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A Fine Time to Raise the Minimum Wage?

Richard Daughty — Tue, 14 Jul 2009 18:00:27 +0000

To show you the kind of idiocy that passes for economics, The Wall Street Journal, in a story about the imminent rise in the minimum wage from $6.55 to $7.25 an hour, notes that the Economic Policy Institute “estimates that the minimum-wage increase will add $5.5 billion to the economy” which makes me laugh – Hahaha! – in a mocking-yet-scornful way as my humble way of saying, “These guys are idiots!”

If another lousy 70 cents an hour will add $5.5 billion to the economy, then raise the minimum wage by $7 an hour and add $55 billion! Or raise the minimum wage by $70 an hour and add $550 billion! Hahaha!

So I’ve got a real Hot Mogambo Tip (HMT) for these Economic Policy Institute (“a liberal think tank” says the WSJ) weenies: Wrong-o! Morons!

For one thing, money does not appear out of nowhere, including that $5.5 billion. It has to come from somewhere. And since these dorks obviously have no idea what in the hell they are talking about (which explains why the WSJ called them a “liberal think tank,” which is a euphemism for “idiots in a room”), the fact is that the businesses that pay the higher wages are going to have to charge more for their output to make up for the higher labor expenses or make $5.5 billion less in profits, which does not even include the higher charges for the employer-half of taxes on wages, higher unemployment insurance premiums or other expenses linked to wages.

In short, the whole $5.5 billion that will theoretically end up in the paychecks of low-wage employees will all be spent by them paying the higher prices that businesses will have to charge! Surprise! No free lunch! Hahaha!

And the businesses and employees that buy materials and supplies, but do not have any minimum-wage employees, will end up paying the higher prices charged by businesses that do, and they will have to raise prices, too! Hahaha! Surprise!

Apparently, the halfwits at the EPI never heard of the famous book by the famous Austrian-school economist Henry Hazlitt, Economics In One Lesson, where the One Lesson is that “The art of economics consists in looking not merely at the immediate but the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

And although some doofus “economist” named Heidi Shierholz at the EPI says “it is actually a good time” for an increase in the minimum wage, the fact is that businesses are not making any money as it is with the lower minimum wage… Bankruptcies are soaring, businesses are folding, consumers are broke and the economy is in a mess, which is NOT a “good time” to be raising the prices of anything, including labor, although the idiot state and local governments think it is a FINE time to raise taxes! Hahaha!

And for proof of the decline in the economy, all one needs to do is look at the earnings of the S&P500, the 500 biggest corporations in America, which are down to a measly $6.86 in earnings, down from last year’s $84, which, with a current price of $896 for the index, gives a laughable P/E ratio of 130 for the S&P500! Hahaha! “Invest for the long-term by buying stocks that are so ridiculously overpriced that it makes you laugh so hard that it would make Graham and Dodd pee in their pants!” Hahaha!

Bill Bonner here at The Daily Reckoning sums it up as, “No consumer spending, no sales. No sales, no revenues. No revenues, no one can stay in business. No small businesses. No new jobs. No new jobs, no economic recovery. No economic recovery and the meddlers are back on the Hill asking for more power and money.”

You can almost hear the sarcasm in his voice when he says, “No surprise there.”

And if you want another surprise, go look at the last 4,500 years of history and see how gold and silver fared against everything else, particularly paper currencies, economies based on paper currencies and assets whose value is reliant on paper currencies, and then you, too, will come to the conclusion, “Whee! This investing stuff is easy!”

Source: A Fine Time to Raise the Minimum Wage?

Global Investment News Briefs Friday, February 27, 2009

William Patalon III — Fri, 27 Feb 2009 16:10:34 +0000

JPMorgan Cuts 2,800 WaMu Jobs; GM Post $30-Billion Loss; Hong Kong Exports Sink; IGM Retains 2009 Outlook; Jobless Claims Spike; Oil Rises for Second Day in a Row

JPMorgan Chase & Co. (JPM) will eliminate 2,800 jobs at Washington Mutual through attrition, Bloomberg reported. In December, the company slashed 9,200 jobs at WaMu, which it bought for $1.9 billion last year.

General Motors Corp. (GM) posted a loss of almost $31 billion in the fourth quarter, and said its auditors will likely doubt its viability. The company burned through $5 billion during the quarter, and warned that its pension plans were underfunded by $12.4 billion, Reuters reported.

Hong Kong’s January exports sunk 21.8% from a year earlier, the biggest decline in 50 years. “It’s not just Hong Kong, the financial crisis is dragging down the whole of Asia,” Wang Qian, an economist at JPMorgan Chase & Co. in Hong Kong, told Bloomberg. “The trade environment is going to get worse.”

