Global Economy Bursting?

[Randolph Kinney]

I.M.F. Urges Leaders to Act Decisively on Debt

http://www.nytimes.com/2012/10/14/b....html?nl=todaysheadlines&emc=edit_th_20121014

World finance officials called on the United States and Europe to quickly resolve their debt problems, saying on Saturday that more decisive action was needed to restore confidence in the faltering global economy.

In a communiqué at the end of a three-day meeting here in Tokyo, the members of the International Monetary Fund warned that global growth was slowing as the persistent debt crises in developed countries dragged down growth in emerging markets. The statement said quick action was needed to “break negative feedback loops and restore the global economy to a path of strong, sustainable and balanced growth.”

The I.M.F. warned that economic stagnation in richer countries hurt poorer ones, which rely on exports to the developed world to lift themselves out of poverty.

 

[Randolph Kinney]

A Giffen Good

In economics and consumer theory, a Giffen good is one which people paradoxically consume more of as the price rises, violating the law of demand. In normal situations, as the price of a good rises, the substitution effect causes consumers to purchase less of it and more of substitute goods. In the Giffen good situation, the income effect dominates, leading people to buy more of the good, even as its price rises.

As Mr.Giffen has pointed out, a rise in the price of bread makes so large a drain on the resources of the poorer labouring families and raises so much the marginal utility of money to them, that they are forced to curtail their consumption of meat and the more expensive farinaceous foods: and, bread being still the cheapest food which they can get and will take, they consume more, and not less of it.

There are three necessary preconditions for this situation to arise:

1. the good in question must be an inferior good,
2. there must be a lack of close substitute goods, and
3. the good must constitute a substantial percentage of the buyer's income, but not such a substantial percentage of the buyer's income that none of the associated normal goods are consumed.

Is Gold A Giffen Good?

http://www.zerohedge.com/news/2012-10-13/gold-giffen-good

 

[Randolph Kinney]

Mystery of job growth explained

Obamacare Mandate: Anyone Who Works 30-Hour Week Is Now 'Full-Time'

http://cnsnews.com/news/article/obamacare-mandate-anyone-who-works-30-hour-week-now-full-time

A little-known section in the Obamacare health reform law defines “full-time” work as averaging only 30 hours per week, a definition that will affect some employers who utilize part-time workers to trim the cost of complying with the Obamacare rule that says businesses with 50 or more workers must provide health insurance or pay a fine.

“The term ‘full-time employee’ means, with respect to any month, an employee who is employed on average at least 30 hours of service per week,” section 1513 of the law reads.

The obscure provision recently reemerged in regulations issued by the IRS for how employers must account for which workers are full-time and which ones are not.

 

[Terrel L. Shields]

The obscure provision recently reemerged in regulations issued by the IRS for how employers must account for which workers are full-time and which ones are not.

Why do you think Wal-Mart, Red Lobster, etc. etc. are going to hire a lot more people for 29 hour work weeks?

 

[Randolph Kinney]

Why do you think Wal-Mart, Red Lobster, etc. etc. are going to hire a lot more people for 29 hour work weeks?

The good news, more jobs will be created as more 40 hour workweek jobs are converted to 29 hour workweek jobs. The bad news, the 40 hour workweek will shrink to the 29 hour workweek, along with shrinking take home pay. And Obamacare mandates the individual to buy their health insurance if not provided by the employer.

Look for falling unemployment rate as more part time jobs are created even though full time jobs are eliminated.

For store front businesses, look for business hours to shrink. No more 24 hours a day / 7 days a week businesses. Restaurants will open for their busiest meal and shut down in between.

Demand for goods and services will fall.

 

[Dee Dee]

That section, known as the employer mandate, requires any business with 50 or more full-time employees to provide at least the minimum level of government-defined health coverage to those employees.

Here's the part I don't get. I keep reading that the employer must "offer" the minimum level of insurance, but my experience is that "offering" insurance doesn't mean they're actually paying an insurance premium. My son works at a restaurant where he's "offered" health care insurance, but it's up to him to pay for it. Truth is...it's not any cheaper than if he were to seek out individual insurance on his own.

Does anyone know if the employer actually has to BUY insurance for the employees, or simply make it available for employees to purchase at the employees expense? I've been Google-ing around and can't seem to find a precise answer.

