Thoughts from the Frontline

Kicking the Can Down the Road One More Time

July 22, 2011

Choose your language

This week we start with the latest version of the solution to the European Crisis, the details of which are now coming out. Then we look at the global economy, and some signs that seem to point to a softening. And then there’s some data on US employment from a friend who has some thoughts about what we really need to do to get unemployment to come down. There is a lot to cover.

But first, we have posted the latest of our Conversations with John Mauldin on the website. It is with Dylan Grice of Societe Generale in London, and he is just brilliant. Subscribers will love it. Basically, Conversations with John Mauldin is my subscription service where you can “listen in” on my conversations with my friends from around the world talking about the topics of the day. Subscribers give it rave reviews, and of course we do transcriptions. You can go to http://www.johnmauldin.com/conversations/ and type in CONV as the code to get a $50 discount off the $199 price. And, of course, you’ll get the past conversations as well, with all sorts of well-known analysts. To learn more just click on the link. And now, let’s turn to Europe.

Kicking the Can Yet Again

My friends at GaveKal point out that this is “… the sixth time in 18 months European leaders have announced a definitive solution to the Euro crisis. Should this version of the final bailout be taken any more seriously than the first and second solutions to the Greek crisis in May and September 2010 or the Irish bailout of December 2010 or the Portuguese rescue package of March 2011 or the breakthrough vote in the Greek parliament of last month? The supposedly good news for markets was that the -21% haircuts to be imposed on Greek creditors (as estimated by banker groups) were less than half those suggested a few days ago.”

A 21% haircut is a bad joke. If you assume that Greece can afford to spend 10% of their revenues just to pay the interest, which is what they will need to be able to do to get out of their crisis, then the haircuts look more like 75-80%. Sean Egan, the most credible credit analyst in the country, estimated this week that the eventual haircuts on the Greek debt will be 90%.

You can read the release from the EU leaders in its entirety, if you like, at http://www.foxbusiness.com/markets/2011/07/21/read-eu-leaders-full-statement-on-greek-bailout/. I really have no idea what you should drink as you read it.

Here is what it really says: We are going to keep throwing good money after bad and work as hard as we can to transfer the debt that is on the banks to the ECB and European taxpayers as long as the voters will let us. This first tranche will be another €109 billion. That will last a few years, and Greece will only have to pay about 3.5% on that debt and the rollover debt, and people who expected to be repaid in that period will see payment extended to either 15 or 30 years.

You can call this what you like, and they call it “selective default,” but it is a default. There will be government guarantees on the debt, so the ECB can take it from the banks.

Let’s see what the “voluntary” debt rollovers will look like and what the likely debt destruction will be. This is from Global Macro Monitor.

First, notice that the plan claims haircuts will only be 21%. But that assumes you can sell the new bonds at a 9% interest rate. If the interests rate demanded by the market are 15%, which is closer to reality, the haircuts are closer to 67%, after what appears to be an initial 20% cut. Will any institution not immediately try and get those bonds into the hands of the ECB? This is just ugly.

I have to quote what may be the most laughable part of the whole document:

“4. We call for a comprehensive strategy for growth and investment in Greece. We welcome the Commission's decision to create a Task Force which will work with the Greek authorities to target the structural funds on competitiveness and growth, job creation and training. We will mobilise EU funds and institutions such as the EIB towards this goal and relaunch the Greek economy. Member States and the Commission will immediately mobilize all resources necessary in order to provide exceptional technical assistance to help Greece implement its reforms. The Commission will report on progress in this respect in October.”

Ok, the Greek economy is in a depression, so let’s fire up a jobs program. Run by socialists and bureaucrats. The entire Eurozone is slipping into a slow-growth recession, and these guys are just focusing on Greece.

It’s Not Just Greece

And that’s the problem with this latest patchwork fix. It assumes that Greece is the problem and if we solve Greece everything else will get solved. The document analyzed above promises that bondholders of other nations will not suffer any haircuts. It does say that the Irish will get lower rates. But why won’t the Irish ask for haircuts? And it is my contention that the Irish will eventually reject the ECB loans they took on for their banks. And that will be a 100% haircut for the ECB. Not to mention that the Irish can point out that they didn’t do anything wrong or cheat to get into the Eurozone. They just built too many houses and ran up huge bank losses.

