Business & Economics: November 2007 Archives
It appears that all your have to do is form yourself a "union" and the Democrats will back you up no matter who you hurt. The ongoing exploitation of our children by the various teachers' unions is obviously a prime example, and the recent decision by the Democrat presidential candidates to avoid the upcoming CBS-sponsored debate if the writers strike is a less egregious but more timely.
Sens. Hillary Rodham Clinton of New York and Barack Obama of Illinois, and former North Carolina Sen. John Edwards, all said Wednesday they would not cross a picket line to appear at the CBS debate, with Clinton issuing a statement which said, in part, “It is my hope that both sides will reach an agreement that results in a secure contract for the workers at CBS News, but let me be clear: I will honor the picket line if the workers at CBS News decide to strike.â€Spokesmen for New Mexico Gov. Bill Richardson and Connecticut Sen. Chris Dodd also said those candidates would not participate.
This decision is thick with irony. As with much the Democrats do, this makes for good publicity but ultimately hurts a hoard of "working-class" people for the benefit of the wealthy. Striking members of the Writers' Guild of America make a mean of $200,000 per year and should be easily able to survive an extended work stoppage, but what about all the other workers who are put on hold by their strike? The caterers, grips, teamsters, assistants, set designers, lighting engineers, make-up artists... they don't make six-figure salaries, and they're the ones who end up suffering.
And let's not even get into the money this costs the poor middle-class investors who own these entertainment companies. Thanks for looking out for the "little guy", Democrats!
(And yes, the median writer doesn't make $200k, but apparently 50%+ of WGA members don't even work in a given year.)
Donald Luskin explains why the best time to buy is when everyone else is scared.
But that would be giving in to panic, wouldn't it? Yes indeed, which brings me to my next simple solution: Buy everything you can. Go bullish. Sound crazy? Maybe, but there's some sound logic to it. And simple logic, too — logic that has served investors well for centuries. When things are most uncertain, most complex, most opaque, most scary — then you know that you'll be buying at bargain prices.So even if a lot of bad news really does end up coming true, you'll have paid such low prices that you won't get too hurt. And if after a couple of weeks it turns out things weren't really all that bad, then you'll make out like a bandit.
How can I say that you'd be buying at bargain prices when stocks were at all-time highs just five weeks ago, and have only fallen about 7% from there? Hey — don't act like that 7% drop is nothing. It has you plenty scared, doesn't it? When you think about selling everything just to end your fear, you're thinking how horrible that 7% drop is. But when I suggest buying, you think that 7% is nothing. Am I right?
I've got friends who work in the financial industry and they're practically jumping out of windows. Do they know more about what's going on than I do? Maybe at the micro level... but I think they're missing the forest because of all the trees. Scared investors depress prices below their rational value, which means this is one of the best times to buy.
I just got a note from a friend pointing me to this Snopes.com page confirming that Sears treats their military reservist employees very well.
Sears is indeed one of the employers who take additional steps to show support for employees involved in serving their country (either in the Reservers or the National Guard) by guaranteeing the continuance of their civilian pay (for up to 60 months) and allowing continued participation in life insurance, medical and dental programs. Many other companies, large and small, do the same for their workers, but as one of the nation's oldest and largest employers, Sears (acquired in 2005 by Kmart) gets the publicity for setting a prominent example.
Maybe this will influence where you decide to shop this Christmas season.
(HT: Chris.)
Former Federal Reserve governor Bob McTeer explains why the declining value of the dollar is the "least-worst" way to correct our ongoing trade deficit. The international monetary system is not an easy topic to understand, but he does a good job of making it accessible.
What is the big picture of what's going on with our B/P and the dollar?Like a family during the process of running up their credit card balances, our large current account deficit means we have been living beyond our means as a country. We have been absorbing (consuming, investing, etc.) more goods and services than we have been producing. This isn't necessarily bad — you can use a credit card for worthy purposes — but it probably was unsustainable and it is the opposite of what one would expect of the world's richest large economy. The "normal" pattern is for capital to flow from rich countries to poor countries, where presumably its return is greater. The reverse has been happening. Capital has moved to the richest country from poorer countries, presumably because our institutions and policies compared to our trading partners more than offset other factors.
What has to happen for "equilibrium" to be reached?
Our exports need to rise relative to our imports. Resources will need to move from other industries into export industries. The declining dollar will provide the needed price incentives by making our imports more expensive at home and our exports less expensive in foreign currencies. Another way of saying that is that the exchange rate will raise the price of traded goods relative to the price of non-traded goods.
Is there an alternative to a declining dollar?
Yes, but they probably would involve more friction and more pain. If the dollar is somehow prevented from falling, the needed adjustments would be the same in terms of exports needing to grow relative to imports, or imports needing to shrink relative to exports. But with no change in the exchange rate, downward pressure on domestic income would push down domestic goods prices relative to international traded goods. Our imports would have to shrink not because of higher import prices, but because of lower domestic incomes. If internal prices and wages were as flexible as the exchange rate, it would make little difference which is used. But internal prices, and especially wages, tend to be sticky in a downward direction, so unemployment would be the likely result. In effect a recession would be needed.
With inflexible exchange rates the temptation would be very strong to avoid the internal adjustments by restricting trade. Our free trade policy would be in jeopardy.
There's lots more. It's not something I'm losing sleep over at the moment, though the falling dollar does make my foreign investments more expensive.
