Wednesday, December 30, 2009
The Monetary Base is exploding. So what? - Greg Mankiw's Blog
"An article in Saturday's Wall Street Journal says that some big-league investors are betting that inflation will rise significantly. The reason? 'The nation's exploding monetary base is a harbinger of inflation.' Is this right? Probably not."
Solving Whose Problem? - Thomas Sowell
Solving Whose Problem?
By Thomas Sowell
No one will really understand politics until they understand that politicians are not trying to solve our problems. They are trying to solve their own problems-- of which getting elected and re-elected are number one and number two. Whatever is number three is far behind.
Many of the things the government does that may seem stupid are not stupid at all, from the standpoint of the elected officials or bureaucrats who do these things.
The current economic downturn that has cost millions of people their jobs began with successive administrations of both parties pushing banks and other lenders to make mortgage loans to people whose incomes, credit history and inability or unwillingness to make a substantial down payment on a house made them bad risks.
Was that stupid? Not at all. The money that was being put at risk was not the politicians' money, and in most cases was not even the government's money. Moreover, the jobs that are being lost by the millions are not the politicians' jobs-- and jobs in the government's bureaucracies are increasing.
No one pushed these reckless mortgage lending policies more than Congressman Barney Frank, who brushed aside warnings about risk, and said in 2003 that he wanted to 'roll the dice' even more in the housing markets. But it would very rash to bet against Congressman Frank's getting re-elected in 2010."
By Thomas Sowell
No one will really understand politics until they understand that politicians are not trying to solve our problems. They are trying to solve their own problems-- of which getting elected and re-elected are number one and number two. Whatever is number three is far behind.
Many of the things the government does that may seem stupid are not stupid at all, from the standpoint of the elected officials or bureaucrats who do these things.
The current economic downturn that has cost millions of people their jobs began with successive administrations of both parties pushing banks and other lenders to make mortgage loans to people whose incomes, credit history and inability or unwillingness to make a substantial down payment on a house made them bad risks.
Was that stupid? Not at all. The money that was being put at risk was not the politicians' money, and in most cases was not even the government's money. Moreover, the jobs that are being lost by the millions are not the politicians' jobs-- and jobs in the government's bureaucracies are increasing.
No one pushed these reckless mortgage lending policies more than Congressman Barney Frank, who brushed aside warnings about risk, and said in 2003 that he wanted to 'roll the dice' even more in the housing markets. But it would very rash to bet against Congressman Frank's getting re-elected in 2010."
Saturday, December 26, 2009
Venezuela's President Threatens Toyota, GM - WSJ.com
Venezuelan President Hugo Chávez, beset by a recession that is hurting his popularity, has turned his sights on international car companies, threatening them with nationalization and pledging to ramp up government intervention in their local businesses.
The populist leader has threatened to expropriate Toyota Motor Corp.'s local assembly plant if the Japanese car maker doesn't produce more vehicles designed for rural areas and transfer new technologies and manufacturing methods to its local unit. He said other car companies were also guilty of not transferring enough technology, mentioning Fiat SpA of Italy, which controls Chrysler Group LLC, and General Motors Co.
The president ordered his trade minister, Eduardo Saman, to inspect the Toyota plant. He said if the inspection shows Toyota isn't producing what he thinks it should and isn't transferring technology, the government may consider taking over its plant and have a Chinese company operate it.
'We'll take it, we'll expropriate it, we'll pay them what it is worth and immediately call on the Chinese,' Mr. Chávez said in a televised address late Wednesday.
Mr. Chávez, a former army officer who has been in power longer than a decade, has nationalized dozens of foreign-owned companies—and sometimes entire sectors of the economy, including electricity firms, cement companies, coffee companies and oil-services firms."
The populist leader has threatened to expropriate Toyota Motor Corp.'s local assembly plant if the Japanese car maker doesn't produce more vehicles designed for rural areas and transfer new technologies and manufacturing methods to its local unit. He said other car companies were also guilty of not transferring enough technology, mentioning Fiat SpA of Italy, which controls Chrysler Group LLC, and General Motors Co.
The president ordered his trade minister, Eduardo Saman, to inspect the Toyota plant. He said if the inspection shows Toyota isn't producing what he thinks it should and isn't transferring technology, the government may consider taking over its plant and have a Chinese company operate it.