It’s just simple math. The Irish can’t afford to pay that debt. It should have never been taken on to begin with, and Irish voters threw the government that did it out of power. It cannot be lost on the leaders in Ireland that when the Greek prime minister called the EU’s bluff, the EU blinked. Trichet agreed to take on Greek debt after saying “non” for months, but with guarantees, kind of, sort of. Merkel caved. Ireland has to be paying attention. (By the way, I am going to go to Ireland in late September on a fact-finding mission. More below.)

Is Portugal any better off this week than last? Italy? Spain? Italy and Spain have barely any nominal growth in GDP, and the nominal growth of both these countries is below their debt-service growth. That is basically Ponzi-level finance. They have to issue new debt just to finance the old debt. And that is why interest rates are rising in both countries. Spanish banks have huge holes in their balance sheets from real estate loans that simply have not been written down. If Spain were forced to underwrite their banks, they would quickly be insolvent. To be sure, Italy introduced a new budget that, if followed, will make real headway on their deficit; but it also means a slower-growth economy for the next year.

To get an idea of the relative size of the problem, Germany has a GDP of about €2.5 trillion. The Italians have issued DEBT of €1.9 trillion. Italy’s debt-to-GDP ratio is approaching 120% (if it’s not already there) and is the second highest in Europe, following Greece. There is not enough money in Europe to help Italy, should the markets start to really run up their interest rates, as they must roll over debt. And higher rates mean that the debt costs and interest payments will be even larger. Their latest budget deficit was 4.6% of GDP, which means they need to borrow rather large sums of money

Italy does have a few things going for it. Much of its debt is of longer duration, so they have some room to maneuver for a few years if interest rates can remain kind, but they must find a way to increase growth or they too will become a Eurozone problem. The latest budget and austerity measures may give them a surplus, which they can use to pay down debt; and that would placate the markets.

And don’t forget France. The French may talk a good game, but their budget is in a shambles and their entitlements are unsustainable. There is a French day of reckoning coming.

Who is Going to Buy that Debt?

I had a conversation with my good friend Lord Bridport, who runs a major bond trading house in Geneva, selling bonds to pension and insurance funds in Europe. The plan is for the Eurozone to issue eurobonds and sell them into the private market to back the various bailout schemes. I asked him whether he thought his clients would buy. He said very clearly he would recommend they do not buy until it is quite clear who and what will back them. Otherwise, buy German and other solvent-country bonds. This is going to be a tough sell in Europe, gentle reader, if Alex is saying “no”; and he is not alone.

You Have to Admire the Commitment

You simply have to admire the commitment of European leaders to ignore common sense, simple arithmetic, and their voters in pursuit of the goal of a United Europe at all costs. It is really quite astounding.

I would remind my American readers that if you go back and read the history of the 1780s and our original Constitutional Convention (1787), it was the same determination on the part of our founding fathers that gave us a constitution. The convention was originally just supposed to be for amending the Articles of Confederation. Alexander Hamilton and James Madison never had any such intentions and argued forcefully for a full-blown change, with George Washington presiding. They got their way. There was no great clamor among the people for a United States of America and the loss of sovereignty of the 13 original states, which happened over time, by the way. The founding fathers would be aghast at the lack of state sovereignty today.

Can Europe do something along these lines? Possibly. They will need to move toward more fiscal consolidation, acknowledge that the European Central Bank is going to have to take on at least €1 trillion in debt by printing money, and that governments will have to run balanced budgets, much like our states; but the transition will be costly. And it will take time. And the obstacles are many, and not just monetary.

We at least had just one language (more or less) and the shared experience of a successful revolution. Plus a growing economy and plenty of opportunity and relatively free land in the west for pioneers, as well as some real visionaries as leaders.

John F. Kennedy once held a dinner in the White House for a group of the brightest minds in the nation at that time. He made this statement: "This is perhaps the assembly of the most intelligence ever to gather at one time in the White House, with the exception of when Thomas Jefferson dined alone.”

