The first ship I ever steered was USS Iowa (BB-61) a 45,000 ton behemoth as long as three football fields, propelled by more than 200,000 horsepower.
The boatswain's mate who taught me to steer emphasized that I shouldn't use too much rudder. If I did, I would be constantly chasing the course back and forth across the compass binnacle and never get it right. Even worse, the constant corrections would slow the ship down and waste fuel. If I just used a light touch, natural wave action would usually bring the ship back on course.
As it turns out, the same principal applies to the economy and inflation.
There are two kinds of inflation. There is "headline" inflation, which includes highly volatile prices like food and gasoline. This kind of inflation is notoriously seasonal and subject to temporary influences (bad weather, for example).
The other kind of inflation is referred to by economists as "core" inflation. That is the underlying inflation rather than day to day price fluctuations.
When the Fed manages monetary policy, they have found through experience that they should limit their measures to those affecting core inflation.
Core inflation right now is less than two percent. Furthermore, it is not increasing and there is no sign it will increase anytime soon.
The problem for most of us is that we spend money at the grocery store and gas station in response to "headline" inflation.
Nonetheless, it would be bad for all of us if the Fed started responding to headline inflation with a heavy hand on the helm. That would be another way to kill economic recovery. Goodness knows, the House of Representatives is doing enough on its own to accomplish that. They don't need the Fed's help.
Thursday, April 28, 2011
Wednesday, April 27, 2011
NC Unemployment Benefits
Forbes.com reported on a confrontation today in Raleigh between Republican legislators and workers losing their unemployment benefits.
"The jobless workers." Forbes.com reported, "are caught in a partisan rift over the seemingly straightforward move to change a formula for calculating unemployment benefits, allowing the federally funded program to continue for people out of work for up to 99 weeks."
Some may call it a "partisan rift," but real people are at risk. The dispute, at bottom, is over whose vision for the future of America will prevail. The issues are certainly not trivial.
Americans are increasingly reliant on government programs to meet their most basic requirements. Last year, more than 18 percent of the nation's total personal income came from entitlement programs such as Social Security, Medicare, food stamps, unemployment benefits and other programs, according to an analysis by USA Today. Wages were only about fifty percent of total personal income, the lowest share since government tracking began in 1929.
National Public Radio asked members of the public receiving government benefits to call in with their stories. The transcript of their calls is heart wrenching.
"The jobless workers." Forbes.com reported, "are caught in a partisan rift over the seemingly straightforward move to change a formula for calculating unemployment benefits, allowing the federally funded program to continue for people out of work for up to 99 weeks."
Some may call it a "partisan rift," but real people are at risk. The dispute, at bottom, is over whose vision for the future of America will prevail. The issues are certainly not trivial.
Americans are increasingly reliant on government programs to meet their most basic requirements. Last year, more than 18 percent of the nation's total personal income came from entitlement programs such as Social Security, Medicare, food stamps, unemployment benefits and other programs, according to an analysis by USA Today. Wages were only about fifty percent of total personal income, the lowest share since government tracking began in 1929.
National Public Radio asked members of the public receiving government benefits to call in with their stories. The transcript of their calls is heart wrenching.
The Matinee - Waiting for Hopalong
In the late forties, kids flocked to the matinees. It was always a raucous crowd of children ranging from about five years old to twelve or so. When the cartoon started up, the crowd cheered and then watched in rapt attention as the previews of coming attractions, the next episode of an exciting serial and the newsreels all flashed on the screen.
Then came the main attraction, usually a cowboy movie but sometimes a detective story like Boston Blackie.
Cowboys were the favorite and it was from those movies that we received the most influential instruction about proper conduct. Cowboy movies were far more influential than Sunday School.
The plots were always the same. The villain, a greedy, cowardly bully who sent his hired hands to do the dirty work, had devised a way to take over the town and leave the good, hardworking and honest townspeople, farmers and ranchers without an effective voice.
Then the hero rode into town. It might be Hopalong Cassidy or the Lone Ranger and Tonto, Lash Larue or Wild Bill Hickock. It might even be Roy Rogers or Gene Autry, though they sang entirely too much.
The hero quickly sized up the situation, possibly spying on the villain. Then he organized thetownspeople, pumped up their courage and led them in the effort to undo the villain's plan. There was always a fist fight, and often a gun fight, though the hero never killed anyone. He would just shoot the gun out of the bad guys' hand and "bring him to justice," which meant turn him over to the Sheriff.
It was all good fun, even though we knew it was unlikely that a real world hero could shoot a gun out of someone's hand without otherwise harming him.
Other moral lessons from these movies: greed is bad and greedy people are usually evil; people have to stick together to fight evil; honest workers who do an honest days' work for an honest days' wages are the good guys; if a deal isn't fair, it isn't right.
And altruism is good.
Not bad life lessons.
In the real world, though, it might not work to just wait for Hopalong. Sometimes we have to set things right ourselves.
Then came the main attraction, usually a cowboy movie but sometimes a detective story like Boston Blackie.
