No, Is Not Jobs, Jobs, Jobs; But Growth, Growth, Growth.

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By Intelliunits for Robbing America
Since the electoral campaign of 2008, during the economic and financial crisis, and until now three years later, the then Candidate and now President Obama has been repeating with incessant regularity how he was to concentrate - like a laser beam, he reminded us - on jobs and more jobs. This unkempt promise has been repeated no less than in the thousands of times if we consider the amount of speeches he has made in this three year period. But has it occurred to anybody - not the press of course - but anybody with rational and unbiased thinking that in all those thousands of occasions that this promise was made, and in which most observers all so happily agreed and nodded so approvingly - including most Republicans - that it could be absolutely wrong. Yes, wrong as a fundamental policy, not as a product of a policy. What I am saying is that jobs and employment are a product of an economic policy and not a policy per-se.

Jobs and employment are a product of an

economic policy and not a policy per-se.

To talk about desiring jobs is like saying that you are for motherhood and happiness. Who isn't! How can one reach these attributes is what we must resolve. It is rather silly and childish of the President to constantly repeat that he wants to create jobs without telling us what policy recommendations he will use to obtain them. So I will tell you, jobs are engendered by growth, and to have economic growth you must have capital investment that in turn - if successful - will generate capital creation. This cycle will repeat itself ad-infinitum - with a lot of bumps in the road. This is the heart of the capitalist system - the creation of capital - and why is better in producing jobs - or as one may choose to call it - in creating motherhood and happiness.

So how do you arrive at this panacea of growth - well obviously by nurturing, instead of punishing, this essential core of capitalism - capital. You nurture capital by telling her (capital is feminine, like all beautiful things) that you love her, and by proving it to her, of course - she is no fool. After you are finished with all your promises, you buy her a diamond ring, or its equivalent, allowing her to pay the lowest marginal tax rates that you can possibly get by with - and make it permanent, as with an offer of marriage - she does not like one-night-stands. Or promises with a two year deadline. Do not, I repeat, do not do as a lousy lover would and pick a fight with her (capital) and threaten her with taking her diamonds away by ever increasing punishing rates of taxation.

This behavior of the President came in spite of having among his advisors a well respected expert in the love affairs of capital from the University of California at Berkeley, Christina Romer. Mrs. Romer was having a problem convincing her boss of her conclusions from her own research* on the subject of Taxation and Economic Growth which showed that tax changes have very large effects on growth. Her research had found that an exogenous tax increase of 1 percent of GDP would lower real GDP by roughly 2 to 3 percent. It is obvious that the President was not in a mood for listening to anything so contradictory to his redistribution philosophy and good Mrs. Romer had to leave.

Dispensing with the growth period of the technology revolution of the 90's that ended in 2000, we carefully calculated the correlation between GDP growth and government revenue growth between 2000 and 2008. We found that GDP growth between 2000-2003 averaged between 3.36% and 4.7% in spite of which it produced negative tax revenue collection growth of between -1.7% and -6.9%. However, the period between 2003-2007, after the passing of Bush's tax cuts, we found not only an acceleration of GDP to 6.1% and 5.1% in that period, but that tax revenue annual growth grew at a much higher rate of 14.5% in 2005 and 11.8% in 2006. It is obvious that in the long-term lower tax rates produced revenue growth much higher than GDP growth with a correlated creation of jobs that lowered the unemployment rate from 6.3% in June 2003 to 4.6% in June 2007.

There are many complementary policies that need to go along the treatment of taxation policies, i.e., lower regulation, free trade, etc., but taxation is the most relevant factor relating to capital and consequently to economic growth. Policy initiatives need to be directed at growth, growth and growth. This in turn will produce Jobs, Jobs, Jobs.



* The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks (NBER Working Paper No.13664), authors Christina Romer and David Romer, University of California, Berkeley

A Desperate Need For a New National Housing Industrial Policy.

By IntelliUnits
October 25, 2010.
The forces that will destroy the Housing Industry, and in passing the American Economy, are assiduously working in demonizing the banks (again) and their mortgage departments as well as the mortgage servicers. They are accomplishing this with the most flimsy of evidence and promoted mainly by anecdotal stories that even if true only amount to a miniscule part of the market. They advance cases of “as many” as 8 or 10 home owners that have been evicted through no fault of their own but whose worth sum can not be more than 2 million - on face of a market worth 1.4 Trillion dollars. We grant the existence of certain sloppiness that has resulted from a trillion dollar market of complex paper work and variable state laws; but under no circumstance this should be promoted to a full housing foreclosure process moratorium or anything close.

