Explaining Southern California's economy

Tweet of the Day: America in hock

Today's Tweet of the Day comes from David Wessel (@davidmwessel), the Wall Street Journal's economics editor. It speaks for itself. But it doesn't necessarily tell the whole story. The U.S. government may be financing 36% of its spending. But how much is that financing costing?

The yield on the 10-year treasury has been falling for quite some time, recently dipping below 2 percent before recovering, but still hovering well below 3 percent. In other words, the government can borrow as much as it wants for practically nothing.

When you have to finance 36 cents on every dollar you spend, this is a position you want to be in. Worldwide, people still think the USA is safe place to stash their cash.

Follow Matthew DeBord and the DeBord Report on Twitter.

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Worry at the LA port as holiday shipments fail to materialize

Mercer 3383

David McNew/Getty Images

A truck passes shipping containers at China Shipping at the Ports of Long Beach and Los Angeles, the busiest port complex in the U.S. (File photo 2008)

If you believe that the Port of Los Angeles is a reliable indicator of the holiday retail season, then signs for a Merry Christmas are not very good. This from the L.A. Times:

International trade is one of Southern California's most important sources of relatively high-wage blue-collar employment. More than half the state's 1.1 million cargo-related jobs are located in the region, where a boost in cargo would have had an immediate effect on the amount of work available to dockworkers, truck drivers, warehouse and distribution center staff, railroad workers and others.

Instead, cargo traffic through the Port of Los Angeles showed a slight overall decline in September, down 0.8% to 705,623 cargo containers, compared with 711,613 a year earlier. Imports through the nation's largest container port were down 0.2% to 372,655 containers. The only bright spot was in U.S. exports through Los Angeles, which continued on a course toward a new record, up 26.6% to 176,954 containers.

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Saving the economy: Infrastructure spending isn't enough

Occupy LA

Eric Richardson / Blogdowntown

Participants in Occupy Los Angeles rally on the steps of City Hall after marching from Pershing Square on Saturday, Oct. 1, 2011.

At Business Insider, Henry Blodget offers a plan to save the economy. In the process, he says that he's choosing sides in a religious-econo war, between the big-spending Keynesians on one side and the no-spending Austrian School economists on the other (this is a super-shorthand version of the major economics debate of the past 100 years). His solution? Massive infrastructure spending:

  • The government should construct and pass a long-term budget plan that
    • Minimizes short-term pain, while
    • Getting the long-term deficit under control
  • This budget plan should be designed to benefit all Americans, not just special-interest groups or different classes or industries
  • This budget plan can theoretically include an increase in short-term spending designed to minimize the country's pain, as long as it also includes a decrease in long-term spending (again, right now, the world is willing to lend us as much money as we want)
  • One form of government spending that unequivocally benefits all Americans is infrastructure spending (when the projects are finished, America has the infrastructure)
  • Infrastructure spending would help America address another reality that has emerged in the past three decades—the reality that the infrastructure of many countries in Europe, Asia, and other regions has vaulted past that in the US and made the US look like a second-world country
  • Infrastructure spending would boost employment in one sector of the economy hammered by the recession—construction
  • Infrastructure spending would involve fewer of the conflicts and misaligned incentives that infuriate many Americans about "entitlement programs," extended unemployment benefits, welfare, food stamps, and other government expenditures that seem to encourage sloth and laziness and "socialism"
  • The 10-year government budget designed to get us out of our current predicament, therefore, should probably include a massive, multi-year infrastructure spending program.

This makes a lot of sense and sticks to the Great Depression playbook, when Harold Ickes oversaw the Public Works Administration and built much of the heavy-duty infrastructure that we assoiciate with that period and the recovery from the crisis. But just as it wasn't enough on its own in the 1930s, it won't be enough in the 2010s. 

For that, the other half of the Great Depression playbook needs to be used. This is the Works Progress Administration, overseen by Harry Hopkins. Its focus was simple and short-term: jobs, jobs, jobs.

Infrastructure spending is the perfect way to find detente between the Keynesian spenders and the Austrian no-spenders because it represents investment rather that, bluntly stated, waste. If you're going to spend, spend long-term and build what the country needs to be competitive in the future. Who can argue with that? In fact, there's aready bipartisan enthusiasm for infrastructure spending. 

But what do you do about, for example, 12 percent unemployment in California — right now? If you follow the Hopkins rules, you throw money at the problem, spending now and asking questions later. At best, you restore dignity and save citizens from the threat of long-term unemployment; at worst, you pump money into some pointless endeavors that won't yield much of anything in 30 years, but will at least attack the problem of idle human capital.

Occupy Wall Street and its offshoots have shown us that there's a lot of rage and frustration in the land. Rebuilding the nation's infrastructure is a great, partial solution. But if we're going to stave off the potential social fracture that now looms, we need to get the unemployed to work, and we need to do it a lot faster than the time we'll need to approve bridges, tunnels, and roads.

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The state of venture capital and tech investment

TechCrunch Disrupt SF 2011 - Day 3

Araya Diaz/Getty Images for TechCrunch

SAN FRANCISCO, CA - SEPTEMBER 14: (L-R) TechCrunch Founder and Co-Editor Michael Arrington,500 Startups Venture Capitalist & Founding General Partner David Mclure, Tasty Labs Co-Founder and CEO Aydin Senkut, Freestyle Capital Founding Partner Josh Felser, SoftTech VC Managing Partner Jeff Clavier, and SV Angel angel investor Ron Conway speak onstage at Day 3 of TechCrunch Disrupt SF 2011 held at the San Francisco Design Center Concourse on September 14, 2011 in San Francisco, California. (Photo by Araya Diaz/Getty Images for TechCrunch)

If you aren't reading Fred Wilson, you should. He's a venture capitalist who runs Union Square Ventures in New York and regularly writes about being a VC at his aptly named blog, AVC. Many people who are pondering the woeful state of the U.S. economy are looking to tech as something that may lead us out of the woods. Problem is, tech costs money. And tech is extremely competitive. And there's been some discussion of late that VCs are having trouble raising money to fund new companies.

Wilson breaks it down. Here's what I think is his most interesting point:

5) The internet investing market is transitioning. Social was the driving force for the past three or four years. In the wake of Facebook and Twitter, how could it not be? Mobile has also been a hot theme. Both sectors have consolidated a few winners and a number of additional interesting emerging companies. But how many social platforms of scale will there be? Five, ten, twenty? And mobile is hard because distribution continues to be limited to the app store model where you get on the leaderboard and win or you don't and you don't. Investors are moving into new areas like cloud, peer to peer marketplaces, and trying to take what worked in consumer into the enterprise. There is no lack of interest in internet investing, but investors are having to learn new markets and new sectors. And that kind of transition takes the heat out of an overheated market.

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