Cowboys were the favorite and it was from those movies that we received the most influential instruction about proper conduct. Cowboy movies were far more influential than Sunday School.
The plots were always the same. The villain, a greedy, cowardly bully who sent his hired hands to do the dirty work, had devised a way to take over the town and leave the good, hardworking and honest townspeople, farmers and ranchers without an effective voice.
Then the hero rode into town. It might be Hopalong Cassidy or the Lone Ranger and Tonto, Lash Larue or Wild Bill Hickock. It might even be Roy Rogers or Gene Autry, though they sang entirely too much.
The hero quickly sized up the situation, possibly spying on the villain. Then he organized thetownspeople, pumped up their courage and led them in the effort to undo the villain's plan. There was always a fist fight, and often a gun fight, though the hero never killed anyone. He would just shoot the gun out of the bad guys' hand and "bring him to justice," which meant turn him over to the Sheriff.
It was all good fun, even though we knew it was unlikely that a real world hero could shoot a gun out of someone's hand without otherwise harming him.
Other moral lessons from these movies: greed is bad and greedy people are usually evil; people have to stick together to fight evil; honest workers who do an honest days' work for an honest days' wages are the good guys; if a deal isn't fair, it isn't right.
And altruism is good.
Not bad life lessons.
In the real world, though, it might not work to just wait for Hopalong. Sometimes we have to set things right ourselves.
It's the Economy, Stupid!
Eighteen years ago, the Clinton administration focused its efforts intently on improving economic conditions for ordinary Americans. As a result, during President Clinton's two terms from 1993 to 2001, employment in this country increased by 23 million jobs, far surpassing the rate of growth of the population.
During President George W. Bush's first term, there was zero job growth, while the population grew, resulting in a lower percentage of Americans employed than in 2001. By the end of President Bush's second term, the total of job increases during his eight years was 4.8 million. The Bush job increases fell significantly below the increase in population.
As soon as he became president, George W. Bush insisted that tax cuts would lead to more prosperity for Americans.
It didn't work then and it won't work now.
Why do we keep repeating failed experiments?
During President George W. Bush's first term, there was zero job growth, while the population grew, resulting in a lower percentage of Americans employed than in 2001. By the end of President Bush's second term, the total of job increases during his eight years was 4.8 million. The Bush job increases fell significantly below the increase in population.
As soon as he became president, George W. Bush insisted that tax cuts would lead to more prosperity for Americans.
It didn't work then and it won't work now.
Why do we keep repeating failed experiments?
British Austerity
The Cameron government in the UK is busy testing the hypothesis that the way to economic recovery from a severe recession is to drastically reduce government spending.
How is that working out? Not so well, according to the latest information from the Financial Times. While the government is touting GDP growth in the first quarter of this year, it is only 0.5%. That offsets the previous quarter's decline of 0.5% and shows the British economy essentially treading water.
Britain's opposition finds the performance unimpressive. Mr. Balls, the chancellor of the shadow (opposition) government in waiting, observed that Chancellor Osborne “doesn’t seem to understand that without jobs and growth you can’t get the deficit down. The slower growth, higher unemployment and higher inflation we now see under George Osborne means he is now set to borrow £46bn more than he was planning to. That’s a vicious circle and makes no economic sense at all.”
Regrettably, our own deficit hawks seem bent on leading us down the same path.
By the way, the "austerity will get us out of recession" hypothesis has been tested before. We tested it in 1929. Japan tested it in the 1990's. It doesn't work.
How is that working out? Not so well, according to the latest information from the Financial Times. While the government is touting GDP growth in the first quarter of this year, it is only 0.5%. That offsets the previous quarter's decline of 0.5% and shows the British economy essentially treading water.
Britain's opposition finds the performance unimpressive. Mr. Balls, the chancellor of the shadow (opposition) government in waiting, observed that Chancellor Osborne “doesn’t seem to understand that without jobs and growth you can’t get the deficit down. The slower growth, higher unemployment and higher inflation we now see under George Osborne means he is now set to borrow £46bn more than he was planning to. That’s a vicious circle and makes no economic sense at all.”
Regrettably, our own deficit hawks seem bent on leading us down the same path.
By the way, the "austerity will get us out of recession" hypothesis has been tested before. We tested it in 1929. Japan tested it in the 1990's. It doesn't work.
Tuesday, April 26, 2011
Ford Ascendant
Ford Motor Company today reported its first quarter net income was $2.6 billion, or 61 cents per share, a $466 million increase from first quarter 2010. Pre-tax operating profit was $2.8 billion, or 62 cents per share, an increase of $827 million from first quarter 2010. Ford also reported it had posted a pre-tax operating profit for seven consecutive quarters.
This is not just good news for Ford. It is good news for a particularly effective style of management, advocated by one of America's great innovators.
After a bad experience with an automobile built by one of Ford's domestic competitors, I read that Ford had hired W. Edwards Deming as a consultant on quality. Not long afterward, I bought a 1987 Taurus and have purchased Ford products ever since.