A new American class –

the “Home Squatter”.

The superiority of the American economy over its European competitors has always been supported and enhanced by a housing industry infinitely more dynamic than in the old continent. We exchange home ownership at a more rapid pace which provides the mobility of labour necessary for higher productivity in the economy and feed a substantial construction activity of great importance to the overall GDP.

However, our government presently seems to be at a loss as to what to do. The lack of action is providing fodder to those that thrive in the creation of a crisis. It would be desirable to have strong and clear guidance from the government which in this case controls 90% of the housing industry through Fannie and Freddie. We need a National Housing Initiative. Let us suggest 6-steps to a new housing policy that should take precedent over any more Keynesian stimulus and quantitative easing from the Federal Reserve:

(1) Stop demonizing the Banking, the Mortgage, and the Mortgage Servicing industries.
(2) Stop relying on Fed policy to brings down interest rates. Interest rates have reached their level of inelasticity.
(3) Stop relying on increasing the money pool in circulation and concentrate on the velocity of the pool already available. A vivrant mortgage industry will increase the velocity of money.
(4) Swing the pendulum back from extreme paranoiac regulation and over-stiffening of standards in the home purchase process. The present extremes have kicked out of the market millions of potential home owners due to draconian qualifying requirements as well as unnecessary inspection overkill, and other prerequisites. This has been indirectly promoted by the government from its dependents Fannie and Freddie and can easily be controlled from the same sources.
(5) Create a new government finance entity - the “Home Ownership Mortgage Enterprise” (HOME) - that will cover the refinancing of any home with 10-15% or less of under-market value. We estimate that out of 2 million homes in foreclosure today around 1 million to be 10% or less under water. The HOME initiative could guarantee this 10% with a total cost of only 21 billion. This initiative will cut in half the number of homes coming in the market at a modest cost to the taxpayer.
(6) Bring back the private home “Investor” by passing a long term capital gains tax exemption (short term tax policy and tax credits do not work) that will eradicate any capital gains taxes of any home bought and sold within the next 10 years without having to be owner-occupied or to be limited to any number of properties. It will open the housing market to new Investment capital.

Without fixing the housing industry the economy in general and especially the jobless rate will never be healthy again.

Stimulus For Dummies – Bunnies, Widgets and Holes.

Bunnies and Widgets multiply
where there is capital

By Intelliunits for Robbing America
It has been 19 months since the Democratic Congress decided to add to the ballooning deficit and national debt another 800 Billion in an expenditure program to “stimulate” the economy. This was on top of 400 billion in the TARP financial rescue package and 250 billion in a previous “stimulus” bill, plus 410 billion in their myriad take over frenzy of Freddie and Fannie, AIG, GM and Chrysler, and more. We don’t even want to get into the “deficit neutral” Healthcare reform that this year alone will increase premiums to individuals and small businesses by 12.4%, nor the higher costs that the Financial Reform bill will bring by 2011. We want to keep it simple and address only those “little” extra expenditures of the “Stimulus” bill and try to achieve what nobody else has; to make Democrats and the public understand why the stimulus bill as crafted has been such an embarrassing failure and why this “economic policy for Dummies” is very damaging to the country.


The Democratic Administration’s stimulus program is a flop because 80-90% of it is waste, bureaucracy, corruption or plain unproductive projects. Bureaucracy, however, is a monster that must be slained at another time. Corruption and plain nutty projects are easier to understand with plenty of samples of them available, i.e.; $62 million for a tunnel to nowhere in Pittsburg, PA, that even Governor Ed Rendell called “a tragic mistake”; $1.9 million for international ant research; $700,000 to study why monkeys respond negatively to inequity; $363,760 to help NIH promote the positive impacts of stimulus projects; and much more.

We declare without any apprehension the Stimulus

 Bill of 2009 to be “the mother of all misappropriations

 of resources” in the long history of the Unites

 States Congress “Bills for Dummies”.

