BART Holds San Francisco Hostage; Best Way to Deal With Public Unions

The average BART (Bay Area Rapid Transit) worker makes over $76,000 per year, plus huge benefits. Janitors make as much as $82,752. But the unions want more. And they are willing to bankrupt the region to get more.

In my opinion, San Francisco is already bankrupt due to pension obligations that cannot possibly be met (but the city may not realize that yet).

Oakland is without a doubt bankrupt due to public union pension obligations. Oakland city officials likely realize that (but they just do not want to admit the obvious).

In due time, both Bay Area cities will follow Vallejo, Stockton, and San Bernardino into bankruptcy. In the meantime, unions are hell bent on driving cities right over the bankruptcy cliff.

With that backdrop, please consider San Francisco Bay Area transit unions threaten midnight strike.

San Francisco Bay Area Rapid Transit workers are threatening a midnight strike because contract talks have reached an impasse.

Earlier Thursday, Roxanne Sanchez, president of Service Employees International Union Local 1021, said the transit agency and its two largest unions have "come extremely close" to agreement on economic, health care and pension issues. However, she said the parties remained apart on work rule issues.

She said the workers would walk off the job at midnight unless BART officials agree to submit the remaining issue to arbitration.

Talks began in April, three months before the June 30 contract expirations, but both sides were far apart. The unions initially asked for 23.2 percent in raises over three years. BART countered with a four-year contract with 1% raises contingent on the agency meeting economic goals.

Workers represented by the two unions, including more than 2,300 mechanics, custodians, station agents, train operators and clerical staff, now average about $71,000 in base salary and $11,000 in overtime annually, the transit agency said. BART workers currently pay $92 a month for health care and contribute nothing toward their pensions.

BART Workers Plan to Strike Friday

SF Gate reports BART Workers Plan to Strike Friday

Roxanne Sanchez, president of Service Employees International Union 1021, said Thursday afternoon that they met BART on its health care and pension requests, but the two sides still could not come to an agreement on pay and work conditions.

"We made concessions, but you can only bend so far before you break," Sanchez said. "This is the way they want to solve the conflict, in a fight, a street fight."

BART's General Manager Grace Crunican said there are certain rights that management needed to retain.

"The union decided they would take the money on the table but not the work rules on the table," she said. That's when BART asked unions to take the offer to its membership for a vote. Crunican said the offer remains on the table until Oct. 27 and if approved, the deal would be retroactive to July 1. If a vote is taken after Oct/ 27, the contract offer would no longer be retroactive.

BART's final offer included a 12 percent raise over four years and provisions that would have employees paying a 4 percent pension contribution and a 9.5 percent increase in their health-insurance contribution.

BART's Offer Overly Generous

Mercury News reports BART workers' paychecks already outpace their peers'

BART workers easily earned the most money on average last year among the 25 largest government agencies in the Bay Area, the newspaper's review of public employee payroll data shows. What's more, BART employees also topped the list of the highest-paid transit operators in California.

And the results are not close. Even when eliminating high-paid police officers and executives, the average gross pay for the blue-collar BART union workers who are threatening another shutdown was $76,551 last year.

Overall, BART's average employee -- executives included -- made nearly $30,000 more than employees at Los Angeles' transit line, and nearly $10,000 more than those at San Francisco Muni, the state's second-highest paid transit workers.

Blackmail

"(BART unions) have a degree of leverage from a strike perspective that many other industries don't, and this is a classic example of them capitalizing on it," said Christopher Thornberg, founding partner of Beacon Economics, a Los Angeles-based economics consulting firm. "If you ask me, it's a tiny bit short of blackmail: 'Give me the money or the commute's going to get it.' "

No Shortage of Workers

The BART gravy train has no shortage of applicants.

Mercury news reports "Since 2007, BART has received nearly 65,000 job applications for about 1,800 line-level union openings."

Public Employee Salary Database

Mercury news has an interesting interactive map of Public Employee Salaries in the Bay Area that inquiring minds may wish to take a peek at.