It wasn't that I thought Deming could magically and immediately bring Ford up to the quality of the Japanese auto makers to whom he gave advice not long after WWII. It was rather that I thought his hiring told me that Ford was now taking quality seriously. That meant a lot.
It turns out, Deming paid no attention to the details of Ford's quality control procedures. He examined Ford's management. It is management, he insisted, that is responsible for 85 percent of a company's problems with quality.
Problems don't lie to any significant degree with the workers, and cannot be corrected by the workers. Slogans and exhortations don't work, he insisted. Instead, he concentrated on changing the culture of management.
Good for Ford.
I'll have more to say later about some of Deming's ideas and how they might help address some of our problems in government and politics.
This is not just good news for Ford. It is good news for a particularly effective style of management, advocated by one of America's great innovators.
After a bad experience with an automobile built by one of Ford's domestic competitors, I read that Ford had hired W. Edwards Deming as a consultant on quality. Not long afterward, I bought a 1987 Taurus and have purchased Ford products ever since.
It wasn't that I thought Deming could magically and immediately bring Ford up to the quality of the Japanese auto makers to whom he gave advice not long after WWII. It was rather that I thought his hiring told me that Ford was now taking quality seriously. That meant a lot.
It turns out, Deming paid no attention to the details of Ford's quality control procedures. He examined Ford's management. It is management, he insisted, that is responsible for 85 percent of a company's problems with quality.
Problems don't lie to any significant degree with the workers, and cannot be corrected by the workers. Slogans and exhortations don't work, he insisted. Instead, he concentrated on changing the culture of management.
Good for Ford.
I'll have more to say later about some of Deming's ideas and how they might help address some of our problems in government and politics.
Momentous Events
This Friday, April 29, 2011, two momentous events taking place an ocean apart will probably dominate television.
Early that morning east coast time, the world will be treated to the spectacle of the royal wedding of Prince William and Kate Middleton.
That afternoon, we will see the final launch of space shuttle Endeavor, commanded by Captain Mark Kelly, husband of Congresswoman Gabby Giffords, who was shot in the head last January by an attempted assassin. Congresswoman Giffords is expected to attend the launching. Oh, by the way, so will President Obama.
By far the most momentous of those events will be the presence of Congresswoman Giffords at the launch of Endeavor.
My guess is that the largest TV audience will be that of the wedding.
A question for the bean counters among us: which event cost their nations the most - the wedding or the space launch?
I have no idea.
Early that morning east coast time, the world will be treated to the spectacle of the royal wedding of Prince William and Kate Middleton.
That afternoon, we will see the final launch of space shuttle Endeavor, commanded by Captain Mark Kelly, husband of Congresswoman Gabby Giffords, who was shot in the head last January by an attempted assassin. Congresswoman Giffords is expected to attend the launching. Oh, by the way, so will President Obama.
By far the most momentous of those events will be the presence of Congresswoman Giffords at the launch of Endeavor.
My guess is that the largest TV audience will be that of the wedding.
A question for the bean counters among us: which event cost their nations the most - the wedding or the space launch?
I have no idea.
Monday, April 25, 2011
Church and State II
In the late 1940's, I attended Star School, a rural grade school about eight or ten miles east of Oklahoma City.
In addition to reciting the Lord's Prayer every morning, we had other religious instruction.
The most memorable was the annual visit by an itinerant preacher, who addressed the student body on the importance of religion, the evils of smoking, and related subjects.
At one point in his presentation, the preacher asked if any student could recite the golden rule. He offered a quarter to anyone who could do so. Hands shot up, usually hands of eager boys anxious to win the quarter. The preacher would call on the boys in turn. None ever won the quarter.
The only way to win, it turned out, was to recite the King James translation of Matthew 7:12 - "whatsoever ye would that men should do to you, do ye even so to them." No variations allowed.
I don't recall that he required the rest of the verse, where Jesus is quoted as saying: "for this is the law and the prophets." That is, this is the essence of Judaism, and by implication, the essence of Christianity.
Sounds like altruism to me. Maybe those who claim to be Christians and also followers of Ayn Rand should reexamine their position.
In addition to reciting the Lord's Prayer every morning, we had other religious instruction.
The most memorable was the annual visit by an itinerant preacher, who addressed the student body on the importance of religion, the evils of smoking, and related subjects.
At one point in his presentation, the preacher asked if any student could recite the golden rule. He offered a quarter to anyone who could do so. Hands shot up, usually hands of eager boys anxious to win the quarter. The preacher would call on the boys in turn. None ever won the quarter.
The only way to win, it turned out, was to recite the King James translation of Matthew 7:12 - "whatsoever ye would that men should do to you, do ye even so to them." No variations allowed.
I don't recall that he required the rest of the verse, where Jesus is quoted as saying: "for this is the law and the prophets." That is, this is the essence of Judaism, and by implication, the essence of Christianity.
Sounds like altruism to me. Maybe those who claim to be Christians and also followers of Ayn Rand should reexamine their position.
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