The financial markets are doing exactly the opposite of what was predicted if Donald Trump won

From Robert Stacey Stacy McCain:

Amid Dow Boom, Liberal Media Gloom

Posted on | December 5, 2016 |

In the weeks leading up to the Nov. 8 election, Democrats and the media (but I repeat myself) warned of economic disaster if Donald Trump won.

“Economists: A Trump win would tank the markets,” was the Oct. 21 headline at Politico, and on Nov. 6 — two days before the election, when some polls showed Hillary Clinton’s numbers had sagged — the headline at Huffington Post was, “Donald Trump Has Caused A Historic Drop In The Stock Market,” with writer Ben Walsh warning:

Deporting some 11 million undocumented immigrants, building a wall along the border with America’s third biggest trading partner, starting a trade war with Mexico and China that would destroy 4 million U.S. jobs: These are all deeply harmful economic policies.
Moody’s says Trump’s policies would throw the U.S. economy into the longest recession since the Great Depression. Citigroup thinks a Trump win could cause a global depression. By a different measure, Trump in the White House would cause the American economy to shrink by $1 trillion over five years, according to British research firm Oxford Economics.

As Democrat campaign propaganda, this may have been effective, but as financial journalism, it has proven woefully incorrect. The day after Trump’s stunning victory, the Dow gained more than 250 points, and by Nov. 22, hit a record high above 19,000 points. This “Trump boom” shows no sign of fading. The Dow jumped 100 points after the opening bell this morning and, as of 11 a.m., was at 19,260. And yet the media are still looking for gloom amid the economic sunshine:

“It’s hard to know how President-elect Trump will be in 54 days or 53 days when he is President Trump,” Joann Weiner, director of the department of economics at George Washington University, told Circa.

“I think the biggest worry for anyone getting out of college is, ‘Will these policies tip the economy into a recession?’”

What liberals don’t seem to understand . . . Well, they don’t really understand anything very well, but they especially don’t understand economics, having paid little if any attention to the subject, except to seek justification for their crypto-Marxist antipathy to profit.

There’s more at the link.

I will admit to not having been too kind to the professional economists of late. This was Heather Long’s1 tweet the day before the latest unemployment numbers were released:

So, what happened?

Larry Summers falls asleep during President Obama's meeting with credit card officials. Would it be wrong of me to suggest that economists need to sleep on the job more often?

Larry Summers falls asleep during President Obama’s meeting with credit card officials. Would it be wrong of me to suggest that economists need to sleep more often?

In other words, the professional economists got the number of new jobs added very close to correct (178,000 vis a vis 181,000 predicted), but they totally missed on the U-3 unemployment number,2 because they never saw that so many people, 226,000, would drop out of the workforce.

Eventually, there will be another recession, and if historical numbers are any indication, it will happen sometime during Donald Trump’s initial term, which I stated would be the case regardless of whom won the election.3 The recession will be blamed on the President, as recessions always are, but at least for right now, the predictions of the learned economists are all being proved wrong.
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  1. I’m not picking on Miss Long, who is a reporter, not an economist. I tend to reference her a lot because we follow each other on Twitter, and she is pretty fair about presenting economic and business news, without much apparent bias. No one can read all of the news; by following just a few economics reporters, I can get good leads without having too much of a cacophony roaring in my ears.
  2. I have stated previously that I pay attention to the U-6 unemployment numbers over U-3, and that U-6 is a better indicator.
  3. Recessions happen when economic optimism leads to excess productive capacity, as businessmen make estimates on future growth and markets, and get it wrong. It is a pet theory of mine, one which I have not yet worked out with statistics, that the continued slow-growth of the economy since the last recession is having the effect of delaying the next recession.

How the GOP can cut into the Democrats’ urban vote totals

From The Chicago Tribune, via Le*gal In*sur*rec*tion:

Emanuel doubts Trump will cut funding for sanctuary cities

By John Byrne | November 16, 2016 | 5:09 PM CST

Mayor Rahm Emanuel on Wednesday said he doesn’t think Republican President-elect Donald Trump will cut off federal funding to sanctuary cities, the latest salvo in the mayor’s post-election defense of immigrants here without permission against possible deportation by the incoming White House.

“I don’t believe they’ll do it, because that would mean every major city in the United States would be targeted, and that’s not what an administration will do,” Emanuel said after a City Council meeting.

“When you’re in the White House, it is incoming,” said Emanuel, who worked in the Clinton and Obama administrations. “When they look at all the things they want to get done and all the battles that will be coming — whether the battles they initiate and the ones that come to them — they will make a choice that this is not the battle they want to take on because they have bigger fish to fry, mark my words.”

Trump has pledged to deport millions of immigrants living in the country illegally. The Justice Department released a memo in May saying Chicago could stand to lose nearly $29 million in annual justice grants if found to be in violation of federal laws on detaining people to be turned over for possible deportation. On Wednesday, the mayor declined to say what he would do if Trump takes away that money, calling it a hypothetical that wouldn’t happen.

There’s more at the original. What Mayor Emanuel was asked, about the potential loss of $29 million in law enforcement grants, something The Los Angeles Times reported was under consideration, he wasn’t addressing the fact that Chicago receives more than $1 billion, over 10% of its entire municipal budget, from the federal government.