Message From FDR

Inquiring minds are reading snips from a Letter from FDR Regarding Collective Bargaining of Public Unions written August 16, 1937.

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management.

The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations.

Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees.

A strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable.

For more on public union slavery, coercion, bribery, and scapegoating please see ...

• Paul Krugman, Stephen Colbert, Bill Maher, others, Ignore Extortion, Bribery, Coercion, and Slavery; No One Should Own You!
 
• President Obama's Slave Trade; Senator DeMint Says Team Obama Acts Like Thugs; Death of Right-to-Work?
 
• Scapegoating Madness

Best Way to Deal With Public Unions

The best way to deal with public unions is to not deal with them at all. Ronald Reagan had the right idea when he fired all of the PATCO workers.

Scott Walker had the right idea in Wisconsin when he ended collective bargaining of some public unions. Unfortunately, Walker failed to include police and firefighters.

Actual Wisconsin results prove Union-Busting is a "Godsend"; Elimination of Collective Bargaining is the Single Best Thing one Can do for School Kids

It's time to implement national right-to-work laws and put an end to public union collective bargaining nationally.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Silence is Golden

The message of the day comes from the Fed currency crank Charles Evans who wants to continue QE because "incoming information has been silenced with the federal government shutdown."

Evans' statement is in reference to nearly useless reports from the BLS and BEA that have not come out since the shutdown.

Bloomberg reports Fed’s Evans Sees QE Tapering Postponed After Data Shutdown

Federal Reserve Bank of Chicago President Charles Evans, an outspoken advocate of pressing on with Fed stimulus, said the central bank should not begin reducing the pace of asset purchases as the data used to gauge the economy’s health stopped during the government shutdown.

“Only the data can tell us how much progress we’ve made and they aren’t saying much right now,” Evans said today in a speech prepared for delivery in Madison, Wisconsin. “The data available in September were inconclusive, and since then, incoming information has been silenced with the federal government shutdown.”

“It is not yet time to remove accommodation,” Evans said at the 2013 Wisconsin Real Estate and Economic Outlook Conference. “The data are still not definitive enough to say that now is time to adjust the QE3 flow purchase rate.”

In response to audience questions, Evans said the Fed would likely need “a couple of meetings to assess” the economy and await data that present a picture of how the economy weathered the shutdown.

“I also would need to see more steady, solid growth in gross domestic product to be confident that the labor market gains would not be undone by a drop in businesses’ demand for labor,” Evans said.

The government had planned to release its jobs report updating statistics on the labor market on Oct. 4. The report was postponed by the shutdown and has not been rescheduled for release.

Musical Tribute



Link if video does not play: The Tremeloes - Silence is Golden

Question of the Day

With all these currency cranks on the Fed, and with incoming Fed chairperson Janet Yellen more dovish than Ben Bernanke, how can you dislike gold?

Addendum:

Here is a comment from a friend that I agree with: "I have thought lately how nice it has been without the noise from all the different economic reports while the government has been shut down. If it was up to me, I'd keep it that way..."

I made a similar comment in Is Gathering Real Time "Inflation" Data With Smart Phones a "Game Changer"? 

Instead of bringing back laid off BEA and BLS workers let's get rid of them. Gallup can easily track unemployment and this firm can better track consumer  prices.

Any technology with a capability of eliminating government workers is fine by me, but unless that actually happens, "game changer" is a bit of a stretch.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Unsustainable Social Security Promises: Spain vs. U.S.

I have written numerous times about pension problems in the US. Let's cross the Atlantic and take a peek at the setup in Spain, then let's compare the two setups.

Via translation from Libre Mercado, please consider The Chart That Will Shake Future Pensioners.

Workers vs. Pensioners

Given that eight million people age 65 and 16.7 million workers cannot sustain the current pension, imagine what will happen in the coming decades as the differential goes back even closer.

