Cramer on CNBC; Misconceptions

In the afternoon Jim Cramer and Erin Burnett do a little segment.  It gives Cramer a chance to answer questions from Ms. Burnett and talk about things. Sometimes he is pretty funny, sometimes he is even right!

Today Cramer made a fatal intellectual error.  He was talking about how Obama screwed up by attacking health care and the banks without paying attention to unemployment.  Cramer said nations like China, Germany, and Brazil tackled unemployment. Check out this chart. I included the PIIGS, plus Belgium just for kicks. From the unemployment numbers, you can see one reason the PIIGS are in trouble.

Jim is correct, Obama did stimulus, health care, Dodd-Frank and a host of other things he had no business doing. He messed things up rather than fix them. It will take yeoman’s work to undo them.

German unemployment in February of 2009 was 7.2%. It’s 6.5% today. It’s lower, but that’s not a dramatic move. The dramatic move for Germany was from 2005-06 to 2008. They finally finished integrating the East Germans into their economy after the fall of the wall in 1989.

Brazil’s unemployment rate has ticked up the last couple of months. Not a trend for sure, but it’s ticking up, not down.

When we think about Chinese unemployment, in reality there is no such thing. Since they are a communist country, it’s impossible to be unemployed. By definition, they always run at full employment.

It’s also important to consider the standard of living. US wages are higher, and our standard of living is higher than anywhere else in the world. It is crass to say, but our poor have it better than a lot of the middle class in places like China, Brazil and other nations. What sounds romantic to your ears and dreams falls quickly to earth when you find out the reality.

I had an acquaintance that defected from behind the Iron Curtain in the early 1980′s. He was an athlete, and saw what life was like on the other side of the wall. He told me that in his country, everyone always had a job. They all collected a government check. They went to an office every day. Of course, they didn’t do anything but smoke cigarettes all day, but they were “employed”.

China is different because there is production, but they are still a command and control economy. They operate at full employment. I always get nervous when people in the US look fondly at the Chinese model. The reason that they can get by with that model is there are no human rights, no rule of law, no property rights. It’s what the Communist Party says.

Free markets can be extremely messy. They can take some time to operate. But, if not influenced artificially, capital is always allocated in the most efficient manner. Prices and output are at their most efficient. The upside is they work best in a society like the founder’s envisioned.

China can keep it’s growth. I’d prefer my freedom.

Brazil can keep it’s growth. I like my standard of living compared to theirs.


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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