Elasticity

Turning away from crass national politics we find a report from Bloomberg Economics that talks about the impact of $100 oil.

The good news is that Bloomberg Economics found that oil at $100 would mean less for global growth in 2018 than it did after the 2011 spike. That’s partly because economies are less reliant on energy and because the shale revolution cushioning the U.S.

Elasticity.  When the quantity demanded increases, the supply tends to increase and the equilibrium price floats on the new supply curve.   That's basic economic theory.  It's taught in most college classes in Eco 101.

Here's the deal with oil.  Oil companies exist to make a profit.   If it costs $XX.XX to take a barrel of oil from the ground, then if the price falls below t hat cost, t hey turn the pumps off and let the oil stay in the ground.  I know of at least one oil field that is sitting idle right now, not because it's dry, but because the price of oil is less than the cost to pump it out of the ground.

Right now, WTI spot prices are at $75.30 and Brent is running at about $84.90.  Let the price of oil rise to $100 and all across the US, pumps will whir to life and the supply curve will shift.  It's basic economics, and it's all based on equilibrium and elasticity of supply.

Two Things

Two interesting news items this morning, both of them having to do with the socialist disaster area that is Venezuela.

First, their president admits that the economy has failed.   Yeah, it took him long enough to admit that.  It has been obvious to the casual observer for a while now.

Second, a single US dollar will buy 3.5 million liters of gasoline in Venezuela.  I can remember when a single US dollar would buy five gallons of gasoline in the US.  But that's been several decades ago.

That is the face of socialism everywhere it is tried.  it's a simple lesson, but one that many people never seem to realize.  Socialism fails everywhere it is tried.

More Fake News

It seems that CNN had a public forum, a town hall type meeting that is big in the news this morning.

Ostensibly set up as a place for survivors of the latest outrage to vent, they invited local politicos to attend.  Senator Marco Rubio was one who showed up.   Of course, CNN scripted the whole thing, to provide coverage to their preferred narrative that guns are bad and Republicans are evil.  Kudos to Rubio for showing up to be the scapegoat.  Those people needed to vent, and he provided the target.

These folks are grieving.  I get it.  They're hurting and they aren't getting the answers they need.  The horrible truth is that they won't get the answers they seek.  Those answers don't exist.  The sick, tormented person who conducted the atrocity (no, I won't use his name), probably doesn't have the answers.  Those answers won't exist until we as a society get over the idea that Government is the answer.  It's not, it's often the problem.

Government allowed the offender to stay in the school system, long after it was apparent that he was a continuing problem.  Government failed to heed warnings that he was dangerous.  Government failed to protect the innocent children that were slain.  Government failed.

I was in a meeting the other night, talking exactly about these things.  Someone mentioned that "this is the world we live in", and I've been thinking about that phrase, and the implications of that mindset. When I hear that, I seem to hear that we, as a society, are willing to live in a less free society because sometimes bad people do bad things. 

In related news, I see that Broward County deputies will carry rifles on school campuses.I admit to mixed feelings about that.  We all know that I'm a staunch supporter of the 2nd Amendment, and I've carried rifles as part of my duty when I was in other assignments and working for my Uncle. 

But, if this is the world we live in, perhaps the bad guys have won.  Of course we have a mandate to protect the children, but at what price?  I admit that I'll have to ponder this a bit longer.

Clueless

It seems that the Democrats are holding classes and seminars on how to talk to real people.

Manchin and nine other Senate Democrats are up for reelection next year in states that Trump won. Much of the event appears geared at figuring out how to turn people who supported Trump into Democratic voters in 2018.

The problem is that liberals despise people who think differently than they do.

 As for this election, and the locals, she continued, “I think they thought the liberal elite was looking down on them, and I guess, in some ways, we were. Because we couldn’t believe anybody would vote for Trump.”

If you disagree, they want to shut you down.

 “My job is to shut other white people down when they want to interrupt,” Brown said during a DNC candidate forum.

A lot of big city Democrats don't see how devastating Obama has been to the party.  Since he took office in 2009, they've lost most governorships, both houses of Congress, and over a thousand lesser elected offices nationwide.  Their big women's march this past weekend was a debacle that descended into parody.

And, in case the Democrats didn't notice, the Dow jumped over $20K today, for the first time ever.

