Thursday, October 11, 2012
Fisher At His Best
I have been working on a series of posts to answer Third Coast's question:
Mom, I'm feeling whipsawed by conflicting data. I read your posts regularly and it seems that based on some of your recent comments, you've been hinting that we're on the verge of a recession if not already in one. Now, happy days are here again? Could you do a post that puts recent economic data in some sort of context?Happy days aren't here again, but a lot of the structural OMGs have been worked out of the private sector economy, and we have reached the point at which we could start to decouple from the global economy. But we won't unless we address the real handcuffs (emphatically not golden) which Richard Fisher discusses.
Credit standards for granting new credit are not the impediment. Rates are not the impediment. Our inability to create workable governmental policy is the impediment. It's not just at the federal level, but obviously national policy can't address CA idiocy, so we just have to let reality correct that.
What they cannot manage is the mordant fiscal predicament hanging over their heads. A feckless American government—specifically, a Congress that hasn’t created a budget for more than three years—is poised to drive us off the so-called fiscal cliff. It has contrived a tax code and regulatory structure that would baffle a financial Houdini, has compounded the uncertainty facing businesses to a stifling degree. At present, no business—big or small, public or private—knows what its tax rates will be going forward. No business knows the social overhead needed to cover their employees. No business knows the degree to which federal spending programs will be changed or truncated, and how that will impact it or its customer base.In The Poker Rules for Businesses, I tried to address this problem. That was written in early 2011. Since then the situation for 2013 has only gotten worse and the uncertainties have multiplied.
Without some certainty about your cost factors or reasonable understanding of the prospects for demand for your products, you go into a defensive crouch. You can’t budget; you can’t plan. You can’t run the risk of hiring and expanding beyond your replacement needs. Uncertainty of the kind I have just described cripples job creation, capital investment and the ability of businesses to realize their potential.
Congress is doing what it should be doing and that is grid lock. Half the country is Greek, and half the country is German. There should not be any getting along.
I believe splitting up the country is the best answer. Let those who want a political economy have it. Let those who want free enterprise have it.
California would likely be its own country because liberal Oregon and Washington don’t like California. Texas would become the center of many and far reaching states. New England would go off on its own. The deep south would probably join in with the Texas centric country. New York, Ohio, PA, would become the union mentality country.
I don’t even think you need to have the states be adjacent what with telecommunications being so advanced.
One area for rebellion would be eastern California, eastern Oregon, and eastern Washington. These easterners are oppressed by the city states of LA, SF, Portland, and Seattle. So the Texas centric country which will have most of the armed forces, could force a split of those liberal states so the conservative eastern residents can join in with states to their own east.
As to the Union, I can't think that splitting up will help us much. I'm afraid we have to start dealing with realities.
For one thing, how do you split the debt? For another thing, if you introduced a bunch of separate currencies, you'd have massive sudden inflation.
So we can ignore the fiscal cliff, and the lack of certainty on income tax rates?
Are you serious, or would you like to amend your remarks?
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