Who commanded the respect of the nation like Washington, or Adams or Hamilton or Madison? Would that we had such leaders today. We can’t even agree on cutting the deficit when almost everyone says we need to. Well, except for Paul Krugman.

I hope Europe pulls it off. I really do. They have done the US a huge favor by adopting this latest plan, as it keeps their banking system from imploding; because their banks are essentially insolvent with all the sovereign debt on their books. Such a banking crisis, which would be worse than 2008, in my opinion, would no doubt plunge a world already slowing down back into recession and pull our own slow-growth economy down into recession with them.

How long can they kick the can down the road? My guess is that it will be longer than we suspect. Will European voters go along with the continual lurching from crisis to crisis and piling more and more debt onto taxpayers? Will Germany allow the ECB to destroy its balance sheet and the euro with it? Can they keep their Bundesbank mentality in check and put to rest the ghost of the Weimar Republic?

I continue to predict the euro is going to parity against the dollar if it survives with all the current members intact. Parity may be optimistic. Stay tuned. I will follow this closely, gentle reader, and keep you updated.

The Problem of US Employment

I wrote about a year ago about how difficult it was going to be to really bring unemployment down. Rather than go back and replay that piece, I am going to pass on a note that my friend Barry Habib sent me today, which is quite sobering, and then add my thoughts. Quoting:

“A healthy employment market is the key to a strong economy. The housing market, along with many other important sectors of our economy, is highly dependent on people feeling confident in their ability to find work. But with the rate of unemployment above 9% and the economy sputtering to recover, everyone is asking how and when will the employment situation improve? This economic lynchpin is a very hot topic, which is also a critical element of many political, economic proposals. But while promising or estimating a decline in the unemployment rate may sound good, when the actual numbers are looked at more closely, realistically, and held to the light of historical performance, the forecasted declines may be far more difficult to achieve.

“For almost 40 years, the average rate of unemployment was below 6%. But the latest recession has pushed the rate far above what had been considered “normal”. So will we get back to the “normal” levels we have been accustomed to? I don’t see that happening for at least a long while. Let’s look at some data.

“There are about 311 Million people in the US. Our natural population growth rate, which compares births to deaths, is 0.6% per year. Our overall growth rate, which adds in migration, is 0.9% per year. There is currently a little less than half of the total population in the workforce, or about 153 Million people. So a 10% rate of unemployment would amount to about 15.3 million people wanting to find work. These factors create the need for job creations that will keep pace with the growing workforce so that the rate of unemployment can at least remain stable. How many jobs need to be created to absorb the growing workforce? About 115,000 per month. This calculation takes the current work force and overall growth rate into account. Therefore, the US must create 115,000 jobs each month just to keep pace!

“These numbers also tell us that if we want to reduce the rate of unemployment by 1%, there must be about 1.53 million jobs created. But remember that our population is also growing. That means young men and women are entering the workforce every day. And the positive migration causes more people seeking employment. During the last decade, there have been two stock market tumbles and a housing crash. This has adversely changed many previous plans to retire, and causing individuals to remain in the workforce longer than they may have originally planned. And if we want to see a reduction in the unemployment rate, we will need to see job creations over and above 115,000 per month. Therefore, targeting or projecting a 1% decline in the rate of unemployment requires 1.53 million jobs created plus 115,000 jobs per month for as long as it takes to achieve the target.

“In order to calculate this correctly, we need to factor in the time frame that this target is being projected over. For example, if the target is one year, then the 1.53 million jobs would be divided by 12 months, or about 125,000 per month. We then add this to the 115,000 needed to keep pace, which brings the total to a lofty 240,000 jobs per month for 12 months average. If the target is for a drop in unemployment by 2% in three years, the total jobs needed to be created are 3.06 Million, divided by 36 months – or about 85,000 jobs per month, plus the 115,000 needed to keep pace with population growth. This means we would have to add and average of 200,000 jobs per month for 3 years. And when we start to look at historical performance, we begin to see just how hard it is to accomplish this.