Falling Oil Prices Hurts Saudi Middle Class

As the Wall Street Journal reports.

Mohammed Idrees used to travel to London once or twice a year, but these days the Saudi civil servant is asking his wife and children to cut back on using the family car to save fuel and has installed a solar panel for the kitchen to reduce electricity costs.
For decades, Saudi nationals such as Mr. Idrees enjoyed a cozy lifestyle in the desert kingdom as its rulers spent hundreds of billions of dollars of its oil revenue to subsidize essentials such as fuel, water and electricity.
But a sharp drop in the price of oil, Saudi Arabia’s main revenue source, has forced the government to withdraw some benefits this year—raising the cost of living in the kingdom and hurting its middle class, a part of society long insulated from such problems.

I can't blame the Saudi government for not providing subsidies when the cash isn't available, and I certainly can empathize with Mr. Idrees.  When the government money runs out, and the welfare goes away, everyone has to cut back. I get it.  The Saudi government can't afford to subsidize everyone.

I wonder when our government is going to make the same decision?  What can't go on forever, won't.

Turned A Profit

Well, lookee here.  It seems that the US Postal Service turned a profit last quarter, for the first time in several years.

The U.S. Postal Service turned a profit in a financial quarter for the first time in five years, though President Obama still proposed the agency slash 12,000 employees in his fiscal 2017 budget.

That's great news.  Evidently they're turning their operation around, after losing money for years.  I generally like the US Postal Service, although they've been "behind the power curve" for several years. They face stiff competition from other package delivery services (like UPS and FedEx).

I have noticed from my several package deliveries that the USPS is making it's money on package delivery.  I have a package coming this week from Fernley, NV, and the USPS is the one delivering it.  It should be here tomorrow.

Pore Ol' Unions

I see in the news that the unions are still hammering Wal-Mart.  You'd think by now they'd learn.  They're plannning a strike on Black Friday to draw attention to .. I dunno... something.  Higher wages, better benefits, the usual litany of complaints.

Wal-Mart is in a bind, believe it or not, because of competition.  They're a gigantic player in the retail box store business, and they've got to control costs just like everybody else.  In this economy, it makes business sense to hire part-time help, and that's what Wal-Mart does, just like everyone else.

However, when people talk about striking, I don't have much sympathy for them.  Nurses, doctors, police, firefighters, EMT's, CNAs and all manner of people work around the clock, 24/7/365.  Let's not forget the utility folks, who come out on Sunday when a squirrel trips your electricity, or the poor folks who repair utilities after a storm, or the guys who go in every single day to make sure that you have good drinking water and that your sewerage flows downhill.

Yeah, it's hard for me to have much sympathy for striking Wal-Mart employees.  And you know where sympathy falls in the dictionary.

Pineville Debates Alcohol

There's a debate raging in Pineville, LA right now about whether or not to allow businesses to sell alcohol.  Yep, that's right, Pineville is dry.  Pineville has been dry for as long as I can remember, except for one short time in 1980 when the Louisiana Supreme Court invalidated the alcohol prohibition laws in the state and called for new elections.  For a short time, Pineville and every other "dry" jurisdiction in Louisiana was wet, leading to such bizarre businesses as "Bobs Auto Parts and Package Liquor".  The citizens of Pineville ultimately voted the town dry again, except for one small precinct which voted to allow low-alcohol package sales.  In that precinct, you can buy beer.  Not surprisingly, the beer stores in that precinct do a landslide business, because the beer drinkers don't have to cross the river into Alexandria.

Just across the river, Alexandria is wet.  Wide open, it allows alcohol sales in bars and restaurants, package stores, grocery stores and convenience stores.  All they need is a license.

Recently, a local developer told the city of Pineville that he was hanging-fire on several development deals.  Hotels and restaurants wanted to come into the area, but that they want to be able to sell alcohol and that the prohibition on the Pineville side of the river was the deal-breaker.  As regards the city itself, tax revenues are flat, but costs keep increasing.  Pineville is simply not able to compete with businesses across the river because of the alcohol prohibition and that prohibition is stifling development.

The usual suspects are against alcohol.  They're vocal, committed, and powerful.  As are the proponents of development.  Pineville held a town-hall meeting yesterday to discuss the issue, and both sides of the argument were allowed to air their opinions.

