A Nationwide Minimum Wage Is Even Worse Than State-Imposed Wages
By Tyler Durden
Submitted by Ryan McMaken via The Mises Institute,
Labor activists have continued to press for a nationwide minimum wage of 15 dollars, and in a surprisingly economically-literate article at ABC news, commentators recognized that the higher a minimum wage is pushed, the more it will increase unemployment:
“It seems to me very probable that the employment losses would be quite a bit larger under a $15 federal minimum than under a $12 minimum,” Burtless said. “And I am speaking as a labor economist who strongly supports the president's call for an increase in the federal minimum wage to $10.10 an hour. I can even be persuaded that a hike in the minimum wage to $12, if phased in over a long enough period, could be a good idea, depending on the condition of the economy and the rate of increase in U.S. median wages.”
“If we want low-skilled people to still get or keep jobs, $12 is a stretch for many, while $15 might be impossible. Think of someone earning $10 right now,” Holzer said. “They probably get hired or kept at $12 but not $15. And those earning $8 right now might be priced out the market at both wages.”
In other words, if you set the minimum wage at a point where it won't affect that many workers, and you won't end up with noticeably higher unemployment rates on your hands.
Make no mistake: as a result of any increase in the minimum wage, fewer new hires of low-skilled workers will take place, and some may even be laid off (ceteris paribus). But proponents believe that the workers who are priced out of a job are just the price “we” pay for raising the wage of those lucky enough to keep their jobs.
At $12 per hour — this way of thinking goes — some people will simply be unlucky and lose their jobs. At $15 per hour, though, an even larger number will lose their jobs.
This fact is hard to deny, and it's why no one advocates for an increase in the minimum wage to $50 dollars per hour. Virtually everyone instinctively knows that no one will hire low-skilled workers at that wage. Nevertheless, there remains an idea that the downside can be minimized by raising the minimum wage incrementally.
That's just wishful thinking, but it is true that raising the minimum wage incrementally is better than raising it $10 or $20 all at once. That would throw the labor markets into complete disarray.
Minimum Wages : Keep it Local
Another less-bad way of dealing with minimum wage increases is to make sure that they are done only at the local level. A nationwide minimum wage is one of the more damaging ways of implementing a minimum wage, and this also brings us back to what the economist Holzer was saying in the opening quotation.
Holzer correctly notes that the more you try to push the rate above the current market rate, the more unemployment will result.
This …read more
Source: A Nationwide Minimum Wage Is Even Worse Than State-Imposed Wages
Barron’s Does It Again
By Tyler Durden
Has there ever been a more ill-timed example of the curse of the Barron's cover than this?
After months of “strong” sales, rising prices, and Phil-LeBeau-gasms, Barron's decides that – following the biggest used-car price plunge since 2008, amid a drastic drop in sales, and near-record high inventories – now is the time to print this…
RBC recently asked if the automakers were “the card that brings the whole house down,” as Alhambra's Jeffrey Snider asked rhetorically, “will autos be the recession trigger?”…
What is most amazing about the current “manufacturing recession” is that it has occurred while automobile production has remained rather stout. That would suggest the state of production beyond motor vehicles is much worse than the headline contraction rates. However, that might all be changing as we know “something” is amiss in the auto segment. Inventories of all kinds of vehicles have piled up especially on the wholesale level, leaving channels stuffed to a degree not seen since the worst of the Great Recession.
As inventories rose, auto production stumbled on both the domestic and import side. US production, or the Fed’s data series within Industrial Production counting motor vehicle assemblies, showed a sustained drop that began around August. That is, of course, likely not coincidence given that it is coincident to the “global turmoil” policymakers have referred to of late as a benign pretext in substitute for the previously benign “transitory.” Assemblies rebounded somewhat in February, but inventory remains downright repulsive and even that upturn in production may be nothing more than the usual monthly variation.
Benchmark revisions in the data released this month have taken some of that volatility out, but it still leaves questions about where auto production is heading not just on its own terms but relative to the overall engrossing slowdown and manufacturing recession.
The problem is not just the disparity suggested by inventory, as the inventory surge these past few months is itself being driven by an actual and serious setback in overall motor vehicle sales. In other words, it seems something altogether different than a more benign scenario where car and vehicle manufacturers have had to slow production temporarily in order for sales to catch up; vehicle sales are actually tanking.
