Beer prices rise for the Consumer as Costs of Production Fall and Profits Rise

A number of brewers announced recently that the price of beer that the consumer pays will be going up citing rising costs. In the CNN story above the reasons given are less vague. The brewers claim to be raising prices to offset rising commodity prices and fall in volumes. Though, commodity prices have fallen recently and have caused farmers and dairies to worry about staying profitable this year. Also, ten days ago Anheuser-Busch InBev announced that their second quarter profits had grown despite the drop in volume because of cost cutting measures. One has to work through the maze of business doublespeak in these non judgmental articles regarding price increase and increased profitability to understand that cost cutting and "synergies" in these cases refers to job cuts as a result of the InBev takeover of Anheuser-Busch.

If you are the kind of person who likes to buy American and support American jobs, it is getting harder and harder to find an economical beer. Though some of the big brewers still employ Americans.

Pay

As a result of the media focus on the crash of a commuter flight in Buffalo, NY it has been revealed that pilots starting out and breaking into the industry make about as much as the girl at Starbucks that hands you your coffee in the morning. Add on to that, the fact that the pilots work long days at a job that it is critical they maintain focus and composure and you get a mild national shock.

I was surprised also. I really shouldn't have been given the nature of corporate America that pays the people that actually do the work a pittance while the executives who have never worked a day in their lives rake in exorbitant salaries. Still when you think of a pilot, its the one job that you wanted as a child that even from adulthood still looks like it has the least chance of turning out like the soul crushing office work you wound up doing.

Now more than ever we need the minimum wage to be set to the actual living wage. There really shouldn't be a distinction between the two. Congress should act now because the old argument that raising the minimum wage would cost jobs doesn't fly when companies nation wide have already cut their staff down to bare bones, cutting labor down to workers with essential functions and then cutting just a few more. There aren't any more jobs to loose.

You might still be foolish enough to believe in the American Dream, that hard work pays off, or you might be an aspiring corporate raider and make the argument that this still increases overhead of even small businesses. Sure it does, but you are willfully ignoring the big picture. To be trite, the rising tide raises all boats. If everyone is being paid a living wage, suddenly you have a surge of new consumers that have never had disposable income before. They are buying their coffee from Starbucks instead of from Maxwell House, which increases the dollars in circulation and increases profits and liquidity.

Of course this only happens if Starbucks, forced to increase wages, doesn't increase the price of their already overpriced coffee. Theoretically this could cause an increasing spiral where the costs of goods is increases commensurate to the increase in the minimum wage creating an runaway spiral of inflation. But that's where the other market forces come in. First, not every company will simply raise prices to artificially keep wages low. In our global mega corporation economy where even the store brand discount paper towels are made by the massive conglomerate that makes the costly brand name ones it is easier for such companies to spread any cost increase out over a large population and over time. This doesn't even have to turn into a situation where Congress is robbing the rich to pay the poor.

This was what we once got from unions. We have them to thank for the weekend and the forty hour work week. Unfortunately now they have turned into a punchline about organized crime and an albatross around the neck of the poorly run auto companies. If unions want to become relevant again they need to seize on this recession and take big bold action that will carry us out of the recession. I don't see this happening. They protect workers who don't work and see themselves as the enemy of management. Even worse younger workers have to pay dues into the union and get little out of it by being relegated to the worst jobs not by the company but by the union that is supposed to be looking out for them, and they still get crap wages because the union had to sell out the decent wages of new employees to maintain the benefits of the retired.

That being said, I have worked for companies that hate unions, ones that just aren't unionized, and ones that have a large powerful union and ones where the union is a minor impact on a portion of business, and I have seen that the big powerful unions still have a beneficial impact on more than the quantifiable benefits and wages one gets.

