Industrial Insight

new regs cost a lot…

January 31, 2013
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The Cost of Obama’s Regulatory Explosion

Nearly double the cost of the first three years of Bush and Clinton combined.

2:29 PM, Jan 30, 2013 • By JEFFREY H. ANDERSON

In fact, as the chart below shows, the costs of “major” regulations — those estimated to cost at least $100 million in any one year (in 2001 dollars) — issued by the Obama administration in its first three years nearly tripled the cost of those issued by the Clinton administration in its first three years, nearly quintupled the cost of those issued by the George W. Bush administration in its first three years, and nearly doubled the cost of those issued by Bush and Clinton combined. Again, that’s according to the Obama White House’s own tallies.

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money printing…

January 30, 2013
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| MONDAY, JANUARY 21, 2013

Here’s What’s Cooking for 2013


Zulauf:We are living in a world of money-printing. Almost 40 countries are pursuing a policy of zero or negative real interest rates to spur more economic growth. We have never seen anything like this in modern history. The people will try to protect themselves against this monetary baloney. It is accelerating the debasement of paper currencies around the world.

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How many ounces of gold to buy the DOW?

January 30, 2013
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fewer people need college??

January 28, 2013
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We Need Fewer College Graduates?

By Maggie Gallagher
January 28, 2013 11:21 A.M

According to a new study, based on 2010 Labor Department data and led by economist Richard Vedder, the number of college graduates in the work force (41.7 million) in 2010 was larger than the number of jobs requiring a college degree (28.6 million).

“That, he says, helps explain why 15% of taxi drivers in 2010 had bachelor’s degrees vs. 1% in 1970. Among retail sales clerks, 25% had a bachelor’s degree in 2010. Less than 5% did in 1970.

“There are going to be an awful lot of disappointed people because a lot of them are going to end up as janitors,” Vedder says. In 2010, 5% of janitors, 115,520 workers, had bachelor’s degrees, his data show.”

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Carbon and prosperity…

January 28, 2013
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January 28, 2013 4:00 A.M.

Carbon Use and GDP
Why are progressives so eager to suppress the things most necessary for economic growth?

By Robert Zubrin

The story that Figure 1 tells is remarkable; it is, perhaps, one of the grandest stories ever told. It shows how, over the past two centuries, by using carbon in ever-increasing amounts, the human race has lifted itself out of hopeless poverty and misery to achieve a modicum of dignity and happiness. Look at that line reaching up, in direct proportion to global carbon use, from an average global income of $180 per person in 1800 to $2,200 in 1960 to $9,000 today; that is progress.

Of course, we still have a ways to go. The current $9,000 average world income is just a fifth of the $45,000 U.S. average, yet we still have some poverty here. Still, the achievement is incredible. In 1932, Franklin Roosevelt campaigned for president on the promise of “a chicken in every pot,” and millions found the offer compelling. Today, in the United States, minimum wage is $7 per hour, and chicken sells for less than $2 per pound; so, a person working at minimum wage can buy a pound of chicken with about 17 minutes’ labor. This is freedom from want, indeed, delivered not by the New Deal, but by the terrific expansion of our use of carbon.

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skilled labor shortage in construction?

January 21, 2013
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The real worry is inflation

As investors realize the market’s deflation phantoms aren’t real, they’ll notice a potentially fearful rise in inflation. That will give the bond market jitters.

By Bill_Fleckenstein Fri 3:09 PM

On that score, an article by Anjli Raval in Wednesday’s Financial Times headlined, “Labour shortage holds back builder Lennar” was most instructive. Raval began: “Lennar (LEN +0.33%) said labour shortages and higher construction material and land costs were challenges for the US homebuilder even as it reported a surge in fourth-quarter earnings.”

The writer went on to note, “The scarcity of construction labourers, as well as plumbers, electricians and carpenters among others that are the backbone of the residential construction industry, has resulted in projects facing delays . . . . The company said additional charges and higher prices for construction materials such as lumber, drywall and concrete had increased the average cost of building a new home by $1,600.”

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where’s all the money?

January 11, 2013
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January 11, 2013

What Happened To All Of That Money?

By Jeffrey Snider

As hard as it is for most people in today’s modern era to grasp, as evidenced by the coin gambit, money is not wealth. Money can represent wealth, and, at times, even become a workable but temporary substitute, but money will never be able to replace true wealth as the central object, subject and foundation of the capitalist system. Of course, the capitalist system has found itself fettered by this modern obsession with money (included in the usage of debt as a centralized lever of control) and the political approval of economic central management, but, by and large the developed world still finds itself in some hybrid form of capitalism. While every major system continues to move to disproportion away from free markets and into the heavy handed, centralized approach, what is needed is less hybrid and more capital.

The central agency of true wealth is that it distributes economic success without the need for nudging or control. Debt, on the contrary, is the very embodiment of economic slavery – the overconsumption of current needs at the expense of encumbrance on future prosperity. Unfortunately for the developed world, that encumbrance began collecting rent in August 2007.

Much of the balance sheet expansion sold as economic elixir has simply been used to pay the freight of a debt-addled system. The cost of debt is interest, but the penance to the interest rate system lies in the multi-national banking system’s schizophrenic function. Comprised as nothing more than a cartel of interconnected behemoths, central banks have used these creations of debased monetary units to maintain the financial status quo. In the mechanics of central banking, these balance sheet expansions really amount to nothing more than risk transformations. Unusable financial collateral is exchanged out of the international banking system by central bank asset purchase programs, to be replenished by new issuance of “approved” security issues.

