Minimum Wage

President Obama is making a push to raise the minimum wage.  Many economists using simple supply and demand analysis are sure this will hurt low income people by destroying jobs.  Some states and cities have defied economists and passed higher minimum wages laws. Michael Reich and Ken Jacobs of the University of California Berkeley have found that the $13 minimum wage in San Francisco has not had the predicted ill effects.  "Our studies show that the impact of these laws on workers' wages (and access to health care) is strong and positive."  They says supply and demand analysis" is not the whole story though.  A full analysis must include the variety of other ways labor costs might be absorbed, including savings from reduced worker turnover and improved efficiency as well as higher prices and lower profits.  Modern economics therefore regards the employment effect of a minimum-wage increase as a question that is not decided by theory, but by empirical testing."
    Reich and Jacobs say that there is a moral value as well.   I used to tell my students, "You are not paying enough for your burgers. The workers need to eat too."

Quantitative Easing

Quantitative Easing, don’t you love that term?  It is meant to be psychic balm.

The idea behind it is that the central bank can buy Treasury Notes and mortgage-backed  securities and thus increase their prices and drive down long term interest rates. The low rates are supposed to enable firms to borrow and provide employment.

      In 2012, the Bank of England (BOE) issued a report that said that the Bank of England’s policies of quantitative easing (QE)– similar to the U.S. Fed’s – had benefited mainly the wealthy.

Specifically, it said that its QE program had boosted the value of stocks and bonds by 26 percent, or about $970 billion. It said that about 40 percent of those gains went to the richest 5 percent of British households.

        Many said the BOE's easing added to social anger and unrest. Dhaval Joshi, of BCA Research  wrote that “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it."

     "The question is whether putting more profits into the hands of the top 5 percent will really generate jobs for the rest of America. So far, the evidence is not promising."

Robert Frank, CNBC

According to an article in Wikipedia, “Central banks in most developed nations (e.g., the United Kingdom, the United States, Japan, and the EU) are prohibited from buying government debt directly from the government and must instead buy it from the secondary market. This two-step process, where the government sells bonds to private entities which the central bank then buys, has been called 'monetizing the debt' by many analysts.  The distinguishing characteristic between QE and monetizing debt is that with QE, the central bank is creating money to stimulate the economy, not to finance government spending."  Got that distinction?

     This is double-speak, as if government spending in recessions does not stimulate the economy. The term “monetizing the debt” is meant to be a take-out stopping further thought. Young economists are taught that monetizing the public debt is bad.  Further, they are taught that helping banks is good and helping people without jobs is bad.  It makes labor lazy, but not bankers.  Got that?

Contributions to the Financial Crisis

"The email from a Credit Suisse executive was blunt: The bank seemed to be pushing through risky home mortgages from questionable applicants.

One borrower, the executive wrote, appeared to be a gas station attendant who was living with his mother while claiming to make $93,000 a year. Another was a former sales clerk at Nordstrom who was said to be making $110,000 a year.

A different email, from another Credit Suisse executive in June 2007, went further: “Our diligence process is such a joke.”  NYT 9 March 2014

The joke was on us.  These guys still have not been held accountable for all the pain they created.

Union Busting

Recently, a vote to unionize a Volkswagon plant in Tennessee failed by a narrow margin.  Were the workers scared by threats to withdraw state subsidies to the automaker, or have they forgotten our labor history?  They probably forgot the good old days when unions were weak and had no Federal government protection.  In the Great Coalfield War of 1914,the Colorado Fuel and Iron Company owned by John D. Rockefeller, used standard union-busting techniques such as mass firings, and if that was not enough, they obtained the help of Colorado's National Guard who turned a machine gun on the strikers encampment killing twenty of its inhabitants including women and children. 
     Class war continues.

Melding finance and politics

William A. Ackman, the activist hedge fund manager who had bet a billion dollars on the collapse of the nutritional supplement company Herbalife, offered his latest evidence to a handful of other hedge fund managers about why the company’s stock could soon plummet. He also spreads the word in Congress and regulatory agencies, hoping the bad publicity will ruin Herbalife and cause its stock price to fall to benefit his short position.  (see NYT 10 March)
    Small time crooks who steal a purse or have an ounce of pot go to jail for long periods.   But if you steal a billion, you probably are featured in the Wall Street Journal.

A Dreadful Deceit

A selection from a review of the A Dreadful Deceit--The Myth of Race From the Colonial Era to Obama's America is worth repeating:
"To explain how racial conflict has masked power struggles for control over others' labor, Jones surveys compelled work in its many varieties, from slave labor under the lash on tobacco plantations in Maryland to mandatory overtime in unsafe and sweltering auto plants in Detroit.  Racial ideologies, she argues are like mob violence, disenfranchisement and discriminatory laws--merely tactics used to secure material advantages in social contexts perceived as zero-sum"
         review by Tommie Shelby in the New York Times Book Review, Feb. 16, 2014

War on the Low income worker

Robert Reich makes the following points about the ruling class in Congress:
1. They refuse to extend unemployment benefits.
2. They don't want to raise the paltry minimum wage.
3. They are against extending medicare benefits to millions (Congress of course has its own medical benefits.)
4. They cut food stamps in the latest farm bill.
5. They refuse to invest in education and job training.
6. They do not want to rebuild America's crumbling infrastructure, or any other job creating program.
7. They are out to bust what unions remain.
Why do they do this? 
Big employers like a docile workforce who are thankful for whatever they get.

     I say that this low wage policy is backfiring.  Poorly paid and unemployed can't buy the products of these corporations.  Weak consumer spending is hampering our recovery.
Besides, this war on the poor and working class is greedy and immoral.