Finding a New Dealer

With the announcement that GM and Chrysler will be slashing their dealer networks over the coming weeks it is obvious that thousands of family owned small businesses will be going out of business. This will of course exacerbate the current recession. Clearly this will cause a similar chain of events that the auto giants threatened us with when they blackmailed Congress into bailing them out. The dealers go out of business, sending their employees out into the street and into unemployment and into the worst employment market in decades. Auto repair technicians who were making a middle class living will now be changing your oil at Speedy Lube for minimum wage. This cuts into the spending power of the community at large, and greatly reduces local tax revenues, which are already having the carpet pulled out from under them because of the housing market collapse. I hope you are getting ready for monthly garbage pick up instead of weekly because as the purse strings tighten municipalities all over the country are going to start looking as dilapidated as Detroit and Cleveland.

The closing of auto dealers also helps to worsen the recession by directly adding to the liquidity problem that got us into this recession in the first place. All those acres of cars that the dealer can't sell anyway will not be packed up onto trucks and hauled back to the manufacturer. Oh no. These cars will continue to sit in your dealers lot.

The dealer doesn't own those cars either. The dealer has huge loans to keep those things on property. The longer they sit there the less profit they make. More seriously for the rest of us though, is the probability that these cars will now be sold at fire sale prices by dealers desperate to unload unpopular merchandise and avoid bankruptcy. Which is exactly like those assholes that were flipping houses in Vegas and Atlanta. Except auto dealers know how to unload cars and house flippers couldn't tell their own ass from a hole in the wall.

The real threat is that banks might wind up owning these unwanted cars. That's something no one wants so hopefully they will all see their own best interest is in making credit available to dealers to keep the cars profitable and by making auto loans available to buyers so the dealers can unload these heaps of smoking steel and glass on us. Somehow I don't see that happening, and what we end up with is a sub prime mortgage and credit default swap sundae with bad auto loan sprinkles.

I made you an economy but I broked it.

If any of you are regular readers you may be wondering why these last two weeks have gone without a posting on the economy. There are several reasons. First, our senior economic analyst, TheRedKap is still stuck behind the Great Firewall. Second, my political rage peaked about a year ago. After seven years of rising outrage at this administration I finally reached my limits and fizzled out somewhat.

I haven't been able to listen to Marketplace in almost a year so I have had to try and make sense of this stuff myself. Which is difficult for even economists to understand. If the voodoo priests of the dollar can't explain on whats going on, what hope does an average American have? Here is one thought I had yesterday which I hope is not so obvious that I appear foolish for taking the time to lay it out.

One economist yesterday likened the current $700 B...B...B...Billion Bailout to that scene from Blazing Saddles when Bart, played by Cleavon Little, holds a gun to his own head to keep the town from lynching him. Wall Street, here played by Henry Paulson, is holding the gun to its own head and saying they will pull the trigger if we don't save them from their own mistakes. That's pretty obvious but it's the first step. So, what caused this situation? Housing and real property values have risen astronomically bolstered by unfettered access to credit. People were given loans that they could never pay back and the sleaze bags that sold them these loans bunched them together to hide that they were bad investments and then gave them to ratings agency sleaze bags that told the whole world that this was some good shit. Then the poor people who were lied to about how much house they could afford in George Bush's "ownership society"start defaulting on their mortgages. Banks sit up and take notice and start forecasting falling profits and eventually losses and then admit that they don't know how many of these toxic mortgages are going to explode, but they have lots of em'. Opportunist investment bankers then short sell the stock of these banks. (Short selling is either complicated, or simple and commonplace depending on which economist you are talking to and their politics, but the basic explanation is investment bankers try to drive down the value of a stock in order to make a quick buck. They do this because they don't actually have jobs and don't contribute anything of value to society and can only destroy. Like little economic vampires in suspenders.)

So, you get to our current situation with overinflated housing values putting pressure on the markets because banks are so heavily invested in these things that aren't worth what they paid. Now they want the government, meaning the taxpayers, meaning you and me, to buy these worthless bundles of mortgages. They say this will set a bottom level price that they can always be sold to the government for, so that investors can never loose all the money they put into these mortgages, eliminating the mystery of whether the one they just bought will explode in their hands, thusly bolstering confidence in the market and loosening up credit so you and I can go back to buying 72" LCD TVs and leveraging our house to put a pool in our back yards. Thusly fueling the rampant over consumption that has fueled the economy.

