Posted by Ray on February 18, 2011 under Main | 
Social unrest has swept the globe and the only surprise to this fact is that it has taken some 3 years for it to happen. In foreign lands which many have never even heard of the name of the countries the people want change, real change. Some are fighting because of political repression and others because of higher food prices, thanks Ben, and they are politically oppressed. Regardless of the reasons people are on the move and America is not immune from this change.
In Madison Wisconsin we are witnessing the first of what I predict will be many protests over public union contracts. It is simply amazing that the unions are so upset over modest changes to healthcare and pension premiums, 12% is the magic number there. However, it seems the real sticking point is that Wisconsin wants to reform the collective bargaining arrangement which has consistently favored labor for the last 50 years and, in my opinion, has allowed for unions to make demands that have led to higher taxation of the people because the pension funds were so underfunded, as participants did not have to add any money to it, and healthcare costs rocketed to the moon, again, participants had to add little to no money to their health insurance plan. On top of these fantastic benefits they have job security meaning they literally cannot be fired.
In a nutshell, states are going bankrupt in order to pay a few peoples pensions, often 70-80% of the last 3 years of the employee’s highest earning pay. Oh, did I mention that they also got mandatory 4-5% cost of living adjustments during their working years and during their retirement? It is a good deal and getting these public sector jobs are difficult and you typically have to know someone to get one. You also get nice vacation time as well, often starting off with up to 3 or 4 weeks and earning more as time goes on. When things do not go well you strike to get your way.
Unions are what drove GM and Chrysler out of business and their bankruptcies allowed them to start over with their contracts. Since those contracts were redone both firms are doing much better, go figure. Ford forced unions to the table threatening bankruptcy and got their contracts redone and look what is happening there. In all 3 cases the union employees are happy. Sure, they are not as happy as they were when the Job Bank was there, they got paid for months at normal rates if they were laid off, but they have hobs, goof benefits and in GM’s case they got the biggest bonus ever, I believe, last year. This is evidence that when you take the power away from unions it actually benefits the employees, but only time will tell if this continues but so far it looks pretty good.
The public sector though, well, should they be unionized at all? I personally do not believe so, but at the same time when dealing with the government some protection is warranted so I would say a nontraditional union is needed not the super strong unions we currently see that curry state and the federal government into bankruptcy. If you are paying attention to the Madison situation it is very interesting especially from the media’s perspective.
I have been watching a lot of MSNBC lately who was classic for smashing and ridiculing the Tea Party last year. I have to say that their coverage of Madison is much, much different than their coverage of the Tea Party events. For starters the Tea Party events were all nonviolent, completely peaceful open gatherings where kooks were chased away. Contrary to all reports no racists were there and I saw plenty of nonwhite people attend and, in short, they were people who cared about the country and wanted to restore some sanity in the government which is a noble cause in my mind. They were described by MSNBC as America hating racists who want to destroy this country, all we stand for and are violent, not one report of violence was ever reported to my knowledge.
Compare that to Madison which is all white, ironic in my opinion, they spat upon state senators, pushed them around, shouted them down, shouted for an Egyptian style revolution and held signs of the usual Hitler pictures. MSNBC said these people were being stripped of their civil rights and are fighting for democracy even though their elected officials fled the state so a vote could not take place. The protesters were teachers who walked out of their jobs, that they love, supposedly, to protest for a week straight so kids are now without school which means parents are paying for daycare or babysitting. These people are not fighting for work, they are not fighting against a massive pay cut or furloughs what they are fighting about is paying an extra 12% for their benefits that are outstanding and still way underpriced.
Keep in mind that if this bill does not go through some 6,000 people will lose their jobs, think about that for a minute. Instead of giving up 12% and the right to strong arm the state later on they instead decided to walk off their jobs, spit and shove people, and cost 6,000 people their jobs. Oh, the 12% benefit hike was on the table last fall and the union rejected it and they are trying to get it back now because of the removal of the collective bargaining language in this bill, keep in mind that the senate only got rid of the collective bargaining language because they rejected the 12% then, but decided to take it when the state decided to play hardball. What the new language does is gives the state more equal say in negotiations with unions instead of the unions having 90% of the power like they have now. It is time to reduce their power especially in the public sector where we all pay for these people through our tax dollars.
As far as who are the patriots I would have to say the Tea Party wins hands down. You may not agree with their politics, but I can guarantee you they will always be polite to you, respect your views, not spit on you, shove you and they will defend your right to say whatever and gather wherever you want just as the Constitution allows. I am not so sure about the Madison people I have a feeling if you agree with them they will like you, but if you disagree with them get out of their way and that is not patriotic, American or the sign of a healthy Democracy. I had to say m peace. Thank you.
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Tags: collective bargaining, healthcare costs, job security, Madison, madison wisconsin, MSNBC, pension funds, pensions, public sector jobs, social unrest, tea parties, union contracts, unions
Posted by Ray on February 5, 2011 under Main |
The world is in a very tough spot right now and the word of the day is social unrest. On top of the news from the Middle East we got some, in my opinion, pretty bad jobs numbers on Friday. Of course if it was a good report it is because of the ‘economic recovery’ and when the report is bad it is because of snow, rain, wind, Earth or whatever else they want to say instead of the truth, the economy stinks.
There was not one good piece in the jobs report, not one. Sure, an unemployment rate of 9% was the headline given to us, but doesn’t this strike you as being odd since the BLS just added in some 300K under reported job losses from last year? On top of that we had, unadjusted, horrible initial claims reports for January and even the adjusted reports stunk. Even though the economy did add jobs governments are laying people off which is a problem as this will likely continue on into the future. Overall, there is still some 5 people for every open job right now, think about that and then think about how long it will take for unemployment to actually come down, especially with new workers coming into the work force through population growth.