Sales have been quite robust as, again, autos have been about the only bright spot in this recovery and especially during the slowdown portion of it. Peaking in October and November at 18.6 million units SAAR, the level of sales has dropped by an astounding 9% to just 16.9 million in March – with sales falling 1 …read more
Source: Barron’s Does It Again
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Top oil countries fail to reach deal on production freeze
The world’s top oil producers walked away from a marathon negotiating session on Sunday without an agreement to freeze crude production, a failure that could spook investors and send tremors through the oil market.
…read more
Source: Top oil countries fail to reach deal on production freeze
"If You Like Your ‘Peddled Fiction’, You Can Keep It…"
The Real Reason Hillary Clinton Refuses To Release Her Wall Street Transcripts
By Tyler Durden
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
“It was pretty glowing about us,” one person who watched the event said. “It’s so far from what she sounds like as a candidate now. It was like a rah-rah speech. She sounded more like a Goldman Sachs managing director.”
– From the post: What Clinton Said in Her Speeches – “She Sounded More Like a Goldman Sachs Managing Director”
We’ve seen bits and pieces emerge from Hillary Clinton’s infamous $225,000 speech to Goldman Sachs in October 2013, but an article published by the Huffington Post yesterday adds some additional perspective. In a nutshell, the author believes that a release of these transcripts would be so damaging it would end her bid for the presidency.
Here are a few excerpts from the Huffington Post piece:
The reason you and I will never see the transcripts of Hillary Clinton’s speeches to Wall Street fat-cats — and the reason she’s established a nonsensical condition for their release, that being an agreement by members of another party, involved in a separate primary, to do the same — is that if she were ever to release those transcripts, it could end her candidacy for president.
In fact, it appears they’d cause enough trauma that Clinton would rather publicly stonewall — to the point of being conspicuously, uncomfortably evasive — in public debate after public debate, to endure damning editorial after damning editorial, and to leave thousands and thousands of voters further doubting her honesty and integrity, all to ensure that no one outside Goldman Sachs, and certainly no voter who wasn’t privy to those closed-door speeches, ever hears a word of what she said in them.
The real experts on this topic are the friends and acquaintances of Hillary’s who, for whatever reason, have chosen to be candid about what they believe is in those speeches. And it’s only that candor that helps explain the longest-running mystery of the Democratic primary — a mystery that’s been ongoing for over seventy days — which is this: why would anyone pay $225,000 for an hour-long speech by a private citizen who (at the time) claimed to have no interest in returning to politics?
Mr. Sanders has implied that there are only two possible answers: (a) the money wasn’t for the speeches themselves, but for the influence major institutional players on Wall Street thought that money could buy them if and when Clinton ran for President; or (b) the speeches laid out a defense of Wall Street greed so passionate and total that hearing it uttered by a person of power and influence was worth every penny.
Per Clinton surrogates and attendees at these speeches, the answer appears to be both (a) and (b).
Now here are a few examples of what we’ve heard from others:
1. Former Nebraska Governor and Senator Bob Kerrey (Clinton surrogate)
“Making the transcripts of the Goldman speeches public would have been devastating….[and] when the GOP gets done telling the Clinton Global Initiative …read more
Source: The Real Reason Hillary Clinton Refuses To Release Her Wall Street Transcripts
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China official: Donald Trump ‘is an irrational type’
China’s finance minister, Lou Jiwei, has weighed in on one of the biggest headlines of the U.S. presidential race: Donald Trump’s controversial proposals on trade.
…read more
Source: China official: Donald Trump ‘is an irrational type’
Mysterious Foam Covers Japanese City In Aftermath Of Destructive Earthquake
By Tyler Durden
After this week’s spike in destructive Japanese earthquakes, which in addition to the two strongest tremors since 2011 has also unleashed several hundred smaller aftershocks and led to over 40 deaths, thousands injured, landslides, collapsed buildings and extensive damage, the most surprising aftereffect appeared yesterday on the streets of the southern Japanese city of Fukuoka which became blanketed in “mysterious foam” leaving residents baffled by the phenomenon which the authorities, busy with the disaster’s aftermath, found no time to explain.
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?????? pic.twitter.com/JE2QKxayBT— ?????? (@_xPIYOx_) April 15, 2016
The froth appeared shortly after disastrous tremors from a 7.3 magnitude quake shook the city of Fukuoka on Friday. Twitter users posted photos of the snow-like foam sheet and wondered what caused it.
