USA Today reports
Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds.
At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010.
Those records reflect a long-term trend accelerated by the recession and the federal stimulus program to counteract the downturn. The result is a major shift in the source of personal income from private wages to government programs.
The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. “This is really important,” Grimes says.
So there you go, everything is going to hell. Of course what really matters are Rand Paul’s private views on the public accommodations provisions of the 1964 Civil Rights Act.
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Ya think???
I made the mistake of reading the comments on the USA Today web site. YIKES!, like turning over a rock in a worm farm!
I just listened to LR’s talk at the Mises Circle where he talks about a culture that has forgotten what freedom even is. A little despair perhaps. I share that feeling. It MAY BE TOO LATE. ***sigh***
As the State continues to game the system with the fiat currency of “bread and circuses,” the so-called confidence of the consumer is on the rise to “spend and consume” to place the system further into debt. This pattern reminds me of the directions on the back of my shampoo container: Wet, Lather, Rinse, Repeat. Eventually my shampoo container is empty, go figure!!! money.cnn.com/2010/05/25/news/economy/consumer_confidence
Something else unstainable that I just read about is High Frequency Trading, or HFT. Apparently a small number of banks and specialized brokers have high-speed computers which do billions of trades per day, arbitraging by tiny amounts. They have been making many billions in profits doing this, while practically every other activity in the economy from investing to lending to construction and manufacturing is more or less flat on its back. I assume that the actual trading activity from which they are parasitically sucking so much blood is mostly sovereign wealth funds and state pension plans moving money here and there trying to escape the growing calamities in USA, Europe, Asia, etc.
The impression I have is that the real economy, real investing and real trading, is drying up so that these HFT computers are left doing nothing but batting around trades at each other. It’s like a bunch of poker sharks cutting and dealing and betting at lightening speed, but nobody noticed that the sucker they invited has left the table, broke, and gone for a powder. The money they took off him had been earmarked for his mortgage payment, business payroll, 401k contribution, student loan repayment, income and property tax payment and health insurance premium.
Hi Henry,
Don’t forget that entrepreneurial efforts (such as the arbitrage you mention) are good for the economy.
Although lubricating prices upward or downward does not sound glamorous (sounds greasy in fact), they are not “causing” prices to go up or down, but are merely “facilitating” prices toward where they should be (I use the term should loosely here).
Quite true, my point is not to shut down the HFT but to inquire as to why the investment markets appear to have more lubricant in their machinery than fuel.
The answer is that the real money, representing real investment by real investors, has become panic stricken and is being moved around at hyperspeed compared to any time in history. It is not so much that the technology permits shifts of massive amounts of money in a nanosecond therefore it happens, but that investors are so dubious of the soundness of practically any real investment that money has become just an abstract aggregation of digits which they flip from place to place according to barely-rational criteria.
It is the nature of fiat currency that good investments look lousy and bad investments look attractive, in ways that are not at all rational. If one is attracted to irrational-unsound investment ‘A’ then one can just as easily (and twice as quickly) decide that maybe irrational-unsound investment ‘B’ is just as good, and press a button to move half of your portfolio. Evidently these massive shifts of money attracted the brains behind the HFT programs in the same way that a rain of lemmings over a cliff attracts vultures.
I’m not sure that the lemmings have any real target prices in mind when they move half their portfolio from Euro Bonds to US Treasuries and back again. It’s more like a race to zero. By helping them along the HFT are assisting the markets to find out the ultimate worthlessness of government bonds and government-supported bank and manufacturer stocks. In the end the lubricant will be burned in a puff of blue smoke when the engine seizes up and quits.
well said, I’m going to try to remember that analogy “inquire as to why the investment markets appear to have more lubricant in their machinery than fuel.”
I like it
Don’t worry folks, a second stimulus is in the works, so we can spend our way out of this recession. Because the problem is not unsustainable bank credit inflation and malinvestments, but rather inadequate aggregate demand (ie. we only need to spend more).
http://www.minyanville.com/businessmarkets/articles/stock-market-dow-jones-obama-congress/5/25/2010/id/28458
So on the Road to Serfdom the unConstitutional coup has just turned off the interstate and is entering into the neighborhood of fascistic socialism. You can tell by the hoodlums that line the streets!
Nice Metaphor!
But it is quite clear from history that all governments are unsustainable. So where’s the news?
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