“For the record, I understand that demographics from 50 years ago are different, as well as different circumstances and moving targets. It’s true we can’t create an exact duplicate set of conditions. And I also understand that as the population grows, the 115,000 jobs needed each month will compound over time. That said, I am keeping it a bit simple so we can illustrate the concept.

“I went back 50-years on the BLS site and found some very interesting data. The best year for job gains was 1978, when the US added an average of 356,000 per month. Best decade was the 1990’s, with 181,000 average monthly gains During the past 50-years the average gains per month were only 124,000. The worst decade was the 2000’s, which actually saw monthly job losses that averaged 10,000 per month.

“We often hear projections on reaching a lower level of unemployment within a certain time frame. Let’s look at a chart to see how many jobs it would take to reduce the current 9.2% rate to a lower level over some different periods of time.

“The colors on the chart help us see how likely this scenario may be. For example, the numbers in the red boxes indicate that this has never been done before during the time frame desired. Green boxes indicate that this is close to a historical average. Blue boxes are an optimistic, but achievable goal. Grey boxes have numbers that have been reached in the past, but very rarely. The yellow box indicates that this has happened only once before – and that is over 50 years of data…meaning a very slim 2% chance.

“We often hear of a return to a 6% unemployment rate. Well if the goal is to do this in 4 years, then the US would need to create just under 250,000 jobs per month on average during this period. There are 47 rolling 4 year periods during the past 50 years. For example 1961 – 1964 is one. Then 1962 – 1965 is the next, and so on. During this time, a level above 250,000 jobs per month average for a 4 year rolling period only happened three times. There were a few more times when the numbers were close, but the chance of this happening was less than 10%. If history is a guide, the promises and projections we have been hearing, will have a very low probability of becoming a reality.

“History tells us that bringing unemployment down to 8% over 4 years is just about 50/50. This is very worrisome. And back to our earlier example of bringing the rate down 2% in 3 years – The 200,000 monthly job gains needed during a 3 year period of time has about a one in three chance of happening, according to the historic data.

“Let’s look at the total needed to get to 7% unemployment in 5 years, or about 171,000 jobs per month average. There are 46 rolling 5 year periods during the past 50 years. There were 17 times where the creations were above the number needed to reach the goal. That is just a little better than a one in three chance. Not very good odds, and worse – this is what many projections are based upon.

“Job creations need to be the central focus of our leaders. Small Businesses create so many of these jobs and should be given the tools to help them do this.”

OK, John here. The times Barry talks about, of large job creation, were during periods of either high innovation or significant home and infrastructure building and increasing leverage. That is just not in the cards now. It requires an economy rocking and rolling north of 4% GDP growth. We are barely at 2%. In May, total state payrolls (the data came out today) were down 64,000; in June they were up 65,200, averaging out to +1,200 for the two months combined.

We keep hearing about what the government should do to create jobs. And the reality is that it can do precious little. Private businesses create jobs, and nearly all net new jobs for the last two decades have come from start-up businesses. What government can do is create an environment that encourages new businesses, get rid of red tape (especially in biotech, where the FDA is mired in the 1980s!), stop creating even more rules that make it costly for new businesses to hire, and so on. I could go on, but the fact is, we are in for a rather long period of higher-than-comfortable unemployment. And that means lower tax revenues and a more difficult economy.

Washington DC, Vancouver, NYC, Maine, and now Europe

I am making a last-minute trip to Washington, DC on Sunday, at the invitation of some Senators and Congressmen. Monday morning I will be meeting with Congressmen, then have lunch with some chiefs of staff of Senators (evidently, some of them actually read me – who knew?), and then have meetings with a growing group of Senators, some of whom seem to have read my book, Endgame.

I have not pushed my book for some months, but the response has been very good. Great reviews, along the lines of “the best explanation of the crisis we face.” The book is not just about the US, but the entire developed world. I hope I can add something to the political conversation on Monday. I know there is a desire to cut the deficit all at once; but we have to realize, this must be a long process, unless we want to engender a true depression. It is going to be tough enough to cut a few hundred billion a year.

