say what you want about conservative talk radio, it is far more civil.  The lefties seem as critical of the president as the righties do.

To the eighteen wheeler that cut me off and made me slam on my brakes.  Be more careful if you post that 1-800- HOW AM I DRIVING phone number on your truck. We all have cell phones and my wife had one of those portable pocket movie cameras. I called and reported you, reading all the data on the truck to the attendant.  The worst 18 wheelers are the ones on I-75 South from Chattanooga southward.  A fourth of them should be arrested.

The local federation hosted Micah Halpern this evening at the Cox Theatre.  He is an authority on Iran and their nuclear effort.

A few random yet relevant points.

There are 3,000 FBI agents. None of them have passed the test to speak or understand Persian, the language of Iran.  Only a few dozen can speak Arabic. Translation is jobbed off to Israel.  We must job to a third party to translate the language of our biggest security threat.

The Iranians know us far far better than we know them. See above. They are much better at playing the international chess game than we are.

The Iranians have more Phd’s per capita that any country besides the US, Israel and maybe India.  Most are educated in European universities.

Natan Sharansky is a world class champion chess player, and keeps a continuous game with Kasperov.

Unlike Iraq in 1981 with a single nuclear plant above ground, Iran has at least 38 sites and many below ground.

Iran has a space program and has developed rockets to propel satellites into space. This same rocket technology can carry nuclear warheads and their satellites are critical to guide their rockets to assure accuracy. Their space program is not subject to inspection by the nuclear verification agencies.  Other components of their program sucha as triggers are also exempt.

We have no power over Iran. If we are to have any influence it must come though a third party, most likely China, which has a $100 billion dollar oil deal with them. Unfortunately we have been and are bungling our Chinese diplomatic realtionship.  We need a strong relationship with China to have any influence over Iran.

Iran’s diplomatic relationship with Venezuela is based totally on a common hatred of the U.S.

Iran will likely succeed in developing their nuclear weapons.

Read Micah  Halpern at The Micah Report . (now on recommended sites)