Monied Groups attack the Fed for inequality statements.

Yellen’s Declaration Of Non-Independence « Palisades Hudson Financial Group



Why is is always the money moguls that nay say the problems of inequity or try to say that it does not exist at all?

It's Just Not That Hard

Some of you may know that I, along with my wife, own and operate a small business. It is a business that provides services and some durable goods sales to mainly residential customers. It is very small having only one employee at the time. I have had as many as two and at other times it has just been me. I confess that I am not the 60 or 80 hour week kind of guy but I have, on occasion, been forced into such a schedule. Some years we have done okay and others we haven't. Since the economy fell off the cliff it has been more haven't. I believe it was the year following the beginning of the recession that the President pushed a small stimulus bill through Congress and it was targeted in a way that impacted my business favorably. It was a decent year. Since then business has been more a matter of holding on that being a growth business. I have made a few observations of things that have impacted my business and I think they may be the same kind of things that impact other businesses.

One thing I can say for sure is that tax policy is a non-issue with my business. Taxes are reasonable and I have discovered that to pay taxes one has to make money. Social Security is the largest burden since, as a self-employed entrepreneur, I have to bear the entire payment. If you are employed by another employer you only pay half while your employer pays the other half. But I really can't gripe because I knew that going in and I figure I will get more than I paid in when I start receiving benefits. What hasn't happened is enough income to plan for retirement so my plan is to work as long as I can even after I start receiving benefits. This way maybe I'll drop dead on the job and won't have to worry about retirement.

Over the years I have noticed how my business rises and falls with the local economy. I have examined that with a great deal of interest since people that I owe money to really want to get paid whether or not I have any money. I'll bet that is true for most of you. With my business I carved out a small niche where I wasn't in competition so much on price as I was on quality and customer service. What I have seen is that when other companies in my line of work who are larger employers become affected by the local economy they begin to lay off workers. Some of those workers do what they have to do to earn money and that is encroach into my niche. With that competition goes up and I have the choice of doing less business, lowering prices or cutting quality which is a part of my overhead. I have to tell you that if I had known thirty years ago what I now know about operating a small business I may have looked a little harder at working for another company or trying for a government job. However, I was confident that my work and skill would be a better choice in the long run. Entrepreneurship is to be highly valued. Those owners really are a vital part of a local economy and they assume a lot of risk often being ill equipped to assess that risk and therefore become one of the many that fail within the first 5 years.

This recession that began in the year before President Obama was elected was rooted in the exploding home construction bubble. I recall in those years leading up to the recession people in my business kept wondering who was really buying all those houses. Turned out that a lot of people were just trying to buy those houses. When the bottom fell out and the mortgages on those houses turned upside down that golden goose died and with it the dreams of millions of people. Around here the ripple effect could be observed going through the economy. Because I wasn't so much involved in construction it took a little longer to begin to affect me but affect me it did in two ways. As I said, those workers laid off started businesses of their own and they were willing to work in my niche. Also, it soon became evident that our local population was being much more conscious about how it spent money. Jobs that would have come along were now being delayed and people did not spring for repairs until they were affected in a painful, negative way.

So, this is what I have learned about operating a small business, at least one as small as mine. Tax policy on earned income is of little consequence. What is of consequence most is lack of demand. People don't have any money. Now, some are okay but I am speaking generally. The federal stimulus was a matter of tax policy but it allowed people to use a deduction to stimulate the economy in a targeted way. The way it affected my business was to create demand and I suppose it did the same for others who are in my line of work. In addition, it was targeted in such a way as to get people to make investments in energy efficiency which stimulated the entire economy to some extent.

This is what I see. Of all factors demand is most critical. Demand is created when consumers have disposable income that they can use for necessary or elective needs. We have a lot of people, just ask Mitt Romney, who don't make enough money to pay much more in taxes than their Social Security. If you take that population out of the equation then demand takes a huge hit. Lowering the overall tax rate will not impact those people to any large degree. However, targeted stimulus using the tax code will impact those people by making it possible to have some extra income to spend and that ripples through the economy from the ground up. It does not trickle down. Families with children are able to access the earned income credit which also allows them to acquire income they would not have had before and this is stimulative to the economy from the ground up.

Lowering taxes on higher incomes has no stimulative effect on my small business. Even if they invest the money in stocks, bonds or whatever it is simply not trickling down because the businesses those stocks represent are not creating new business. They are sitting on trillions of dollars of cash or using it to buy back stock to increase the net worth of that stock. It has no stimulative affect nor does it create new wealth.

My take is that we are told a lie when our aspiring leaders tell us that taxes are too high and that lowering them will bring prosperity. What is needed is demand and we must ask what will create new demand. It's not hard.

