MORFseconomicblog

economic analysis from Georgia Ladlie MORF's lead economist

What can Obama say that will help?

The big speech is Thursday.¬† Obama’s people sure know how to build up an event… (too bad some idiot aid forgot about the NFL opening ūüė¶ )¬†¬†¬†He better come out tap dancing with a brand new routine since all the pundits are predicting the same old same old.¬†¬† He hinted when he spoke on Monday in front of the Unions in Detroit that he would push for a middle class tax cut.¬† That’s a good move¬†since the Republicans can hardly disagree with that.¬† Problem?¬† He has said this before and the public doesn’t believe it.¬†¬†It has “leaked” out….. perhaps orchestrated… that he will talk infrastructure.¬†¬† Everybody likes better roads and bridges and that has a Roosevelt overtone that certainly can help his campaign.¬† He better shy away from bullet trains and¬†wind power since the economists are in agreement that Green Sector jobs are difficult to create and maintain.¬† So what can he say¬† that will help create confidence?¬† Nothing.¬† He is screwed.¬† He’s got Romney out there with a list of 59 actions ready to implement.¬† Perhaps he can have some thieves break into Romney’s office and plagarize his ideas (channeling Nixon)?¬† One big problem….. you don’t know if Romney has the answers either.¬†¬†There is no magic pill!¬† Maybe he should just come out and say that in his speech.¬† Drop all the politician vernacular and stand up and get vulenerable with the public!¬† (like that is ever going to happen…she writes with sarcasm… sorry.. there is no font for sarcasm)¬† How do you make people get back their CONFIDENCE?

If I were King

Now if I were King…… First, ¬†I would start my speech EARLY… so¬†that all you have to miss of the NFL opening day is the first BS hour of commentary from the has been players and wannabe’s.

Second, I would start with the infrastructure idea since it does seem to be one of the easiest and fastest ways to inject job creating cash into the system and everybody likes the results.

Third, I would discuss the need for State by State micro loans.¬†¬†Mimic what we do around the world for helping third world countries.¬† Identify someone locally who has their nose to the ground and is aware of what regional entreprenuers are out there and what good ideas they might have that can benefit from free financing.¬†¬† Get the loans out to the small businesses that are efficient and profitable to promote expansion.¬† Stop giving money to inefficient people in the name of “social change.”

Fourth,¬† invest in education and don’t be cultural and¬†general about it.¬†¬†I am NOT talking about giving money to the NEA.¬† Tenure is crummy (I will blog on this one later).¬† Get students going to school in much needed occupations the¬†aid¬†they need.¬† Nurses, doctors, computer technicians, statisticians … whatever shortages that exist help the market speed up meeting those needs.

Fifth, stop expanding the government.  NO MORE CZARS.  No supercommittees.  The problem with government is it is easy to create a government position, office.. etc.  It is a HELL of a lot harder to cut it.

War… or Nibble?

I remember stomping across the stage at Middlebush Auditorium on the Mizzou campus twenty five
years ago bellowing to my basic macroeconomics students, “War is GOOD!”¬† I enjoyed the perplexed
looks on their faces.¬† It meant two things….first, I had their attention (hence the stomping) and second, I had
tweaked their intellect.¬† How can war begood?¬† Don’t mothers cringe when their kids run around make believing sticks are guns?
Whoa, don’t people die in war?¬†Aren’t buildings and bridges blown up in war?¬† I could almost see the T.V. images of the
blood and carnage in Vietnam cruising through their brains. (Yes, it’s true,there was T.V. back then)¬† How can
something so bad be good?  Maybe in bizzaro world of Superman.

Nope.  Not bizzaro world.  It is reality.  In the real world there are costs and benefits to everything.  An economist
lives and dies by this mantra.  We make our living trying to identify, calculate and forecast costs and benefits.   The costs are not always easily qualified and quantified and the benefits are not usually easily recognized and measured.  Predicting and forecasting
these is comparable to teaching yourself to be an idiot Savante.

Yet, any idiot can see the cost of War.  Death and destruction.  It is such a stark cost, so personal that we as a civil society believe War is bad.