The unexplained phenomenon affected the downtown Tenjin and Imaizumi areas of Fukuoka, according to reports.
Some speculated that it may be the result of a burst underground pipe caused by the earthquake. Others suggested it could have been common firefighting foam, although no fire trucks could be seen anywhere in the photos.
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????……????????????????????????????????? pic.twitter.com/5lQNuyK0Sd— ??? (@R0KlA) April 15, 2016
There has been no official explanation for the foam as of yet. Speculation that this is simply a logical consequence of the BOJ owning over half of Japan’s ETFs and on pace to also own half of Japan’s government bonds have so far been unconfirmed.
Source: Mysterious Foam Covers Japanese City In Aftermath Of Destructive Earthquake
"I Am Not Sure You Can Call It A Freeze" – OPEC Deal In Jeopardy As Saudi-Iran Tensions Spike: All The Latest
By Tyler Durden
Following last night’s leaked draft Doha document, which envisions a non-binding, “gentleman-like” oil freeze agreement, that caps production at January levels until October, with zero enforcement or oversight, moments ago the formal Doha talks started:
- OIL PRODUCERS START FORMAL TALKS ON OUTPUT FREEZE IN DOHA
However, even before the start, things did not look good, when Saudi Arabia delayed the start of the meeting in what seemed to be a redrafting to account for the inclusion of Iran as part of the freeze, something which Iran has clearly said it won’t do.
- DOHA OIL MEETING DELAYED AFTER SAUDIS REQUEST CHANGES: REUTERS
- DOHA OIL TALKS SAID DELAYED UNTIL AFTER VISIT TO EMIR PALACE
- DOHA OIL-FREEZE PROPOSAL SAID BEING AMENDED AHEAD OF MEETING
- OIL-OUTPUT FREEZE DEAL SAID BEING AMENDED TO ACCOUNT FOR IRAN
Furthermore, we already know what the next strawman will be once today’s “deal” disappoints: yet another meeting which will keep the headline scanning algos busy
- OIL PRODUCERS SAID TO PLAN NEXT FREEZE MEETING IN RUSSIA OCT.20
Or as one commentator put it, “more meetings, more jawboning.It’s OPEC’s OMT program. Freeze won’t happen,but they hope pretending it will, will do the trick” which is exactly the point.
So where are we now?
According to Reuters things are not as “optimistic” as Ecuador, Venezuela and many of the other high-cost, and quite desperate, OPEC producers had hoped ahead of the meeting.
According to the wire service, “a spike in tensions between arch-rivals Saudi Arabia and Iran appeared on Sunday to ruin prospects of the first binding oil output deal in 15 years between OPEC and non-OPEC nations, and looked set to prompt another fall in the price of crude.”
But the meeting was postponed after OPEC’s de facto leader Saudi Arabia told participants it wanted all OPEC members to take part in the freeze, according to OPEC sources.
Riyadh had earlier insisted on excluding Iran from the talks because Tehran had refused to freeze production, seeking to regain market share after the lifting of Western sanctions against it in January.
With the deal running into trouble, oil ministers in Doha met with the Qatari emir, Sheikh Tamim bin Hamad al-Thani – who was instrumental in promoting output stability in recent months.
But a new draft seen by sources thereafter contained none of the binding points of the previous outline. Ministers are due to start talks at around 1200-1230 GMT, according to sources.
“I am not sure you can call it a freeze,” one OPEC source said.
A senior oil industry source said: “The problem now is to come up with something that excludes Iran, makes the Saudis happy and doesn’t upset Russia.”
Failure to reach a global deal would signal the resumption of a battle for market share between key producers and likely halt a recent recovery in prices.
And then, someone finally got to the bottom of things: “If there is no deal today, it will be more than just Iran that Saudi Arabia will be targeting. If there is no freeze, that would directly affect North …read more
Wishes Aside, Gold Is Going To Fly
By Chris at www.CapitalistExploits.at
Sure, it may just go to $650 an ounce first, which incidentally would be awesome for those of us who love going long asymmetry.
Rest assured however, when the wheels truly come off of what is easily the craziest monetary experiment of modern times, there will be no stopping gold from running.
A lesson I have learned (there have been many), and one that I’m particularly keen not to relearn, is that it’s dangerous to let emotions influence investment decisions.
It’s easy to get emotional about the shambles central bankers have made of our world.
