Archive for category Economics
When I was in the eighth grade, the science class I took was Earth Science taught by Mrs. Fowler. I loved that class because it taught me how and why the landscape all around us was the way it was. I especially enjoyed the demonstations of how water impacted the landscape around us, cutting through rock, forming canyons and deltas. I can remember going home and recreating the demonstration of how deltas were formed in my driveway. That class and the lessons I learned have stayed with me to this day.
Of all the things I learned in that class, one lesson has impacted my understanding of politics and economics like no other. Water always flowed through the path of least resistance. As I learned about economics, I discovered a natural law about money. Money is like water. Money will naturally flow through the path of least resistance. That is not to say we cannot try to redirect the flow of money (or water), just that, if left to its own devices, money will flow to the path of least resistance.
With this foundational Law of Money Flow, I was not surprised to learn that in the United States there is an estimated $2 trillion shadow economy.
Estimates are that underground activity last year totaled as much as $2 trillion, according to a study by Edgar Feige, an economist at the University of Wisconsin-Madison. That’s double the amount in 2009, according to a study by Friedrich Schneider, a professor at Johannes Kepler University in Linz, Austria. The study said the shadow economy amounts to nearly 8 percent of U.S. gross domestic product. – SOURCE: CNBC
There are many reasons why the shadow economy may have doubled during the Obama presidency. Here are just a few
Unemployment Benefits. With unemployment benefits lasting two years, for many people receiving the benefits, getting a lower paying job would not have resulted in enough income to justify foregoing the unemployment benefits. So getting any wage off the books allowed them to keep the unemployment benefits while earning additional income.
Taxes. While taxes are not high from a historical perspective, with about half of US households not paying any income tax, it is easier to avoid personal income taxes if your income remains in the shadows. No income tax liability is no resistance.
Obamacare. The much touted health care reform law imposes a number of costs on individuals and small businesses that will only work to force more money. Small businesses, to avoid certain taxes and mandates, are incentivized to not hire new workers on a full time basis. In fact, for many small businesses it may just be easier to hire people off the books to avoid Obamacare mandates and taxes. Subsidies for health insurance will provide another significant disincentive for people to earn more money.
When government puts too many barriers in the way of the flow of money like regulation and taxation, then money will find a way around those barriers. And since government only knows how to regulate and tax, the shadow economy will burst through like water bursting through a dam.
And when it does, I hope you have a life jacket.
If you are a football fan perhaps you remember the awful news that former Pro Bowler, Junior Seau had died. He had committed suicide.
A few days ago, Seau’s family filed suit against the NFL on a wrongful death charge.
The wrongful death suit, filed in San Diego Superior Court, contends that Seau took his own life because of brain injuries suffered over the course of his 20-year NFL career. The NFL hid the dangers of repetitive blows to the head and deliberately ignored and concealed evidence of the risks associated with traumatic brain injuries, the lawsuit alleges.
“For many decades, evidence has link repetitive mild traumatic brain injury to long-term neurological problems,” the complaint reads. “The NFL was aware of the evidence and risks associated with repetitive traumatic brain injuries for many decades, but deliberately ignored and actively concealed the information from the players, including the late Junior Seau.”
Because the league establishes rules regarding player safety, it “has unilaterally shouldered for itself a duty to provide players with rules and information that protect players as much as possible from short-term and long-term health risks,” the lawsuit alleges.
And apparently, the Junior Seau case is not all that unusual:
The NFL faces lawsuits by thousands of former players who say the league withheld information on the harmful effects of concussions. According to an AP review of 175 lawsuits, 3,818 players have sued. At least 26 Hall of Famer members are among the players who have done so.
Could this be the beginning of the end for the NFL?
If the Junior Seau case and the thousands of others currently pending are successful, the NFL will be faces with potentially massive financial settlements. I would not be surprised if some of the settlements require rule changes. Some may even require equipment modifications.
It is even conceivable that the NFL game will become so watered down that fans no longer find it appealing. And if fans don’t find it appealing, then kids may stop playing the game in college, high school, and pee wee leagues. Without a pipeline of players filtering into the NFL, we could even see a decline in the talent level at the big time college and professional level.
So what does a watered down game plus lower levels of talent do for the NFL?
It makes it less appealing, and less valuable. And eventually, in the USA, we may start calling soccer by its international moniker, “football.”
And then there is this
If I had a son, I’d have to think long and hard before I let him play football. – President Barak H. Obama
There will be no shortage of food on the shelves, you just won’t be able to afford it. – Pastor Lindsey Williams, June 30, 2011
With this prediction in mind, I hope you like pork or chicken, because beef prices are about to go up…considerably.
Cargill announced Thursday that it will idle its Plainview, Texas, beef processing facility effective at the close of business, Friday, Feb.1, resulting primarily from the tight cattle supply brought about by years of drought in Texas and Southern Plains states.
Approximately 2,000 people work at the Plainview facility, and they will receive company support. Federal, state, county and city government representatives, as well as Cargill customers, suppliers and other key stakeholders were informed of Cargill’s decision, concurrent with Cargill employees being notified. – PorkNetwork.com
[That's right, I just quoted a news article from the Pork Network. Why? Because I am always on the search for news about bacon. Bacon makes everything better.]
Less beef supply means prices will rise, at least until demand begins to fall.
- Your grocery bill will go up.
- Your restaurant tab will go up.
- Restaurant traffic may take a hit, especially the quick serve and fast food restaurants that rely heavily on beef menu items.
- I don’t think your Beefeaters Gin will be affected.
If you have the freezer space, I highly recommend buying a side of beef now as a hedge against higher beef prices this spring and summer.