'We'll take it, we'll expropriate it, we'll pay them what it is worth and immediately call on the Chinese,' Mr. Chávez said in a televised address late Wednesday.
Mr. Chávez, a former army officer who has been in power longer than a decade, has nationalized dozens of foreign-owned companies—and sometimes entire sectors of the economy, including electricity firms, cement companies, coffee companies and oil-services firms."
Friday, December 25, 2009
Thursday, December 24, 2009
A bridge too far - How to think about a government-designed health-care system
"Trying to restructure an industry that constitutes one-sixth of the United States economy is indeed complicated. It is so complicated that it's impossible to accomplish without risking catastrophic failure.
Our world is full of complexities that defy human engineering. Can Congress engineer winter snow so that it never again falls on Minnesota? Can it engineer human romance so that none of us ever again suffers a broken heart?
Of course not. Any attempts that Congress might make to do so would be correctly read as arrogance of the highest and most hazardous sort.
Attempts to consciously redesign the health care industry are equally hubristic and hazardous. That industry is one of billions of unique, often personal, relationships, each of which is part of countless long chains of efforts to transform raw materials and human effort into life-improving and life-saving drugs and treatments.
Like weather and the mysteries of love, these long chains of human relationships weren't designed by anyone. Like weather and love, they change, often unexpectedly; they also possess as many unique properties as there are persons involved.
And like weather and love, their all-important details are beyond the comprehension of would-be redesigners. These long chains of human relationships cannot be undone and reassembled at will by politicians and 'experts' without risking enormous and unintended catastrophe.
For proof, look no further than Mr. Schieffer's lament that the very 'engineers' -- the members of Congress -- who are now attempting to redesign the details of the health care industry cannot themselves grasp the full meaning of, or even simply read all the words in, the bill that they're debating.
It's as if a committee of engineers trying to design, say, a bridge to connect New York and London draft a blueprint that is so huge and complex that none of the engineers can possibly comprehend its details. No engineer knows, or can know, exactly what it is he or she is helping to engineer.
Each engineer might fervently endorse the prospect of a bridge to connect North America to Europe. Each engineer might be able to offer a long list of all the wondrous benefits that a trans-Atlantic bridge would bestow upon motorists on both continents.
Some of these engineers might also even insist that crossing the Atlantic by car is a basic human right, one that must be guaranteed by government.
But despite the realness of the benefits of a trans-Atlantic bridge, if that bridge's own designers cannot comprehend what they're designing, no sane person would volunteer to drive across that structure if and when it is built.
If an engineer can't read and understand even his own blueprint, why should we trust him to understand the vastly more complex reality that his blueprint allegedly represents? And, more importantly, why should we trust that what is built based upon the incomprehensible blueprint will work as advertised?
A trans-Atlantic bridge, of course, is not the same thing as a health care system: The bridge is much less complicated.
No matter how complicated the bridge, ultimately it is a physical structure, composed of lifeless materials that metallurgists, chemists and engineers understand quite well.
A human economy is very different. Each person -- as producer and as consumer -- has his own unique abilities and wants. Each person can respond imaginatively to unexpected problems that she encounters. Each person is a potential source of creative new ideas that might improve the operation of his medical office, her research lab or his insurance company.
With hundreds of millions of customers -- everyone from those whose health care needs go no further than an occasional aspirin to those who need round-the-clock care in cancer wards -- and with millions of providers doing countless different tasks, the idea that 535 geniuses on Capitol Hill can design this industry so that it will improve human well-being is laughable.
There are steps that Congress can sensibly take, but all of these involve removing government-imposed restrictions on the abilities of individuals to seek out, and to supply, health care provision within markets."
Our world is full of complexities that defy human engineering. Can Congress engineer winter snow so that it never again falls on Minnesota? Can it engineer human romance so that none of us ever again suffers a broken heart?
Of course not. Any attempts that Congress might make to do so would be correctly read as arrogance of the highest and most hazardous sort.
Attempts to consciously redesign the health care industry are equally hubristic and hazardous. That industry is one of billions of unique, often personal, relationships, each of which is part of countless long chains of efforts to transform raw materials and human effort into life-improving and life-saving drugs and treatments.
