Yet another term being thrown around the business news is Cap and Trade. What does this mean? The Cap is the limit that large companies will have on the amount of greenhouse gas they can emit. The Trade is that since some companies can reduce their emissions more cheaply than others, a market will be created where companies can trade their right to pollute.
Sounds pretty straightforward. But as with many new taxes, there’s an unintended consequence. The added cost these companies will have to bear will be passed along in increased cost to the consumer. As the Congressional Budget Office estimates, The middle 60% of income earners will see an increase in their expenses ranging from $880 to $1500 per year. This is the group our president promised not to tax more heavily. This isn’t a tax directly on the consumer, but one that will have the same impact.
- Dollar Value vs Foreign Currencies
- Trade Surplus / Deficit
- Interest Rates
- Tax Rates
- Unemployment Rate
Did I miss anything? I don’t know if there’s a ‘general happiness’ index available, but if there were, I’d add it to the list. What is this list? It’s the data we follow and hear comments in the business news. There are ideal numbers for each, right? For trade, we want a surplus, we want to sell the goods we make in the good old USA. But we want a strong dollar, and today, the dollar is low compared to say, the Euro, or the Yen. I look at Yahoo and see that in the last few years, the Yen was as low as 123 to the dollar and recently is about 102. I remember in the early 90’s getting 240 Yen for my buck. But at 240, I could buy twice the Japanese goods I can today, so the trade balance was an issue. See where I’m going? And I’ve only looked at two variables so far.
What is the ideal unemployment level? Who was it that said “If you lose your job, it’s a recession. If I lose my job, it’s a depression.” (Some say this was Truman.) I would like to stay employed, so 0% works for me, but as unemployment drops ‘too low’ wages tend to get inflated as people are offered more money to lure them over from another company.
We had a similar issue a few year ago with inflation. As we approached 1% and less, people started to discuss the risk of deflation, as if that risk were real. At that time the budget deficit was no longer, we ran a surplus. The fear turned to ‘where will Social Security funds get invested?” and worse, “how will the Fed implement monetary policy if the purchase and sale of bonds is no longer available?” Well these fears were short-lived, but you get the idea.
I have no answers, just observations on this topic.