Tax Profits, Not Labor!

Are you properly compensated for your work? As we discussed previously, between 1947 and 1973 worker’s salaries accounted for half of Gross Domestic Product (GDP). There was a solid if unspoken agreement that labor and capital split the spoils of the free market equally between them.

But what of output per worker? Is it possible that workers are slacking off and don’t deserve the same arrangement they had in the immediate Post WWII era? An analysis of productivity, or output per worker, shows some interesting trends that may point to more unspoken agreements that the various markets for capital and labor expect. These trends follow business cycles, and as such point to some important changes that are necessary as we move ahead into the next cycle in the next few years.

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Exit the Eurocrisis – Slowly

Now that the Eurozone Crisis is over, we can all breathe a little easier. Right? While it’s good to not be loping along from one crisis to the next, the aftermath of the flood that lasted from 2008-2012 in drips and drops is still being mopped up. The hits are just being absorbed by the banks and growth is going to be sub-par through 2014, meaning that the lingering unemployment problem is not going away.

There are two parts left to this clean-up – what comes next and what can we learn? They are both important and will dominate 2014 in Europe and the developed world.

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Meanwhile …

A continuing resolution which re-opens the federal government was passed along with a debt ceiling increase that keeps everything hummin’ along until February. It’s good news, at least until the next manufactured crisis comes. We can’t be sure what kind of economic damaged was done in the 16 day shutdown until … well, until the workers in the government that tabulate this stuff get back to work.

So what stories have we missed during the obsession over the limits? Quite a few, actually. Here’s a rundown of some of the interesting stories that were easily lost over the last two weeks.

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Three Views of an Economy

When the summer livin’ is easy, I enjoy sitting out on the porch with a few tunes.  Today’s lazing soundtrack was “Three Views of a Secret” by Jaco Pastorius as I went over some old posts to see if anything needed revisiting.  And this piece from July 2011 popped out as a debate that is still raging – but with some resolution.  It seemed to fit the tension that always builds in a Jaco piece.

Economists, as noted before, have widely divergent views about the economic situation and what should be done about it.  But the experiments that have been running through various economies are teaching us all a little bit along the way as to who may be right.  It’s worth revisiting.

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The Livin’ is Queasy

Your daddy’s rich / And your mamma’s good lookin’
So hush little baby / Don’t you cry
Summertime, from Porgy & Bess by George Gershwin

As the school year winds down, summer officially starts.  You wouldn’t know it in the upper Midwest, where a cold rain has drizzled down nearly every day for the last month.  Though a lot of crops didn’t make it into the field on time, it’s really summer.  The thermometer might not say it, but the economic reports do.

Every year at this time there is a small recession, a general slowdown.  It’s why so many financial advisers avoid stocks this time of the year.  But wasn’t this year supposed to be different?  It was.  But it isn’t.  And that has everyone scrambling to explain why things are looking a little bit blue.

They shouldn’t.  This is normal – or normal amplified a bit by general uneasiness for the long haul.

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Austerity Goes Down

How’s that austerity workin’ for ya?  Just as sequestration takes hold here in the US, Europe is looking to go the other way, releasing more Euros (and even Pounds) in order to get things going again.  The new US “policy” of budget balancing, backed into without thinking, is now being formally abandoned by everyone else.

There is probably some kind of requirement that any blog on economics has to write about Europe every so often, even if nothing new is happening.  But today there may well be something worth writing about as the Central Banks develop the whiff of panic that has been absent so far.   As Japan becomes more urgent and the US shoots itself, Europe has some tough choices to make.  What, or better yet can, they do?

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While Europe Burns

It’s been a long time since I wrote about Europe.  How many ways can a humble blogger say, “Nothing has really changed”?  Nothing has.  Currency union has turned into a straightjacket of austerity and the European Union is plunging into a deep recession.  The only true news has been a day of protest across Europe, fueled in part by the now 25% unemployment rate in Spain and other nations.  It has become a full meltdown.

But so far, no banks have failed.  Isn’t that wonderful?

There are several potential problems for the US as this continues, but the most important is its effect on our trade.  Yet, for all the trouble in Europe, it may not affect us at all.  Can Europe burn while the US stands by?  The short answer is sure, why not.  Here’s why:

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