And that’s where the real leverage is: Chicago, and other ‘sanctuary cities,’ would feel some pain, would have a headache, if just the ‘justice grants’ were suspended, but if all federal funding was suspended, the pain would be more than the worse migraine ever; it could turn out to be a fatal disease to many city budgets. Mother Jones, a far-left journal, listed some of the sanctuary cities, and how much they stand to lose if all federal funds are suspended. New York City receives around $7 billion from the federal government, about 9% of its total budget.

This is where the Republicans have an opportunity to reduce the stranglehold of the left on our cities. Donald Trump earned the votes of 13% of black men, which doesn’t sound like much, but it’s a significant increase from the percentages won by either John McCain in 2008 or Mitt Romney in 2012. This, to me, indicates the growing realization among the working people of the United States that the interests of the welfare class are diametrically opposed to their own; whenever someone is living on welfare, he is dependent upon the government taking tax dollars away from people who are working for a living to support him, and the taxpayers are realizing that. The black vote has been so monolithically Democrat that 13% is a big departure. And if the GOP can withdraw federal funds completely from ‘sanctuary cities,’ working-class blacks, as well as working-class whites, are going to feel the effects in their cities, as those cities will have to either significantly increase taxes or cut programs, or both, to cover the loss of revenue. When the city governments choose to favor the illegal immigrants to the point that it causes real pain to American citizens, those citizens are going to express their displeasure at the ballot box.

Former Secretary of State Hillary Clinton ran up a significant margin in the popular vote, something on the order of 2½ million votes, but that margin was won in geographically small areas, in our largest cities. It was decreased turnout by the demographic groups on which the Democrats counted, primarily in our cities, which enabled Pennsylvania’s more suburban and rural areas to overcome the votes in foul, fetid, fuming, foggy, filthy Philadelphia, and carry the state against Mrs Clinton for Donald Trump.1 If the GOP can earn a bigger split in the cities, by demonstrating to the black working-class how their interests are being harmed by sanctuary city policies, then Republican candidates will do much better in statewide races.
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Cross-posted on RedState.
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  1. The pre-election polls had Democrat Katie McGinty unseating Senator Pat Toomey (R-PA), but Mr Toomey won re-election. The polls are all manipulated to survey ‘registered voters’ or ‘likely voters.‘ A depressed Democratic turnout caused by a depressing Democratic candidate is what (probably) led to the polls being wrong.

The Italian referendum: a harbinger of things to come? In the end, the European Union is an unworkable idea

From The New York Times:

Italy’s Premier, Matteo Renzi, Suffers Stark Defeat at Hands of Populism

By Jason Horowitz | December 4, 2016

ROME — Italy plunged into political and economic uncertainty early Monday after voters rejected a constitutional reform upon which Prime Minister Matteo Renzi had staked his government. The result is certain to reverberate across a European Union already buffeted by political upheaval and anti-establishment anger.

Ostensibly the vote was about arcane changes to Italy’s Constitution that would have streamlined government. But opposition to the reforms came from the same anti-establishment sentiment — spiked with skepticism of globalization, open borders and the feasibility of an ever-closer European Union — that has transformed the politics of a growing list of European countries.

Such movements have already smashed the traditional political structures in Greece and Spain, and Euro-skeptic forces led Britain to vote in June to leave the European Union.

In Germany, Chancellor Angela Merkel, once untouchable, now seems vulnerable in next year’s elections. And far-right parties are also seeking power in France.

In Austria, the Green Party stalled the advance of populist forces on Sunday by defeating the presidential candidate of the far-right Freedom Party, which was established by former Nazis. The result in Austria might have calmed some nerves, but it was the rejection of Mr. Renzi that most sent shivers through Europe and the world.

There’s more at the original.

I was in Italy during the last part of June, during the Brexit vote as it happens, and one thing I noticed: wherever I saw the Italian flag, the flag of the European Union was flying beside it. I saw no evidence that the Italians wanted to leave the EU. But it’s also true that the only places I saw the Italian and EU flags flying were in the major cities, Rome, Florence, Venice and Milan. I never really noticed them in the smaller towns we visited. Is there the kind of rural/urban divide in Italy that stunned Hillary Clinton in our own elections? I really don’t know, but the election results from today indicate a deep dissatisfaction with the current center-left1 government.

We have already noted the possibility of a “Frexit” and that maybe, just maybe, the whole idea of a unified Europe is unworkable. The common currency is certainly a convenience for people taking advantage of the open borders in Europe, but it is very much an inconvenience to the taxpayers of the wealthier eurozone countries, as they have to pony up more to bail out Greece, and might eventually have to bail out other eurozone nations.

The Wall Street Journal noted:

Investors will be watching developments in Italy closely as they assess the risks of an anti-euro shift and weigh the chances of contagion. Events in Italy could also influence decisions by the European Central Bank on how long it sticks with its easy-money policies.

Capital has flowed out of Italy steadily for much of this year. In recent weeks, concerns have sent the gap between Italian and German 10-year government bonds to their highest level since 2014, while Italy’s stock market has been among Europe’s worst performers this year.