Like weather and the mysteries of love, these long chains of human relationships weren't designed by anyone. Like weather and love, they change, often unexpectedly; they also possess as many unique properties as there are persons involved.
And like weather and love, their all-important details are beyond the comprehension of would-be redesigners. These long chains of human relationships cannot be undone and reassembled at will by politicians and 'experts' without risking enormous and unintended catastrophe.
For proof, look no further than Mr. Schieffer's lament that the very 'engineers' -- the members of Congress -- who are now attempting to redesign the details of the health care industry cannot themselves grasp the full meaning of, or even simply read all the words in, the bill that they're debating.
It's as if a committee of engineers trying to design, say, a bridge to connect New York and London draft a blueprint that is so huge and complex that none of the engineers can possibly comprehend its details. No engineer knows, or can know, exactly what it is he or she is helping to engineer.
Each engineer might fervently endorse the prospect of a bridge to connect North America to Europe. Each engineer might be able to offer a long list of all the wondrous benefits that a trans-Atlantic bridge would bestow upon motorists on both continents.
Some of these engineers might also even insist that crossing the Atlantic by car is a basic human right, one that must be guaranteed by government.
But despite the realness of the benefits of a trans-Atlantic bridge, if that bridge's own designers cannot comprehend what they're designing, no sane person would volunteer to drive across that structure if and when it is built.
If an engineer can't read and understand even his own blueprint, why should we trust him to understand the vastly more complex reality that his blueprint allegedly represents? And, more importantly, why should we trust that what is built based upon the incomprehensible blueprint will work as advertised?
A trans-Atlantic bridge, of course, is not the same thing as a health care system: The bridge is much less complicated.
No matter how complicated the bridge, ultimately it is a physical structure, composed of lifeless materials that metallurgists, chemists and engineers understand quite well.
A human economy is very different. Each person -- as producer and as consumer -- has his own unique abilities and wants. Each person can respond imaginatively to unexpected problems that she encounters. Each person is a potential source of creative new ideas that might improve the operation of his medical office, her research lab or his insurance company.
With hundreds of millions of customers -- everyone from those whose health care needs go no further than an occasional aspirin to those who need round-the-clock care in cancer wards -- and with millions of providers doing countless different tasks, the idea that 535 geniuses on Capitol Hill can design this industry so that it will improve human well-being is laughable.
There are steps that Congress can sensibly take, but all of these involve removing government-imposed restrictions on the abilities of individuals to seek out, and to supply, health care provision within markets."
President Obama on "Cadillac" Health insurance plans
OBAMA: "I'm on record as saying that taxing Cadillac plans that don't make people healthier, but just take more money out of their pockets because they're paying more for insurance than they need to, that's actually a good idea and that helps bend the cost curve; that helps to reduce the cost of health care over the long term. I think that's a smart thing to do."
Wednesday, December 23, 2009
Hanoi Weighs Price Controls, Tightens Grip - WSJ.com
EXCERPT:
"HANOI – Vietnam is considering putting price controls on a broad array of products and is cracking down on certain personal and political activity, in a sharp reversal of what has been a move toward more-open markets and a more-open society.
Foreign businesses worry about the threat of price controls—something many analysts consider a hallmark of Vietnam's Marxist past....
Carlyle Thayer, a veteran Vietnam watcher and professor at the Australian Defense Academy in Canberra, says conservative factions in the ruling Politburo are tightening their grip on the country as Vietnam's economic worries—especially inflation and fallout from currency devaluations—grow. He says he expects more crackdowns and arrests to come in the run-up to the country's 2011 Party Congress, a major political event that will aim to map out Vietnam's political and economic direction for the following five years....
In some cases, the proposed rules would allow the government to set prices on a wide range of privately made or imported goods, including petroleum products, fertilizers and milk to help contain inflation as Vietnam continues pumping money into its volatile economy....
"HANOI – Vietnam is considering putting price controls on a broad array of products and is cracking down on certain personal and political activity, in a sharp reversal of what has been a move toward more-open markets and a more-open society.
Foreign businesses worry about the threat of price controls—something many analysts consider a hallmark of Vietnam's Marxist past....