The Republicans have put up two plans. The House passed one. Obama is criticizing them for not compromising, but he has offered no concrete plan, just vague ideas about cuts of the “player-to-be-named-later” variety. You can’t compromise when you don’t have anything on the table to compromise with. The budget Obama submitted last February was rejected by the Senate 97-0. Not one Democrat voted for it. We must raise the debt ceiling, but we must also get serious deficit reduction into the process. I am not against tax reform (indeed, I am all for a lot of tax ideas), but we can’t pass any tax increases without guaranteed cuts that are much larger than the increases. And we need to recognize that tax increases will not make it any easier for new businesses to start up.

I fly back late Monday night and get up early to fly to Vancouver for two nights, then back Thursday and write Friday. I leave the followingTuesday with son Trey for two nights in NYC and then on to Maine, about which more next week. And I’ll have a report on my DC trip. I expect to learn more than I impart, but I will try to offer up a few ideas. Wish me luck!

In September, I will be going to London, Malta (for a day), back to London, and then spend four days in Ireland and a few days in Geneva before I head home. I am really looking to meet people in Ireland.

Have a great week; I know I will. Dinners on Tuesday and Wednesday with so many friends – Bill Bonner, Pat Cox, Keith Fitzgerald, Frank Holmes, David Tice, Mike West of Biotime, Rick Rule, et al. – what a wonderful time. And then Thursday with my Canadian partner, John Nicola, in a seminar, before heading back. Enjoy your week.

Your curious as to what Monday holds analyst,

John Mauldin

Discuss This

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Tom Stark

July 29, 2011, 9:07 p.m.

Hi Jeff LIttle,

Very nicely put.  Here’s how it was explained by Mariner S. Eccles who lived though the Great Depression and served as FDR’s Fed Chairman.

Please notice how Mr. Eccles distinguishes between real and money income.  I don’t believe the current financial system makes as much of this distinction and treats money income as though it were real income.  I see failure to make this distinction as a key problem in treating our economic malaise.

From your writing, I would guess you would also be inclined to see this difference.

Tom Stark

Inequality of wealth and income
Marriner S. Eccles, who served as Franklin D. Roosevelt’s Chairman of the Federal Reserve from November 1934 to February 1948, detailed what he believed caused the Depression in his memoirs, Beckoning Frontiers (New York, Alfred A. Knopf, 1951)[24]:

As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth—not of existing wealth, but of wealth as it is currently produced—to provide men with buying power equal to the amount of goods and services offered by the nation’s economic machinery. [Emphasis in original.]


Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

 


That is what happened to us in the twenties. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system. This debt was provided by the large growth of business savings as well as savings by individuals, particularly in the upper-income groups where taxes were relatively low. Private debt outside of the banking system increased about fifty per cent. This debt, which was at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer installment debt, brokers’ loans, and foreign debt. The stimulation to spend by debt-creation of this sort was short-lived and could not be counted on to sustain high levels of employment for long periods of time. Had there been a better distribution of the current income from the national product—in other words, had there been less savings by business and the higher-income groups and more income in the lower groups—we should have had far greater stability in our economy. Had the six billion dollars, for instance, that were loaned by corporations and wealthy individuals for stock-market speculation been distributed to the public as lower prices or higher wages and with less profits to the corporations and the well-to-do, it would have prevented or greatly moderated the economic collapse that began at the end of 1929.

 


The time came when there were no more poker chips to be loaned on credit. Debtors thereupon were forced to curtail their consumption in an effort to create a margin that could be applied to the reduction of outstanding debts. This naturally reduced the demand for goods of all kinds and brought on what seemed to be overproduction, but was in reality underconsumption when judged in terms of the real world instead of the money world. This, in turn, brought about a fall in prices and employment.

 


Unemployment further decreased the consumption of goods, which further increased unemployment, thus closing the circle in a continuing decline of prices. Earnings began to disappear, requiring economies of all kinds in the wages, salaries, and time of those employed. And thus again the vicious circle of deflation was closed until one third of the entire working population was unemployed, with our national income reduced by fifty per cent, and with the aggregate debt burden greater than ever before, not in dollars, but measured by current values and income that represented the ability to pay. Fixed charges, such as taxes, railroad and other utility rates, insurance and interest charges, clung close to the 1929 level and required such a portion of the national income to meet them that the amount left for consumption of goods was not sufficient to support the population.