 

[Randolph Kinney]

Here's the part I don't get. I keep reading that the employer must "offer" the minimum level of insurance, but my experience is that "offering" insurance doesn't mean they're actually paying an insurance premium. My son works at a restaurant where he's "offered" health care insurance, but it's up to him to pay for it. Truth is...it's not any cheaper than if he were to seek out individual insurance on his own.

Does anyone know if the employer actually has to BUY insurance for the employees, or simply make it available for employees to purchase at the employees expense? I've been Google-ing around and can't seem to find a precise answer.

Everyone has to have government approved insurance or pay a penalty to the IRS for not having insurance. There are exceptions. see below

Most employers will have to offer government approved insurance to their employees or pay a penalty to the IRS per employee.

If an employee rejects the employer insurance, that employee must buy their own government approved insurance or pay a penalty to the IRS.

The Requirement to Buy Coverage Under the Affordable Care Act

http://healthreform.kff.org/the-basics/Requirement-to-buy-coverage-flowchart.aspx

 

[Terrel L. Shields]

My insurance is a $5000 deductable. It costs $14,450 annually, it was higher but the insurance company had such a big slush fund from our group it had to repartriate our money over the next year. I don't meet the minimum so I guess I get to pay $1500 for "not" having insurance that I have...make sense? The "Bronze" plan is a mandated $2000 max. deductable....

 

[Restrain]

Plus there are yearly caps far lower than most insurance companies have today. Add to that the push to get people out of hospitals, then a penalty if someone is readmitted within 30 days. So you get moved out, but the hospital will do everything in its power not to readmit you, so you get worse, not better.

On top of that, the mandate for Exchanges was effectively eliminated by the Supreme Court so states are bailing on the Exchange, so there won't be the exchange available.


Can we say BIG MESS?

 

[Randolph Kinney]

Standard of Living Is in the Shadows as Election Issue

http://www.nytimes.com/2012/10/24/u...?nl=todaysheadlines&emc=edit_th_20121024&_r=0

Taxes and government spending. Health care. Immigration. Financial regulation.

They are the issues that have dominated the political debate in recent years and have played a prominent role in this presidential campaign. But in many ways they have obscured what is arguably the nation’s biggest challenge: breaking out of a decade of income stagnation that has afflicted the middle class and the poor and exacerbated inequality.

Many of the bedrock assumptions of American culture — about work, progress, fairness and optimism — are being shaken as successive generations worry about the prospect of declining living standards.

The causes of income stagnation are varied and lack the political simplicity of calls to bring down the deficit or avert another Wall Street meltdown. They cannot be quickly remedied through legislation from Washington.

At the top of the list are the digital revolution, which has allowed machines to replace many forms of human labor, and the modern wave of globalization, which has allowed millions of low-wage workers around the world to begin competing with Americans.

The minimum wage, similarly, appears to play only a minor role in the income slump. It has risen faster than inflation since 2000, even as overall pay at the bottom of the income distribution has not. And the size of the federal government also looks like a dog that is not barking: Washington collected taxes equal to 15.4 percent of gross domestic product last year, down from 20.6 percent in 2000.

A second group of much-cited forces have indeed played a role in middle-class stagnation and inequality, many economists argue, just not as big a role as automation, globalization or education.

Health care costs have grown sharply over the last decade, leaving employers with less cash to use on salaries.

One of the more striking recent developments in economics has been economists’ growing acceptance of the idea that globalization has held down pay for a large swath of workers.

In particular, job growth and wage growth have been weaker in sectors exposed to global competition — especially from China — than in sectors that are more insulated.

Automation creates similar patterns. Workers whose labor can be replaced by computers, be they in factories or stores, have paid a particularly steep price.

Workers with less advanced skills have also suffered disproportionately. The pay gap between college graduates and everyone else is near a record.

What is the solution to this thicket of economic forces?

It is hard to see how either globalization or automation can be stopped.

If the economy can be made to grow fast enough, incomes can still rise across the board, as they did when the unemployment rate fell below 5 percent in the 1990s and briefly below 4 percent in 2000. If educational attainment rises, more people will be able to get jobs that benefit from technology and global trade, rather than suffer from it. And if inequality continues to soar, the government could choose to use the tax code to ameliorate it.

Maybe the biggest reason for optimism is that there is still a strong argument that both globalization and automation help the economy in the long run.