Carlyle Thayer, a veteran Vietnam watcher and professor at the Australian Defense Academy in Canberra, says conservative factions in the ruling Politburo are tightening their grip on the country as Vietnam's economic worries—especially inflation and fallout from currency devaluations—grow. He says he expects more crackdowns and arrests to come in the run-up to the country's 2011 Party Congress, a major political event that will aim to map out Vietnam's political and economic direction for the following five years....
In some cases, the proposed rules would allow the government to set prices on a wide range of privately made or imported goods, including petroleum products, fertilizers and milk to help contain inflation as Vietnam continues pumping money into its volatile economy....
Tuesday, December 22, 2009
The "Costs" of Medical Care: Part III - Thomas Sowell
EXCERPT:
"One of the strongest talking points of those who want a government-run medical care system is that we simply cannot afford the high and rising costs of medical care under the current system.
First of all, what we can afford has absolutely nothing to do with the cost of producing anything. We will either pay those costs or not get the benefits. Moreover, if we cannot afford the quantity and quality of medical care that we want now, the government has no miraculous way of enabling us to afford it in the future.
If you think the government can lower medical costs by eliminating 'waste, fraud and abuse,' as some Washington politicians claim, the logical question is: Why haven't they done that already?"
"One of the strongest talking points of those who want a government-run medical care system is that we simply cannot afford the high and rising costs of medical care under the current system.
First of all, what we can afford has absolutely nothing to do with the cost of producing anything. We will either pay those costs or not get the benefits. Moreover, if we cannot afford the quantity and quality of medical care that we want now, the government has no miraculous way of enabling us to afford it in the future.
If you think the government can lower medical costs by eliminating 'waste, fraud and abuse,' as some Washington politicians claim, the logical question is: Why haven't they done that already?"
The "Costs" of Medical Care: Part II - Thomas Sowell
EXCERPT
"Letting old people die instead of saving their lives will undoubtedly reduce medical payments considerably. But old people have that option already-- and seldom choose to exercise it, despite clever people who talk about a 'duty to die.'
A government-run system will take that decision out of the hands of the elderly or their families, and thereby 'bring down the cost of medical care.' A stranger's death is much easier to take, especially if you are a bureaucrat making that decision in Washington.
At one time, in desperately poor societies, living on the edge of starvation, old people might be abandoned to their fate or even go off on their own to face death alone. But, in a society where huge flat-screen TVs are common, along with a thousand gadgets for amusement and entertainment, and where even most people living below the official poverty line own a car or truck, to talk about a 'duty to die' so that younger people can live it up is obscene.
You can even save money by cutting down on medications to relieve pain, as is already being done in Britain's government-run medical system. You can save money by not having as many high-tech medical devices like CAT scans or MRIs, and not using the latest medications. Countries with government-run medical systems have less of all these things than the United States has.
But reducing these things is not 'bringing down the cost of medical care.' It is simply refusing to pay those costs-- and taking the consequences."
"Letting old people die instead of saving their lives will undoubtedly reduce medical payments considerably. But old people have that option already-- and seldom choose to exercise it, despite clever people who talk about a 'duty to die.'
A government-run system will take that decision out of the hands of the elderly or their families, and thereby 'bring down the cost of medical care.' A stranger's death is much easier to take, especially if you are a bureaucrat making that decision in Washington.
At one time, in desperately poor societies, living on the edge of starvation, old people might be abandoned to their fate or even go off on their own to face death alone. But, in a society where huge flat-screen TVs are common, along with a thousand gadgets for amusement and entertainment, and where even most people living below the official poverty line own a car or truck, to talk about a 'duty to die' so that younger people can live it up is obscene.
You can even save money by cutting down on medications to relieve pain, as is already being done in Britain's government-run medical system. You can save money by not having as many high-tech medical devices like CAT scans or MRIs, and not using the latest medications. Countries with government-run medical systems have less of all these things than the United States has.
But reducing these things is not 'bringing down the cost of medical care.' It is simply refusing to pay those costs-- and taking the consequences."
Friday, December 18, 2009
Behind the Rejection of Kelly as Bank of America CEO - WSJ.com
"Bank of America Corp. directors decided to hire Brian T. Moynihan as chief executive after the U.S. government raised concerns about the potential political impact of the compensation package proposed by an outside candidate for the job, according to people familiar with the situation.