Except maybe some of these banks should fail. Maybe an economy based on credit is inherently unstable. Maybe we shouldn't just go back to buying cheaply made garbage from overseas? Maybe these same people that have been pushing for deregulation and chanting the mantra of the free market, when suddenly faced with the terrifying face of the monster that is the free market, they let up a cry for socialism such that has not been heard since Lenin. These people who have played games with our retirement and destroyed the value of our employers and our homes want it both ways just as long as they don't have to feel the pinch. Analysts point out that CEO's of these failed banks are getting fired but mention golden parachutes to them and they begin to dissemble. It doesn't take an economics degree or an MBA to understand that if someone who made over a million dollars in income last year looses their job, they aren't going to loose their house or go hungry like the guy working down at the Ford plant in Cleveland, or the GM factory in Janesville. These guys on Wall Street are more out of touch with what middle class is then McCain. When was the last time an investment banker welded the bumper onto a car or pulled a ton of coal out of the Earth with only their sweat and muscle?

OK, I got distracted by class warfare there. Where does this $700 Bubble Burst Bailout Billion come from? It doesn't just come out of the ass of Johnny Taxpayer, it gets squeezed out of the value of the Dollar. What the markets and Paulson are asking congress to do is to transfer the overinflated value of housing and real property indirectly to the value of the dollar. Inflation. I am talking about inflation with a capital "I." The value of the dollar has been falling against other currencies over the course of this whole subprime crash and since commodities are pegged to the dollar it has fueled the rise in costs of oil and food and other basic essentials. So basically after destroying the value of our homes and companies, the Wall Street voodoo machine is going to destroy the value of our labor and the dollar. I think they are doing this because they know that their "labor" doesn't have any value.

Cleveland Ohio: Terrible American City or The Worst American City?

Cleveland is such a terrible cesspool that the suburbs long ago seperated themselves from it politically and financially as much as possible. This amounts to dozens of tax districts in one county. Each of them jealously guarding their hoard like the poison spewing worms they are. They also tax you both in the city you work and in the city you live. So if you commute from a residential suburb to a commercial or industrial town for work then at tax time you get double teamed up the asshole by fat government dicks.

As you can probably tell this is rather personal for me since this double-dick ass fucking I am getting from these cities amounts to a bill for $100 a month. These are cities in the rust belt. The industry left decades ago. The sewers overflow when it rains. The roads have huge and frequent holes which make them worse than most gravel roads I have driven on. These cities don't plow the snow all winter. There are packs of wild dogs roaming the streets at night. Arson is on the rise. What is that money going for?

More golden pig idols?

The Child-Man

Not long ago a shrill bitter woman published an op-ed decrying the contemporary propencity of men in their late twentys to delay marriage and career advancement. Many outlets of the old media recognized the inflamitory nature of her insult and decided to piggyback on its ratings generation powers by printing articles like this. (freedom hating British!)

Most responce to the author has been either an attempt to counter the assumptions in the article or to simply disagree with the author or the traditional notions of success. My contention is that her position is immoral.

This is best explained from a Kantian perspective; Hymowitz is treating all western males as means to an end rather than ends in themselves. To use the language of feminism, she is objectifying men. Or to describe my own moral outrage; Hymowitz has no right to declare that I be of use to her.

Ripple Effects

As closing the port of Mombasa in Kenya because of the post-electoral violence could potentially cause severe economic contraction in surrounding countries, so too goes the unfolding story of the financial markets. With the announcement that 2007 was a horrible year to try to find a job, the "r" word is on the lips of many experts. The most important note of the Employment Situation is that if one discounts government jobs and those in the service sector, the number of jobs fell by several thousand during 2007.

The Federal Reserve and the European Central Bank are more worried about inflation tying their hands as the crisis further unfolds.

On a positive note, the price of oil went down based on projections of lower demand in the U.S.! I'm sure that this is going to be more than lost considering that the violence in Kenya and its consequent economic ramifications will cost the U.S. far more than getting crude for a couple of bucks cheaper on the barrel.