Look closer.¬† Or, perhaps, step further back and change your perspective slightly.¬† Imagine you are at the art gallery physically examining a beautiful Monet impressionist painting.¬†¬† You¬† stand back and admire the lillies on the pond. Now walk closer to the painting.¬†The closer you get the more you see the individual strokes, dots that don’t look like lillies.¬† Changing your examination mindset brings you a whole new view.¬† Do the same with War.¬† Historically, the United States has come together in times of WAR. We did not pull out of the depression solely because
of Roosevelt’s policies, we pulled out because we had to unite against an evil dictator in Germany who was trying to take over the world.¬† We did not go to war because of Hitler; J.P.Morgan the industrialist begged¬† congress and Roosevelt to help the English and protect his holdings in Europe and congress refused.¬† We went because the Japanese had the audacity to bomb us.¬† As a country we started working together to win the war.¬† Politics were set aside and more importantly, the FEAR of economic failure.¬† No more talk of depression, all the country turned to producing

War did not only fix the United States, it fixed the world’s economic woes.¬† Japan was devastated by the nuclear bombs
dropped on their cities.  The United States went in after the war and helped re-build their industries.  It is somewhat ironic the the Japanese steel
companies were able to out compete American steel in the 1950’s as a result in large part to the new state of the art plants the United States helped them build after the war. War results in major advances in production and technology.¬† The development of smart bombs led to major advancements in GPS technology.¬† The use of android robots rather than soldiers has created major developments in the private sector robotics.

SIDENOTE¬† – Vague movie reference = “The Mouse that Roared” (1959)¬† This is a wonderful Peter Sellers comedy.¬† The hilarious story of how the Duchy of Grand Fenwick ( the leader of a tiny economically distressed¬† country ) waged war on the United States in hopes that their country would be destroyed and subsequently re-built by the United States and gain¬† prosperity.

So, lets get back to today.  My last blog entry examined the current economic quagmire we find ourselves mulling in.  We need a leader and none is forthcoming.  Do we need a war?  Some cataclysmic event or natural disastor that pulls us all together and makes us forget our fears?  My military friends tell me NO WAY.  They tell me the army is tired.  Ten years of fighting in Iraq and Afghanistan have drained them.  Perhaps
Pakistan?  They have nuclear capabilities.  What if they did something stupid, like dropping a bomb on Cleveland? Or worse yet, Daytona in the spring. That would be stupid!  Piss off a bunch of NASCAR fans and you will not only get a war, it will be over quick so they can get back to the season and find out if this is the year of Carl Edwards! (gotta go for 99 since he is Columbia Missouri native)

Seriously, war today would be difficult to pull off. Technology has made it possible to talk, virtually meet and work
together with people clear across the world.¬†Shipping them products takes as little as a day and a half.¬† The more intertwined the United States’
economy becomes with our potential “enemies” the less likely we all are to hurt and kill each other.¬† Are you really going to kill your customer or your worker?¬† If the guy owes you money you have to let him live so he can pay you back!

Can we pull out of this recession or whatever you want to call this “soft bump” now?¬† War? Probably not.¬† This one is going to take some slow steady changes.¬† Those who have the vision, those who dare to start a business in bad times, those who survive the bad times and hang on will make little nibbles at the problem.¬† They will do what they need to do to slowly grow and prosper.¬† While the politicians, wallstreet and the economic forecasters change their tactics week after week, the spirit that made this country great once will permeate.¬† In spite of the interference, quietly, businesses will operate on, solving their individual problems, meeting their small growth goals, finding their niche markets and creating new ones….nibbling away at the negativity.¬† No one leader will pull us out of this, this time, it will have to be the heart of successful capitalism that keeps beating away, chugging on, prospering in times of diversity.

Gosh… that sounded
good.  Now, can I get people to believe
it so things will get better?  I only
hope and pray.

Maybe… just maybe… we can have a LARGE national disastor,¬† Irene… was not big enough, just a drop in the bucket of expansion needed.

All we have to fear is FEAR

Our economy is on the ropes.¬† A mess, a quagmire, struggling,recessed, possibly depressed, these are all adjectives flying out of the mouths of business people “in the know”.¬†The politicians blame Wall Street and the banks, the banks blame politicians and big business.¬† Oh! And lest we forget the oil Sheiks, the energy companies and¬† the over inflated price of fuel slicing big profits out of the sides of the working people. There are so many fingers pointing in so many different directions the lines drawn look like a cats cradle of crossed yarn.¬† Is there a simple solution out there that someone has conveniently forgotten to implement?¬†¬† Isn’t there some white knight who can lead the Republicans or the Democrats or the upstart Tea Party people to the golden gates of prosperity again?¬†Reagan? Roosevelt?¬† Perhaps their reincarnated souls?

