EXCERPTS:
"Uncle Sam’s Ponzi scheme will stop. But it will stop too late. And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
Wednesday, August 11, 2010
Tuesday, August 3, 2010
Rent Control and Its Damage Isn't Limited To New York City - WSJ.com
EXCERPTS:
"A 2001 San Francisco study showed that 49% of that city's rent-controlled apartments had only a single occupant. Three quarters of the controlled housing was more than half a century old, and 44% was greater than 70 years old. The resulting severe housing shortage forced thousands of people to make long commutes to their jobs in San Francisco. More than one-fourth of rent-controlled households had incomes greater than $100,000 per year. This 1979-2001 assessment gauged the actual (rather than the intended) economic impact on occupancy, housing supply and the beneficiaries of the politically popular rent-control program.
"A 2001 San Francisco study showed that 49% of that city's rent-controlled apartments had only a single occupant. Three quarters of the controlled housing was more than half a century old, and 44% was greater than 70 years old. The resulting severe housing shortage forced thousands of people to make long commutes to their jobs in San Francisco. More than one-fourth of rent-controlled households had incomes greater than $100,000 per year. This 1979-2001 assessment gauged the actual (rather than the intended) economic impact on occupancy, housing supply and the beneficiaries of the politically popular rent-control program.
A Keynesian assesses today's economy, and what government should do - WSJ
From today's (8/3/10) WSJ. Robert Reich was the Secretary of Labor under Bill Clinton, and a good Keynesian. Note his assessment of the economy's current problem, and of what the government should do about it.
EXCERPTS:
"Consider the stimulus package.... Real GDP is now increasing at an annual rate of 2.4%, and although the recovery is still fragile it's unlikely we'll fall back into a full-fledged recession. Yet the official rate of unemployment remains above 9%, not including millions either too discouraged to look for work or working part-time when they'd rather have full-time jobs. Almost half of the jobless have been without work for more than six months, a level not seen since the Great Depression.
The central problem continues to be inadequate aggregate demand. The administration's original sin was not spending enough and focusing the stimulus more directly on job creation.
In fairness, no one knew how sick the economy was in February 2009 when Congress approved the initial stimulus. Yet by late spring 2009 the White House knew the extent of the damage and should have pushed much harder for significantly more spending....
EXCERPTS:
"Consider the stimulus package.... Real GDP is now increasing at an annual rate of 2.4%, and although the recovery is still fragile it's unlikely we'll fall back into a full-fledged recession. Yet the official rate of unemployment remains above 9%, not including millions either too discouraged to look for work or working part-time when they'd rather have full-time jobs. Almost half of the jobless have been without work for more than six months, a level not seen since the Great Depression.
The central problem continues to be inadequate aggregate demand. The administration's original sin was not spending enough and focusing the stimulus more directly on job creation.
In fairness, no one knew how sick the economy was in February 2009 when Congress approved the initial stimulus. Yet by late spring 2009 the White House knew the extent of the damage and should have pushed much harder for significantly more spending....
The Living Yield Curve - Investing - Bonds - SmartMoney.com
This link shows how interest rates, as represented by the shape of the yield curve, have changed month by month between March 1977 and the present.
Fed Mulls Symbolic Shift - WSJ.com
EXCERPTS:
Federal Reserve officials will consider a modest but symbolically important change in the management of their massive securities portfolio when they meet next week to ponder an economy that seems to be losing momentum.
The issue: Whether to use cash the Fed receives when its mortgage-bond holdings mature to buy new mortgage or Treasury bonds, instead of allowing its portfolio to shrink gradually, as it is expected to do in the months ahead. Any change—only four months after the Fed ended its massive bond-buying program—would signal deepening concern about the economic outlook. If the Fed's forecast deteriorates significantly, it could also be a precursor to bigger efforts to pump money into the economy.
Moving to stop the Fed's portfolio from shrinking would prevent monetary policy from slightly tightening in the face of a weakening recovery.
The central bank's $2.3 trillion portfolio has nearly tripled in size since 2007.
What is the official definition of recession?
According to the Business Cycle Dating Committee of the NBER (National Bureau of Economic Research), here's the official definition of recession:
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.
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