GOP = Gonads Outta Play?

What is it with the US Republican Party, otherwise known as the GOP?

Does GOP stand for Gonads Outta Play?  It certainly seems that many GOP members in the Senate display an amazing lack of courage and they are joined by their spineless colleagues in the House of Representatives.

Of course these folks will be looking at the mid-term elections but is that it?  A potential threat to job security means that principle and integrity is cast aside?

Surely there are some Senators and Representatives (you listening Ted Cruz and Paul Ryan?) who will filibuster any attempt at a deal that doesn't include a reduction in US debt  and the US budget deficit. 

The October 17th deadline is bogus.  The key date is November 1st because that's when big payments become due and maybe the US won't have the money, at that time so there is not the urgency that the White House have concocted.

So why are the GOP playing into Obama's hand?  

Linking the budget approval with Obamacare was surely short-sighted.  All indications are that this programme already contains the seeds of its own destruction (see the numerous stories on the multiplying of premiums that people are encountering and the failing, and failed, online registration system).  However, now things have moved on.

My advice to GOP members is don't get tied-up with Obamacare.  The real, indeed the only, issue, is America's addiction.  The drug of choice is debt or other people's money (taxes to you and me!)

When Obamacare is long-dead and buried the American people will still be suffering  from the spending splurge and debt-overdosing that is occurring day after day.  We are not talking about going 'cold turkey', of completely stopping government spending, but rather of weaning the government of their over-indulgence in spending money that they don't have. 

That should be the whole focus of the GOP and it's activities around the budget impasse and the debt ceiling.  Giving any addict greater and greater access to their drug of choice is never a good idea. 

Einstein said that insanity is  doing the same thing over and over again and expecting different results

 So this time, do something different - don't pass the budget, make cuts, don't increase the debt ceiling, stop feeding the beast!

Banking patterns, debt junkies and Fiscal diarrhoea

Have you noticed how financial institutions are starting to get worried about the possibility of a US default, if the US borrowing limit isn't raised?

First we had the head of the World Bank, Jim Yong Kim, expressing 'concern'.  Now we have Christine Lagarde, who took over as head of the International Monetary Fund, from Dominque Strauss Kahn after he was implicated in a sex scandal, saying her piece.

Ms Lagarde, the former finance minister of France, has warned that a default by the US could tip the world into recession and massive disruption.   Leave aside for a moment any thoughts or doubts about any former minister from a country such as France, opining on debt.  Forget that France's debt represents >90% of GDP!

Ms Lagarde and Mr Kim are joined by Jamie Dimon from JP Morgan (yes the same JP Morgan that has got $23Bn stashed away to cover expected legal charges for allegedly inappropriate banking behaviour, yes the same JPM that paid a fine of more than $900M just last month for bad behaviour)

I find it worrisome that these 'mega bankers' seem to have learned nothing from events in 2007 and 2008.

Here we have a US Government that continues to spend money far, far in excess of what it takes in.  The debt junkies that are running the US government (Democrats and Republicans) know that the US' economic model is unsustainable.  They know!  However, these 'patriots' fiddle and prattle about Obamacare (they can do this because Congress is exempt from the Affordable Care Act!) while the US burns!

Think about going to see a banker, let's call him Jamie-Kim Lagarde.  You have been called in because once again you are maxed-out on your credit cards and overdrafts.  You have been told to bring along with you a budget for the next year.

JKL:  Well when I look at this budget, I see that you want to spend more money next year than you are earning.

You:  Yes that's right.  I have all of these things and people that I need to pay because they think they are entitled to this, plus I have a couple of things that I like to do and, hey, these toys ain't cheap!

JKL:  I understand, consider yourself lucky that you don't have to spend a fortune on lawyers.  Anyway, what is it you want to do?  I keep thinking that giving you extra credit maybe isn't the best solution because you just keep coming back for more.

You:  But I need this, people will starve, chaos, in our household, will ensue...

JKL:  Wait!  I didn't say we wouldn't give you more money but, you know, I just want to avoid you getting into the same situation as some Europeans that we lent money to.  These guys got into a pickle and kept promising they would repay but then they couldn't.  They even 'stole' money from other people's bank accounts but my bank still lost money!

You:  I hear you and I have spoken to some of my neighbors about their over-spending.  I mean some of these folks think they have a god-given right to spend other people's money and that the government or someone else will just print and keep on printing the extra money they need.

JKL:  Yeah, well let's not go there.   OK, we will give you some extra credit but before you start jumping up and down, this is going to cost you.  As well as extra interest, I need you to get together with a few of your buddies and kick-up a ruckus somewhere.  I have interests in some businesses that would benefit from coming in after you have done your bit and fixing things up!

You:  You got a deal, buddy.  See you next year!

Of course, on the personal level it wouldn't happen that way.  JKL would simply take all that you have, to the world declare you bankrupt and a deadbeat, and then ask his shareholders to stump up money to fill the losses.  All the time, ensuring that his fat pay checks and bonuses continue to roll in and pushing governments to continue so called 'quantitative easing' as no one can now afford to turn-off this cheap source of finance.

