New Year's thought: Maybe the Danes are on to something?

Danes were recently rated the happiest people on earth. More recently, the FT (which I am reading online since it hasn't been delivered in the past week) reported the following survey:

Duval Patrick: This is another fine mess you've got us into.

Massachusetts ranked among the best-funded state pension plan when Duval Patrick was elected governor. When he recently left office, it ranked among the worst. Employees continued to contribute 11% of their gross income to the fund, but the state has not put in its share since Gov.Patrick's first budget. (As far as I can remember. This is my impression and I tried to verify it by reading the pension fund's annual report, but they don't break out the state's contribution.) Four states are given a grade of "F" by the Urban Institute for funding their plans: Massachusetts, New Jersey, Pennsylvania, and North Dakota.

Patrick was a big spender, and non-payment of pension contributions is a form of deficit spending that does not require legislative approval.

Looking forward to 2016: An optimistic prediction

The Boston Globe had an interesting factoid on December 31. The rise in heroin use, addiction, and death has been of growing concern here in Massachusetts. In 2014, we had 1256 deaths from heroin overdoses. (By comparison, we usually have about 300 automobile-related and 250 gun-related fatalities each year, including suicides and accidents.) 80% of the opiate dead were men, with an average age of 36. The death toll was an increase of 88% over 2013. The numbers are not in for 2015, but in Norfolk County around but not in Boston the increase was 60% over 2014, and this is probably representative. Meanwhile, auto and gun deaths are trending down.

As it commonplace to make optimistic predictions about the new year, I shall do so: I predict that the number of deaths from heroin in Massachusetts will increase less in 2016 over the previous year than was the case in 2014.

Still, it is very troubling, and I shall make an additional prediction: By January 2018, public opinion will be far more concerned about the risk of death from drugs or the actions of drugged persons than from autos or guns.


Happy New Year.







Lincoln

Global wage growth robust at 2.5% real in 2015 but varies considerably by region

India 4.7%, China 6.2% and Asia overall 3.5%. World 2.5%. Germany 2.5%. Africa 8%.
Low inflation is creating an illusion of stagnant salaries in some countries. In reality, wage growth is the best since 2008, but skewed toward Africa and Asia.
Lincoln

Strong dollar claims another victim

At a Xmas party this weekend, a small "middelstand" businessman here in Hingham, an OEM that provides metal plating to the US electronics and other industrial industries, who has been in this business for decades, said, "I always thought my business would be my retirement fund, because I could sell it. I can't sell it now; my customers are rapidly disappearing. Production is going offshore."

His business is fading like a cheap Chinese knock-off Star Wars Xlarge t-shirt worn by an out-of-shape American tourist at the Great Wall on a sunny day, there enjoying the momentary benefits of the strong dollar that may have eliminated his job by the time he returns stateside.

We need to manufacture more debt to offset these losses in the real economy. The Fed will buy this debt and hand us strong dollars in exchange. That way all will be well.

Prof. Summers says ZIRP should continue for the next decade.

In the FT this morning, Summers says:

". . . for reasons rooted in technological and demographic change and reinforced by greater regulation of the financial sector, the global economy has difficulty generating demand for all that can be produced. This is the 'secular stagnation' diagnosis, or the very similar idea that Ben Bernanke, former Fed chairman, has urged of a 'savings glut'. Satisfactory growth, if it can be achieved, requires very low interest rates that historically we have only seen during economic crises. This is why long term bond markets are telling us that real interest rates are expected to be close to zero in the industrialised world over the next decade."

So I guess that may be it. It is interesting, and to me questionable, however, that financial repression and ZIRP are compatible with financial stability in the long run, as Prof. Summers may assume.

"Good fences make good neighbors"

Robert Frost wrote this in “Mending Fences,” and he also remarked that “Something there is that doesn’t love a wall. . . elves, maybe.”

The Weekend FT had an interesting article, “Hungary erects a border fence to plug migrant flow.” So far this year, 80,000 illegal immigrants have entered this country by crossing the border with Serbia, which is quite a lot for a small country about the same size as Indiana and with a population of less than 10 million, and declining fast. (Hungary’s population has been declining since the 1980 census; the net reproduction rate has dropped to 0.6 while the net death rate has remained stubbornly fixed at 1.0/capita.)

The Hungarians are a little paranoid. The country, which is 98% ethnic Hungarian, has not been a melting pot since the Treaty of Trianon in 1920 when it lost 64% of its territory and 30% of its ethnic Hungarian population, according to the article.

So the Hungarians are doing two things: 1. They are building a 175 km steel fence to seal the entire border with Serbia; the fence should be finished by November. 2. They are pushing as many of the migrants north into Austria and Slovakia as fast as possible.(Church groups are giving them sandwiches and water at the train stations.) (Final destination: Germany)

The Schengen Area with no border controls means that Austria and Slovenia have no way to stop the migration. (26 countries are members of the area, including all the main EU states, except Ireland and the UK, which have opted out. (Iceland has joined, but the North Atlantic provides an alternative border control.) Since the Schengen Area as designed can be no stronger than its weakest link with an external border, it seems reasonable to expect that Schengen’s days are numbered.

Migration is pulling the EU apart. It is making the idea of the EU unpopular with the populations of its member countries.

Here is a European poll taken at the end of last year:




http://www.europarl.europa.eu/pdf/eurobarometre/2015/major_change/eb_historical_deskresearch_en.pdf

This is a very serious matter that no amount of bombing can easily solve. (Mr. Cameron seems to think differently as I read this morning he has just asked the UK parliament for permission to bomb Syria.)