Tech giant IBM (IBM) retained its full-year earnings outlook, saying that service contracts are grew in January. “Recognizing that it is still early in the quarter, the company expects double-digit growth in long term signings, and growth in total signings in first quarter 2009,” IBM said in a regulatory filing, Reuters reported.

The number of Americans filing initial claims for unemployment insurance spiked the week ended Feb. 21, as 667,000 Americans filed initial jobless claims, up 36,000 from a revised 631,000 the previous week, the Labor Department reported.

Oil prices jumped for a second straight day yesterday (Thursday) with light, sweet crude for April delivery jumping $2.72, or 6.4%, to settle at $45.22 a barrel on the New York Mercantile Exchange.

Global Investment News Briefs Friday, February 27, 2009

The Blood of the World’s Economic Circulatory System

Chris Hancock — Sat, 12 Apr 2008 16:41:16 +0000

For one moment, forget about stock markets as divine measures of prosperity. Focus on the lives of ordinary citizens. We read that 28 million Americans will subside on food stamps this year — the most since Congress enacted the program in the 1960s. A typical trip to the grocery store will cost the American consumer 9% more today than it did just one year ago.Have you picked up a five-pound bag of flour or a dozen eggs lately? Both staples are up more than 40% since January 2007 — among the worst price hikes. In effect, your paycheck must increase 10% just to keep as much food on the table in 2008 as you had in 2007.

Of course, that’s assuming there’s a paycheck to spend. The Labor Department reported on April 3 that new applications for unemployment insurance jumped 38,000, to 407,000, at the end of March, a two-year high. Some analysts estimate the unemployment rate may reach 5.5%.

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If that weren’t enough, oil has topped $110. Prices at the pump hit $3.28, another all-time high. Meanwhile, the nation’s truckers prepare to strike. According to reports, many truckers are operating at a loss when diesel prices rise above $4 per gallon. To protest rising fuel costs, a group of big rig operators engineered a massive traffic jam on the New Jersey Turnpike. They monopolized all lanes, geared down to 20 mph and crept from the Big Apple like floats in a holiday parade. Similar protests clogged Chicago and Atlanta. It feels, dear reader, like an emotionally debilitating chapter from Atlas Shrugged.

We take these protests very seriously. After all, the health of the American economy rests on the ability to move goods to and fro. Like shipping, trucking still serves as the world’s economic circulatory system. This business connects the world in ways high-tech never will. Trucking is, and will remain, irreplaceable on the world stage. We cannot live without it.

Trains and planes, by nature, have limited reach. Railroads lead to rail yards. Airplanes fly to airports. Ships, for their part, carry goods to the to the tidewater’s edge, but no further. In each case, commerce depends on the truck to finish the job.

Truckers will demand higher wages to offset higher costs. Higher wages will require the goods they haul to be sold at higher prices. You get the idea. And this scenario discounts a major disruption to world oil supplies. A militant group truly determined to thwart the American dream wouldn’t have to leave the Middle East. Ask policymakers which asset they covet more: The Green Zone or Saudi oil production?

Treasury notes and bonds yielding 3-4% may appear a safe haven in today’s market environment, but they are a long-term investment I would strongly advise you to avoid. It’s better to own a diversified portfolio of stocks — especially stocks that have the ability to pass through price increases and those levered to long-term investment cycles, like energy, natural resources and infrastructure stocks. They might be rocky in the short term, but they should far outpace bonds over the next five-10 years.

Therefore, we argue that it never hurts to hold a major refiner.

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America’s limited refining capacity ensures tight supplies. It’s no secret that the U.S. hasn’t built a new refinery since 1976. Why? Keep in mind that historically speaking, oil markets thrive on volatility. OPEC can effectively manipulate the price overnight. Consequently, many industry executives remain wary of risking the billions in capital investment needed for such expansions. Even as gas prices soar, companies wonder: What about five years from now? What about 10 years down the line? How will alternative energy affect the demand for petroleum products?

Others argue that tangible growth in offshore refining capacity can offset a lack of U.S. expansion. Maybe so. Or maybe Southeast Asian growth will absorb any and all extra supply. Maybe a decrepit old American refinery will explode or succumb to fire, restricting capacity even more. And maybe sound judgment will prevail, and the illogical, economically unfeasible solution better known as corn-based ethanol will lose its proverbial steam.

Whatever holds for 20-40 years down the road, our present situation remains inescapable: The world consumes about two barrels of oil for every new barrel it finds.

To think this can continue in perpetuity is delusional, a naiveté of convenience and nothing more. No amount of rationalization can convince a sober mind that one plus one equals three. If and when carbon-based fuels are replaced, we think the substitute will be just about anything but ethanol. But for now, the world still runs on oil.

But the real problem, dear reader, isn’t the absence of oil. It’s the absence of cheap oil.

Until next time,
Christopher Hancock

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