Italian banks have been especially hard hit, amid fears that Mr. Renzi’s departure will delay or derail efforts to shore up the country’s ailing financial institutions.

Government officials fear a selloff by investors on Monday could force a state bailout of troubled lender Banca Monte dei Paschi di Siena SpA in the coming weeks. That could undermine confidence in other banks in Italy and elsewhere in Europe.

Sunday’s vote heralds an end—at least for now—to Mr. Renzi’s ambitious plans to upend legacy parties and reinvigorate one of the worst-performing economies in Europe.

Mr. Renzi, 41 years old, stormed into office as Italy’s youngest-ever premier in 2014, and pushed a series of market-oriented changes through parliament, including amendments to labor laws aimed at encouraging hiring.

He lifted spirits in a country angry at its elite and beaten down by a debt crisis and high unemployment. Mr. Renzi’s broadsides against old-school politicians initially took some fire out of the 5 Star populist campaign, which had a strong showing in 2013 parliamentary elections.

Mr. Renzi’s ascendance raised hopes among establishment EU leaders that Italy—a perpetual worry because of its large, moribund economy—would emerge from the doldrums.

“If I could vote in Italy, I would vote for” Mr. Renzi, German Finance Minister Wolfgang Schäuble said last week.

Italy’s economy, however, has lagged behind. A nascent recovery in 2015 petered out in the first half of this year. Output remains below what it was before the 2008 global financial crisis. Joblessness has remained stubbornly high; more than 35% of young people are unemployed.

The euro dropped 1.1% against the dollar, down to $1.0527, as exit polls revealed that the “No” side would win the vote.

Italian BluesSimply put, the Italian economy sucks. The charts from the Journal give a broad picture, but it’s worth noting that, unlike the small economy of Greece, Italy is the third largest economy in the eurozone, and fourth largest in Europe. That makes a real economic failure in Italy — though I have to ask how much more of a failure there can be after an 8.3% contraction of the economy since 2007 — a real challenge for the EU and the eurozone. Just propping up Greece (2015 GDP = $195.21B) has proven to be a nightmare, and hasn’t been finished yet; Italy’s economy (2015 GDP = $1,814.76B) is nine times larger.

I confess to an affection for Italy, and if someone would be kind enough to send me €2,000,000, we could buy our Tuscan villa and live quite well there. But that affection notwithstanding, the situation in Europe is simply not at all akin to the differences between American states. New Yorkers and Mississippians are all still Americans, united by one nation, by a common language, by culture and heritage and tradition, in ways that Germans and Italians never have been, and never can be. The populist sentiment that is growing in the European Union nations is evidence of that, and if the populists don’t win in the major European elections coming up in the next few months, their ranks will probably still continue to grow. In the end, a political unification of Europe is simply an unworkable idea.
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  1. Center-left is how the Times defines it.

The growth of bad jobs: a look at the official unemployment numbers Real unemployment is reflected in U-6, not the official U-3 numbers

From The Wall Street Journal:

U.S. Nonfarm Payrolls Rose 178,000 in November; Unemployment Rate Falls to 4.6%

Federal Reserve is likely on track to raise interest rates later in December

By Jeffrey Sparshott | Updated Dec. 2, 2016 12:03 p.m. ET

WASHINGTON—U.S. employers hired at a steady clip in November while the unemployment rate fell to the lowest level in nine years, signs of enduring labor-market growth that will likely leave Federal Reserve officials on track to raise interest rates later this month.

Nonfarm payrolls rose by a seasonally adjusted 178,000 in November from the prior month, the Labor Department said Friday. The unemployment rate dropped to 4.6% last month, the lowest level since August 2007 as some people found jobs while even more dropped out of the workforce.

There’s a lot more at the original.

Donald Trump was widely excoriated by the professional media for claiming that unemployment was much higher than the official numbers. We have noted previously this article from CNNMoney:

Most Americans think unemployment is a lot higher than 5%

Americans think the economy is in far worse shape than it is.

by Heather Long | @byHeatherLong | September 6, 2016: 2:28 PM ET

The U.S. unemployment rate is only 4.9%, but 57% of Americans believe it’s a lot higher than that, according to a new survey by the John J. Heldrich Center for Workforce Development at Rutgers University.

The general public has “extremely little factual knowledge” about the job market and labor force, Rutgers found.

It’s another example of how experts on Wall Street and in Washington see the economy differently than the regular Joe. Many of the nation’s top economic experts say that America is “near full employment.” The unemployment rate has actually been at or below 5% for almost a year — millions of people have found jobs in what is the best period of hiring since the late 1990s.

But regular people appear to have their doubts about how healthy America’s employment picture is. Nearly a third of those survey by Rutgers believe unemployment is actually at 9%, or higher.

Republican candidate Donald Trump has tapped into this confusion. He has repeatedly called the official unemployment rate a “joke” and a even “hoax.”

There’s more at the original.

Mr Trump was using the U-6 unemployment numbers, rather than the ‘official’ U-3 figures. The U-3 numbers include those people who are employed, plus those without jobs who are ‘actively’ seeking work; those who would like a job but have not been looking, because they are discouraged or for other reasons, are not included in U-3. U-6 is defined as “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force,” with Marginally Attached being defined as “those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.” In other words, U-6 gives us a more complete picture of what the unemployment situation really is, and it would seem, from Heather Long’s article, that the public see the U-6 number as more realistic.

