Mystery Economic Theatre 2013

[cheesehead]

Some comments on that analysis:

Originally Posted by George Friedman

And the United States has emerged from the post-Cold War period with one towering lesson: However attractive military intervention is, it always looks easier at the beginning than at the end.

How long will this lesson stay learned? One, one-and-a-half generations?

The greatest military power in the world has the ability to defeat armies. But it is far more difficult to reshape societies in America's image.

Republicans who decried "nation-building" seem to have had that part right.

A Great Power manages the routine matters of the world not through military intervention, but through manipulating the balance of power.

... but will they get this right?

Third, Russia is re-emerging. ... The deals they are making, of which this is a small sample, are not in their economic interests, but they increase Moscow's political influence substantially.

Haven't the references to "soft power" in recent years meant "political power"?

... It was said that the post-Cold War world was America's time of dominance. I would argue that it was the preface of U.S. dominance. Its two great counterbalances are losing their ability to counter U.S. power because they mistakenly believed that real power was economic power. The United States had combined power -- economic, political and military -- and that allowed it to maintain its overall power when economic power faltered.

Those who scorn "soft power", or "hard power"!, beware. "Combined power" trumps either alone.

[xilman]

Originally Posted by cheesehead

Those who scorn "soft power", or "hard power"!, beware. "Combined power" trumps either alone.

Who was it that recommended speaking softly and carrying a big stick?

In case it wasn't clear, that was a rhetorical question.

[literka]

Recent events indicate that 60% levy tax for deposits in Cyprus banks is very improbable. It will be much smaller or there will not be any tax at all. I wrote about it before expressing doubts about it. Moreover, deposits are not frozen so every day amount of deposits is melting down.

[Fusion_power]

http://thecontributor.com/opinion/co...trayal-america

Worth reading to see where the profits and taxes are actually being made and paid. Corporate profits are at record high levels, but taxes are paid in Caribbean tax havens.

The UK has Starbucks using all the profits to purchase arbitrarily inflated coffee beans effectively moving the profits from the UK to a Dutch subsidiary. Similar manipulations are used by most large corporations.

DarJones

[cheesehead]

"The 37 Percent Mystery: Where Did All the Workers Go?"
http://www.theatlantic.com/business/...ers-go/274786/

The answer comes down to (in order of importance): demographics, college attendance, the Great Recession, and the decline of manufacturing

. . .

The share of adult Americans who have a job (or are looking for a job) has fallen to its lowest point since 1979, hovering around 63 percent.

That means 37 percent of working-age Americans aren't working. ...

But what's the story of how it's changed over time? Why is the participation rate declining? Let's investigate.

. . .

Indeed, that's precisely what demographers have long predicted: The slow decline of the participation rate from this decade through the 2030s, as the Boomers moved into retirement.

. . .

This very important picture tells us two things. First, the participation rate was expected to drop, with or without a recession. Second, the drop is happening much faster than we expected. The economy is behaving as though it's 2025 rather than 2013. What pushed the participation rate down prematurely?

The obvious answer is that the recession happened. The recession effect on participation rates is pretty clear when you zoom in on the data.
. . .

But the recession's effect is more complicated than you might think. According to a new paper by Kerwin Kofi Charles, Erik Hurst, and Matthew J. Notowidigdo, what we're really seeing is the decline of manufacturing, which is only being felt now because the band-aid provided by a temporary construction bubble was ripped clean off the labor market. Nearly 40 percent of the increase in non-working Americans between 2000 and 2011 "can be attributed to manufacturing decline," they wrote. The housing boom shifted some of these jobs to construction. But after the bust, the crutch was gone -- and so were the workers.

It's about time for an upshot. So, where did all the workers go? Four answers, in order of importance.

(1) They retired. The country is getting older, and older countries have a smaller share of workers.
(2) They went to school. More young people are going to college, and young people in college are less likely to look for work.
(3) They just stayed home -- they stopped looking for work and decided instead to raise their kids; they sat on the couch waiting for the market to thaw; they filed for disability insurance. The recession discouraged them from seeking a job.
(4) And the factories closed. Behind all of these stories lurks the long decline of manufacturing, which has very little to do with the Great Recession, or college attendance, or demographics, but nonetheless explains a significant portion of falling participation rates among prime-age workers.

So there you have it, the answer to the 37 percent mystery in five words: Retirement, college, recession, and manufacturing.

[LaurV]

Is anyone riding the bitcoin rally?

[jasonp]

Mass dumping of gold for bitcoins?

[cheesehead]

Originally Posted by jasonp

Mass dumping of gold for bitcoins?

Hmm... that wasn't mentioned on "Nightly Business Report".

[Fusion_power]

Any currency is a medium of exchange. It allows me to sell tomato seed (which I produce) converting to currency, then use the currency to purchase food to eat. When we work at a job, we are converting our labor to currency which is then used to provide the necessities we need to live. The currency is therefore just a medium of exchange.

When a currency is linked to a specific item such as gold, then the currency fluctuates in parallel with the underlying linked item. This results in disparities when I convert my product into currency and then use the currency to purchase supplies. In other words, if we were on a gold standard, then I might have converted my tomato seed into gold at $1600 per ounce, then purchase something today when gold is at $1300 per ounce. In effect, I would have lost @18% of the value of my product.

This illustrates the losses that can be incurred with conversion from goods to currency to goods. Why is this important? Well, any effort to create an arbitrary currency such as bitcoin has to be denominated in terms of the value it can be used to purchase. When the bitcoins fluctuate in value, there will be gains and losses in currency conversion. This instability leads to hedging of positions by either deliberately holding currency or else deliberately holding goods, depending on whether you anticipate a rise in value of the currency or a rise in value of the goods.

I read a book by Robert Heinlein years ago that suggested using wheat as the underlying good to which currency should be tied. The logic is that wheat is a fundamental good required for life since it is a food that most people eat. The currency was called "wheat dollars". One wheat dollar could be used to purchase one bushel of wheat. The problem with this economy would be that the price of wheat could never fluctuate but the cost of inputs to produce the wheat could rise or fall. Sooner or later, the economy would destabilize and lead to either overproduction or underproduction of wheat.

From studying various currency systems, it is obvious that none of them are good for the average person. The objective of the currency issuer always conflicts with the objectives of the currency user. The economy always requires that a certain amount of goods and services produced must be destroyed in order to maintain currency stability. The productive capacity of an economy is bounded by the fluctuations of the currency.

Just some thoughts on currency and markets for a Monday evening.

DarJones

[Xyzzy]

…"wheat dollars".

How about wheat pennies?

(We had a jar full of them when we were little.)

Anytime we hear a word like "wheat" we have to link to this:

http://www.mersenneforum.org/showthread.php?p=320962

#2

[only_human]

Originally Posted by jasonp

Mass dumping of gold for bitcoins?

Maybeso. I think there might be some overlap between gold holding government/money distrust and bitcoin afficianados. If there is, they might twitch and shift their precioussss.