13 August 2010

This Was the Week That Was: 13 August 2010

For the next little while, I'm going to just keep notes during the week, and post on Friday; since this is Friday the 13th, and the stock market has been playing Vomit Comet, there's been just too much going on to have enough time to deal with it all. I didn't keep written notes, of course, just having gotten the notion into my head, as a result, this missive is extemporaneous.

The two highlights of the week were the continuing braying from the Right Wingnuts about "Inflation is Coming, All Poor People Must Be Starved to Death", and Oracle's apparent unmasking as the Evil Monolith.

About Inflation. Regular readers have waded through three installments of Dee Feat, but it all bears repeating: inflation happens for any of three reasons; a commodity gets scarce and expensive (aka, the stagflation of the 1970's when the hated Arabs cut off the oil) which is Cost Push, when labor gets enough power to impose wage increases beyond productivity (alleged to have happened in the 1960's, but I don't buy it) which is Wage Push, and when there is excess money just floating around in the system chasing a stagnant output level which is Demand Pull (there are historical cases in other countries, but none here that I can recall here off the top of my head). It is alleged now, by the Right Wingnuts, that the stimulus and TARP before it, will cause inflation, but they're wrong so far, and will be wrong in the future. THE ONLY WAY YOU CAN GET CASH DRIVEN INFLATION IS IF THE MONEY IS IN THE HANDS OF CONSUMERS. Rinse, repeat until understood. That hasn't, and won't be, happening. The money, both TARP fur shur, and much of the stimulus, went to the Financial Services Industry; which caused the mess in the first place. Wages continue to decline, even for the employed, and the ranks of the 99ers grow each week.

There are, one may note, localized versions of Demand Pull; localized in place, time, or commodity. You see where this is going? The housing bubble is localized inflation. Prices in the Washington, DC metro is localized inflation. The Chinese and whoever, dumped cash into the mortgage market and rocketed prices up. But only by getting the money into hands of consumers.

The last few weeks have seen rising new unemployment counts, but steady or declining total unemployment and unemployment rate. And wonder of wonders, some Mainstream Media mention, in passing, that this is due to folks being tossed off the rolls. Real unemployment is getting worse. The stock market then gets scared because there's no demand for goods, and it goes into a tail spin. As this endeavor has preached from the beginning, you don't improve an economy by making more people poorer. Well, the fascist ones like the idea. But the USofA isn't fascist, is it?

And, since April, the stock market has been falling. Why? Money is being withdrawn by both retail (what few there are) and hedge funds; ergo, overall prices fall. There are occasional increases, but as money is taken out of the game, consumers (stock gamblers) have less to spend, so prices overall fall. It's that simple. It can't last for too long. The cash has been injected, and won't disappear. The cash won't be transferred to regular consumers, the riff raff on Main Street, so falls are temporary. Remember, buying stocks in companies is gambling, not investing in the companies. Roll the dice, Nathan. Even if the "new normal", as the condition is coming to be called, is 10% unemployment and little demand for goods, the Fed and EU continue to keep money interest rates near zero, so you might as well pump up stock prices and earn a lot more. It beats working for a living.

The other interesting note is Oracle suing Google over some aspect, not yet public, of Google's use of java. For the non-tech types, Oracle got into some hot water when it went to buy Sun over the way java would be manipulated by Oracle if the sale was approved. Eventually, Oracle flummoxed both our DoJ (not so difficult) and the EU (thought to be tougher) into approving. Right now, the Cassandra's look right.

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