And the U-6 numbers are telling a tale that is being completely ignored. I went back, looked at the official numbers, from the Bureau of Labor Statistics, downloaded the files on labor utilization, and found something truly disturbing. In good years and bad, through the Clinton and Bush Administrations, U-6 was never twice the U-3 number. During the recession in 1994, such a doubling never happened. During good years and bad, even during the so-called ‘Great Recession,’ it never happened.

But now, it has happened, with some frequency. I have converted the files to images, and the months highlighted in yellow indicate those months in which U-6 was twice, or more, U-3.

U-3 unemployment rate, by month, since 1994.

U-3 unemployment rate, by month, since 1994.

U-6 unemployment rate, by month, since 1994.

U-6 unemployment rate, by month, since 1994.

If you’ll look closely, you can see that even in those months where U-6 hasn’t been twice U-3, it has been close to it.

What this indicates, to me, is that the growth of jobs has been a growth of bad jobs, jobs which are insufficient to support people and families, but jobs in which employees feel stuck because there’s nothing out there that is better for them. This is why so many Americans simply don’t accept the official numbers, this is why Mr Trump was right to keep pointing out that the U-3 numbers were a joke and a hoax, and this is a big part of the reason that he won, and Hillary Clinton lost.
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Cross-posted on RedState.

€urosclerosis: What the Greek banks want, and what it would mean in the United States Just another proposal to take people's money

The Greek economic crisis hasn’t been talked about as much as it had been, but it still exists. From Greek Reporter:

Greek Banks Propose Tax on Cash Withdrawals to Curb Tax Evasion

By Philip Chrysopoulos | November 28, 2016

Greek banks have proposed taxation of cash withdrawals so that Greeks make more electronic transactions as a measure to curb tax evasion.

I had to buy a new wallet in Italy, because some euro bills are 'taller' than American dollars.

I had to buy a new wallet in Italy, because some euro bills are ‘taller’ than American dollars.

The proposal is sent to the ministry of finance for further review, the basic idea being that it would become expensive to use cash. The ministry is advising people to make more electronic transactions and is planning a program that would give people incentives to use credit or debit cards in order to battle rampant tax evasion.

The proposals submitted by Greece’s largest banks include:

  • Mandatory use of cards or other electronic networks for transactions in professions where there is strong evidence of tax evasion, or where cash is used as the only form of payment.
  • Mandatory use of cards or electronic networks for transactions over a certain amount.
  • Reform the tax system by introducing a system of revenues-expenses. Households or professionals will only be taxed on the amount of income that is not spent. Thus, professionals and households will have a strong incentive to ask for a receipt on every transaction in order to increase their costs and have their taxes reduced.
  • Connect the tax-free income with the amount of expenditures paid by credit or debit card.
  • Make mandatory for all businesses, to make electronic payments and pay payroll electronically. Payments will also show if they are consistent with security contributions.

Well, thank the Lord that Hillary Clinton and the Democrats didn’t win in our recent elections, or we might be seeing something like this in the United States! We noted previously Patrick Gillespie’s article on CNNMoney pointing out that the plurality of economic transactions1 in the United States are made in cash, and that there are good reasons for doing so. Every transaction which is made by something other than cash imposes additional costs, primarily on the retailer, and those costs can be a fairly significant amount of a small transactions. In the US, current regulations that went into effect in 2011, debit card transaction fees are capped at 21 cents plus 0.05% of the purchase price. The use of a credit card, rather than a debit, is more expensive; the potential fee difference for a $10 fast food purchase:

  • Credit Card: 2% of transaction ($0.20) + Transaction Fee (let’s use $0.50) = $0.70.
  • Debit Card: $0.21 + 0.05% ($0.01 rounded up) = $0.22.

The transaction fee is what makes the use of cards for small purchases so expensive for merchants. That 22¢ for a $10.00 meal is 2.2%, a fairly significant amount for a small business, and possibly the difference between profit or loss. If a credit card is used, 70¢ is a 7.0% hit on the merchant; that’s pretty high:

Full-service restaurants at all levels spent about 32 percent of each dollar on the cost of food and beverages, 33 percent on salaries and wages, and from 5 percent to 6 percent on restaurant occupancy costs. Profit margins, however, varied according to the cost of the average check per person. Those with checks under $15 showed a profit of 3 percent. Those with checks from $15 to $24.99 boasted the highest profit margin at 3.5 percent. Finally, those with checks of $25 and over had the lowest profits, at 1.8 percent.

Restaurants that accept plastic have to build those costs into their pricing, meaning that they are passing along those transaction costs to the consumer. The Greek bank proposed regulations would either increase costs to consumers, or reduce profit margins for small businesses if imposed here, and certainly would there as well.