Pensions today promise Social Security payments of 100% of the average wage in the last 25 years for those with 37 years of Social Security contributions. Such payments are absolutely unsustainable. The relative income of pensioners relative to the average income of the society will sink (without massive tax looting of active workers).

Immigration could partially alleviate the problem, making the demographic transition somewhat smoother, but if new rights accrue to future pensions, immigration only delays the problem. In any case, it might be a good idea to allow free immigration to Spain in exchange for not accrue rights to Social Security.

The most important practical advice to draw from the above chart is simple: save and invest. If you trust your retirement to politicians, you will end up poor and feeling cheated.

US vs. Spain

Here are a few charts from my January 8, 2013 post Social Security Trends: Beneficiaries, Total Costs, Number of Workers, Ratio of Workers to Beneficiaries

Social Security Beneficiaries, Costs, Employment

Year	Beneficiaries	Average Monthly Benefit	Total Annual Cost	Employment	E/B Ratio
Dec-67	22,979	$73.92	$20,383,201,682	66,900	2.9114
Dec-68	23,886	$85.24	$24,432,839,002	69,245	2.8989
Dec-69	24,709	$86.47	$25,638,687,737	71,240	2.8832
Dec-70	25,701	$101.35	$31,257,463,769	70,790	2.7544
Dec-71	26,817	$113.22	$36,435,282,006	72,108	2.6888
Dec-72	28,066	$138.70	$46,712,482,840	75,270	2.6819
Dec-73	29,514	$143.99	$50,996,092,215	78,035	2.6440
Dec-74	30,576	$163.02	$59,813,483,661	77,657	2.5398
Dec-75	31,862	$179.29	$68,549,741,469	78,017	2.4486
Dec-76	32,835	$194.95	$76,815,361,682	80,448	2.4500
Dec-77	33,923	$211.16	$85,958,416,484	84,408	2.4882
Dec-78	34,453	$229.86	$95,032,473,435	88,674	2.5738
Dec-79	35,013	$258.37	$108,555,575,502	90,669	2.5896
Dec-80	35,526	$300.75	$128,213,644,374	90,936	2.5597
Dec-81	35,930	$340.84	$146,956,770,724	90,884	2.5295
Dec-82	35,778	$372.10	$159,755,010,234	88,756	2.4808
Dec-83	36,034	$393.15	$170,001,091,973	92,210	2.5590
Dec-84	36,439	$412.21	$180,244,135,062	96,087	2.6370
Dec-85	37,027	$429.35	$190,768,953,436	98,587	2.6626
Dec-86	37,683	$438.76	$198,407,802,022	100,484	2.6665
Dec-87	38,171	$461.35	$211,323,314,397	103,634	2.7150
Dec-88	38,613	$484.01	$224,268,374,172	106,871	2.7678
Dec-89	39,141	$511.89	$240,431,129,294	108,809	2.7799
Dec-90	39,825	$544.52	$260,224,095,454	109,120	2.7400
Dec-91	40,587	$568.55	$276,908,006,552	108,262	2.6674
Dec-92	41,504	$588.90	$293,296,976,201	109,416	2.6363
Dec-93	42,243	$607.48	$307,943,241,597	112,204	2.6561
Dec-94	42,882	$628.14	$323,229,663,108	116,055	2.7064
Dec-95	43,386	$648.77	$337,772,228,816	118,208	2.7246
Dec-96	43,736	$672.81	$353,113,695,411	121,002	2.7666
Dec-97	43,971	$692.82	$365,565,297,977	124,357	2.8282
Dec-98	44,246	$707.39	$375,585,941,872	127,359	2.8785
Dec-99	44,595	$730.53	$390,940,040,819	130,533	2.9270
Dec-00	45,415	$767.35	$418,187,686,581	132,481	2.9171
Dec-01	45,877	$795.69	$438,050,881,510	130,720	2.8493
Dec-02	46,444	$815.05	$454,253,081,458	130,175	2.8028
Dec-03	47,038	$840.62	$474,497,794,254	130,259	2.7692
Dec-04	47,688	$871.80	$498,889,778,321	132,316	2.7746
Dec-05	48,434	$915.71	$532,222,768,675	134,814	2.7834
Dec-06	49,123	$955.53	$563,260,007,133	136,882	2.7865
Dec-07	49,865	$987.03	$590,618,750,824	137,982	2.7671
Dec-08	50,898	$1,054.38	$643,995,009,294	134,379	2.6401
Dec-09	52,523	$1,064.41	$670,869,765,261	129,319	2.4621
Dec-10	54,032	$1,074.33	$696,579,633,240	130,346	2.4124
Dec-11	55,404	$1,122.89	$746,557,638,566	132,186	2.3858
Dec-12	56,758	$1,152.79	$785,163,217,034	134,021	2.3613