 


This then, was my reading of what brought on the depression.

Jeff Little

July 28, 2011, 1:12 a.m.

Oh, I just noticed one more similarity between Harding and Reagan:

From Wikipedia:

This “America first” campaign encouraged industrialization and a strong economy independent of foreign influence. Harding departed from the progressive movement that had dominated Congress since President Theodore Roosevelt. In the 1920 election, he and his running mate, Calvin Coolidge, defeated Democrat and fellow Ohioan James M. Cox, in the largest presidential popular vote landslide in American history (60.36% to 34.19%) since first recorded in 1824.

Jeff Little

July 28, 2011, 1:08 a.m.

Regarding unemployment:  You can’t look at the last fifty years for two reasons.  One is that the time period is too small to include a lot of times when we came down from a high level of unemployment (and saying that we never went from 6% to 2% doesn’t really provide any information concerning our ability to go from 10% to 6%), and the other is it ignores the periods of high growth between 1933 and 1965 or so.

Economic activity at it’s root boils down to a very simple process with three steps.  a) Someone produces something, b) a transaction occurs, c) someone consumes it.  It can actually be thought of as being very analogous to a chemical reaction with two inputs.  Economic activity could be thought of as proportional to the concentration of people ready and able to produce times the concentration of people ready and able to consume.

In chemistry, whichever of the ingredients is the scarce one determines the rate of reaction.  Similarly, there can be economic climates in which production is the limiting factor, and economic climates where ability to consume is the limited factor.

In computer science, people talk about the baby problem.  Given 9 women and one month, make a baby.  The punch line is, of course, that good software takes both time and talent.  In economics you have the reverse problem.  Given 1 billionaire and 9 unemployed, sell ten houses.

Unfortunately in economics it is hard to tell when we are supply driven and when we are demand driven, except of course when it’s obvious… :)  As Stiglitz mentioned, we have a very large percentage of the population that is underemployed, which means they have the skills to do the job, but the demand to keep them busy isn’t there.

The problems we are facing now remind one of Warren Harding.  He ran for president and won on the promise of returning to laissez faire.  He did exactly what he said while in office and busted unions, deregulated industries (and of course got caught up in a couple scandels), but his crowning achievement was to reduce the top tax bracket from 75% to 25%.  In short he was quite possibly the only US president since WWI more anti-progressive than Ronald Reagan.  He certainly seems to have a lot in common with modern republicans.

The result was a large chunk of change was diverted from the economic consumption cycle into asset appreciation.  GDP growth slowed even as the stock market and real estate had record performance.  As income moved from the middle class to the upper class, a debt-based economy was required to maintain forward progress.  Finally in 1928 (just as in 2010), the top .01 percent of the population earned a full 5% of the national income.

Libertarians like to point out that the economy is not zero-sum.  Well, yes and no.  If you look at production capabilities it is not zero-sum, but if you look at the number of chips on the table, then, ignoring the Fed’s liquidity management and dollars entering or leaving the system (trade deficit, war, etc.) it *is* zero sum.  In a system like Ron Paul’s gold standard, trade deficits are managed via movements of gold, and when a ringer is present, all the chips just fall in his lap that much faster.  The safety valve that lets dollars adjust to production efficiency is price inflation/deflation on an item-by-item basis.

After the middle class transitions from savings-based consumption to debt-based consumption, the system gets more vulnerable to shocks.  When one of those shocks finally happens, the transition back to sanity can be quite rough.

Since 1980, we have spent 20 years under supply-siders (GB senior was probably not completely sold, but he toed the line enough to count) and 10 years under moderate progressives.  The combined GDP growth per capita according to John’s recent graph was 0k under Reagan, Bush, and Bush, and 12k under Clinton and Obama. 