Rule Number One

A few years back there used to be a
used car salesman in Somerset from whom I learned an elemental lesson
in economics. He didn't teach it to me directly but rather through a
story I heard about him one time. Seemed that this young couple came
to him to purchase a new car. They had shopped around and saw one
they liked on his lot and inquired as to the price. He told them the
price and it was considerably higher than some prices they had gotten
on some similar vehicles around town and they told him so and asked
why. His reply was, “Well, I make more money that way.”

This seems like one of those obvious
things that everyone knows but I recognized it as a fundamental rule
of capitalism. Everyone wants to maximize profits and will charge
whatever they feel the market will bear. It is up to the purchaser
to be wise.

I applied this well known rule to a
discussion I had online with some people over the past week or so.
They were remarking on the very high price of some cancer drugs that
were up around $100,000 per year or more. At the same time I had
watched a television special on the prices of drugs where some had
gotten to the public relations group that represents Big Pharma
asking why this was so. Of course the stock reply is that it costs
millions and billions to put a new drug on the market and they should
be compensated adequately to insure motivation for research and
development and to cover the costs of production. One of the drugs
mention was Gleevec which is a very effective drug that combats
leukemia. When it first came out it cost $28,000 per year for the
drug regimen. Soon some other drugs came on the market that were in
direct competition. One would expect the competition to force prices
down but Gleevec rose to almost $90,000 per year. This was an eye
opener because it flew in the face of accepted free market ideology
and that meant that there was another dynamic at work here. What was
at work here is the economic rule I spoke of earlier. They make more
money that way. But why didn't the competition force prices down?

The thing that forces prices down is
the willingness of the purchaser to shop elsewhere for the product at
a cheaper price. That assumes that the end user is the purchaser
which is not the case here. The purchaser in this case is the
insurance company that pays for the drug. People without access to
insurance obviously can't afford it and so they die. Just not in
large enough numbers to affect the bottom line. The largest insurer
in the United States is Medicare but Medicare is prohibited by
legislation that was written into the Medicare D bill that President
Bush the Second pushed. That legislation forbids Medicare from using
the enormous purchasing power of the federal government to negotiate
a lower price. The law states that Medicare must pay whatever is
charged by the pharmaceutical pushers.

Two things that are unacceptable here.
One is that the taxpayer is forced to subsidize the profits of the
pharmaceutical industry and the other is that the insurance companies
are guilty of de facto rationing of medical care based on ability to
pay. The United States is the only developed country in the world
that pays full retail for drugs. All other civilized countries have
negotiated prices well below what we pay. If the pharmaceutical
companies are so focused on recovering costs then how can they sell
at those steep discounts to those countries? Make no mistake. For
drugs still under patent protection there is no one else making those
drugs so one can't use the excuse of them being made overseas under
poor supervision. And, in the case of Gleevec, if costs were being
covered under the lower price then what was the justification in
tripling the price. The drug companies also say that they take into
account the value of the quality of life of those using the drug. In
other words, if it is a real good one they want to charge a lot.

This is the way the free market works,
right? Well, it would be if medical care and pharmaceuticals
competed in a free market but they don't. If a person has leukemia
and there is one drug that can help that is not a free market. If an
insurer has a single drug on its formulary that is not a free market
but at least the insurance company can negotiate a lower price. The
largest insurer in the country can't even do that since that was a
gift to Big Pharma in order for them not to lobby against the law.
Why would they? It is the largest cash cow to come down the pike and
it dumped excessive profits on them like the rain in spring. If it
were a free market people would be able to shop for prices and
Medicare would be able to negotiate on behalf of the taxpayer.

Big Pharma does many things in order to
keep the cash cow giving milk. Gifts and honorariums to physicians.
Free drugs. Trips (ostensibly to attend training or seminars but
more likely to play golf or scuba dive) are quite the draw. But the
biggest of all is the lobby Big Pharma pays for in Washington,D.C. to
keep Congress growing the grass for the cash cow.

So, what is the reason drugs cost so
much? “Well, I make more money that way.” Rule number one of
capitalism. Hold it close to your heart.

Arming the Ally and Enemy Alike

Islamic State’s ammunition has origins in U.S, China | World | Kentucky.com





This has been exactly what the President warned of and one of the major reasons that he did not want to send arms to the factions fighting in Syria.  Organizations and governments in that region are hotbeds of corruption and will sell out their patrons in a minute by selling or giving the arms provided by the US and other countries to combat the Syrian regime to ISIL.  In essence, we are arming our enemies.  This article points out other ways that US made equipment is falling into the hands of those we have to fight.



My point is this.  If we must fight then why are we not pursuing back channels to force change on the battlefield?  Why must we rely on military action for our foreign policy goals?  Why must we continue to drop billions into this rat hole?  Now the US armaments manufacturers get to supply both sides.  How does that make sense?