I note, with some interest, that the demographic in the affected area has changed since the last vote in 1980.  Pineville and the area northwest of the river has experienced huge growth since the last vote, with lots of folks taking advantage of better land prices and a more rural environment.  As one long-tern resident told me, ":There are houses in places where I never knew there were places to put a house."  Indeed, PawPaw lives in a subdivision that wasn't here fifteen years ago.

Whether you're "fer it or ag'in it", it's time for this issue to come before the people.  Pineville and the area north of the river has changed dramatically since 1980 and it is time again to revisit this issue.  Put it before a vote and let The People decide.  Let Freedom Ring.

Sequester?

Oh, the sequester!  The humanity!  The absolute tragedy of the cuts to government.  Thousands of workers laid off, lots of problems in airports, everything is going to grind to a halt.  If you believe any of that, we need to talk about a bridge I'm trying to sell.

They're not cutting anything, simply slowing the growth of government.  This whole sequester problem is only a problem if you believe that government should grow every year at a set rate.  This graphic from George Mason University shows how they intend to cut government under the sequester.

That looks like quite a cut, doesn't it?  Such a cut that government continues to grow.  No, dear friends, our problem is that we elected a President who doesn't understand that cutting a budget entails spending less money than we spent last year.

Mr. President, we intend for you to cut a trillion dollars from next year's budget, not simply slow the growth of government, but to actually use smaller numbers than you used last year.  A trillion dollars in next year's budget would be a good step.  A good first step.

The Instapundit Fiscal Cliff Plan

Glenn Reynolds (Instapundit), rolls out his fiscal cliff plan for House Republicans.  Revenue bills originate in the House, as we all know from high school civics, and the House is controlled by Republicans, even if many of them are only marginally conservative.  Still, Boehner and crew has a golden opportunity here.  The tax bill should consist of three parts.

1.  Adopt the Bowles-Simpson Plan.  It's not the greatest plan in the world, but it's bipartisan and it will start moving us in the right direction.

2.  Fifty percent surtax on post government employment salaries for government officials.  Lets say a cabinet officer goes to Washington, makes $200K in a year, then leaves government employment to take a private job at $1 million a year.  Simply, we tax that excess $800K at 50%.  For ten years.  The official is being hired because of his Washington contacts, so why shouldn't the people get a portion of the increased salary? Obama promised to close the revolving door in Washington, and this simple tax plan would go a long way in that regard.

3.  Make Hollywood pay it's fair share. Bring back the 20% tax on motion picture theaters, but also expand it to include CD's DVDs, and movie downloads.

If Boehner adopted this plan, pushed it through the House, then sent it to the Senate, he could say that he has sent a plan to the Democrats.  If the Senate killed it, that would be their fault.  If the Senate passed it, then sent it to Obama, he could either sign it or veto it.

The Money Votes

I don't know if you've been watching the Dow averages, but it has been steadily sliding since the election.
Nov 6 close 13245.68
Nov 7 close 12932.73
Nov 8 close 12811.32
Nov 9 close 12815.39
Nov 12 close 12815.08
Nov 12 close 12756.18
Nov 14 now 12570.95

The country voted on Tuesday, the money is voting now.  Gold is currently trading at 1725.90 per ounce. You might notice that the administration is pushing for higher taxes on the wealthy.

Obama has been pressing to let the George W. Bush-era tax cuts expire at the end of the year for the wealthiest 2 percent of the nation’s households, a tax hike adamantly opposed by Republicans. But Carney suggested that even the revenue generated by letting those tax cuts end would not be enough to tame the national debt and reenergize the economy.

It is refreshing to see Carney saying that the letting the Bush tax cuts expire won't be enough to tame the debt and energize the economy. The only way to do that is to cut spending. Drastically, to the bone. Entitlement cuts by the bushel. No, he wants 1.6 trillion in new taxes. The money folks can see which way this debate is going, and they're dumping stocks.