As the Charlotte, N.C., bank was pursuing Bank of New York Mellon Corp. CEO Robert Kelly last week, a Bank of America board member asked Treasury Secretary Timothy Geithner for his opinion on the $35 million to $40 million compensation proposed by Mr. Kelly, one of these people said.
As part of his discussions with the board's search committee, Mr. Kelly sought about $20 million to buy out unvested Bank of New York Mellon shares and options, plus $15 million to $20 million in annual compensation as chief executive. All but $1 million of that amount was to be paid in stock, people close to the talks said.
In response, Mr. Geithner suggested that Bank of America approach Treasury pay master Kenneth Feinberg for his views on what would be politically palatable. Mr. Feinberg said the total amount might cause alarm and be seen as excessive, according to people familiar with the exchange.
...The government's role in the 11-week CEO search is another sign of how regulators are shaping the new banking landscape after coming to the rescue of ailing financial institutions."
As the Charlotte, N.C., bank was pursuing Bank of New York Mellon Corp. CEO Robert Kelly last week, a Bank of America board member asked Treasury Secretary Timothy Geithner for his opinion on the $35 million to $40 million compensation proposed by Mr. Kelly, one of these people said.
As part of his discussions with the board's search committee, Mr. Kelly sought about $20 million to buy out unvested Bank of New York Mellon shares and options, plus $15 million to $20 million in annual compensation as chief executive. All but $1 million of that amount was to be paid in stock, people close to the talks said.
In response, Mr. Geithner suggested that Bank of America approach Treasury pay master Kenneth Feinberg for his views on what would be politically palatable. Mr. Feinberg said the total amount might cause alarm and be seen as excessive, according to people familiar with the exchange.
...The government's role in the 11-week CEO search is another sign of how regulators are shaping the new banking landscape after coming to the rescue of ailing financial institutions."
Tuesday, December 15, 2009
What Red Tape? Auto Community Czar Gets Results - WSJ.com
By MELANIE TROTTMAN
When worries about environmental cleanup costs stalled plans to redevelop an abandoned auto factory in Flint, Michigan Gov. Jennifer Granholm called Edward Montgomery.
Mr. Montgomery, President Barack Obama's auto-communities recovery czar, cut through the bureaucracy at the Environmental Protection Agency, and brought officials from the EPA's Washington office to meet with Flint officials to get a deal done.
The solution: Carve out the part of the 700-acre site with the worst contamination, and clear the rest for potential sale to investors who have told the city they would create a multipurpose facility that would employ as many as 500 people in hard-hit Michigan. A process that could have taken years wound up taking just a few months.
'He's on my speed dial,' Ms. Granholm says. 'He has really been the hub of the wheel for us.'
At a time when the Obama administration is ratcheting up regulatory scrutiny of environmentally sensitive development, Mr. Montgomery is helping communities in struggling auto states find shortcuts through the administration's own bureaucracy, making it easier for the communities to redevelop sites as part of a recovery.
'What many expected to be a multiyear process with the EPA became a multimonth process,' says Flint Mayor Dayne Walling. Given Flint's economic trouble, with unemployment at 25.5% in October, 'time is our enemy,' Mr. Walling says.
Mr. Montgomery says decisions about policy and allocation of funds rest with government agencies, not him. But local officials who have benefited from his help call him a powerful advocate."
When worries about environmental cleanup costs stalled plans to redevelop an abandoned auto factory in Flint, Michigan Gov. Jennifer Granholm called Edward Montgomery.
Mr. Montgomery, President Barack Obama's auto-communities recovery czar, cut through the bureaucracy at the Environmental Protection Agency, and brought officials from the EPA's Washington office to meet with Flint officials to get a deal done.
The solution: Carve out the part of the 700-acre site with the worst contamination, and clear the rest for potential sale to investors who have told the city they would create a multipurpose facility that would employ as many as 500 people in hard-hit Michigan. A process that could have taken years wound up taking just a few months.
'He's on my speed dial,' Ms. Granholm says. 'He has really been the hub of the wheel for us.'
