Work for What You Need
Wednesday April 3, 2013
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Regular readers know that I have the same understanding of global economics as a three-year-old has of quantum physics.
I watch CNBC's Squawk Box every morning because I know a lot about politics and don't need to watch (a) people I know talking about what I know or, (b) people I don't know making stuff up about things they don't know.
I have never made a dime in any investment so, hope springing eternal, I like to listen to people who have made multiple dimes.
About two weeks ago the economic world was frozen by the specter of Cyprus - CYPRUS - going broke.
Cyprus has a population of about 1.1 million people and a GDP of about $23.5 billion which puts it between Zambia ($23.7 billion) and Macedonia ($22.1 billion).
Put another way, Cyprus' GDP is about 1.5% of the U.S. GDP.
The point being, Cyprus is not a major economic power in the European Union, of which it is a member, but when it looked last week that the Cypriot economy might collapse the worlds' markets shuddered.
Put that aside.
Yesterday it was reported that the average unemployment figure for the European union - the average - had reached the astonishing level of 12 percent.
That's the average.
Of course, Germany has the lowest unemployment rate at 5.4 percent. Alles ist in Ordnung
The highest unemployment rates in the EU are in Spain (26.3 percent) and Greece (26.8 percent)
We have been told for decades that the world is shrinking and what happens in Upper Iguana (or Cyprus) has an impact on what happens in Kansas City.
That is apparently, as Sherman Potter might have put it, horse hockey.
The European Union - taken as a whole - is the largest economic unit on the planet.
The official U.S. unemployment rate is 7.7 percent. According to the Department of Labor that means 12 million Americans are out of work.
If the U.S. unemployment rate were 26% it would mean that 40.5 million Americans would be looking for jobs.
Hours after the EU unemployment figures were released, the U.S. equity markets opened and they were so unimpressed with the continued recession in Europe that the Dow Jones Industrial Average ended yesterday with a gain of over 89 points to close at 14662 - an all-time high.
Where's the panic over the EU unemployment figures?
These data come on the heels of a report in March showing French private business in the sharpest decline since 2009, indicating the EU's second-largest economy is entering another recession.
If the world is, in fact, a closely interrelated economy, how is it that with Europe trending downward U.S. investors are gleefully buying equities?
Can it be that our attention has turned from Europe to China and the far east?
Reuters reported that
"Most analysts expect China's economy to enjoy a steady but gentle recovery this year, driven internally by infrastructure investment and household consumption �"
Well, according to the World Bank, China's population is 1,344,130,000 or more than four times the size of the U.S. so if Chinese moms want washing machines, that adds up to a lot of washing machines and Tide.
In most of Europe (not counting Germany) people work fewer hours per week, fewer weeks per year, and fewer years per lifetime than we do in the U.S.
That has led to the collective collapse of the European economy - the Cyprus, Spain, Greek, Italy, Ireland crises that fill the economic/business pages every day.
My friend Jim Blasingame had me on his radio program yesterday and we talked about the differences between the American version of a free market and the European view.
I didn't have a good answer.
I still believe that free markets, given a reasonable chance, will provide the highest level of economic benefit to the highest number of people. Not everyone will be at the top of the pyramid, but even those at the lowest levels will be better off than the majority of people have been in Communist/Socialist societies.
We know that the Soviet system failed. The Chinese have admitted that the Maoist system can't work. The EU is struggling to keep its collective head above water.
Perhaps it is time for 21st Century governments to require their citizens to work for what they need, rather than be given what they want.
On the Secret Decoder Ring page today: Links to the EU unemployment figures, the French economy and to Jim Blasingame's website.
Also two Mullfotos from our trip west to visit the granddaughters.
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