Recently in Business and Economics Category

Much as cities in California have made mistakes when it comes to their finances, it appears here on the East Coast the city of New York is about to shoot itself in the foot, but in a different fashion.

While New York also has problems with its public employee unions, it's nowhere near the level seen elsewhere. Instead, the City Council is proposing rules that will help drive the last surviving industry out of the city - the financial industry.

For the life of me I can't figure out how making it too difficult and too expensive to remain in New York City is going to help the city's finances. Is it possible the City Council has been infected with the "California disease"? After all, California's state and local level governments have been doing their best to drive businesses out of business or out of state. They have succeeded. That's why California is in the fiscal mess it's in. And now New York City wants to do the same thing?

Yet in the wake of JP Morgan's massive losses last week and the continuing controversy surrounding the Wall Street bailouts, the New York City Council is debating a measure that would require city banks to publicly disclose their efforts at "socially responsible" banking.

--snip--

Many bankers, as well as Mayor Michael Bloomberg, have voiced their opposition to the new plans. The regulations, they say, would add another burdensome layer to the web of regulations that already exist at the federal and state levels. The Council, however, appears unmoved, and support of key council leaders...give it a fighting chance at making it into law.

If it does, its supporters on the Council will hail it as a major victory, but it will be a loss for the city as a whole. The financial industry is the one industry keeping the city alive, yet New York's blue politicians seem unconcerned about the risks of antagonizing their major cash cow.

This is the same attitude held by many politicians in California and we've seen how well that's worked out for them. The City Council doesn't seem to understand that the banks and other financial institutions will have no problem departing the city for greener pastures. As the post linked above states, Fortune 500 companies have been leaving New York for decades. Wall Street firms will have no problems following them to places with better business climates. And with today's telecommunications infrastructure, those greener pastures can be anywhere, even here in New Hampshire.

As I commented upon earlier this month, people have been dropping HBO and switching over to streaming video because of HBO's support of an increasingly misogynistic Bill Maher and the political hatchet job they did on Sarah Palin.

In the two weeks since that post the number of people doing that has grown. In a Glenn Reynolds post about the failure of the Media Matters driven Rush Limbaugh boycott, Instapundit reader Kirby Angell comments about a bit of anecdotal evidence the "dump HBO" phenomenon is continuing.

"I was at the cable store dropping all of the movie channels, but I told them I specifically wanted to drop HBO because of Bill Maher and objectionable content. Then I found out if I got a new cable modem I could get a faster internet connection. Yesterday the cable guy was out with the new modem and while testing it he said 'lots' of people were dropping cable service and going with streaming only. He said he would drop it at his house but there was one show he would miss and that's the only reason he keeps it. I've never seen Game of Thrones which he would miss, but I love Walking Dead and would still wait until I can stream it at my convenience than pay for cable. Soon the cable companies' only product may be the pipe."

At the moment "the pipe" is the only service we have from our local cable company. We never had the video service (we subscribe to satellite, but don't have any of the movie channels) and dumped our phone service almost a year ago when we realized our home phone was redundant. We haven't subscribed to one of the streaming video services yet, but I figure that's coming. I do use Hulu to catch up on episodes of shows I might have missed.

The WP Parents use a Sony Media Player to stream stuff from Netflix. They'd never go back to HBO. I know a number of my co-workers have also dumped their movie channels in favor of streaming video, with two of them specifically mentioning HBO as their reason for dropping their service.

I've covered the decline of Detroit more than once, covering the various reasons for its precipitous fall from grace.

It's decline continues as the Democrat policymakers continue their experiment to create a socialist utopia. Too bad it's been failing and in such a spectacular fashion that it's impossible to hide. No amount of dissembling and sleight-of-hand can point observers away from the obvious: Detroit is dying and it's the fault of the Progressives who have been running the city for decades.

They have implemented just about every socialist program, regressive 'redistributionist" tax, and punitive business regulation on their wish list upon the city and its residents and the results are clear to see: Detroit has gone from the richest city in the US (per capita) to the second poorest. (Only Cleveland beat them out for that honor.) Detroit can stand as an example of what the rest of the nation will look like if Obama and the rest of the Progressives get their way. The socialist experiment has failed and no amount of window dressing can change that, no matter how hard the MSM tries.

