What Happens When They Run Out Of Other Peoples Money To Spend?

Spending other peoples money can be a lot of fun . . . until the money runs out.

See: Illinois deep in debt, doesn’t pay bills

Paralyzed by the worst deficit in its history, the state has fallen months behind in paying what it owes to businesses and organizations, pushing some of them to the edge of bankruptcy.

Illinois isn't bothering with the formality of issuing IOUs, as California did last year. It simply doesn't pay.

Think about that.

That is not a small thing.

All of those vendors that are not being paid have employees that may soon be out of a job because their employers can not get paid.

How many other State and City governments are going to have this problem? How many people will lose their jobs, their careers and their life savings when their employer's government customers fail to pay their bills?

Greece - Economic Liberalization And Removing The State From The Market Place

See: The Bitter Pills in the Plan to Rescue Greece

Another reform high on the list is removing the state from the marketplace in crucial sectors like health care, transportation and energy and allowing private investment. Economists say that the liberalization of trucking routes — where a trucking license can cost up to $90,000 — and the health care industry would help bring down prices in these areas, which are among the highest in Europe.

Note how in this paragraph, "liberalization" refers to "removing the state from the marketplace."

Greece is in such bad shape, they are considering taking two steps back in order to take one step forward.

Not to worry though. One of the proposals is to have Greece increase its Value Added Tax (VAT) up to 25%. That is a high enough rake off of the private sector to insure that no real economic recovery will come of anything inadvertently positive that could be imposed.

There is no easy solution for Greece or for any other nation that is suffering from the all to predictable results of running out of other peoples money to spend. You can't spend what you don't have. Resorting to debt will only make the problem bigger. Resorting to raising taxes will only cripple that part of the economy that creates wealth. Freeing the economy from government regulation and taxation could work but it can not rescue welfare-state socialism from its all to predictable and inevitibly destructive results.

Bottem line, Socialism Sucks.

The Coming Commercial Real Estate Crash

You may have noticed a lot of empty store fronts in your neighborhood strip malls. If those empty spaces give you any kind of uneasy pause or sense of concern, your instincts are sound. Something terrible is happening in the quiet corners of the nation's economy.

Commercial Real Estate is about to become big news. Very big news.

Lets look at a news article that appeared recently in the Seattle Times.

See: Columbia Center misses mortgage payment

The Columbia Center is Seattle's tallest skyscraper. It is the city's flagship office tower. A tall slender structure of black glass and steel, it rises high above all of Seattle's other offices buildings.

And nearly half of it is now available for rent.

Bottom line!: The new owners of the building are totally screwed.

When Beacon bought the Columbia Center in April 2007 it was 89 percent leased. The firm paid $621 million, according to county records, and borrowed a total of $480 million to help pay for the tower.

Its assessed value now is $380 million.

"There are many buildings in a similar position where the loan is greater than the value of the building," said Craig Kinzer of Seattle-based Kinzer Real Estate Services.

That is a world of butt-hurt.

That is also only one of many of the large office towers in this city.

The office towers are not alone in their problems. Residential rents in the Seattle area are at historic lows.

See: Renters, rejoice: Apartments are cheap and the iPod is free

After peaking in 2006 and 2007, rents in King, Snohomish and Pierce counties tanked over the course of last year by nearly 4 percent, according to Scott. He expects rents will continue to plummet this year by 5 percent, and again in 2011, but less dramatically.

In Seattle, property managers say that trend has been more pronounced, with some rents dropping as much as 15 to 20 percent last year. In general, higher-priced units have had biggest rent reductions. Bart Flora, co-owner of Cornell & Associates, which manages 6,500 properties in the city, said some, in-city, one-bedroom apartment now rent for $800 to $850, instead of roughly $1,000 two years ago.

"It's the steepest drop I've ever encountered in 25 years, certainly in my career," said Flora. He added that he believed the market - at least in Seattle - appears to have hit bottom and is stabilizing.

(Stablizing? Not even close buddy. There is a whole lot more bottom to hit.)

Now think about what all of that means, not only to the landlords of both the office towers and the apartment buildings, but also about what it means to the municipal coffers. When there is no money to tax . . .

Seattle is screwed.

And its not alone.

Look around.

What do you see happening in your city?