Notes for Above Table

• Employment and beneficiary numbers are in thousands.
• I computed the total annual cost as monthly benefit * 12 * number of beneficiaries. That method will tend to overstate annual costs slightly vs. totaling every month individually. Thus, the total cost may vary slightly from other published figures.

Average Monthly Social Security Benefit



Total Annual Cost of Social Security 1967-Present



Social Security Beneficiaries vs. Total Non-Farm Employment



Ratio of Workers to Social Security Beneficiaries



Social Security Benefits Analysis

• The ratio of workers to beneficiaries peaked in 1999 at 2.927 to 1.
• The ratio of workers to beneficiaries was 2.361 to 1 at the end of 2012.
• The ratio of workers to beneficiaries is falling fast and will continue to fall fast for a decade as the baby boomer population ages.
• The average payout and the number of payouts are both rising fast
• Total Social Security payouts (a multiplication of two rising numbers) are on an unsustainable exponential growth path.

The system is currently running a deficit. Trends say that deficit is going to worsen with each passing year unless benefits are cut and/or taxes are hiked.

The next chart is courtesy of Reader Tim Wallace in a January 11, post.

Social Security Burden on Non-Farm Workers



Social Security Cliff Reading

• Making Social Security Actuarially Sound in a Business-Friendly Manner
• Social Security Cliff in Sight; Retirees Will Outlive Trust Fund; Ramifications of Nonmarketable IOUs and Privatization
• Payroll Employment for Age Group 18 to 29 Shows Fewer Full-Time Employment "Regardless of Education"

Tip of the Iceberg

Unfortunately, Social Security is just a tip of the unsustainable payout promises problem. Public union pensions are trillions of dollars underfunded and several cities in California have gone bankrupt over those promises.

Detroit went bankrupt for the same reason as did Central Falls, Rhode Island (see Central Falls Set to File Bankruptcy Exit Plan; 50% Pension Reductions, 40% Slash in Police and Fire Budgets Coming Up).

Zombified Cities

• Philadelphia: 5th Largest City in US is Effectively Bankrupt; Mayor Holds Closed Meeting With Wall Street to Discuss Asset Sales
• Houston: CPAs state Houston is Bankrupt
• LA: Mayor of Los Angeles Says "Bankruptcy is Not an Option" (Of Course It Is)
• New York Cities: Public Pension Ponzi Scheme - New York Cities Borrow From Pension Plan to Make Contributions
• Baltimore: Time for Baltimore to "Pull a Vallejo" and Declare Bankruptcy
• Miami: Miami Commissioner Says Bankruptcy is City's Best Hope; Chris Christie Says New Jersey Careens Towards Becoming Greece
• Chicago: Chicago's Mayor Daley Discusses Bankruptcy For City Pensions 
• Scranton: Scranton Mayor Slashes All Public Worker Wages to $7.25 per Hour, Including Police, Fire, His Own; City Effectively Bankrupt
• Harrisburg: Pennsylvania State Capital Files for Bankruptcy
• Zombified Cities Roundup: Detroit Becomes Dumping Ground for the Dead; Financial Urgency in Miami; Oakland Pension Time Bomb; How Pensions Crashed Stockton and San Bernardino

Vallejo Round Two

Vallejo, California went bankrupt about two years ago and is headed there again because it did not shed pension promises in bankruptcy: Vallejo, Mired in Pension Debt Again; Lesson for Stockton and Detroit - Shed Those Pension Obligations Now!