But, let’s tell the whole truth: the Greek banks absolutely love those proposals, because banks and the card transaction firms make money every time those cards are used. In 2011, the Federal Reserve estimated that it cost banks 12¢ every time a Visa or MasterCard debit transaction was made, but that the banks actually collected 44¢ on each transaction. Of course the Greek banks want to force transactions further away from cash and more into electronic exchanges! The Greek Reporter article said that the banks had made the proposals “to curb tax evasion,” and perhaps they can justify their arguments that way, but it was really so they could make more money.2

There was one more paragraph in the article, which pointed out a big part of the problem in Greece’s economy:

According to bank records, the underground economy in Greece is estimated to be around 40 billion euros and the loss of tax revenue estimated at about 15 billion. If only one third of lost tax revenues is collected, then the State will receive 5 billion euros annually, which is roughly the total amount of the single property tax (ENFIA).

The “underground economy” is guesstimated at €40 billion, and that’s a tax loss of €15 billion? That means a 37.5% tax rate on the entire economy! No wonder Greeks like to use cash: they are losing €37.50 out of every €100 they spend to the tax collector. In the end, taxes, while necessary to pay for essential services, are still a drag on the economy: they burden every private transaction with unrelated expenses. It’s no wonder that the Greek economy is in the toilet; I just don’t want to see that here.
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Cross-posted on RedState
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  1. Not actual dollar amounts, but simply the number of transactions.
  2. I was unable to find average transaction costs for Greek banks, but they don’t do these things for free. I am more concerned with such proposals being put in place in the United States.

China blusters, but it exposes their weaknesses

From my favorite CNNMoney reporter:

China warns Trump: Good luck bringing jobs back to U.S.

China appears to be sending a message to President-elect Donald Trump: Good luck competing against us on manufacturing.

by Heather Long | @byHeatherLong | November 30, 2016: 2:11 PM ET

Mere hours after Trump, Vice President-elect Mike Pence and Carrier announced a deal to keep nearly 1,000 factory jobs in the U.S., a top Chinese newspaper published an analysis piece with the headline: “China would benefit from Trump’s effort to bring manufacturing jobs back to U.S.”

The commentary ran in the “business opinion” section of the Global Times, a newspaper backed by the Communist Party.

“It will be almost impossible for the [U.S.] to restore its glory as a major manufacturing powerhouse under his presidency,” the piece says. The author is a reporter for the Global Times.

If companies like Apple (AAPL, Tech30) move factory jobs back to the U.S. in a “show of patriotism,” it will raise costs dramatically, the reporter argues. That opens the door for Chinese companies like smartphone makers Huawei and Xiaomi to undercut Apple on the world market.

Well, one thing is certain: the election of Donald Trump is shaking up the whole world. The article continues to note that this might be more of a public relations stunt to reassure Chinese workers that their jobs are safe. If that’s the motivation behind it, such would demonstrate that the Communist leadership are worried that their subjects — in a country in which news and the internet are heavily censored — are concerned that the US could reassert its manufacturing dominance.

But there’s another problem for the Chinese leadership: in making such an argument, they are pointing out to their own people that manufacturing workers in the United States are paid much more than similar workers in China. The Chinese article itself points out the disparity:

Assuming Apple is willing to bear these economic burdens in a show of patriotism, the question remains whether American workers will want to fill the low-wage jobs brought back from China.

I’m not sure just how wise it is for the Chinese government to state, plainly, that its manufacturing workers are filling “low-wage jobs.” The question is obvious: if the People’s Republic is the number one manufacturing nation in the world today, why can’t it afford to pay Western-level wages?

I’ll admit it: on my first glance at Miss Long’s article, my impression was that the Chinese were engaged in a slightly more subtle Kim Jong-un style of blustering. But reading the Chinese article changed my mind: there’s a lot there that ought to be worrisome for the Communist leadership. The article conclude:

In reality largely revitalizing the US’ manufacturing sector is unlikely. All other previous attempts to re-industrialize America failed to achieve the result of bringing manufacturing back to the US. Instead, Washington should encourage investment in high-end manufacturing to consolidate the country’s leading position in industries such as IT, aeronautics and space, health care and defense instead of competing with Southeast Asian countries like Vietnam, where even China is transferring manufacturing to take advantage of lower labor costs.

Good Lord, how stupid can they get? Not only did the author, a government lackey, tell the readers that Chinese workers are filling “low-wage jobs,” but he continued to tell them that their wages are not low enough, so the Chinese government is outsourcing jobs to even lower-wage Southeast Asian nations.

Tank ManIn War and Remembrance, Herman Wouk, the author, makes a point through the character of General Armin von Roon, a fictitious member of the German General Staff, that, in the end, even a dictator like Adolf Hitler depended upon the support of the people to retain power. The Chinese Communists retain their power through a huge military and n internal system which does not hesitate to use force against subjects who dissent. “Tank Man” showed the power of just one dissident, and if the Tiananmen Square protests were put down by the laughably-named People’s Liberation Army in 1989, the Communist government has not forgotten those events, are realize that such could happen again. Their own actions and words in trying to fight whatever economic measures our incoming President takes could well be the things which push a tightly controlled, simmering population beyond the boiling point again. Kim Jong-un keeps his subjects too weak, too hungry, to have the strength to rebel, but the Chinese are reaching the point at which they have the wealth, they have the strength, to overthrow the government, if they simply get angry enough.