At a time when the Obama administration is ratcheting up regulatory scrutiny of environmentally sensitive development, Mr. Montgomery is helping communities in struggling auto states find shortcuts through the administration's own bureaucracy, making it easier for the communities to redevelop sites as part of a recovery.
'What many expected to be a multiyear process with the EPA became a multimonth process,' says Flint Mayor Dayne Walling. Given Flint's economic trouble, with unemployment at 25.5% in October, 'time is our enemy,' Mr. Walling says.
Mr. Montgomery says decisions about policy and allocation of funds rest with government agencies, not him. But local officials who have benefited from his help call him a powerful advocate."
Obama Slams 'Fat Cat' Bankers - WSJ.com
WASHINGTON -- President Barack Obama lashed out at Wall Street, calling bankers "fat cats" who don't get it, in an escalation of tensions with the industry.
Mr. Obama, speaking on the eve of Monday's meeting with the heads of major banks at the White House, said he would try to persuade bankers to free up more credit to businesses, with the aim of boosting job growth. But the president also expressed frustration with banks that the government has assisted.
"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street," Mr. Obama said in an interview on CBS's "60 Minutes" program on Sunday.
On CBS's "60 Minutes," President Obama decries "fat cat bankers" ahead of Monday evening's meeting between White House officials and banking representatives.
"They're still puzzled why is it that people are mad at the banks. Well, let's see," he said. "You guys are drawing down $10, $20 million bonuses after America went through the worst economic year that it's gone through in -- in decades, and you guys caused the problem. And we've got 10% unemployment."
Mr. Obama, speaking on the eve of Monday's meeting with the heads of major banks at the White House, said he would try to persuade bankers to free up more credit to businesses, with the aim of boosting job growth. But the president also expressed frustration with banks that the government has assisted.
"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street," Mr. Obama said in an interview on CBS's "60 Minutes" program on Sunday.
On CBS's "60 Minutes," President Obama decries "fat cat bankers" ahead of Monday evening's meeting between White House officials and banking representatives.
"They're still puzzled why is it that people are mad at the banks. Well, let's see," he said. "You guys are drawing down $10, $20 million bonuses after America went through the worst economic year that it's gone through in -- in decades, and you guys caused the problem. And we've got 10% unemployment."
Venture Capitol: New VC Force - WSJ.com
"When tiny Fisker Automotive Inc. hit a financing glitch last year, threatening its plan to build a fancy gasoline-electric hybrid car in Finland, it turned to the U.S. Department of Energy.
The DOE had a bolder idea. Why not also step up the company's plans to develop a less-expensive model, and assemble it in a closed U.S. auto plant?
Within months, Vice President Joe Biden, the former senator from Delaware, was helping lure the embryonic car company to a shuttered General Motors Co. factory four miles from his house in Wilmington, right across the tracks from Biden Park. Soon, Fisker Automotive, a two-year-old business that has yet to sell a car, won loans from the federal government totaling $528 million.
Fisker had joined a flock of other businesses seeking cash from the biggest venture capitalist of all, the U.S. government....
Thus, while much attention has been focused on the federal government's involvement in banking, Washington also is gaining sway in another swath of the economy. By financing clean-tech ventures on a large scale, the government has become a kingmaker in one of technology's hottest sectors.
Some young companies are tailoring their business plans to win DOE cash. Private investors, meanwhile, are often pulling back, waiting to see which projects the government blesses. Success in winning federal funds can attract a flood of private capital, companies say, while conversely, bad luck in Washington can sour their chances with private investors. The result is an intertwining of public and private-sector interests in an arena where politics is never far from the surface....
'The existence of an 800-pound gorilla putting massive capital behind select start-ups is sucking the air away from the rest of the venture-capital ecosystem,' said Darryl Siry, former head of marketing at Tesla Motors Inc., a San Carlos, Calif., company that got a $365 million DOE loan in June to build high-end electric cars. 'Being anointed by DOE has become everything for companies looking to move ahead.'"
The DOE had a bolder idea. Why not also step up the company's plans to develop a less-expensive model, and assemble it in a closed U.S. auto plant?