I have no magic wand and I do not believe there is one out there… yet.¬† Here is the dirty little economic secret about our problems….¬† They are all in our heads. ¬†Yep.¬† It is all about what we (the American¬† general public)¬† believe is going to happen.¬† The economy runs on EXPECTATIONS.¬† If you believe things are going to get worse,
guess what?  You make them worse.  No one likes a pessimist because they bring
bad luck and bad times.  If one person is worried that a depression is imminent, they begin stockpiling and saving their money.  Why invest if the investment is doomed?  When they save their money in the mattress, in the jar, in the safe bet low risk place, it cannot be multiplied to buy and produce more things.  When more than one
person adopts this gloom and doom view… when people collectively believe in a
downturn, their belief in the downturn actually CAUSES the downturn to
happen!¬†¬† Jimmy Stewart’s George tried to explain this to the good people of Bedford Falls in “It’s a Wonderful Life!”¬† When your money gets deposited in the bank it does not stay there long.¬† It usually gets leant to the guy down the street who needs a new roof, or the businessman who wants to start a mercantile retail business.¬† It multiplies and gets used by more people…. CREATING WEALTH.¬†Don’t take your money out of the system he proclaimed.¬† Let it work.¬†George was successful in stopping the raid that day, because he was able to dissipate the fear.

Where is Jimmy Stewart today?  The banks have been battered and spanked the last few years.  They were told to make loans to ALL sectors of society and not to discriminate in the housing markets.  Yet, this discrimination was justified.  Certain
areas of town represent the lower class and home ownership is rare because
people in those areas do not have the income to support the purchase of a
house.  The banks made those loans at the urging of the government and when those loans later began to fail, instead of an apology from the politicians they received a visit to testify in front of congress and explain their poor loan rates and higher capital
restrictions.¬† Today, the banks have lots of cheap cash available, however they do not want to loan it unless the people requesting the loan can prove that they have no need for that loan.¬† Quite a paradox.¬† The Federal¬†Reserve cannot make the banks loan the money, their tools are only enticement and are not binding.¬† In economic terms we call this a LIQUIDITY TRAP.¬† The banks fear a repeat of the collapse of the housing market, they fear the reprisals for loaning to business’s which later go bankrupt, so, rather
than take the risk they sit on their money, awaiting a better day somewhere in
the future.   The money is not multiplying.  It is not pushing the production of goods nor the consumption of services.  It is trapped and is ineffective.

Banks are not the only ones who are afraid.  Consumers are afraid.  Why make that major auto purchase or that major electronic purchase that locks you into monthly payments for the next three years when you are not sure what the economy will be like in three years?   The little bit of retirement money you hid away needs to be increased since things are not looking so good.  Every time the money is placed in a jar, in gold under the bed, in a bank who doesn not lend the funds it is causing a drainage on the economy and MAKING THINGS WORSE.  Perhaps we should get the politicians
together, the new super commitee with Obama and Gingrich in the lead singing…” Happy days are here again” and people will ease up, let goof the squirreling and start buying again.¬†¬†That’s it!¬† That is my excuse for hitting the mall tomorrow.¬† In fact, I
implore all of you out there to do what is right for the country and theeconomy…. GO SHOPPING!!!¬† And not just looky loo shopping, really buy something!¬†The bigger and more expensive the item the better.

That is the light hearted solution today.¬† Tomorrow, I will get serious and make the case for what will most likely happen to pull us out of our doldrums……¬† War.

It’s a brave new economic world for MORF Consulting

Hello blog readers!¬† This is the blog sponsored by MORF Consulting.¬† I am the new Economist on staff and I am going to attempt to babble, ramble, spew, pontificate, postulate and stir up the pot when it comes to economic analysis of yesterday,¬†today and tomorrow’s events!¬†¬† Please feel free to agree, disagree or let me know if I make any sense at all!¬† I love a good argument and I love praise… I can take a good critique as long as it makes sense so send them on!¬†¬† Let the games …begin.