Those California Bankruptcies

I'm reading about those California cities going bankrupt and everyone seems to think that this is something new.  Oh, no, my child.  Cities have been going bankrupt since mankind bound together to live in cities.  Poor fiscal management, an imploding economy, lack of jobs, declining housing market, all these things conspire to make people move away.  Sometimes it's a trickle, sometimes it's a flood, but folks have been building and abandoning cities since time immemorial.  Remember studying Troy?  Point at it on a map.

More recently, in the late 19th, early 20th century we made a lot of boom towns here in the US, then abandoned them.  Google "ghost town" and see how many hits you get.  Wikipedia is a great asset when you want to talk about ghost towns.  Folks move in, folks move away.  After a while, it just doesn't make any sense to stay in that spot, so we pull up stakes and go where the opportunity is.  It's the American way.

This ain't nothing new, folks.  It's as American as apple pie.

Gridlock Eases in Metro Areas

USA Today reports that traffic congestion is easing in many metro areas.

Traffic congestion dropped 30% last year from 2010 in the USA's 100 largest metropolitan areas, driven largely by higher gas prices and a spotty economic recovery, according to a new study by a Washington-state firm that tracks traffic flows.

That's an upside, I guess. You have to find good news wherever it may be, but I don't think that those folks who don't have jobs or can't afford gasoline will see it as good news.

Gusher!

This is interesting.

The United States' rapidly declining crude oil supply has made a stunning about-face, shredding federal oil projections and putting energy independence in sight of some analyst forecasts.

If the administration would let us tap it, we might be on our way to energy independence. With gasoline prices shooting up, energy is on the minds of every American and we've got all that energy laying in the ground. Our President's decision to block the Keystone XL pipeline has cost America energy and jobs and that should be his epitaph.

I agree that there is a place for green energy. We should proceed with experimentation with solar power, wind power, coal power, nuclear power, every form of energy production, but we've got lots of hydrocarbon energy under our feet and we're foolish not to use it. Our President is foolish for holding us back.

Louisiana knows about oil booms and busts, and we also know how energy production gives good jobs and excellent paychecks to lots of people. The rest of the nation is discovering what we've known for a long time. It makes no sense not to use the resources we have at hand.

The Haves and Have-Nots

There's been a lot of news lately from the Occupy Wall Street crowd, about the haves and the have-nots. You'd think that the pore folks in the US were doing... well... poorly, but that's not altogether the case. As it turns out, the pore folks in the United States would be considered rich folks in much of the world, those places that don't have the compassion that we have.

You don't believe me? Go read the New York Times and be educated. It's true! The liberal bastion that is the NYT gets it right once in a while, and what will blow your mind is the chart that accompanies the article.

You've got to read the article to get the full benefit from the chart, but basically, the pore folks in the USA have a better standard of living than even the very rich in a country like India.

Notice how the entire line for the United States resides in the top portion of the graph? That’s because the entire country is relatively rich. In fact, America’s bottom ventile is still richer than most of the world: That is, the typical person in the bottom 5 percent of the American income distribution is still richer than 68 percent of the world’s inhabitants.

Now check out the line for India. India’s poorest ventile corresponds with the 4th poorest percentile worldwide. And its richest? The 68th percentile. Yes, that’s right: America’s poorest are, as a group, about as rich as India’s richest.

The USA is a wonderful country, where even the poorest citizen is considerably better off than the rest of the world. When we start worrying about the pore and starvin' we should keep that in mind.

Poverty numbers

It seems that the big domestic news today is that the number of people in poverty in the United States has swelled to a record 46.2 million people. More people are making less money than ever before. Of course, in the United States, poverty is defined as a family of four making about 22,000 per year, and they have things like food stamps, free or subsidized school lunches, and the best medical care that the world can provide. Many get rent assistance and every project I've been around in the Deep South has air conditioning and heating. A person in poverty in the United States lives like a prince in many other countries. No one in the US knows what grinding poverty actually is.

Still, there are more pore folks today than there were last year. This handy graphic from the Census bureau shows how income has declined under this presidency.

So, the question that the pore folks (and the rest of us) have to answer; are we in better shape now than under the last President? I think we all know the answer to that question. One wag opined that President Obama loves poor people, he's trying to make millions more of them.

Atlas Shrugs

If you want to see a summation of the nation's current problems, you'd do worse to read Victor Davis Hanson's piece at Pajamas Media. For a nation built on the backs of entrepreneurs, our government seems strangely hostile to the people who crank the levers on the economic engine that is America's strength.