It is telling that Boehner et. al. say you can’t prosper and raise taxes, but Clinton raised taxes and GDP growth in his years out-shined even the early tax cut years when asset growth effectively hides GDP stagnation; Reagan and the Bushes, on the other hand, had the lowest tax rates outside than the Harding era.

In short, the motivations where the same in the Harding and Reagan eras, the policies were the same, the near term effects were similar, and it is depressingly likely the outcomes will end up being the same, although in the modern era we have better tools for managing system shock.

Jamie Schlinkmann

July 26, 2011, 6:14 p.m.

Denny, your point is right on the money. For some reason politicians have gotten in the habit of ‘creating jobs’, or doing things that they believe puts them in positions to take credit for creating jobs. I think I’ll vote for the next politician that states “I’m not going to create any jobs, that’s your job”

Andreas Hartung

July 25, 2011, 3:38 p.m.

The outlook for US unemployment is probably not as bleak as that hostroical analysis suggests, simply because that analysis is faulty. It looks at absolute numbers of jobs gained rather than at jobs gained as a percentage of the workforce (or of the total population). As Russ Abbott commented earlier, it is not adjusted for the size of the workforce. Rather amateurish mistake I have to say.

Hope DC went well, looking forward to hear the results!

Charles Yaker

July 25, 2011, 2:03 p.m.

John while that was a snide remark about Krugman he is not alone. There are others Stiglitz,Robert Reich,Dean Baker and maybe Simon Johnson as well. If I am not mistaken however they are all Deficit Doves and just the other side of the same coin. On the other hand there are a number of Economists and business people who have a entirely different take. First they do not believe that the deficit is a problem more importantly they believe that Governement deficits equal private assets. Among this group are Randall Wray, Warren Mosler, James Galbraith, Marshall Auerback, Scott Fullweiler, Mike Norman and Cullen Roach to name a few. Wray has dispelled the myth about the Feederal Budget and deficits http://www.newdeal20.org/2010/02/10/the-federal-budget-is-not-like-a-household-budget-heres-why-8230/ and Mosler has dispelled e myth that business creat jobs consumers do http://moslereconomics.com/2011/07/17/business-doesnt-create-jobs-consumers-domore-debt-ceiling-comments/  Galbraith calls the discussion a “figmant” based on conflicting staments “http://www.newdeal20.org/2011/07/11/hawk-nation-a-guide-to-the-catastrophic-debt-ceiling-debate-51211/?utm_source=Daily+Digest&utm_campaign=6c649c38ff-DD_7_25_117_25_2011&utm_medium=email . Frankly I think you know who these people are. You may disagree with them but not to acknowledge them is in my mind intellectually dishonest.

Eric Blair

July 25, 2011, 12:50 p.m.

The rules and regulations for employers have become irrelevant, small businesses all over the country have been hiring and paying staff off the books for years.  Life will go on and the economy will continue to chug along.  The government is simply cutting itself out of the loop.

mark fichera

July 24, 2011, 4:54 a.m.

In the early 1980’s, didn’t we have unemployment rates comparable to those of today ???  How long did it take to get them down to more tolerable levels ??  What were the jobs numbers during Reagan’s 8 years as President ??  Just a guess, rate was bout 9 % in 1982-1983 and down to 4.5-5.0 % by 1988 !!? 

Please comment !!

Stephen Decruz

July 23, 2011, 10:16 p.m.

Rules and regulations are in place because of the shortcomings of business. Business quest for profit with little regard of impacts on environment, safety of products etc led to the need for government rules. How would you address tha

Edgar StPierre 26025

July 23, 2011, 8:39 p.m.

Totally agree with your comments about the foolishness in Europe. But w.r.t. the mess in Washington—how can you seriously critique Obama when there are republican congressmen who would rather blow up our economy than raise taxes as a small part of the solution? The lack of a specific plan is not a problem if you can’t even get an 80/20 or 85/15 framework in place.

It’s probably a safe bet that you’ll be meeting with republican congressmen next week. I hope you have the courage of your convictions to tell them that taxes are part of the solution, and that they find the courage to no longer kowtow to tea party extremists.

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