Will Capitalism Survive/Fix This?

[piezoe]

You don't have it exactly right; it is natural for capital to flow to where its application yields the greatest after tax profit. Labor is only one factor of production; at the risk of tautology, I must point out that it would move to cheap labor where labor is cost is the most important factor of production.

That is not the case for all products and where it does apply the other factors of production cannot be made negative by the location. As technology progresses, labor decreases as a production consideration...both effecting domestic manufacturing employment but more significantly removing the labor advantage of offshore production.

I agree in the details you bring up. . Nevertheless as far as i'm concerned CyJackX is not incorrect with regard to the current situation.

Did you happen to notice what the market did when the Fed announced a rate increase? Why did the market do that, do you suppose? You, of course, know that rate increases by the central bank strengthen their currency. In our case the dollar. Did you notice what an announcement of a rate increase by the Fed did to the ES? What you observed is the ceteris paribus effect. The nuances will be apparent later. When the dollar strengthens, the price of equities should decrease, ceteris paribus, in the same way that the nominal price of a washing machine should drop, but doesn't because its price is sticky. Equity prices are not sticky. The equities market is highly liquid.

 

[CyJackX]

I agree in the details you bring up. . Nevertheless as far as i'm concerned CyJackX is not incorrect with regard to the current situation.

Did you happen to notice what the market did when the Fed announced a rate increase? Why did the market do that, do you suppose? You, of course, know that rate increases by the central bank strengthen their currency. In our case the dollar. Did you notice what an announcement of a rate increase by the Fed did to the ES? What you observed is the ceteris paribus effect. The nuances will be apparent later. When the dollar strengthens, the price of equities should decrease, ceteris paribus, in the same way that the nominal price of a washing machine should drop, but doesn't because its price is sticky. Equity prices are not sticky. The equities market is highly liquid.

I'd hazard that retail is probably the slowest to feel a change in a rate hike, and it's not hard to imagine that difference being pocketed somewhere else up the chain for as long as possible.

Also, in response to an earlier comment by @piezoe on "the fallacy of joblessness," I agree that while some jobs will replace those jobs lost to automation, even if there is no net change, that the jobs available to humans will require increasingly higher levels of education. Thus, as the requirements increase, well-paying jobs will be scarce except to the exceptionally privileged.

 

[Ed Breen]

I agree in the details you bring up. . Nevertheless as far as i'm concerned CyJackX is not incorrect with regard to the current situation.

Did you happen to notice what the market did when the Fed announced a rate increase? Why did the market do that, do you suppose? You, of course, know that rate increases by the central bank strengthen their currency. In our case the dollar. Did you notice what an announcement of a rate increase by the Fed did to the ES? What you observed is the ceteris paribus effect. The nuances will be apparent later. When the dollar strengthens, the price of equities should decrease, ceteris paribus, in the same way that the nominal price of a washing machine should drop, but doesn't because its price is sticky. Equity prices are not sticky. The equities market is highly liquid.

I noticed that the price of the dollar has been going up since the election, likely anticipating Fed interest rate policy against EU and Asian policy in the short term, the Fed confirmed expectations already in the market with its hike and surprised the market in projecting three hikes in 2017.

All things really are not equal though; Treasury sales are being driven by EM reserve sales, especially China; did notice that long rates did not move as much as short rates, but then in the last hour of trading made a big move with no news...then the same thing yesterday...someone big is selling Treasuries at the end of the day.

Equities rise since election is running opposite Fed tightening. Trump bump is expectation of growth through lower cost of production domestically. That growth will demand credit expansion and not contraction. The two forces will be in opposition. Fed is, as usual, confusing a growth event with an inflation event, that always leads to a contraction. We are in a deflation trend and Fed move, if continued, will make it worse. See direction of Gold Price and Oil price in response to Fed move, that is not inflationary trend.

Prices are sticky where product has pricing power, value added and is not commoditized. Commoditized products, those easy to substitute or where supply is fungible, have no pricing power. Washing machine is commodity, not sticky.

 

[piezoe]

You will see however that washing machine prices are indeed sticky compared to gold and oil prices, but for reasons you haven't identified.