A couple of suggestions that tax brackets might need to be adjusted would slide off the backs of most business people. Perhaps we can even smile at Barack Obama’s new arbitrary $250,000 divide — above which those who make good money now pay 60% of the aggregate income taxes and are slurred with not paying “their fair share,” while 50% of American tax filers below pay no income taxes and are promised that they “won’t see one penny in new taxes.” That nearly every discussion on the debt ceiling was introduced by Obama with the euphemism “new sources of revenue” and “investments” was only a little alarming.

Yet once again, add up all the 31 months of tax-hike demagoguery. Those who hire finally got it into their collective heads that they were not merely not liked and to be overregulated, but to be further taxed as well — not in a conciliatory manner as contributing to the nation’s welfare, but in punitive fashion as if they were culpable for making profits in the first place.

You can't rebuild the American economy on the backs of American business. You've got to unshackle them, free them, and let them roar. Then, they'll hire workers, build new plants, make profits and rebuild America. If you demonize business, they'll hunker down and wait out the storm.

Maybe it is time for that Killer Rabbit, after all.

China Criticizes US

It seems that the Chinese are upset that the US credit rating has been downgraded. Generally, I don't much care what the Chinese think, but they are our largest creditor. Xinhua News Agency says:

"China, the largest creditor of the world's sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets," the editorial said.

"To cure its addiction to debts, the United States has to re-establish the common sense principle that one should live within its means."

When you borrow money from people, they get to tell you how to act.

Sunday Musing

I've been thinking about the S&P downgrade of the US credit rating, and I've been doing a little reading, and it seems that what I believed earlier is basically correct, with one important caveat.

It's time for the US Government to start saying no to some people. Entitlement spending needs to be cut, and certain persons need to be weaned from the government teat. We don't have to do it today, but we need to do it over the next few years or risk another downgrade, or series of downgrades. It's becoming increasingly apparent that we're no longer able to afford those people who can't take responsibility for their own problems.

I'm not talking about cutting off the old folks, I believe that someone who's worked all his life should be able to draw the Social Security he's paid. I am talking about the neer-do-wells that we've been supporting over the years. Why, for example, should someone believe that if they have a child next year they are entitled to have any government assistance? Free or subsidized housing? Emergency room visits? No, that's your child. You pay for it. Free or reduced price school lunches? Not happening. He's your kid, you feed him.

We don't have to do this tomorrow, but we've got to do it. It's going to be hard, but we simply cannot afford to subsidize people who won't learn to work, to study for a trade, to learn to take care of themselves. It's tough, but it's the only way to avoid further financial problems.

This graph from Heritage.org gives us the magnitude of the problem we're facing.

During last week's budget crisis, entitlements were off the table. We talked a lot about discretionary spending, but entitlements were off the table. After the bills were passed and the President signed them, we got the downgrade. This morning, the President of Standard and Poor's, David Beers told Fox News Sunday that the downgrade was based on rising debt. Our entitlements are on auto-pilot and eventually we'll not be able to afford them.

Even with the debt limit agreement passed by Congress, he said, "the underlying debt burden of the U.S. is rising and will continue to rise over the next decade."

That's what we need to tackle next. Entitlements.

Again, I'm not talking about the old folks. I'm talking about the poor folks who refuse to raise themselves from poverty. We've got plenty of education systems, plenty of trade schools, plenty of opportunities for people to take responsibility for themselves. If they refuse to join the American experiment, there is no reason that we should subsidize them. Let 'em starve. I've got no money to waste on them.

Disturbing

This is disturbing. Gangs of blacks attacking whites at the Wisconsin State Fair.

This is disturbing too. The Dow is down again this morning.

More disturbing. It seems that the jobs numbers ticked up a little, with unemployment at 9.1%m and the economy adding 117K jobs, but fewer Americans are working than ever before. As a person uses up his unemployment benefits, they're dropped from the rolls. Out of the workforce. Not counted. So, the unemployment figures look better and more Americans than ever are out of work.

I went outside this morning while it was cool and did some work in the garage, sorting brass, reloading ammunition, straightening my bench. When I came in for the afternoon, I find all this disturbing news.

I might start drinking early today.