I am neither foolish nor naïve enough to predict that the Chinese people will rise up and overthrow their Communist masters anytime soon; to do so will require the courage of many to lay their lives down for the freedom of others. But eventually, totalitarianism must fall, because there are too many people, with some money and free time, in a country where, eventually, free information will spread widely, and that will be the death knell of Communism.

How Donald Trump can help the American working class

From The Wall Street Journal:

Small Businesses Lament There Are Too Few Mexicans in U.S., Not Too Many

As the labor market tightens and the population of undocumented immigrants shrinks, employers in low-skill industries such as hospitality, construction and agriculture scramble to fill jobs

By Miriam Jordan and Santiago Pérez | Updated Nov. 28, 2016 9:45 a.m. ET

In Dallas, the King of Texas Roofing Co. says it has turned down $20 million worth of projects in the past two years because it doesn’t have enough workers.

In the San Francisco Bay Area, Joe Hargrave is expanding his successful Tacolicious chain of restaurants, but says he is building smaller ones due to “a massive shortage of restaurant workers.”

And in Florida, Steve Johnson, who harvests oranges for the citrus industry, says, “Right now, if I had 80 guys, I could put every one of them to work.”

As hiring accelerates and the labor market tightens thanks to a steady U.S. recovery, employers who need low-skilled workers are increasingly struggling to fill vacancies. One big reason: Mexican workers, who form the labor backbone of industries like hospitality, construction and agriculture, are in short supply.

When I started reading this article, my first thought was that standard economic thinking is that when the supply of workers is insufficient to meet demand, employers ought to be meeting the demand by raising wages. Then I got to these paragraphs, further down:

In 2015, the average wage for roofers was $17.65 per hour, according to the BLS. (Nelson Braddy Jr., the owner of King of Texas Roofing Co.) says he has already raised wages twice this year, putting most of his workers above $20 an hour.

We have noted previously that while the “official” U-3 unemployment rate was 4.9% in October, the real unemployment rate, U-6, stands at 9.5%. There are plenty of available American workers, but Americans don’t seem to want the jobs:

Employers say U.S.-born workers don’t want those jobs.

Of the 85 roofers on King of Texas’ payroll, two are African-Americans hired in the past year and three are Caucasians who have worked there more than 20 years, says Mr. Braddy. The rest are Hispanic, mainly from Mexico. Mr. Braddy says his human-resources office collects Social Security numbers and identification from each hire. He isn’t expected to vouch for the authenticity of documents; in fact, he could be subjected to an investigation or a charge of discrimination by the federal Equal Opportunity Employment Commission if he questions the bona fides of an applicant based on national origin or race, immigration attorneys say.

Well, that’s addressed easily enough: if employers were required to investigate the documents of all applicants, there would be no discrimination questions. Citizenship and Immigration Services already provides employers with the E-Verify system, and if it isn’t perfect, it’s still simple and easy to use; there is really no excuse for not using the system, unless the employer doesn’t want to discover that an applicant is ineligible to work. Mr Braddy might just have to raise wages even more if he wants to get legitimate workers; if the Trump Administration can get laws passed requiring employment eligibility verification, that could be the greatest thing he could do to increase wages for the working class in the United States.

I will be the first to admit that roofing is a hateful job. In the early 1980s, I had to put a new roof on my mother’s house, in Kentucky. My mother didn’t have the money to pay a roofing company, so my wife and my two sisters and I installed the roof ourselves. One of my sisters was able to get out on the roof with me, while my wife and other sister did the grunt work of hauling the material — shingles and roofing paper — up to the roof, carrying it up two flights of stairs and passing it out the attic dormer window. We didn’t have any ladders, and had to crawl out the dormer window ourselves. In case you think that was an easy job, the house is pictured on the right.1 With the ground sloping downward, the roof was three stories above the ground in the back.

Why do I mention this? Because I do not believe that roofing work — or anything else, for that matter — is somehow beneath anyone; I’ve done those jobs myself.2 It might require higher wages to get Americans to go out and do that kind of work, but those wages, coupled with a welfare reform that doesn’t allow people to just sit back and not work when they can work, would fill those jobs Mr Braddy says he cannot fill.

What the incoming President says he wants to accomplish in our economy is actually easily done, if only he has the will to do so.  It will probably require Senate Majority Leader Mitch McConnell (R-KY) to set the Senate rules eliminating the filibuster, period, to prevent obstruction by the Democrats, because it will be the Democrats who will object to requiring employment eligibility verification and any meaningful welfare reform, but those are the things required to help the American working class.
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Cross-posted on RedState.
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  1. This photo was taken by me in 2013, many years after it was sold outside the family.
  2. While I did only that one roofing job, I have been a construction laborer, a concrete finisher, an electrician’s helper, and done every sort of job required at a concrete plant in my lifetime.

#NationalDebt : It will be over $20 trillion when Barack Obama leaves office

In the left hand sidebar, The First Street Journal maintains a link to Treasury Department’s listing of the National Debt, to the penny. As of yesterday, the National Debt stood at $19,929,184,161,352.13.

On November 29, 2015, a year previously, the National Debt stood at $18,782,451,267,806.04. That means that we’ve added $1.147 trillion to the debt over the last year, for an average of $3.134 billion per day. With 53 days remaining until President Obama’s term is over, the National Debt should be roughly $20.095 trillion when Donald Trump takes office.

