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The Tentacle


April 11, 2011

RetrO-bama Econometrics

Steven R. Berryman

Having feelings of nostalgia for Jimmy Carter recently? Probably not, as the mind tends to forget the bad and concentrate on the good; we can only call it déjà-vu now, in Spring 2011, of a time best forgotten, when America diluted.

 

Remembering back a bit to the early 1980s: 444 days of in Iranian captivity, “stagflation,” and the “misery index” come to mind. The “bad old days.”

 

With our President Barack Obama declaring his 2012 candidacy – no fanfare for a reason, the occasion reminded me of bad Wall Street corporate results reporting, slated for release late on a Friday when nobody was watching. A harbinger…

 

We, as a nation, are running out of false-positives to report. This is compounded by double-bama-speak and reinvented economic interpretations: Are results for first time unemployment rates down, or have we given up counting those Americans who are now sitting on the sidelines and waiting for a sea-change in some newly created expansion?

 

I fear they may even remove “public sector” unemployment rates from all stats with the impending trickle-down crunch of budgets.

 

Of course, the term “economic expansion” is hardly included in the Democrats portfolio in these times of party polarization; the people are paying for the partisanship.

 

A growing economic pie is the only thing that will allow America to get a handle on budget deficits and balances due without tax increases or the more disguised “fees.”

 

The definition of stagflation is a period of inflation coupled with reduced economic activity. Everything costs more, while increases in income or profit do not compensate.

 

Stagflation will only allow you to “grow your way out of” your savings accounts value, and possibly your mortgage!

 

Examples of the death spiral of economic stagflation would include increases in ticket prices to compensate for rising jet-fuel costs. When this real cost cannot be reasonably passed along to consumers as other air-carriers do not follow suit, they get cut again, gouging any profits as a result. Do airlines cut airplane maintenance to compensate, just to keep them alive? It’s happened before.

 

When consumer home appliance manufacturers suffer increased costs of production due to rising oil prices – felt in several steps of production as transportation expense – and have metals and other raw materials cost increases as well, they raise prices at the wholesale and at the retail levels.

 

Just ask SEARS.

 

But consumers can defer spending on new appliances and repair instead, or just hold off a purchase, just like keeping that old car another year.

 

The result of the above is that factory production backs up, and sales managers are forced to slash prices to prevent inventory overload that would delay “that newer model” they have been hoping to introduce.

 

Overload of competition, preventing needed price swings is a factor – too many: brands, consumer choices, and retail outlets, keeps allowed pricing down. This happens concurrently with the “reluctant consumers” clutching purses and wallets.

 

I fear that without overt action, fewer airlines and lower choices of brands and retail outlets will negatively impact unemployment.

 

What to do? In the past, we have tried price controls that made things even worse.

 

Where is the evidence that this administration is working on our root economic problems, instead of created ones, such as Obamacare, and is impacting our formula? It’s not.

 

So…we begin with the old Carter misery index. It had been calculated as Inflation Rate + Unemployment Rate = Misery Index (IR+UR = MI)

 

Since definitions have been so tortured and manipulated for political cause, we may need to improve on this formula, Don’t forget that factors like automobile prices, energy prices, and food commodity prices can all be added and subtracted, giving inconsistent results, and our recent years as comparison are very poor benchmarks to use for prediction, or comparison, as they are so atypical.

 

New car sales are up for the month compared to what?

 

Investment capital sitting on the sidelines, as a function of our money supply, could be added to the equation. Maybe couple this with a bank’s probability to lend. Call it “delta IC” for difference (or change) in money supply waiting to be invested.

 

How about “OF,” which is the Obama Factor? It used to be constructed of the value of Hope attributed to his potential as our leader. An example was when the Nobel Peace Prize was awarded preemptively in return for future expectations.

 

Of course, as the mainstream media that got Barack Obama elected and now forgets that original campaign platform – posing no consequence in current reporting – a new equation becomes an even more valuable tool.

 

I would call this the “Misery Index with Attitude” or (MIwA).

 

So, now we have [IR + UR (- delta-IC) + OF = MIwA]

 

The question becomes: where is the evidence of this administration’s actions and plans to deal with the root components of our misery? Are we even on to the right metrics to track this?

 

Fighting for National Public Radio, pushing continued federal funding for Planned Parenthood, the nation’s largest provider of abortion services, and creating chaos in the Middle East through absent, incoherent and uncoordinated foreign policy is not impacting our formula.

 

Without some popular pushback, perhaps on April 18th this year, we'll welcome back the new “good old days.” Uuggghhhh…..

 

srbmgr@gmail.com

 



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