As bad as the real estate bubble and subsequent meltdown was here in the US, the bubble in China is worse and the meltdown will be far more spectacular. Unlike the one in the US, the Chinese meltdown includes entire cities built in anticipation of demands for housing, manufacturing, and consumer spending. It is this last that shows just how badly the Chinese government has overestimated the demand, particularly in light of the highly inflated prices for housing.

One other difference - while shopping malls in the US have been struggling remain open as retailers either fail or decide to move to another location (sometimes to the web), many new malls in China never had the retailers to begin with. One mall, called the South China Mall (also known as the Great Mall of China), was supposed to be the biggest retail mall in the world, with over 1500 shops under one roof. Instead it sits virtually empty, with few operating shops and even fewer customers.

To see how bad it is, an Australian news crew visited one of the new cities. Thousands of apartments sit empty, as do many of the retails shops.



Billions of dollars spent on ghost cities where very few live. This is what happens when the government decides what the demand will be rather than letting the private sector figure it out and build only what they can sell.

Is the UK on the verge of abandoning the EU? It's looking more like a more attractive option as the monetary/finance crisis deepens and threatens to pull the UK irrevocably into a bankrupt and less democratic European superstate.

What options does it have to preclude this out come? Only two variations on a theme, that being withdrawal from the EU. That leave them with two possible options once they've done so: Go it alone or seek alliance elsewhere. Going it alone may seem attractive at first, but it does leave them open the vagaries of the world market with no one else backstopping them. So perhaps they should seek an alliance elsewhere. But with whom?

Well, how about NAFTA? After all, the UK has far more in common with Canada and the US than they do with France, Germany, or Belgium.

Britain does have other choices. To find the country's new role, British leaders should look to North America.

Alone among EEC members, Britain narrowed some of its major trade networks when it joined. It also traded ordinary Britons' right to virtually bureaucracy-free movement, temporary or permanent, between the U.K. and British Commonwealth nations.

--snip--

While much trust was lost between Britain and the rest of the Commonwealth because of this move, strong personal, cultural and economic ties remain and could be revived. Ask the average Briton where he'd feel more at home, Paris or Toronto.

Canada and Australia have well-managed, vibrant economies. Both countries sit on huge deposits of natural resources of ever-increasing value. Britain's top-tier financial sector and still-excellent technical capabilities already play a role in Canada's economy. These ties could be much strengthened.

Britons also feel at home south of the Canadian border. Contrary to an oft-repeated myth, links between Britain and the United States are not reducible to the personal relationships between presidents and prime ministers. The U.S. and the U.K. have always been each other's primary financial partners. A few simple measures could substantially deepen this relationship, especially once Britain no longer needs to adhere to EU rules.

The only thing the UK has in common with the rest of Europe these days is proximity and a centuries long history of armed conflict with a number of countries there. Perhaps it's time for Britain to remember the rest of the Anglosphere and to consider re-aligning itself it with it. I have no doubt it would help both the UK and the other nations of the Anglosphere.

And the UK's trade with the rest of the EU? I have reason to believe that while there would be some fall off in trade, in the end it won't be all that much. And increased trade and relations with the rest of the Anglosphere would certainly help make up any shortfall from the rest of Europe.

Frankly I see little if any downside to the UK withdrawing from the EU and realigning itself with its former colonies and Commonwealth members.

Some of the latest housing news shows that home values are still falling. That's not really a surprise, is it? But prices are rising in 2 cities, Washington DC and Detroit.

Detroit?

Yes, Detroit.

When you think about it it makes sense. Its real estate values plummeted to the point where the median price for a house was less than $7000. (The large number of abandoned homes and buildings in the Motor City helped suck down property values for years.) Many neighborhoods have been abandoned entirely and the city has been tearing down empty homes for some time. The population of Detroit is less than a third of what it was at its peak. In effect, property values hit rock bottom. There's only one way for them to go: up. So is it a surprise that home values are starting to climb? Some folks see an opportunity and are snapping up empty homes for bargain basement prices and fixing them up. Unless the city dies entirely the chances are the value will go up.