It’s easy to be fearful of the consequences yet to be experienced as a result of their actions.
The world is more connected than ever before. This connection has brought positives such as increases in international trade, specialisation of resources and skills, and has certainly helped drag many out of poverty. The flip side is that what central bankers do has a truly global impact, and that impact is often harshest for those that can least afford it.
When Yellen, Kuroda, and Draghi manipulate interest rates lower they affect the cost of capital globally, and this includes the little guy in Dhaka buying an apartment, the merchant in Ghana exporting cocoa to Europe, or the tourism operator in Thailand marketing to Russian clients. Asset prices everywhere are affected by these clowns’ actions.
It’s no coincidence that the three culprits mentioned above are running the central banks of countries which also sport the most unsustainable patterns of expenditure and consumption imaginable, but they’re not the only guilty ones!
Meanwhile, some of the world’s most successful investors see the writing on the wall.
When questioned about this, Stanley Druckenmiller, the hedge fund manager who has compounded money at an annualised 30% return for 25 years had this to say:
And when I look at the current picture of expected tax revenues combined with benefits promised to future generations, this is the most unsustainable situation I have seen ever in my career.
Druckenmiller’s concern lies with the demographic trend in the United States and the growth in entitlement spending. As these two opposing forces have converged the response has been to actually increase expenditures by issuing more debt. The exact opposite of what any reasonable person would do.
This completely unsustainable path is prevalent not just in the United States, but even more prevalent in Japan – with Europe not far behind.
Looking back, historians will reflect on this era, scratch their heads and say to each other, “How did the populace let a tiny few create such a massive disaster… right in front of their eyes?”
They will further marvel at how this path was not followed by just one major economic power, which would have been bad enough on its own, but by all of the world’s major economies. It’s as if the entire world collectively went insane.
A “Popular” Solution?
A popular solution amongst those who realise the problem is to bring back the gold standard. That’s unlikely at best, and in truth it’s not a well …read more
Source: Wishes Aside, Gold Is Going To Fly
Kyle Bass On The Resurgence Of Gold And The Looming "Run On Cash"
By Tyler Durden
Hayman Capital founder Kyle Bass sat down recently for a conversation with Maria Bartiromo and Gary Kaminsky on Wall Street Week. He covered a variety of topics such as NIRP, income inequality, and the U.S. presidential race. As our regular readers know, Kyle correctly predicted the housing crisis, and is now calling for the yuan to be dramatically devalued.
On the growing use of negative interest rates as a central bank policy tool, he pointed out that while the central planners have their PhD's and elaborate excel models, the reality is that not all people behave rationally, and thus in the real world those types of policies won't necessarily work as intended. He also touched on the fact that a concern that should be on the front of everyone's mind is the fact that if NIRP goes full Shinzo Abe and banks start charging customers for keeping cash at their banks, that there will be a run on cash.
“I think this is where the academics are kind of clashing with the practitioners. I think on paper negative rates make a lot of sense if you're running academic models, but in reality they make no sense. Having seven or eight trillion dollars of debt trading at negative rates, having thirty year JGB's trading at fifty basis points is absolutely ludicrous. This experiment that's going on we all know will end poorly at some point in time, I just don't know when that time is.”
“I think that one of the fears that they have is a run on cash. If they told you and I that they're going to tax your deposits by a hundred basis points, well it's better to put it in a safe or under your mattress. And that's why you see a resurgence in gold. The more they move to negative rates, the more gold is gonna take off because there's no carrying cost.“
Regarding what's going on in Asia, he reiterates his call that there's a giant credit bubble (as we discussed here, here, and here) that's reached its breaking point and it's going to burst over the next two or three years. He says that he believes the implosion of the china credit bubble will have a 40-50% chance of causing a recession in the U.S. within the next year.
“From the perspective of what's going on in Asia, Asia has a giant credit bubble that they've been building for the last ten years or longer that has reached its atrophy level, and it's going to happen over the next two or three years. Whether that causes the U.S. to have a brief, minor recession, I think it's kind of forty, fifty percent chance in the next year personally.”
He goes on to hammer the central banks' monetary policy decisions, saying that they can't generate true organic growth and that we've been doing the same thing for the past eight years and we're still in the situation we're in. Something Zero Hedge has been …read more
Source: Kyle Bass On The Resurgence Of Gold And The Looming "Run On Cash"
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