See: Half of Commercial Mortgages to Be Underwater: Warren

By the end of 2010, about half of all commercial real estate mortgages will be underwater, said Elizabeth Warren, chairperson of the TARP Congressional Oversight Panel, in a wide-ranging interview on Monday.

“They are [mostly] concentrated in the mid-sized banks,” Warren told CNBC. “We now have 2,988 banks—mostly midsized, that have these dangerous concentrations in commercial real estate lending."

As a result, the economy will face another “very serious problem” that will have to be resolved over the next three years, she said, adding that things are unlikely to return to normalcy in 2010.

Soon, the quiet corners of our economy are going to come screaming down around all of our ears.

HT: 3Wood at CC

A Jobless Recovery And A Devious Midterm Election Strategy

The new Unemployment Numbers are telling a grim tale.

From Bob Willis and Courtney Schlisserman at Bloomberg.com:

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- rose to 17.3 percent in December from 17.2 percent.

The number of discouraged workers, those not looking for work because they believe none is available, climbed to 929,000 last month, the most since records began in 1994.

Normally, this kind of news would doom the Party in power to a Midterm Election rout. This next Midterm Election may well be an exception.

Watch for the Democrats to begin spending money like its going out of style as the Midterm Elections approach. The Stimulus moneys are still largely unspent. That will change as the election approaches. The Stimulus moneys were never meant to be spent to improve the economy, rather their purpose was to stimulate Democrat election chances in the midterms.

Karl Rove discusses this at the Wall Street Journal.

But Americans shouldn't be misled by the election year ploy: Mr. Obama rigged the game by giving himself plenty of room to look tough on spending. He did that by increasing discretionary domestic spending for the last half of fiscal year 2009 by 8% and then increasing it another 12% for fiscal year 2010.

So discretionary domestic spending now stands at $536 billion, up nearly 24% from President George W. Bush's last full year budget in fiscal 2008 of $433.6 billion. That's a huge spending surge, even for a profligate liberal like Mr. Obama. The $102 billion spending increase doesn't even count the $787 billion stimulus package, of which $534 billion remains unspent.

Mr. Obama can placate congressional Democrats by arguing that all that extra spending he has already crammed through can cover their spending desires at least through the 2010 congressional elections.

This will be an interesting election cycle.

Are we all Refusniks now?

Using soviet era political language to describe those that have refused to “go along” with the “stimulus” plan, the framing continues.

From an MSNBC article

Some refuseniks use terms like “Obama’s filthy, stinking stimulus,” and some have ambitions for higher office, but they insist their actions to reject the money are motivated by a sense of fiscal responsibility, not partisan politics.

. . . and the loudspeakers blare "Oceania has always been at war with EastAsia."

7% of all U.S. banks are on the list and face a higher probability of failure

An article in the Wall Street Journal talks about the growing number of banks that are at risk of failure.

The FDIC's quarterly banking profile, which analyzed data from 8,099 federally insured banks, reported that 552 financial institutions, with combined assets of $345.9 billion, were on the government's problem list at the end of September, up from 416 with $299.8 billion of assets at the end of June. That means roughly 7% of all U.S. banks are on the list and face a higher probability of failure.

FDIC officials don't disclose the names of banks on the list, in part because it could lead to bank runs.

With the dollar crashing and hyperinflation looming on the horizon, hard times seem to be a real and growing possibility.

The UN and the Politics of Science

The Wall Street Journal has an article on the leaked emails.

The emails include discussions of apparent efforts to make sure that reports from the Intergovernmental Panel on Climate Change, a United Nations group that monitors climate science, include their own views and exclude others. In addition, emails show that climate scientists declined to make their data available to scientists whose views they disagreed with.

The IPCC couldn't be reached for comment Sunday.

There is a link located in this article at the WSJ where you can download and read the leaked emails and other documents yourself.

This issue may stay hot for awhile.

Will the Real Jobless Rate Please Stand Up!

There is something a little “Slim Shady” about the official US jobless rate of 10.2%.

Jeff Cox at CNBC.com has an article posted that is worth reading.

According to the government's broadest measure of unemployment, some 17.5 percent are either without a job entirely or underemployed. The so-called U-6 number is at the highest rate since becoming an official labor statistic in 1994.

