Isn’t this fun!?
The good news is the market is up right now. The bad news is the Dow was up yesterday for most of the day but then closed 200 points down.
It should be remembered that even in tumultuous moments like the one we are in the market rarely goes straight down.
I’ll say from the outset that this article is not for everyone, (and it is LONG) but I found it intriguing and potentially very useful for people who are trying to get their heads around what the economy – what I would consider the REAL economy – is doing right now.
And on a personal note I have to give a nod to my dear old Dad who, back in the early early 80s was explaining to his kids why coders would someday roam the business world and change every facet of that world.
Read on for valuable insight.
It hasn’t GONE global. Its long been global and on a massive scale. But China is freaking people out.
Play this game if you want. But understand that it is a game which is run by cronies, for cronies, and that cronies are very fallible. Can you handle the kind of downdraft which may come when reality catches up with the hubris of central bankers?
It’s an important question, and one which should be asked when things (in the USA) are still relatively calm.
When an economy is built upon dishonesty, and dishonest prices most importantly, an economy’s reckoning is only a matter of time. The further the charade goes on, the worse the reckoning. China’s been going on for a long time.
Now the Chinese government is trying to save its market with more central planning and knob turning. And don’t forget about the guns it has too.
But ultimately the system will erode. It isn’t built on real prices.
Many people in China don’t even really know what honest pricing is. Including in high level policy circles.
You want to know why Chinese stocks bounced today? The Chinese government outlawed the selling of stocks for many people and just stopped trading for over half of listings.
That my friends is crony craziness on a massive scale. A Chinese scale.
Well China stocks are cascading. Now the NYSE has suspended trading and may for the rest of the day? Yeah, things are fine. Totally cool.
We are told that the NYSE is “rebooting” now. But it’s been 2 hours and that’s a long bit.
As we’ve said before, raise the minimum wage above what the real wage should be for an unskilled worker and one is just creating havoc in the economy. Margins are closed or erased. Stores close. Prices go up. Jobs are lost. And the tax base is often diminished. (Creating a heavier burden on the remaining businesses.)
It is true that one can not live on the minimum wage. But no skill or low skill jobs are stepping stones to higher wages. Such jobs are not an end point.
It should be noted that arbitrarily raising the minimum wage does increase the floor for many unions which base their wages off of the official minimum wage. And this, not a living wage for fast food workers, is a big part of what is behind the effort to raise the minimum wage dramatically.
This is good news for consumers. This is good news for cities. It’s bad news for the crony medallion systems and the insiders who benefited from these systems.
Water policy in California is bizarre. I had no idea how bizarre until Jerry Brown declared his water emergency last week.
With 39 million people living in a semi-arid to desert environment (at least the southern 2/3 of California) doesn’t it stand to reason that at some point water might become a critical issue? A really critical issue? Doesn’t it also stand to reason that the people of California should be priority number 1 when it comes to water, not a politically powerful agriculture sector which only constitutes 2% of the California economy while taking 80% of the water? (Though there are of course apologists for ag.) But the “planners,” like they always do, thought they had the situation in hand.
India has long been mired in socialism. Bureaucracy ran and continues to run through the country’s massive system of governance. As I understand it, to get anything done in India for many years the paperwork had to be done in triplicate and processed a half dozen times. And then one got a new pile of paperwork.
But times are changing. India has opened up quite a bit over the last 2 decades, and it looks like even more light will be shining into the economy soon.
Murray N. Rothbard explains in 3 minutes why it is that when economic downturns happen the government should just get out of the way. Let prices correct, the pain will be short and sharp but then life will go on, typically in a more prosperous manner.
From Paul Singer’s letter to investors,