We are not going anywhere in the near future and for proof of this look at Bernanke’s speech the other day when he basically guaranteed QE3. As an aside, I love how he said QE2 worked because asset prices, stocks, and bond yields were going up. Umm, wasn’t QE2 supposed to create negative real interest rates? And since when do we use the stock market as a barometer for economic growth? In fact, QE2 did work if you thought it would benefit stocks, but it has failed miserably for the other areas it was supposed to help, i.e. jobs, economic growth and negative real interest rates.
However, QE2 did have a successful side effect that only a few people have realized, it has overthrown a couple of governments and probably will topple a few more in short order. Remember how I said you can get inflation without money velocity? It is kind of happening and just imagine what will happen when banks actually lend again. Now, Ben says food prices are from emerging market demand which is true, but it is also because of bad harvests, which will continue, and the fact that commodities are valued in USD’s which have been sliding down in recent weeks.
This means food prices have risen for the poorest countries in the world to levels that are just unsustainable. When food prices rise in America we can weather the storm for a while, but in some countries food at lower prices consume 50%+ of the average families budget so they do not have the luxury of riding out the storm or cutting back they simply go without. They can only do this for a little while before something gives and we have witnessed what happens when that something gives way. I also believe we have only seen the beginning of the problem as no one has figured out that this year’s wheat harvest is likely to be very, very, bad and we will see much higher prices in a few months. The weather is whacky and I have a strong suspicion that the Midwest will not produce what we are used too this year. If that happens things could get very interesting and perhaps, just maybe, we will stop paying farmers to grow food in order to turn it into fuel, use sugar instead which we pay farmers to not grow… get the picture yet?
Things are getting interesting and I am trying to stick around to see how it all ends. In the meantime I believe that one must be long commodities, silver and softies for sure, and stocks until QE is over, which is likely to be never. I say that with a caveat as I believe if QE3 does happen stocks might get very choppy and at some point people will figure out that ZIRP + interest on excess reserves + QE = Really Bad News and is bad monetary policy. Then again, only a few have figured it out so far so maybe I am too optimistic.
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Tags: asset prices, BLS, economic growth, economic recovery, initial claims, money velocity, news from the middle east, qe2, qe3, social unrest, Stock Market, unemployment rate
Posted by Ray on February 28, 2010 under Politics |
As I conduct my regular daily readings of various blogs and news sites I cannot help to get a very uneasy feeling brewing out there. The negativity is running very high in the political realm and from those who report on economic events. I keep seeing tag lines like; “expect more social unrest” when people report on things like the Berkley protests, which are disturbingly violent I might add. When I hit my favorite Libertarian blogs the feeling is more uneasy as I keep seeing words like revolution being used.
When you add in the Washington factor where our elected leaders are going to hammer unpopular legislation through, with no compromise, it makes me even more uneasy. There is no doubt that we need to make painful decisions in order to get our fiscal house in order, but that usually means less spending, not more. Unfortunately, our current political leaders do not see it that way and are hammering through more spending, in particular the health care reform bill. Look, I know we need to do something, but not this. Deducting money from Medicare and then adding it back in to other areas is not rational, this bill is not paid for and will make costs rise not fall.
Regardless, people are not happy about unpopular legislation being thrown down their thoughts. The kicker is that people like Nancy Pelosi come out and say that programs like Social Security and Medicare were unpopular when they were enacted. I guess what she means is that politicians know what is best for Americans and we should keep our mouths shut. We all know how right politicians are their track record speaks for itself just look at the stellar decisions they made over the last 10 years. Iraq was a great decision, the prescription drug coverage was fantastic (albeit unpaid for), the PATRIOT Act was a winner, free speech zones were fantastic, how many stimulus bills did we have again – they worked out well, eliminating a paper trail for voting is a sure disaster waiting to happen, and need I go on?
Politicians do not know what is good for Americans, they know what is good for them and getting reelected. Well, they did used to know how to get elected until now. If they pass this next unpopular batch of legislative nightmare on the docket they are in for a rude awakening come November because the people are coming for them. My only hope is that people come for them at the polls and not in any other way. Based on what I have read combined with the recent plane crash in Texas into the IRS building I think we might see more people going out to make a statement. Meaning, some nut job will more than likely blow something up or worse.
Who knows what will happen in the future, but we know that the average person feels left out right now. Wall Street got their massive bonuses and, for them, nothing really changed with the exception of having to play defense in the media. At the end of the day, the average person knows they got nothing over the past 2 years except for a higher future tax bill and, maybe, they got to keep their job, but we know about 20% of Americans were not so lucky as they are either unemployed or underemployed. Wall Street though, they are fine. Washington, well, they are doing OK as well as campaign contributions, from Wall Street, are still coming in and many have received raises. Clearly, there is a double standard and John Edwards was completely right when he said there are 2 Americas.
Discontent is here and that discontent could become a powder keg if not rectified. The unfortunate thing is I do not see how the public can be pacified, especially as this thing we are in deepens as we are now seeing. Things could get ugly and politicians need to figure out that they are representing the people and start acting that way. It is beyond me how they cannot see that Americans view them as being on the wrong path, but, again, that is politics and they will be surprised if they get voted out in November.
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Tags: free speech, health care reform, medicare, Nancy Pelosi, patriot act, political leaders, politicians, protests, social security and medicare, social unrest, stimulus