Remember when then-Senator Barack Obama (D-IL), campaigning for President on July 3, 2008, said that it was “irresponsible” and “unpatriotic” of President Bush to have added $4 trillion to the National Debt, “all by his lonesome:”

Well, the National Debt stood at $10,626,877,048,913.08 on the day President Obama took office, and if the $20.095 trillion guesstimate is accurate, we will have added roughly $9.468 trillion, almost twice what was added under President Bush, to the debt, virtually doubling it.

I wonder if Mr Obama would see himself as irresponsible and unpatriotic?
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Cross-posted on RedState.

The Success of Socialism: Part 5 And here I thought that socialist governments were supposed to make things better for the common people!

We have written about Venezuela’s economic crisis previously, and things are only getting worse. From CNNMoney:

Venezuela’s currency is in ‘free fall’

Venezuela’s currency continues to collapse.

by Patrick Gillespie | @CNNMoneyInvest | November 29, 2016: 10:30 AM ET

10,000 Bolivars, worth a whopping $2.87 on November 28, 2016

10,000 Bolivars, worth a whopping $2.87 on November 28, 2016

Just in November, the bolivar has lost 55% of its value.

It’s the latest sign of Venezuela’s extreme economic, political and humanitarian crisis. Sky high food prices — or massive shortages of basic food and medicine — have plagued Venezuelans for years and have gotten worse this year. Inflation in Venezuela is expected to rise 1,660% next year, according to the IMF. The country has been in recession for three years now.

One dollar fetched 1,567 bolivars on November 1. On November 28, a dollar was worth 3,480 bolivars on the widely-used unofficial exchange rate monitored by Dolartoday.com.

“It’s a currency that’s going down the toilet,” says Russ Dallen, managing partner at Caracas Capital Markets, an investing firm in Miami. “No one wants to hold on to something that’s going to be worth 50% less in a month.”

Venezuela fractured flagThere’s more at the link, including a link to an article noting that President Nicolas Maduro just increased the nation’s minimum wage by 40%, the fourth increase this year, but a 40% increase at the end of October was more than wiped out by a 55% decrease in the value of the Bolivar, and a 500% inflation rate; the International Monetary Fund forecasts 1,660% inflation in Venezuela next year.

Venezuela is sitting on the world’s largest proven petroleum reserves,1 and if a lot of that oil is very ‘heavy,’ and requires additional extraction and refining costs, the real problem has been the country’s mismanagement of its oil industry:

Venezuela’s Oil Production Plunges To 13-Year Low

By Nick Cunningham | July 14, 2016 | 3:37 PM CDT

Venezuela’s oil production plunged to a 13-year low in June as the economic crisis continues to eat into the nation’s only source of export revenue.

Venezuela’s oil production has declined by 170,000 barrels per day since the start of 2016, dipping to 2.18 million barrels per day (mb/d) in June, according to the IEA’s latest Oil Market Report. Part of that was due to electricity blackouts that cut 120,000 barrels per day from the country’s output between April and June, but even with some of those issues resolved – rain has restored some output at hydroelectric dams – the IEA says that “further losses are expected in 2016.” A year-on-year decline in oil production of 200,000 barrels per day “looks unavoidable as foreign oil service companies reduce their activity and international oil companies face repayment issues and daily operational challenges.” But 200,000 barrels per day could be just the start.

Venezuela does have some of the largest oil reserves in the world, but much of its oil production occurs at mature fields that require maintenance. But maintenance requires cash, something that is increasingly scarce in the country. Venezuela’s state-owned PDVSA was already failing to properly invest in oil production even when oil prices were in triple-digit territory several years ago. In fact, production has been gradually declining for more than a decade. The problem is that the declines are now accelerating.

In the mature oil fields around Lake Maracaibo in the west, wells are depleting as investment falls short. The IEA says that even in the Orinoco Belt in the southeast output is falling because PDVSA is struggling to process the heavy crude due to a shortage of light crude for blending. Venezuela has long predicted that it would be able to ramp up production from its heavy oil fields in the Orinoco Belt, which holds some of the largest heavy oil reserves in the world and accounts for half of the country’s output, in order to compensate for the aging fields in the Maracaibo region. The predictions were always overoptimistic, but now they are entirely off the table.

Not only did the country short-change maintenance in the state-run oil company Petroleos de Venezuela (PDVSA), then-President Hugo Chavez inserted politics into the workforce:

In 2002, nearly a half of PDVSA workers went on strike to pressure Chavez to call early elections. This virtually halted oil production for two months before the government gradually reestablished control over PDVSA. It then promptly fired 18,000 of its workers – approximately 40% of the workforce. The country’s oil industry was then further hindered when the government, in an attempt to replace the fired employees, hired less skilled — yet pro-Chavez — workers.

And every time a foreign oil company makes investments in Venezuela’s oil production, the country lets them proceed, and then nationalizes the assets. At this point, only an economic idiot would invest private dollars into Venezuela’s oil industry.