We've been hearing about the financial turmoil in the EU, with Greece just this side of total bankruptcy, and Portugal, Italy, Ireland, and Spain no too far behind. There's lot's of finger pointing, with very few pointing the finger at Brussels and he unaccountable EU Parliament.

One of those doing willing to do so is the CEO of Ryan Air, Michael O'Leary. He slams the EU bureaucracy, the politicians, the rent seekers, and those trying their hardest to kill off any innovation that might make things better rather than maintaining the status quo, as bad as it is.


O'Leary tells them some hard truths, truths they'd rather not hear. But then he's helped create more jobs than all of the EUcrats combined.

It is said the truly smart will learn from the harsh lessons of others' failures. I can say that one member of the WP clan is that smart, that being the youngest of the WP sisters. (As she says, she made her own mistakes while growing up that our parents never found out about.)

It would be great if the political class presently ruling the US was as smart as my youngest sister. Unfortunately they are not.

They see the economic meltdown occurring in the Euro-zone, yet refuse to learn the lessons countries like Portugal, Ireland, Italy, Greece, and Spain are teaching us, the primary one being that eventually you will run out of other people's money to fund all the wonderful social programs that have been used to bribe the electorate.

Italy is the latest to teeter on the brink of insolvency, and should it go over the edge it is quite likely it will pull the rest of the Euro-zone with it. Greece's default damaged the European economy yet it has only a fraction of the GDP of Italy. Should Italy default Europe will take an additional $2 trillion hit it cannot afford. Is it any wonder Germany is considering abandoning the Euro and going back to the mark? Can anyone deny that this problem has been driving the British public to demand a referendum about whether or not to remain in the EU? At least those two countries see the problem and realize they'll have to bankrupt themselves in a doomed effort to prop up economic policies from Brussels.

But too many of our own politicians at the state and federal level, regardless of party, seem oblivious to the fact that unless we make some drastic changes in how our federal government taxes and spends we will be headed down the same path. Labor leaders ignore the fact that neither businesses or taxpayers are a bottomless source of funds, shortchanging their own members by making promises no one can keep.

Should the US fail to put its financial/economic house in order, and right quick, it will pull the world economy down with it into a depression unlike any we've seen before.

I saw this by way of Instapundit. It reveals some harsh truths the #OWS folks won't admit to, but something We The 53% understand completely.

We are Wall Street. It's our job to make money. Whether it's a commodity, stock, bond, or some hypothetical piece of fake paper, it doesn't matter. We would trade baseball cards if it were profitable. I didn't hear America complaining when the market was roaring to 14,000 and everyone's 401k doubled every 3 years. Just like gambling, its not a problem until you lose. I've never heard of anyone going to Gamblers Anonymous because they won too much in Vegas.

Well now the market crapped out, & even though it has come back somewhat, the government and the average Joes are still looking for a scapegoat. God knows there has to be one for everything. Well, here we are.

Go ahead and continue to take us down, but you're only going to hurt yourselves. What's going to happen when we can't find jobs on the Street anymore? Guess what: We're going to take yours. We get up at 5am & work until 10pm or later. We're used to not getting up to pee when we have a position. We don't take an hour or more for a lunch break. We don't demand a union. We don't retire at 50 with a pension. We eat what we kill, and when the only thing left to eat is on your dinner plates, we'll eat that. For years teachers and other unionized labor have had us fooled. We were too busy working to notice. Do you really think that we are incapable of teaching 3rd graders and doing landscaping? We're going to take your cushy jobs with tenure and 4 months off a year and whine just like you that we are so-o-o-o underpaid for building the youth of America. Say goodbye to your overtime, and double time and a half. I'll be hitting grounders to the high school baseball team for $5k extra a summer, thank you very much.