Within months, Vice President Joe Biden, the former senator from Delaware, was helping lure the embryonic car company to a shuttered General Motors Co. factory four miles from his house in Wilmington, right across the tracks from Biden Park. Soon, Fisker Automotive, a two-year-old business that has yet to sell a car, won loans from the federal government totaling $528 million.
Fisker had joined a flock of other businesses seeking cash from the biggest venture capitalist of all, the U.S. government....
Thus, while much attention has been focused on the federal government's involvement in banking, Washington also is gaining sway in another swath of the economy. By financing clean-tech ventures on a large scale, the government has become a kingmaker in one of technology's hottest sectors.
Some young companies are tailoring their business plans to win DOE cash. Private investors, meanwhile, are often pulling back, waiting to see which projects the government blesses. Success in winning federal funds can attract a flood of private capital, companies say, while conversely, bad luck in Washington can sour their chances with private investors. The result is an intertwining of public and private-sector interests in an arena where politics is never far from the surface....
'The existence of an 800-pound gorilla putting massive capital behind select start-ups is sucking the air away from the rest of the venture-capital ecosystem,' said Darryl Siry, former head of marketing at Tesla Motors Inc., a San Carlos, Calif., company that got a $365 million DOE loan in June to build high-end electric cars. 'Being anointed by DOE has become everything for companies looking to move ahead.'"
Tuesday, December 8, 2009
My Big Fat Government Takeover - William McGurn: WSJ.com
"Of course, the kind of people who are apt to push for government-imposed solutions are those who are also apt to believe they will be the ones imposing decisions, not the ones who have to live with decisions imposed by others. Sometimes that's because they enjoy the wealth that gives them escape hatches unavailable to the less affluent, such as their ability to ensure that their own children never have to set foot in a public school. Mostly, however, their trust in government reflects their confidence that they have all the answers and that it's government's job to enforce them.
What about conservatives? Don't we have confidence in our judgment and abilities? Of course we do. The difference is that we trust free citizens to make decisions about themselves—and are skeptical about government. As someone who worked inside a White House, I say you really believe government should be small when you see your friends running it.
... conservatives believe that even our smartest friend is no match for the collective wisdom of the marketplace. If we were to wake up and find that someone we knew well had been given control over some important part of the economy, the conservative would not likely think, 'Everything will be fine now that Harry's in charge.' Far more likely we'd be saying to ourselves, 'If it weren't for his wife, Harry would be wearing red and purple socks every day—and we're giving him that kind of power?'"
What about conservatives? Don't we have confidence in our judgment and abilities? Of course we do. The difference is that we trust free citizens to make decisions about themselves—and are skeptical about government. As someone who worked inside a White House, I say you really believe government should be small when you see your friends running it.
... conservatives believe that even our smartest friend is no match for the collective wisdom of the marketplace. If we were to wake up and find that someone we knew well had been given control over some important part of the economy, the conservative would not likely think, 'Everything will be fine now that Harry's in charge.' Far more likely we'd be saying to ourselves, 'If it weren't for his wife, Harry would be wearing red and purple socks every day—and we're giving him that kind of power?'"
Monday, November 30, 2009
Unease Over Banks' Hefty Reserves - WSJ.com
"There is a $1 trillion stash of cash idling in the banking system. It's too big to ignore, and it's a cause for concern.
In normal times, banks hold a bare minimum of funds in reserve to support their liabilities. But these bank reserves now exceed the U.S. Federal Reserve's regulatory floor by $1 trillion. Before the credit crisis intensified in September last year, excess reserves—effectively cash banks hold above their regulatory requirements and usually hate holding—totaled just $2 billion.
The Fed's extraordinary policies aimed at shoring up the economy and banking system are the reason excess reserves have ballooned. As the central bank prints money to buy, say, mortgage-backed securities, much of that extra cash ends up in the banking system, potentially as excess reserves.
So why do excess reserves create disquiet?
First, inflation hawks view them with distrust. In theory, these sleeping funds could be 'activated' to support a huge volume of new loans, which in turn could fuel demand and inflation. True, the Fed can increase interest payments it makes on excess reserves, which would encourage banks to keep holding them and not activate new lending. But that works only if the Fed doesn't wait too long to raise that rate."