The promises made by socialists have always been that the economy would be run for the good of the people, and that the fat-cat capitalists would be brought to heel, and those promises have seduced many, man people. But not even one attempt at socialism has had any success at achieving those promises, and socialist countries have always devolved into authoritarian states.
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  1. Robert Rapier, writing in Forbes, noted that the definition of ‘proven oil reserves’ is dependent upon recoverability under given economic conditions, and holds that the dramatic drop in oil prices means that Venezuela’s proven oil reserves are not as large as commonly stated.

The death of Fidel Castro Major media talking mostly about Donald Trump's policies, demonstrating just how lame a duck Barack Obama is

From The Wall Street Journal:

Death of Fidel Castro May Pressure Donald Trump on Cuba Promises

President-elect could face pushback from some companies regarding his Cuba policies

By Carol E. Lee and Felicia Schwartz | November 27, 2016 6:48 p.m. ET

WASHINGTON—The death of Fidel Castro is putting unexpected pressure on President-elect Donald Trump to follow through on earlier promises to reverse the recent openings to Cuba made by President Barack Obama.

While Mr. Trump could undo Mr. Obama’s efforts, which were implemented using executive authority, he could face pushback from U.S. companies now deeply invested in Cuba under the current administration’s policy. Those companies include major airlines, hotel operators and technology providers, while big U.S. phone carriers have signed roaming agreements on the island.

Mr. Trump’s top aides said Sunday that he would demand the release of political prisoners held in Cuba and push the government to allow more religious and economic freedoms. Reince Priebus, Mr. Trump’s incoming White House chief of staff, said the president-elect “absolutely” would reverse Mr. Obama’s policies if he didn’t get what he wanted from Cuba.

“We’re not going to have a unilateral deal coming from Cuba back to the United States without some changes in their government,” Mr. Priebus said Sunday on Fox News. “Repression, open markets, freedom of religion, political prisoners—these things need to change in order to have open and free relationships, and that’s what president-elect Trump believes, and that’s where he’s going to head.”

Sen. Marco Rubio (R., Fla.), a critic of Mr. Obama’s opening, said Sunday on CBS that he hopes Mr. Trump will examine Mr. Obama’s changes to U.S.-Cuba policy and consider whether they foster democracy.

There’s more at the original.

There are already American media stories telling us how the younger Castro, President of the Council of State Raúl Castro, has been a moderating influence since he assumed power as his older brother’s health deteriorated:

Raúl Castro is less ideological and more disciplined than his charismatic brother, who was renowned for fiery speeches and would often hold forth with journalists or visiting dignitaries for hours on a range of subjects.

Raúl was with Fidel from the revolution’s earliest days, but he is not as beholden to the revolutionary ideology that brought Fidel to international prominence and whose policies frustrated a succession of U.S. presidents.

Since Fidel became ill, Raúl has taken modest steps to liberalize Cuba’s economy and engaged in historic talks with the Obama administration, announced two years ago, to normalize relationships with the two countries.

The younger Castro has pursued policies to shrink the size of government employment and has made efforts to expand entrepreneurship and create more small businesses. He also allowed people to leave the island without requiring an exit visa.

Raúl Castro is seen as someone who will not make wholesale changes but will try to make enough reforms to prevent widespread dissatisfaction that might lead to the collapse of the regime.

Yeah, uh huh, right.

We have had full relations with other Communist countries, countries which were or are hostile enemies of the United States. We had relations with the Soviet Union, and happily enough, the USSR is now just a sad memory in the dustbin of history. And President Vladimir Vladimirovich Putin of Russia, formerly a KGB agent and later head of the Federal Security Service, a successor to the KGB after the fall of Communism, has been verbally admired by incoming President Trump for his leadership skills, so there’s no particular reason why Mr Trump should reverse President Obama’s opening to Cuba, at least not beyond something symbolic. Raúl Castro is 85½ years old, and cannot remain in power that much longer; it won’t be long before he must be succeeded by someone younger, someone younger than the revolutionary generation. Our formal relations with the People’s Republic of China might not have been the cause of China’s shift to capitalism, but they certainly didn’t hurt.

The question isn’t whether Cuba will shift to capitalism; such is already starting, and will accelerate, because Communist/socialism is the continued path to poverty, as Venezuela is so dramatically demonstrating. The question is whether Cuba can remain a one-party dictatorship, as China has managed, under a (somewhat) free market economy, open travel and the existence of the internet. President Castro will almost certainly try to keep the Partido Comunista de Cuba in control, but one has to wonder how successful his successor can be. Again, the lessons of Venezuela are instructive: Nicolás Maduro Moros has not had the success of his predecessor, Hugo Chávez, not only because socialism has destroyed the Venezuelan economy, but because he lacks Mr Chávez’s charisma and personality. Raúl Castro is but a shadow of his dead brother, and his successors are likely to be not charismatic politicians but dreary Communist Party functionaries, men unlikely to be able to retain firm one-party control.

Cuba’s greatest economic potential is in it’s agricultural trade and tourism, the very industries which could more closely tie it with the United States, and thus increase the pressures for freedom. I will admit that I did not like the way President Obama opened relations with Cuba — he should have at least tried to consult with congressional leaders first, because he had a chance to get consensus there — but the policy is actually the wiser one. Incoming President Trump ought to leave well enough alone here, simply putting diplomatic pressure for the release of political prisoners and a more open political system, but not try to close the door again.