So now that we're going to be making $85k a year without upside, Joe Mainstreet is going to have his revenge, right? Wrong! Guess what: we're going to stop buying the new 80k car, we aren't going to leave the 35 percent tip at our business dinners anymore. No more free rides on our backs. We're going to landscape our own back yards, wash our cars with a garden hose in our driveways. Our money was your money. You spent it. When our money dries up, so does yours.

The difference is, you lived off of it, we rejoiced in it. The Obama administration and the Democratic National Committee might get their way and knock us off the top of the pyramid, but it's really going to hurt like hell for them when our fat a**es land directly on the middle class of America and knock them to the bottom.

We aren't dinosaurs. We are smarter and more vicious than that, and we are going to survive. The question is, now that Obama & his administration are making Joe Mainstreet our food supply...will he? and will they?"

So if the OWS folks get their way and kill off Wall Street and the corporations, what they'll get in return is an economic collapse that will make the Great Depression look like a minor market correction in comparison. But what do you expect from economically illiterate and spoiled children who feel entitled to what the rest of us earned?

I've seen this both at Instapundit and on a friend's Facebook page. It's too good to pass up, so I knew I'd have to link it.

While the so-called 99% are protesting for free stuff, we, the 53% who actually pay for that 'free' stuff, are voicing our own opinions about it. One shot from the site:


Yup, I'd say that covers it.

As the foreclosure crisis drags on, it appears banks holding some of the foreclosed properties are taking drastic measures to lighten their burden.

As we've seen in Detroit, foreclosed and abandoned homes have been demolished. In a number of the hardest hit suburbs empty housing developments, some with hundreds of empty never-occupied homes, are being bulldozed to remove the need for the banks or the towns to maintain and police them. (Some of these upscale homes have turned into squatters dens, housing drug dealers and prostitution operations.)

The trend has been spreading, with a number of cities passing legislation to enable them to work with banks to demolish foreclosed properties that are unlikely to ever be occupied before they molder away from neglect. One of the latest to deal with this issue has been Cleveland.

The sight of excavators tearing down vacant buildings has become common in this foreclosure-ravaged city, where the housing crisis hit early and hard. But the story behind the recent wave of demolitions is novel -- and cities around the country are taking notice.

A handful of the nation's largest banks have begun giving away scores of properties that are abandoned or otherwise at risk of languishing indefinitely and further dragging down already depressed neighborhoods.

Four years into the housing crisis, the ongoing expense of upkeep and taxes, along with costly code violations and the price of marketing the properties, has saddled banks with a heavy burden. It often has become cheaper to knock down decaying homes no one wants.

As the linked article states, a number of other states and cities have passed laws allowing the same kind of operations to demolish distressed properties and ease the burden of supporting empty properties.

One area I predict will see such demolitions in the near future is the Las Vegas area. Entire neighborhoods sit empty, with street after street of new homes never sold and never occupied gathering dust and becoming the icon for a modern ghost town.

While not nearly as eerie as the modern ghost cities seen in China, it's still a sad testament to the housing bubble enabled by Congress with their weak oversight of Fannie Mae and Freddie Mac.

I'm beginning to wonder how many times Obama and his advisers will have to hear this message before they come to understand it, if at all: the American Jobs Act won't induce employers to hire new workers.

I've discussed the issue of tax incentives as a goad of hiring a number of times with some of my more liberal friends or acquaintances, few of whom don't seem to understand the reason why businesses hire more workers. They can't seem to grasp the concept that no amount of tax cuts will induce any business owner to hire an employee they don't need. Adding an worker who adds nothing to the bottom line, meaning one who does not create more income for the business than it costs to employ them, makes no sense and causes the business to lose money even with the tax cut incentive.

Message to Obama et al: Businesses hire workers when they can't meet the demand for goods or services with the employees they already have. Period.

So endith the lesson.

Gee, this is a shocker.

FairPoint Communications is laying off 400 workers across its service areas, with 190 of them in New Hampshire. The company cites decreasing revenues and a decline in customers as its reason for the layoffs.

This is not a surprise to anyone paying even a little attention to the telecommunications industry.

