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Business/Finance See other Business/Finance Articles Title: WSJ: World Has Too Much Everything WSJ: World Has Too Much Everything Brad Hoppmann | April 30, 2015 at 4:30 pm Enough already! Crude oil isn’t the only thing glutting the world economy. According to some economists, we have too much of just about everything: money, labor, commodities … even information. The globe is running out of room. This is a big problem, if it’s true. We know how to manage shortages. Managing excess is a completely different problem. Gaining weight is so much easier than losing it. *** Last weekend, the Wall Street Journal featured this curious story: Glut of Capital and Labor Challenge Policy-makers. The global economy is awash as never before in commodities like oil, cotton and iron ore, but also with capital and labor — a glut that presents several challenges as policy makers struggle to stoke demand. “What we’re looking at is a low-growth, low-inflation, low-rate environment,” said Megan Greene, chief economist of John Hancock Asset Management, who added that the global economy could spend the next decade “working this off.” The current state of plenty is confounding on many fronts. The surfeit of commodities depresses prices and stokes concerns of deflation. Global wealth — estimated by Credit Suisse at around $263 trillion, more than double the $117 trillion in 2000 — represents a vast supply of savings and capital, helping to hold down interest rates, undermining the power of monetary policy. And the surplus of workers depresses wages. Meanwhile, public indebtedness in the U.S., Japan and Europe limits governments’ capacity to fuel growth through public expenditure. That leaves central banks to supply economies with as much liquidity as possible, even though recent rounds of easing haven’t returned these economies anywhere close to their previous growth paths. “The classic notion is that you cannot have a condition of oversupply,” said Daniel Alpert, an investment banker and author of a book, “The Age of Oversupply,” on what all this abundance means. “The science of economics is all based on shortages.” I agree with Mr. Alpert. Low prices should quickly resolve any cases of excess supply. The only exception would be if some external influence — like a government policy — interferes with market forces. On the other hand, we’ve seen plenty of strange economic events lately, like the increasingly common negative interest rates. Could the rulebook have changed? I thought about this a lot, and I think my answer is “No.” Richard Ebeling had a good response to WSJ in this Daily Bell editorial. The apparent “gluts” of commodities, capital and labor that the Wall Street Journal reporters see hanging over the global markets and which they forlornly wish governments could “cure” through more deficit spending are, in fact, the relative imbalances, distortions and misdirection of capital and labor brought about by years, if not decades, of government fiscal, monetary and interventionist policies that have created many of the problems we now face. They are the residues of housing booms and investment bubbles caused by earlier interest rate manipulations and money creation that artificially misdirected capital, labor and resources into unsustainable activities, given consumers and savers real preferences to demand various goods and save portions of their incomes as the basis for sustainable investment patterns. Unemployed labor has far more to do with government interventions that impose labor market rigidities and non-market wage levels that price too many wanting work from successfully finding it. Anti-competition regulations and restrictions, and high and distorting tax policies prevent reasonable and profitable uses of capital in the service of actual consumer demands rather than political intrigue. The low rates of interest in many of the leading economies of the world have nothing to do with mythical market-created “gluts” of savings and capital. They are the result of constant and continuous monetary expansion that has undermined the virtual existence of market-based rates of interest to know the reality of actual savings preferences of income earners and the profit-guided investment choices of borrowers based on the actual availability of scarce investable resources for the undertaking of capital projects. This makes more sense to me. Between central bank manipulations and government bailouts, it’s been impossible for markets to function normally since at least 2008. It’s no wonder we’re seeing unprecedented events. The miracle is that we haven’t seen even more of them. I’ll bet they are coming. *** As always, I welcome reader feedback on my afternoon thoughts or any other topics. You can leave a comment on our website or send me an e-mail. *** We’re in the heart of earnings season, and one of the most notable stories this week came from Sony (SNE). Hacking attacks, a weak smartphone business and corporate restructuring have taken a toll. Sony has cut more than 10,000 jobs across the globe since 2012. But the pain may be paying off for the Japanese electronics-maker. Although it posted a net loss for its year ended March 31, Sony reported that it doubled its operating income. It also expects to quadruple its operating profits for the year. Despite the positive news, the stock pulled back almost 2% in today’s trading while the broader market gave up nearly 1%. Elsewhere in the economy … • Did you “hold on to your chair”? This warning came from Deutsche Bank before today’s Employment Cost Index data showed wages gained 2.6% over last year. • On top of that, weekly jobless claims hit a 15-year low of 262,000. • Oil ended April on a high note, with both Brent and West Texas Intermediate crude gaining 20% for the month. This was the biggest increase in six years. • Did Apple (AAPL) boost Taiwan’s economy? The small island nation’s GDP rose almost 3.5% in Q1 from a year earlier. This was thanks in part to manufacturing and shipments of the iPhone 6. • Have $100 million to leave your heirs? Don’t give it all to them, according to a new Merrill Lynch (ML) survey. High-net-worth parents suggest that leaving $26 million to their heirs may be too little, but $63 million may be too much. It could cause a sense of entitlement. Good Luck and Happy Investing, Brad Hoppmann Publisher Uncommon Wisdom Daily Poster Comment: I wish I were in that boat. I need more money, and I need to get back into trucking. Now, I need to take the Clerk of the Court in St. Louis City Court to task for dishonoring my presentment. When this happens, the Clerk owes treble damages and cannot get out of it. Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest
#1. To: BTP Holdings (#0)
"Cannot get out of it" -- that part's beautiful. Best of luck with it and please keep us up to date on it. Apparently every post here is not required to be centered on a 3rd-pty news link, that's just the way most people approach it. Right?
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