You've, in my opinion, correctly sorted out two factors currently effecting equity prices. But it is not correct to say that a stronger dollar will boost U.S. equity prices. Quite the opposite; a higher dollar will tend to hold the market in check against the imagined (at this point anyway) Trump boom. Inflation will raise market prices, a strengthening dollar counters this. This is why the Fed is tightening. They are anticipating further inflationary pressure as we move toward full employment, by their definition, and as the new administration starts to rack up big deficits. Of course if the new cabinet succeeds in dismantling several Federal Departments and putting a million people out of work that will be an effective inflation dampener. We live in interesting times.

 

[piezoe]

I'd hazard that retail is probably the slowest to feel a change in a rate hike, and it's not hard to imagine that difference being pocketed somewhere else up the chain for as long as possible.

Also, in response to an earlier comment by @piezoe on "the fallacy of joblessness," I agree that while some jobs will replace those jobs lost to automation, even if there is no net change, that the jobs available to humans will require increasingly higher levels of education. Thus, as the requirements increase, well-paying jobs will be scarce except to the exceptionally privileged.

We could put another couple million to work in good paying jobs with smaller public school class sizes and upgraded curricula. And that will furnished the educated workers we need for the 21st century economy. These things can't happen overnight, but it is time to get started. I am skeptical that the anti-intellectual promoters in the Trump administration are the best ones to lead us to the promise land. We may get roulette tables in the East Wing before this is over.

 

[java]

We could put another couple million to work in good paying jobs with smaller public school class sizes and upgraded curricula. And that will furnished the educated workers we need for the 21st century economy. These things can't happen overnight, but it is time to get started. I am skeptical that the anti-intellectual promoters in the Trump administration are the best ones to lead us to the promise land. We may get roulette tables in the East Wing before this is over.

Why? Have there been upgraded versions of math?

 

[CyJackX]

We could put another couple million to work in good paying jobs with smaller public school class sizes and upgraded curricula. And that will furnished the educated workers we need for the 21st century economy. These things can't happen overnight, but it is time to get started. I am skeptical that the anti-intellectual promoters in the Trump administration are the best ones to lead us to the promise land. We may get roulette tables in the East Wing before this is over.

I mean, absolutely improving the quality of public education is necessary. This will entail money, better standards, and dealing with the unions. But, Betsy Devos wants to downsize public and increase privatization. Perhaps good for those well enough to get the actually good schools, but given that there's a very amorphous "product" being produced at schools, and that competition is incredibly limited by where you live and your ability to move, I think it's safe to say that increased privatization would be very bad for children whose families can't afford better options.

 

[java]

I mean, absolutely improving the quality of public education is necessary. This will entail money, better standards, and dealing with the unions. But, Betsy Devos wants to downsize public and increase privatization. Perhaps good for those well enough to get the actually good schools, but given that there's a very amorphous "product" being produced at schools, and that competition is incredibly limited by where you live and your ability to move, I think it's safe to say that increased privatization would be very bad for children whose families can't afford better options.

The public schools in the suburbs are very good. It's the public schools in the poor inner city that are failing, or something is failing. Those are the kids who will be helped most by school choice. or so they say

 

[piezoe]

Why? Have there been upgraded versions of math?

Because we want our public schools to offer the same kinds of opportunities available in a good private school. All we would have to do is buy a few less F35 fighter planes each year to afford it. Which is more important, a well educated populace, or a few fancy planes that have no use after the first few dozen. The Senate bought 2500 not yet delivered of course.. The Pentagon, when Gates was in charge, said they were not needed. A good education is affordable and the alternative is even more expensive.

 

[OddTrader]

I mean, absolutely improving the quality of public education is necessary. This will entail money, better standards, and dealing with the unions. But, Betsy Devos wants to downsize public and increase privatization. Perhaps good for those well enough to get the actually good schools, but given that there's a very amorphous "product" being produced at schools, and that competition is incredibly limited by where you live and your ability to move, I think it's safe to say that increased privatization would be very bad for children whose families can't afford better options.

Must pay teachers good salary to attract talented educators. That would provide incentive to attract high quality graduates studying education.

With small class size when high teacher-to-student ratio approaching 1-1 for good mentoring and caring, every child then would have a chance to become a genius - through developing/ maximising individual's gift(s)!

Spending on equipment or building is not as important, imo. Priority-wise!

Just 2 cents!