FairPoint's purchase of Verizon's landline operations in northern New England was a disaster from the beginning. The number of landline customers had been declining for some time and Verizon saw an opportunity to divest itself of an operation in a declining market. FairPoint was stupid enough to buy it despite protests from many that it was paying too much for assets that would continue to decline in value. Once FairPoint took over operations from Verizon the problems multiplied, with a loss of 10% of its landline customers in less than 6 months. The continuing hemorrhage of customers and problems with its operations finally forced it into Chapter 11 bankruptcy and its delisting on the New York Stock Exchange.

Even after reorganization its customer base continued to decline as competitors like cable companies and cell providers undercut it in price and services. Ironically one of its biggest competitors is Verizon, whose wireless operations were winning over an increasing share of customers.

FairPont isn't the first company to see its landline operations become a money losing operation. And in yet another bit of irony, Verizon has seen its own landline services suffering, prompting it to demand concessions from its union employees. This led to a strike by both the CWA and IBEW against Verizon last month. The unions figured since Verizon was making billions in profits that they were somehow entitled to a share. But it was their wireless and business operations making the profits, neither of which are unionized. The landline operations were shrinking and losing money, and Verizon wasn't about to use profits from other operations to fund higher pay and benefits for their landline workers.

Is it any wonder FairPoint is shedding excess employees as its fortunes decline?

The August jobless numbers came out yesterday and for once the results were not unexpected (at least not to anyone not in the Obama Administration).

Job growth for the month of August was zero. Nada. Zip. A Goose Egg. Nil. Bupkus.

The stock market reacted negatively, again not unexpectedly, dropping over 200 points and wiping out the week's gains.

Obama and his 'advisers' wonder why the job numbers are bad when anyone with a lick of sense could tell them that everything they've been doing has discouraged job growth, just the opposite of what they claim they want.

I expect the final job numbers will actually be worse, with a negative growth and an increase in the official unemployment rate to 9.2%. (Remember, the unofficial rate - approximately 19% - includes those who have run out of unemployment benefits or have given up looking for work altogether.)

That ought to help Obama get re-elected.

While those of us outside Verizon's landline service area wouldn't notice that both the IBEW (International Brotherhood of Electrical Workers) and CWA (Communications Workers of America) are on strike against the telecommunications behemoth, it appears those within its service area really haven't really noticed either.

I can honestly say I am not surprised. After all, the landline portion of Verizon's business operations has been shrinking for well over a decade, with FiOS (their Fiber To The Home service) being the only portion of their landline services having seen any growth at all in that time, and that growth has tapered off as Verizon has scaled back further deployment.

What makes this strike so under-the-radar is that the unions are fighting for higher pay and benefits in an operation that has been breaking even at best, and losing money in less-than-best cases. Is it any wonder Verizon has been shedding itself of its less profitable landline operations over the past few years? Why else would they have sold their more rural (and money losing) operations to HawaiiTel, FairPoint, and Frontier? (Both HawaiiTel and FairPoint went into Chapter 11 a couple of years after buying those assets. Frontier has already had to seriously scale back some of the services Verizon used to offer when they owned the assets Frontier bought. That ought to tell you something.)

Yes, Verizon has posted billions in profits. But those profits came from their wireless and business operations (which are not unionized). How is it the CWA and IBEW figure they're due a portion of those profits? They sure as heck didn't help to create them. They're working in a business that is shrinking, both in the number of customers and profit margin. Do they really think Verizon will knuckle under to the unions when they are becoming an ever shrinking portion of their workforce covering a 100+ year old technology that is quickly being supplanted by other more flexible and less costly technologies? Apparently so.

It will be interesting to see the outcome of this contest of wills.

I guess we can call this yet another example of the Law of Unintended Consequences, something the Left seems to be very good at overlooking.

We've been reading about the effects of California's so-called "Amazon Tax", which was supposed to force Amazon to collect California sales tax for all sales made to customers in the state because of its presence by way of its affiliates program. The Golden State expected to collect millions in extra revenues, but no surprise to those of us well versed in unintended consequences, they've collected very little.

Why?