What is holding back recovery is not the recession of debt and credit, but the ongoing lack of genuine income streams and opportunities. Good assets, those that can and do generate positive and sustainable cash flow, are what remain in short supply. Recreating old channels for credit production does absolutely nothing to remedy that central economic problem. Sustainable jobs do not come from Wall Street speculation or London trading of derivatives and rehypothecated central bank certificates.

In the whole spectrum of possible economic projects and activities, those at the lowest end are solely dependent on the flow of new money and debt. At the highest quality level are jobs and income streams that can operate independent of monetary intrusions and disruptions because they perform a service or need that pre-exists the level of money. On the downslope of the housing bubble in the US, for instance, millions of jobs (construction, mortgage financing, real estate churning) were lost simply because money stopped flowing into the housing sector. They were unsustainable and any downstream economic activity (such as automobiles) that was dependent on them was susceptible to not only cyclical reversal but permanent structural decline in the absence of replacement monetary flow.

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France and our future…

January 10, 2013
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The euro crisis no one is talking about: France is in free fall

By Shawn Tully, senior editor-at-large January 9, 2013: 9:26 AM ET

France’s decline is best illustrated by the rapid deterioration in its foreign trade. In 1999, France sold around 7% of the world’s exports. Today, the figure is just over 3%, and falling fast. The same high costs that are pounding exports draw an ever rising flow of goods from Germany, China and even southern Europe. Those imports are taking an increasing share of sales from pricier French-made products. In 2005, France’s trade balance was a positive 0.5% of GDP. Today, it stands at minus 2.7% of national income, meaning imports now far exceed exports, turning trade from a growth-generator into a major drag. An excellent illustration of the competitiveness gap is the chasm between German and French exports to China. Germany sends $70 billion in cars, machine tools and other products to China each year, seven times the figure for France.

The main reason for France’s cost disadvantage is the burden of labor, a factor that typically accounts for around 70% of all corporate expenses worldwide. In France, the problem comprises a both high wage and social costs, and rigid laws, including a 35-hour work week that allows French employees the lowest number of working hours in the developed world. An astounding 86% of all wage earners enjoy “contrats a durée indéterminées,” permanent contracts that make layoffs extremely expensive and time-consuming.

In France, 42 euros for every 100 euros in total expenses go to social charges, versus 34 euros in Germany, 26 in the UK, and 20 in the US.

Since 2005, France’s unit labor costs — the expense of producing a single car or steel beam, for example — has jumped 17% compared with 10% for Germany, 5.8% for Spain, and 2% for Ireland. Today, French workers earn an average of 35.3 euros per hour, compared with 25.8 in Italy, 22 in the UK and Spain.

Government spending now accounts for 57% of GDP and increasing, 12 points higher than Germany. By the way, Germany’s private sector is growing briskly as public expenditures drop as a share of national income. The opposite dynamic is plaguing its long-time partner.

It’s totally implausible to blame “austerity” for France’s poor growth. Austerity is generally defined as large reductions in budget deficits, mainly driven by falling government spending. But France’s spending has increased in real terms, and its deficits have been remained at a substantial 5% or so of GDP in 2011 and 2012, with the same figure likely for this year.

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hope in manufactuirng

January 9, 2013
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5 things to be hopeful for in 2013
The federal government’s debt may be ballooning. But the personal debt of U.S. households is actually shrinking
By Paul Brandus | 6:15am EST

Low-skill, low-pay manufacturing jobs are gone and aren’t coming back. But high-skill, high-pay jobs are growing, as America’s manufacturing industry moves up the value chain. The National Association of Manufacturers estimates that there are some 600,000 openings right now — for those with the right set of skills and education. Many of these jobs require strong STEM training (Science, Technology, Engineering, and Math). Have this background? Congratulations: You’ll make $500,000 more over the course of your career than someone who doesn’t.

Some of this revival is linked to developments elsewhere — rising labor costs in China, for example — but many are homegrown. The steady decline in the dollar (which makes our exports much more competitive around the world), cheaper energy costs, intellectual property safeguards, and a resilient, mobile workforce, are among the reasons why more goods — and goods of higher economic value — are being made here.

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science or control…

January 4, 2013
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January 4, 2013

Economists Make Up a Worsening Story As They Go Along

By Jeffrey Snider

In essence, that is what all this statistical penetration is really about: eliminating tails and curtailing kurtosis by crafting policies and incentives that prevent them from happening. It sounds like a wonderful idea – smoothing out the business cycle, defeating bank panics, making humans more robotic, etc., but it misses the essence of dynamism. Human systems are truly dynamic in that imagination is boundless. While it may seem a worthwhile endeavor to try to banish left tails (the “bad” outliers) in such a truly dynamic system, doing so may actually destroy the good outliers as well. It is a lack of recognition that progress itself is usually not optimal toward the status quo.

We do not know, because there is no way to observe, how human progress and innovation actually occurs. There is much common sense (and even observations) that innovation is actually a creature of failure. We can infer that eliminating failure and creating an “optimal” society would actually be counterproductive because the “science” of statistics is willfully blind to factors beyond its grasp, those same factors that give rise to meaningful advancement. The very upswing of human society, not the least of which was driven by economic progress, is dependent on “tail risks” actually coming true. Real imagination and innovation is, by definition, a tail event itself. Nudging all of society into the narrowness of the Bell Curve is not optimal for anything but debilitating sclerosis.

What’s worse is that all of this is being done in the name of science. The scientific veneer is used as cover for political control in the inarguable trajectory of centralization. Only the priests of statistical knowledge are allowed to define what is “optimal”. Individual preferences are now scientifically proven to be against the Greater Good, and thus the central agency self-delegated to provide an optimal utopia must “nudge” the tail outliers into compliance through all-too-real penalties (that will only increase over time).

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About author

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.