As outrageous as the above samples are, Democrats have been able to swerve the attention to that minimum portion of projects that have been implemented in public works and what they call “shovel ready” (with a bureaucratic time delay) projects. We want to attempt to put a final nail on this coffin by explaining, in such a super simplistic way that even the majority of Democrats would understand, the great fallacy behind their economic thinking in this last bastion of “stimulus” propaganda.

“Shovel ready” projects are Dumb-Economics.

If you take money away from the market vying for it with competitive and asset creation projects (private market) to give it instead to an unemployed worker to dig a hole, you create one job for the duration that the man takes to dig that hole - and this is where the logic of the Progressives dead-ends. When the hole is finished the man is unemployed again and you are one hole’s worth more in debt – since the hole could never be sold. The reason is that the hole has no buyers. Nobody needs a hole (except in Congress where inhabitants wear them in their heads). You are back to where you started minus some capital. That is called capital destruction. Or perhaps, as Schumpeter would have said, but he didn’t, I did - uncreative destruction.

A Black Hole spinning
– No, it isn’t Congress

If you give that same capital to an enterprise that is going to produce a widget at a more competitive price than any other producer of widgets - and the desire to produce widgets by many entrepreneurs proves that there is a demand for widgets - you create one job to produce one widget. But after that widget is produced, it is then sold at a profit – remember, it has been proven that there is a desire for widgets, and not for ‘holes’ - which not only produces a return on capital but a creation of capital. The widget producer then uses that increased capital to hire an extra worker to produce two widgets by which creating two jobs, those two widgets are then sold at a profit enhancing the pool of capital enough to hire an additional 2 workers to produce 4 widgets and creating 4 jobs,.....and so on, and on, and on. The multiplier effect of capital will create a multiplier effect on jobs. With the original capital necessary to create one job and produce one widget the none-government entrepreneur ends by creating many widgets and many jobs. When you invest such needed capital in producing “holes” – which nobody wants – there is no multiplier effect on either capital or jobs (except on Congressmen). Yes, it is actually that simple; and next time you see a politician grand standing in your TV about how he has voted for “shovel ready” projects you can click the remote to something less fake and less dumb, and wait for the next election to take action.

We have never really learned the economic

lessons provided by the third world economies.

Conclusion: you cannot create jobs and a multiplier effect on capital if what you are producing has no demand in a free market place (above the price that you are producing it at), which is not only the case for ‘holes’ but also for all sorts of subsidized industries like renewable energy - solar, wind, photo-voltaic, etc – as well as any other subsidized industry no matter how socially acceptable and well intentioned it may be. That is the function of none-profit foundations. Remember, if it has to be subsidized it is because their product or service is not competitive and there is no desire for it at full cost. We have never really learned the economic lessons provided by the third world economies in the past; where their subsidized protectionism of local industries actually made them poorer and not richer.

The stimulus program of the Democratic Administration is third world domestic protectionism and subsidization – third world economics. We declare without any apprehension the Stimulus Bill of 2009 to be “the mother of all misappropriations of resources” in the long history of the Unites States Congress “Bills for Dummies”.

It is a supreme example of “uncreative destruction”

that will degrade any nation engaged in it.

It buys votes; but it makes their voters poorer. It is “Economics For Dummies”. Will our explanation settle the issue? Not if you don’t want to listen or if it contradicts your political agenda.

The Nanny State – Succeed and You Shall Be Punished.

The view of our times as promulgated by liberals and Progressives strongly disapproves of production and profits, but most of all, they disapprove of “success” – that is the real dirty word.

Sarah Palin as the most conservative
of the present Republican leaders
heads the battle for 'Individualism'.

That is what we are seeing recently in the attacks that the media has perpetrated on Zuckerberg, the FaceBook wiz kid for his intent to give away 1 million dollars to a school. Liberals and Progressives – of which the media is a major element and their main tool of control and expansion - can not tolerate that some individuals are just naturally, and by effort, gifted in their capacity for creation and production. No, they say, we must
 level the playing field. We must provide for those that can not or do not want to produce. We must allow them their free choice of loitering and waste if they prefer, without letting them sink to the bottom which their attitude will inevitably bring. We must save these fools from themselves. Let’s “give them” just because they want, and not because they earned it.