The number dwarfs the statistic most people pay attention to—the U-3 rate—which most recently showed unemployment at 10.2 percent for October, the highest it has been since June 1983.

Pray for recovery, prepare for depression.

Get off your ass and get a job!

The truth behind much of the economic happy-talk that the Obama administration is putting out is that we are in hard times at the moment, with the probability of things getting far worse.

Nouriel Roubini has an article in the New York Daily News that is worth taking a few moments to read.

Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening. While the official unemployment rate is already 10.2% and another 200,000 jobs were lost in October, when you include discouraged workers and partially employed workers the figure is a whopping 17.5%.

While losing 200,000 jobs per month is better than the 700,000 jobs lost in January, current job losses still average more than the per month rate of 150,000 during the last recession.

If you have a job, try to keep it.

If you don't, then you had better be busting your ass to get one. Every day that goes by that you remain unemployed increases the number of people that are in line with you looking for work. Many o these people will be better qualified and more desirable for a company to hire than you are.

Do not rest on your laurels – you don't have any.

Be prepared for some rough times.

Producers going on strike in New York

It is not exactly something out of Atlas Shrugged, but it has strong echoes.

Andy Soltis talks about a trend that few others in the MSM dare mention.

New Yorkers are fleeing the state and city in alarming numbers -- and costing a fortune in lost tax dollars, a new study shows.

More than 1.5 million state residents left for other parts of the United States from 2000 to 2008, according to the report from the Empire Center for New York State Policy. It was the biggest out-of-state migration in the country.

The vast majority of the migrants, 1.1 million, were former residents of New York City -- meaning one out of seven city taxpayers moved out.

"The Empire State is being drained of an invaluable resource -- people," the report said.

What's worse is that the families fleeing New York are being replaced by lower-income newcomers, who consequently pay less in taxes.

The parasitic welfare state can't keep raising taxes with out exhausting its hosts, namely the productive. The productive can move. They can even quit or just simply retire.

In New York, they are moving out.

In a few years when the retirement boom hits, they will probably just up and quit(retire).

In the long run, John Maynard Keynes is still dead

The ABC News website has an article by Mark Trumbull discussing the waning expectations that the "stimulus bill" will be able to help "stimulate" any future economic growth.

Americans hoping for a big economic boost from President Obama's economic stimulus programs got a douse of cold water Thursday: The White House's top forecaster said the largest impact of the stimulus on economic growth is probably in the rear view mirror.

That's the case even though unemployment continues to rise and many of the stimulus dollars haven't been spent.

"Most analysts predict that the fiscal stimulus will have its greatest impact on growth in the second and third quarters of 2009," Christina Romer, who chairs the President's Council of Economic Advisers, said in testimony prepared for Congress. "By mid-2010, fiscal stimulus will likely be contributing little to growth."

In the long run, John Maynard Keynes is still dead. Unfortunately, his economic prescriptions will not die.

When government spends money, it is spending other peoples money. There is a natural disconnect of the value placed on the money by those who earned it when it is spent by those who merely appropriated it.

Stolen money is cheap. Earned money is dear.

Earned money is far more likely to be spent with care than looted money.

No politician and no bureaucrat can ever be as invested in the outcome of the spending of an appropriated dollar then the person that originally earned it. Whether that dollar is spent on a pleasure or invested for the future, the one who earned it is the only one that is able to truly appreciate what that dollar cost him to earn.

To a person that earned a dollar, the notion that it should be used to pay one person to dig a hole and to then pay another person to fill it, sounds like utter madness. To a Keynesian that appropriated a dollar earned by someone else, it is eminently economically sound.

Boeing's troubles.

The following is from an article in the Oct. 7th Seattle Times. In the news stands, it is the "above the fold" story.

Richard Aboulafia, an aviation analyst with the Teal Group, said the common denominators for the two delayed jet programs are a lack of adequate project-management expertise and a shortage of engineering resources.

"There were an awful lot of good people retired after 2000," Aboulafia said. "That, coupled with the decision to outsource major chunks of engineering requirements to suppliers and partners, seems to have resulted in a severe talent shortage and a loss of tribal knowledge."

The population is aging. The economy is in terrible condition. The problems with the “loss of tribal knowledge” is something interesting to be mindful of in the coming years as more and more people leave the workforce in every sector due to either retirement or layoffs.