Because Amazon shut down its affiliates program in California, denying the state any extra sales tax revenues. But there's a secondary effect the legislators didn't foresee that will further decrease tax revenues: loss of income taxes from the affiliates.

Since the now former affiliates are no longer paid a commission from sales made through their links, they no longer generate the income taxes that would have been paid into the state coffers in Sacramento.

Talk about a twofer: no sales tax revenues and even less income tax revenues.

Maybe the pols in Sacramento were expecting Amazon to go to court to block implementation, but leave its affiliates program intact. Instead, Amazon said "Enough!" and pulled the plug, leaving California even worse off than they were before this idiot tax.

But wait! There's more!

Now California wants to pass a "fitted sheet" law that would make it illegal for hotels to not use fitted sheets on their beds. How effin' dumb is that?

It's no wonder California is doomed. All the really smart people have already left, taking their money and their businesses with them.

Since this seems to be "Video Saturday", I figured I'd add this one by Felonious Monk. Felonious addresses the debt crisis and tells Barack Obama to get off his butt and "pay your f***in' bills!".

WARNING! Felonious uses rather...umm...colorful language, so if you have any small children around I would suggest asking them to leave or to wait until they've gone off to bed this evening.

This rant by a small business CEO tells it like it is, something the folks inside the Beltway no longer seem to understand. Do they really think "incentives" to hire will induce business to hire anyone? Businesses hire only when they need more people, not because the government provides some kind of lame incentive to do so.


If the government really wants to give businesses an incentive to hire, then maybe it should get the hell out of the way. Maybe government should stop sucking so much money out of the economy that there's less available to invest or to buy goods and services that create the demand for more jobs. Maybe rogue government agencies should be reined in before they do irreparable damage to the businesses that actually create the jobs.

After all the dire predictions 'they' made about what would happen if Congress didn't raise the debt limit, it turns out they were wrong.

The President got his debt limit increase, but the stock market and at least one financial institution - Standard & Poor's - apparently didn't see it as a solution, and rightfully so. The stock market headed downwards, wiping out a year's worth of gains. Standard & Poor's is still threatening to drop the government's credit rating from AAA to AA or AA+ because of the government's continuing spendthrift ways.

The increase in the debt limit didn't solve the problem we're facing. It merely delayed the inevitable. Former Arkansas Governor Mike Huckabee offered an analogy that illustrated the problem perfectly.

Raising the debt limit solves the government's spending problem like raising the maximum legal blood alcohol content will solve the drunk driving problem.

I'd say he nailed it.

I must admit to being on the edge of Debt Crisis Fatigue after being bombarded by Obama, the Democrats, and the media for months on end about our impending doom if Congress doesn't pass an increase in the already outrageous debt limit.

I might not have nearly as much of a problem with Congress doing so if the Spender-In-Chief were willing to support spending cuts equal to the increase in the limit, but we all know there's no way he'll do that.

In truth, I don't like the idea of raising the debt limit even one penny. History shows us the promises made by Congress to cut spending if only the debt limit is raised have never been kept. All we've ever seen from such promises is more taxes and more spending. The promises made aren't any more real than the old "The check's in the mail" dodge, except that we're talking trillions of dollars, a number that doesn't seem to faze Obama or Congressional Democrats, but scares the bejeezus out of just about everyone else.

It's ironic, considering that many of the same people pushing for increasing the debt limit were vehemently against it the last time the issue came up. The difference this time around? Last time it was a Republican in the White House while this time it's a Democrat, and he's asking for an increase that is far greater than the last one.

Talk about a double standard.

If the President and his Democrat cronies won't control their insatiable appetite for running up the national credit card, particularly if they're not the ones who will have to pay the bill, then it's up to the GOP and the Tea Party to do it form them. Better it be done now than when it will be so painful that it brings the economy down even more than it already is. Obama and the Dems aren't willing to admit that the credit card company (that means us, folks) aren't willing to raise their credit limit until they pay off what they've already charged. Until then it will have to be as so many of we so-called "little people" do under these circumstances - pay cash, or do without.

The national credit card is maxed out and the issuers - We The People - are saying "Enough!"