Relentless

Exxon-Mobil CEO pushes for scrapping ban on U.S. crude oil exports | The State Column





They are relentless.  The hunger for ever greater profits and stock values presses ever onward with no heed of the warnings of climate change.  Saying that allowing US companies to export crude would boost production are probably correct but that is not a thing we should encourage.  Our governmental actions should be focused on energy conservation and a transtition to clean energy.  Already the US is the world's largest exporter of refined goods.  Why would we need to export crude except to enrich the multi-national oil corporations profits.  At least this way they are forced to keep headquarters, and hence profits, here in the US rather than shifting them to some foreign place where they escape taxation.

Alberta Oil Sands

If you want to see fuel prices explode to the heights the rest of the world pays then this is the way to go.

Read the linked article and be forewarned.  Knowledge is power.

The Truth Spoken

Biden blames US allies in Middle East for rise of ISIS — RT News





This is a truth that you won't hear spoken very much in the United States where we tend to protect our regional allies from responsibility for their actions.  The parties mentioned, Saudi Arabia, the Emirates, Qatar, are all responsible for much of the terrorism we see in those countries and also the attacks on European and American interests.  The only reason for such behavior that I can come up with is to protect American business interests in the area.  These kingdoms should be forced to deal with the reality of their actions and defuse the resistance rather than try to use the United States as their mercenary army.



VP Biden is known for his outspoken ways but he is usually correct in his assessment of foreign policy.

Just Like the Stone Age

“The stone age didn't end because
they ran out of stone” was the quote from one of Charlie Rose's
guests. That phrase slapped me across the face because it so clearly
points out the fallacy of most of the arguments for not cutting back
on carbon emissions to reduce the impact of climate change. In one
sentence the arguments about economic impact, lost jobs and reliable
fossil fuel sources are shown to be distractions from the truths that
argue for dramatically developing clean energy.

The buggy and whip industry was wiped
out by the automobile. The ocean liner was docked by the airlines.
Ships with sails lost out to steam powered vessels. Manual labor was
replaced by the movable assembly line and the list goes on and on.
Yes, we are losing those jobs mining coal but the fact of the matter
is that it is not EPA regulations doing it. It is plain old
economics. Profit and loss. Now there are cheaper fuels such as an
abundance of natural gas but, truthfully, it is only a matter of time
before the evidence mounts that using it is little better than
burning coal or oil.

The fossil fuel industry as we know it
is going to die. It may be a long death, a painful death but die it
will because the downside of using those fuels is so devastating that
humanity cannot survive using them in such great quantities.

Solar is gaining traction, not through
subsidies but through simple economics. The power companies realize
it and are lobbying Congress to make it more expensive to use solar.
As it is in most places one can sell an abundance of solar generated
electricity back to the power company at the same rate the power
companies charge to deliver electricity. Now the utilities want
legislation to cut that resale price to a fraction of what it is in
order to make the cost of installation require a longer payback
period. One of the great benefits of individual electrical
generation sites is that power generation would not be so centralized
and would not require as massive an investment in electrical grid
infrastructure as bringing new plants on line. This is an effort
that the federal government should subsidize in the national
interests.

Solar will not serve to replace all
generation now on line but it can serve a significant part. You may
recall that a few years ago the federal government provided loans to
clean energy startups which was a good plan. Problem is that when
those efforts were unable to provide profits they were allowed to
fail. When they failed the intellectual property that was developed
was bought largely by the Chinese who are leading the world in solar
generation and the panels required to accomplish it. As a result
estimates are that the cost of solar panels have fallen by as much as
80%. Our domestic industry doesn't like that and want tariffs placed
on Chinese panels. The domestic industry is a casualty of
shortsightedness. We simply cannot allow unyielding allegiance to
market forces dictate the pace or feasibility of new energy sources.

There are powerful forces arrayed
against the emerging industries. The existing extraction and
generation industries are furiously lobbying Congress to protect
their financial base which should be allowed to die a natural death.
Obviously we will need to keep it on life support while we bring new
generation on line but the movement is in that direction.

Such new industries will generate
thousands, maybe millions, of new jobs in new, emerging technologies
that will once again return the United States to the pinnacle of
economic might. If we do not grasp it then someone else will. There
are those poised to do so.

We have been in the age of steam for
over 200 years. Even the latest turbine using generation plants are
simply steam engines. They differ only in the types of fuel used to
generate the steam to drive the turbines. Just as the stone age did
not die from a lack of stone so steam will not die from a lack of
coal or oil or nuclear. Like stone it will die from new and better
technologies. The only question is how painful will it be? Will our
politicians who worship at the feet of King Coal do its bidding to
hold the line against the inevitable demise or will the people demand
that they now lead us to make the transition in favor of the people
rather than corporate interests? We know what the tendency is.

This is My Take on this issue. Since
my early years I have read magazines such as Popular Science and
Popular Mechanics that predicted that new technologies would provide
all people with adequate resources and leisure time. What happened?
Why have the people not prospered? It is because our system of
corporate influence is such that new technologies don't come on line
until the CEOs and hedge fund managers figure out how to make money
on it. The wealth generated is not shared with the people of the
United States. We need to get past that.