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Oct 21 2014
 by Bill B. May

THE ECONOMY

Wageless Recovery Invites Humbug

In an editorial from the St. Louis Post-Dispatch, the writers complain about the lackluster salary recovery from the Great Recession of 2008, though they say other factors are looking good.   Of course, we know that Wall Street bankers are doing very well.  Salaries and bonuses run in the millions or more.   So they are doing just fine.  Why doesn't it spread to the rest of the workers?  There is a process that happens in the Federal Reserve Bank that we need to understand.  The Fed, as the bank is known, has a charter to keep prices stable and to minimize unemployment by meddling with interest rates and by printing money.  (Nobody ever considered whether these two goals are compatible, but oh, well.)   So the Fed has this idea that if it prints more money, that will aid the economy.  This idea has not been proven but is accepted by many economists.  The Austrian school of economics does not agree.  But anyway, it has been printing money, tons of it.  How does it do that?  The rest of government, presumably independent of the Fed, needs money to operate so it sells bonds to Wall Street and other financiers.  That brings in money to the Treasury.  These bonds are debt owed by the government.  Then the Fed comes along and buys these bonds from the Wall Street investors.  Where does it get the money to buy the bonds?  It prints it.  So new money is created.   And who gets that new money?  The sellers of the government bonds.  When the new money lands in Wall Street, they can use it to buy things on the cheap, like stocks or other assets.  As this new money flows into that marketplace, the prices go up.  Wall Street gains but by the time the money flows elsewhere in the economy, prices have already jumped.  So only Wall Street benefits from this new money.  The average guy on the street may eventually see the new money but by then prices have increased by the same amount.  Thus we see that the salary of average workers is not helped by this process. 
Another thing is that governments, at federal, state and local levels, spend money on mostly non-productive things.  Some are perhaps necessary but most are not integral to building things people need or want.  Government, through taxes and other ways, make products more expensive.  This is a huge burden on the economy which ends up being a burden placed on the average worker, either through higher consumer prices or through less wages.   The unintended consequence of government policies rears its ugly head again. 

PRICE CONTROLS

Basic Economics By Thomas Sowell

Thomas Sowell writes about the New York Times' position on so-called predatory lending.   As usual, there is more to it than the emotions.   And Sowell has the talent to make the NYTimes look ridiculous.   Who wouldn't be against paying $36,500 for a hotel room, for a year?  But nobody does that.   The same is true of interest payments.  If you need to borrow for a couple weeks to meet payroll, it is surely legitimate.  But if you annualized it like the Times does, then it looks terrible.   Whenever government meddles with free enterprise, the consequences are usually bad.  High interest rates in the short term will energize borrowers to use the credit only in emergencies.  And they probably could not get the money elsewhere when they needed it if the government set interest rates too low. 

THE MEDIA

The Media Are Much Scarier Than Ebola

Dennis Praeger writes about excesses that come from the media, in particular, the Ebola scare.  There are many more threats to our existence than Ebola, he says, but the media drums up a big storm.   The media are about the only reason that I started NewsBalance and it was not only its hype of issues but its bias on almost every issue.   The media object to money in manufacturing or Wall Street.  But the media are maybe the worst of them all.  They create crises in order to sell advertising.  Is that doing the public any favors? 

CHINA ECONOMICS

China Economy Grows At Slowest Pace

In 5 Years

China’s economic growth waned to a five-year low of 7.3 percent last quarter, raising concerns of a spillover effect on the global economy but falling roughly in line with Chinese leaders’ plans for a controlled slowdown.
 

NEWSBALANCE

We post many more articles than highlighted on this page.   Some are highly ranked but don't meet my notion of deserving special attention, perhaps because they were covered recently.   I invite you to peruse all the posted articles, or maybe just the liberal onesor the conservative ones
 
 
 
Bill B. May brings you a new book, The Caveman Explores Politics and Economics, explaining the intricacies of economics. Learn how politics and economics interact to negatively impact society. Politicians react to deficits by raising tax rates to cover spending. They also print money to supposedly boost the economy. Find out why these methods don't work and why opposite measures should be the course of action. Become an informed citizen and read this book.
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