As I said in the above link, Stockton and Detroit have a choice. They can cut pensions now, or cut them later in a second bankruptcy, just like Vallejo will.

Pension Promises Not Sacrosanct

Yet people keep emailing me that pension are guaranteed by law. Tell that to residents of Central Falls. Their pensions were cut 50% in bankruptcy.

Here's reality: haircuts are coming. Unions need to negotiate benefit cuts now, in a sensible manner (with the highest beneficiaries taking the biggest cuts). The alternative is across the board benefit cuts à la Central Falls.

Meanwhile please consider the solid advice from Libre Mercado:

"The most important practical advice to draw from the above chart is simple: save and invest. If you trust your retirement to politicians [or promises], you will end up poor and feeling cheated."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Replaced by a Mannequin

Why pay a human if a mannequin can do the job better?

I have talked about mannequins before, but the idea of mannequins replacing humans is back in the news again.

Meet Sandy



"Sandy," a sign-waving mannequin, helps bring in customers to a Los Angeles smoke shop. Image by Alex Schmidt/NPR.

NPR reports There's A New Kind Of Sign Spinner In Town.

Meet the sign-spinning mannequin. She's freakishly tall, and her head is turned way back, Exorcist style.

It's more than one job. There are several sign-spinning mannequin companies now, in LA, Oregon, Florida and beyond. Some business owners are going the Geppetto route and making them from scratch.

Christopher Hunanyan enlisted the help of relatives to create the 6-foot-tall bombshell he named Sandy in front of his LA smoke shop.

"It is a good investment," Hunanyan says. He says the mannequin is bringing in customers, sales and profits.

The way advertising works is we get used to stuff, then we stop noticing it. So marketers are in a constant arms race to get our attention. They have to get weirder and weirder — like with the mannequins — and more sophisticated.

Carnegie Mellon robotics professor Illah Nourbakhsh says one day the mannequins may become actual robots — able to see us, guess our age and gender and customize their marketing messages with frightening accuracy.

Sign Waving Mannequin Video



Link if image does not play: Replaced by a Mennequin

Here is my favorite image clip from the video.



That mannequin rates to bring in far more business than even a good looking sign waver (which most are not).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Deal to Continue the Bickering Through Feb 7; Boehner Compromised; Next election, Rand Paul + Chris Christie?

Even though Republicans hold a majority in the House, Speaker John Boehner failed to muster enough votes for two proposals he floated.

Is that a sign of ineptitude, weakness, or that the House was hijacked by no-compromise Tea-partiers in a complete fool's mission?

Regardless, Senate Leaders Reached Agreement on budget deal to end the shutdown.

"This is a time for reconciliation," said Senate Majority Leader Harry Reid of the agreement he had forged with the GOP leader, Sen. Mitch McConnell of Kentucky. One prominent tea party lawmaker, Sen. Ted Cruz of Texas, said he would oppose the plan, but not seek to delay its passage.

Officials said the proposal called for the Treasury to have authority to continue borrowing through Feb. 7, and the government would reopen through Jan. 15.

Democratic Leader, Rep. Nancy Pelosi of California, has signaled she will support the plan and her rank and file is expected to vote for it in overwhelming numbers.

Despite initial Republican demands for the defunding of the health care law known as Obamacare, the pending agreement makes only one modest change in the program. It requires individuals and families seeking subsidies to purchase coverage to verify their incomes before qualifying.

Boehner's inability to produce a bill that could pass his own chamber likely means he will have to let the House vote on a Senate compromise, even if that means it would pass with strong Democratic and weak GOP support. House Republican leaders have tried to avoid that scenario for fear that it would threaten their leadership, and some Republicans worried openly about that.

