The Human Cost Of Climate Change

Andrew Guzman wrote a book on this topic that is reviewed in this article.  Guzman takes a conservative view on temperature change and describes the consequences of that change. That will focus the debate upon the consequences of the target that major nations have already agreed upon.  The actual temperature change will be much higher at the current rate of carbon emissions but the damages done by the agreed upon target for temperature change boggle the mind.  Most of us know that many island nations will be affected by rising sea levels but California may also lose access to fresh water as a result of rising sea levels.  Climate change will also lead to food shortages and fresh water shortages in many parts of the world.  His book describes a grim legacy that we will leave to our grandchildren if we accept our current target for temperature change.  One of the strengths of his book is the detail that he provides on methods that we might use to limit carbon emissions.  They will be expensive but the costs are low relative to the consequences of inaction.

Where Have All The Jobs Gone?

Economic growth used to be related to job growth.  That has not been the case since 2000.  The economy has grown but job growth has been weak.  There are several factors contributed to weak job growth.  We can create more output with fewer workers.  We call that productivity and that is usually a good thing.  Unfortunately, the benefits from productivity are no longer shared with the labor force.   The gains from productivity have predominantly gone to those who don't spend it.  They invest their money in exotic investment products which funnels more money into the money management sector.  This increases inequality and it fosters financial instability. It also has a negative impact on aggregate demand and job growth.

The US has also been running trade deficits annually for many years.  The trade deficits average around 5% of GDP.  There is nothing wrong with global trade, but it has gotten out of control.  Millions of jobs have been lost to globalization. Moreover, a large share of our imports consists of products made for US companies overseas and resold to US consumers.  The decline in US manufacturing also means that we have fewer tradable products to sell in international markets. 

At one time the US had a full-employment policy.  The decline in US manufacturing has been accompanied by a decline in union membership.  Unions no longer provide a political counterweight to the power of business.  Both or our political parties are financially dependent upon support from business groups.  Workers are no longer represented in US politics.  Their votes are needed at election time but divisive social issues are successfully used to obscure economic issues.  The electorate is also sold on the idea the best way to create jobs is to let businesses do whatever they want.  Government interference in the "free market" is responsible for weak labor demand.

The article contains some thoughts on how to restore a full employment economy.  They are interesting ideas but they will fall on deaf ears in Washington.

Details On The Jobs Report

The good news is that jobs are being created.  The bad news is that few jobs are being created in construction or manufacturing and that the number of workers who would like to work full time are working part time.  Fiscal policy is also working against job growth.  The sequester will take its toll on job growth in future quarters.  Deficit reduction has been a higher priority in Congress than job growth.

US Job Growth Beats Expectations

US job growth is keeping up with population growth but many of the new jobs are in low paying service sector.  Government employment continues to fall.  It will be a drag on the economy in later quarters.

The Austerity Delusion

This article by Mark Blyth explains why austerity is so seductive.  This article was behind a firewall when I referred to Blyth's history of austerity in a previous post.  It is now available for those who would like a more detailed view of the economic history of austerity.

The Rain In Spain Will Continue For A Long Time

The IMF and S&P have bad news for the Spanish Economy.  Unemployment will remain above 20% at least until 2020.  There is little prospect for growth in productivity and its population is shrinking and aging at the same time.  High youth unemployment will also lead to more emigration.  Credit for businesses is also scarce and expensive.  Spain is in for extended period of low growth and increasing debt to GDP ratios.  It is hard to predict the political response to these problems.  The population is losing faith in its domestic and EU institutions.  There does not seem to be an easy solution to the problems in Spain.  Any solution will be painful and politicians will avoid any source of pain.

Apple Raising $17 Billion Through Bond Issuance

Apple shareholders have been putting pressure on the company to increase shareholder value by paying dividends or by increasing the value of the stock via buybacks.  Apple has $144 billion in retained earnings but $100 billion is held overseas.  Apple would have to pay a corporate tax on the profits held overseas if it were to use that money to reward shareholders.  Consequently, it is issuing $17 billion in bonds to reward its shareholders.  This enables them to take advantage of low interest rates.  They get the added advantage of deducting the interest from their US taxes, while also avoiding taxes on profits repatriated to the US.