Only in the USA!

Actually that's untrue, same applies in Japan, Europe and elsewhere.  Though, the USA does kind of excel at fiscal diarrhoea

Labour's dilemma - Welfare and Energy

Readers of previous blogs will have gathered that I am not particularly fond of the UK Labour Party.  Indeed, I have mentally re-christened them the Welfare Party.

However, I feel compelled to offer them advice on where they are going wrong and what they might do to turn things around.  Of course, this blog being open to all, it is just possible that the Conservatives will consider and then implement these.

Welfare - Labour is seen as the Welfare party - the party that values providing excessive welfare to a minority of people more than valuing the efforts of people who actually work for a living.  They opposed the Welfare Cap, even though it still provided an over-generous level.  They have opposed the idea, even the mention, of benefits that are regionally set.  They have constantly placed themselves on the side of the claimant rather than the taxpayer.

Labour's own private polling shows that support for welfare reform is a major vote winner and yet  the left-wing cabal that controls the party, sticks to it's failed and unpopular policies.

So, my advice to the two Eds is  be bold - 'out-Tory' the Conservatives - set the welfare cap below the UK national average wage - let's say at 80% - so £20,000 - show that you have heard the people and understand that it is important to recognize that in order to get people into work, they need an incentive.  Similarly, grasp the nettle of regional benefits.  If people are on benefits and genuinely in need of help, why should those living in a low cost areas get the same level of benefits as those in London, say?  Of course, this still requires the national 'cap' of £20,000!

Energy is much more problematic.  Ed Miliband's conference pledge to freeze energy prices is unraveling.  People see it as a cheap and essentially meaningless offer.  That this harks back to Labour's soviet-style obsession with control, doesn't help either.  Nowadays it isn't just people that have long memories, so do social media sites and blogs.  People dredge-up and post all those comments made by  Miliband when he was part of Gordon Brown's disastrous administration, when he insisted that energy prices had to rise for a decade.  When he initiated so called green taxes that do far more to push-up energy costs for families and businesses, than do the profits of energy companies.

So,

• Abandon the green taxes - wins votes across the country from grateful voters who see this as a real and sustainable cost of living reduction.
• Remove VAT from energy bills - see above
• End the subsidies for wind farms  - as well as taking money from 'rich' landowners (core labour policy) also garners rural votes from people who oppose the despoilation of the countryside.

Of course the Conservatives just might beat you to the punch on these - after all, they finally did on the EU Referendum (though Labour still have time to jump on this popular bandwagon) but you still have time!


  

US Shutdown - Questions for Goldman Sachs et al

Goldman Sachs are reported to be claiming that the 'shutdown' of the US Federal Government is costing the US Economy more than $300M a day!  Yes, a day!

As with many news stories, no supporting data is offered - just a self-serving soundbite.  Here's a tip for lazy journalists - ask the questions - how is that number supported and from where do the numbers come?
 
So let's try to think about it on a simple level.

The US Government is not spending money (money that it doesn't anyway have!) and it is doing this by putting employees on unpaid leave.  Is this the >$300M that is hitting the US economy?  If so, how?

What is the saving to the US economy by not having to borrow money to pay these furloughed employees?  Is that shown as a negative in the calculation?

The US military, Homeland Security and the FBI are not sending drones into the skies, to spy on the American people - so that means that they aren't spending money on foreign oil - presuming that the cost is predominantly for the product and not for the US middle-man's profit element,  how does that affect the US economy?

The EPA and other federal agencies are not issuing their usual reams of regulations that impose cost burdens on US business - is that cost benefit included in the $300M number? 

Surely the $300M can't be the daily cost for putting up barriers at places like the WWII memorial to stop veteran's visits? 

I can't believe that the GS number includes taxes and fines and penalties that are not collected, during the shutdown - surely these are simply deferred so no net impact (and they are zero sum anyway!

Here's another question for GS and Wall Street readers - We have heard all sorts of anecdotal evidence from companies across the US, citing by how much their health care costs will rise (and so profits and shareholder returns fall) as a result of the Affordable Care Act (Obamacare) but how much do you think this will take out of the US economy?  Is it a zero sum game?  So every $ of additional premiums that companies must pay is considered to remain sloshing around in the economy but just being transferred from other parts to the health care and insurance sectors?  Or is this wealth extraction from business seen as destructive to America's ability to invest?


If the GS numbers are correct, think about what that says about the US and its economy.  That the government is such an integral part of the economy that it starts to resemble and mirror the effects that the Soviet and it's satellites had on their economies - they become a or the key component in economic activity and so important that they feed their own destruction.

Of course, maybe GS are right and the number is correct but what would be the actual impact on the economy?  We all know that past shutdowns have led to real measured improvements in GDP so maybe the longer the shutdown, the better the benefit.  Since though this kind of positive data feeds into the 'smaller government is good' narrative, I can kind of understand why GS emphasizes the opposite.