"Of all the damage to be done politically here, one of the greatest concerns I have is that somehow John Boehner gets compromised," said Sen. Lindsey Graham, R-S.C., a former House member and a Boehner supporter.

"It's time to reopen the government and ensure we don't default on our debt," Rep. Jaime Herrera Beutler, R-Wash., said in a written statement. "I will not vote for poison pills that have no chance of passing the Senate or being signed into law."

Deal to Continue the Bickering

Between now and January 15, expect relative calm. Then, if no agreements are made to reduce spending, we can look forward to another ridiculous round of bickering over cutbacks.

Speaker Boehner Compromised

Sen. Lindsey Graham, R-S.C., a former House member and a Boehner supporter, is worried that "somehow John Boehner gets compromised."

Somehow?

It's clear that Boehner is already compromised. The question now is whether or not Boehner loses house speakership due to his inability to lead.

Ultimately, it was clear from the beginning that Boehner would have to send a clean bill to the House, and that is exactly what is going to happen.

Boehner's "End Obamacare" proposals did not have a chance in the Senate and thus were a big waste of time and energy, with Republicans taking the blame for the shutdown.

Since no good (for Republicans) could possibly come from this bickering, the Senate finally voted to cut the losses, and perhaps Boehner's neck at the same time.

Even if Boehner survives, he is damaged goods.

Who is to Blame?

One seriously misguided soul emailed me yesterday, stating that libertarians, especially me, are to blame for this mess, and also for Mitt Romney losing the election.

In regards to soaring debt, both parties are to blame: Republicans for their ridiculous war-mongering and Democrats for entitlements. In addition, President George Bush is responsible for an irresponsible Medicare bill that added greatly to the deficit.

As for Mitt Romney losing the election, neither I nor libertarians are responsible. Toss every libertarian vote to Romney and he still loses in an electoral landslide.

Republicans themselves are to blame for nominating a hopelessly weak candidate.

Independents the Key

Many independents (of which libertarians are only a tiny component) could not support Romney's war posturing with Iran, his trade-war posturing with China, or his position on abortion.

To top it off, Obamacare and Romneycare are one and the same.

The election debacle should have been a wakeup call for Republicans, but judging from the mess Boehner made for himself and Republicans, it wasn't.

Looking Ahead to the Next Election

Hopefully Republicans will get their act together and nominate someone that independents can vote for.

How about a ticket of Senator Rand Paul and Governor Chris Christie?

Independents could vote for such a ticket, and indeed I think they would, especially if Rand Paul keeps his rhetoric under control. Christie is well liked by Democrats in New Jersey and he could make it close in similar states.

If instead, tea-partiers hijack the nomination with an extreme right-wing, pro-war, pro-gun, anti-abortion candidate, that person would likely get trounced by Hillary Clinton (assuming she wins the nomination).

But don't blame me, I am just the messenger.

Addendum:

Reader "CJ" writes ...

"Christie is well liked by Democrats in New Jersey". And why wouldn't they like Christie? He is pretty much a Democrat, who goes along with Obama but has a little bit of sense about budgetary matters. I'm really not even sure why he calls himself a Republican. Sometimes a politician just can't get the party of choice to support him.

My response ...

Christie is extremely anti-public-union and is despised by them. He cut spending and lowered taxes. Yet, many Democrats now like him.

Why? Because his policies improved things. I do not know his position on war-mongering but it cannot possibly be worse than Romney's.

Christie is hardly perfect (but no one else is either).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Is Gathering Real Time "Inflation" Data With Smart Phones a "Game Changer"?

Premise Data Corp, a startup firm backed by Google, has deployed 700 smartphone-equipped workers across 25 cities to capture images of products as their prices change daily.

The Wall Street Journal claims Real-Time Economic Data Could Be a Game Changer.

Software automatically tags the location of the products down to the individual store and analyzes the images—items such as meat and produce—to gauge quality differences. A user viewing the information can zoom in on images of the products at each retail location, making it a store-shelf version of Google Street View.

Premise's computers also scroll through websites to automatically grab prices from Internet stores, a process that still provides about 80% of the data the firm uses to create real-time inflation gauges.

In contrast, the Labor Department collects price data by dispatching its staff to collect product prices once a month. The information is then compiled into a monthly inflation report.

Outsiders have questioned Argentina's inflation data for years. That inspired Alberto Cavallo, an economist at the Massachusetts Institute of Technology, to create his own measures starting in 2007.

The effort eventually became the academic initiative called the Billion Prices Project, collecting data from online retailers around the world to create daily inflation measures. In 2010 it led to PriceStats, which distributes inflation gauges through the financial-services firm State Street Corp. STT -0.36% to about 7,500 clients.

Premise's goal is to provide even deeper information—down to the product level rather than just categories of products—and provide the technology platform for a wide range of other economic indicators beyond inflation.

Hal Varian, Google Inc.'s chief economist and a Premise adviser, said the data could give government officials insight into developments that can stir up their populations. Prices for popular food items—bread in the Middle East, corn in Mexico or pork in China—could be tracked well ahead of popular unrest.

"All these things are sensitive from a political point of view," Mr. Varian said. "Having up-to-date information is quite valuable."

Fatal Flaws in Inflation Tracking Methodology

Let's not pretend any of these companies will be tracking "inflation" because consumer prices are a symptom of inflation rather than inflation itself.

Inflation, the expansion of money supply and credit, frequently manifests itself in the form of asset bubbles, rather than price hikes in consumer goods. For example, the dot-com bubble and the housing bubble (and the subsequent crashes), are the direct result of Fed inflationary practices.

Currently, the stock market and bond market are both in bubble territory because of the Fed's inflationary practices. Unfortunately, there is no way to prove that thesis until the next crash.

Nonetheless, there is a benefit to price tracking.

The Benefit

Instead of bringing back laid off BEA and BLS workers let's get rid of them. Gallup can easily track unemployment and this firm can better track consumer  prices.

Any technology with a capability of eliminating government workers is fine by me, but unless that actually happens, "game changer" is a bit of a stretch.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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VAT Increase Backfires in Spain, Supermarket Sales Plunge 7.2%

The nannycrats in Brussels and the IMF keep pressuring Spain to hike the VAT and Spain does every time. The results are easily predictable.

Via translate from El Econimista, please consider VAT Rise is "Catastrophic"

Anged, the "Association of Large Distribution Companies" suffered a 7.2% drop in sales through August, the biggest drop in sales since the crisis began. Anged companies include El Corte Ingles, Carrefour, Auchan, Tesco, Ikea, Media Markt, Leroy Merlin and Toys R'Us.

Employer, Alfonso Merry del Val, said the increase in VAT has been "catastrophic".

Data from the National Statistics Institute (INE) show that sales in supermarkets were down  7.2% through August and the crisis is deepening.

Apart from the increase in VAT, the Anged president was particularly critical of the rate that some regions have tax supermarkets activity. "It's a revolutionary tax. If not corrected, 18,000 jobs and more than 200 million of investments per year are in grave danger of disappearing," he said.

VAT History

Inquiring minds may wish to revisit my September 5, 2012 post: Spain VAT Hike Largest In History; Stunning Ineptitude Will Make History Books

IMF Recommendation

Given the stunning "success" of the 2012 VAT hike, the safe thing to do is expect more "success". And sure enough, just five days ago the IMF proposed Spain hike the VAT again.

Via translation from Libre Mercado, please consider IMF recommends Spain to raise the VAT

The International Monetary Fund (IMF) said Wednesday that Spain has room "to better raise taxes" and increase the scope of VAT in order to increase revenue. Michael Keen, director of IMF fiscal affairs, said during the presentation of the Fund's fiscal report that Spain "has not used too much VAT tax" to increase income and has the potential to improve the "composition" of the excise tax.

If Spain hikes the VAT, we can expect still more "success".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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