In normal times, banks hold a bare minimum of funds in reserve to support their liabilities. But these bank reserves now exceed the U.S. Federal Reserve's regulatory floor by $1 trillion. Before the credit crisis intensified in September last year, excess reserves—effectively cash banks hold above their regulatory requirements and usually hate holding—totaled just $2 billion.
The Fed's extraordinary policies aimed at shoring up the economy and banking system are the reason excess reserves have ballooned. As the central bank prints money to buy, say, mortgage-backed securities, much of that extra cash ends up in the banking system, potentially as excess reserves.
So why do excess reserves create disquiet?
First, inflation hawks view them with distrust. In theory, these sleeping funds could be 'activated' to support a huge volume of new loans, which in turn could fuel demand and inflation. True, the Fed can increase interest payments it makes on excess reserves, which would encourage banks to keep holding them and not activate new lending. But that works only if the Fed doesn't wait too long to raise that rate."
Saturday, November 28, 2009
Treasurys Rally on Dubai Trouble - WSJ.com
"Treasury prices rallied Friday and the market posted a weekly gain, as investors dumped stocks and commodities and sought safety in low-risk government debt amid worries about the unfolding debt problems in Dubai.
The safe-haven flows added to demand for Treasurys .... Investors at home and abroad snapped up this week's record $118 billion in sales of two-year, five-year and seven-year note supply, allowing the U.S. government to easily fund its budget shortfalls.
Friday, the 10-year Treasury note was up 21/32 point, or $6.5625 for every $1,000 invested, to yield 3.202%, down from 3.279% Wednesday as bond yields fall when prices rise.
The two-year note, a haven in times of uncertainty, was up 4/32 point to yield 0.687%. It touched an overnight low of 0.609%, close to the record low of 0.601% set on Dec. 17, 2008.
In the scramble for safety, rates on four Treasury bills maturing in January 2010 traded around negative 0.01% Friday, dipping below zero for the second time since last week. That means investors were willing to forgo the chance of earning interest and take a small loss instead to get their hands on bills—government securities of less than a year's maturity that are sold at a discount. These are typically seen as the safest types of securities."
The safe-haven flows added to demand for Treasurys .... Investors at home and abroad snapped up this week's record $118 billion in sales of two-year, five-year and seven-year note supply, allowing the U.S. government to easily fund its budget shortfalls.
Friday, the 10-year Treasury note was up 21/32 point, or $6.5625 for every $1,000 invested, to yield 3.202%, down from 3.279% Wednesday as bond yields fall when prices rise.
The two-year note, a haven in times of uncertainty, was up 4/32 point to yield 0.687%. It touched an overnight low of 0.609%, close to the record low of 0.601% set on Dec. 17, 2008.
In the scramble for safety, rates on four Treasury bills maturing in January 2010 traded around negative 0.01% Friday, dipping below zero for the second time since last week. That means investors were willing to forgo the chance of earning interest and take a small loss instead to get their hands on bills—government securities of less than a year's maturity that are sold at a discount. These are typically seen as the safest types of securities."
Lack of Candor and the AIG Bailout - Peter J. Wallison, WSJ.com
EXCERPT:
"The fact that the government itself either bought these bad loans or required them to be made shows that the most plausible explanation for the large number of subprime loans in our economy is not a lack of regulation at the mortgage origination level, but government-created demand for these loans.
.... In the administration's proposed legislation, the Consumer Financial Protection Agency would cover any business that provides consumer credit of any kind, including the common layaway plans and Christmas clubs that small retailers offer their customers.
Under the guise of addressing the causes of a global financial crisis, the Obama administration's bill would have regulated credit counseling, educational courses on finance, financial-data processing, money transmission and custodial services, and dozens more small businesses that could not possibly cause a financial crisis. ...."
"The fact that the government itself either bought these bad loans or required them to be made shows that the most plausible explanation for the large number of subprime loans in our economy is not a lack of regulation at the mortgage origination level, but government-created demand for these loans.
.... In the administration's proposed legislation, the Consumer Financial Protection Agency would cover any business that provides consumer credit of any kind, including the common layaway plans and Christmas clubs that small retailers offer their customers.
Under the guise of addressing the causes of a global financial crisis, the Obama administration's bill would have regulated credit counseling, educational courses on finance, financial-data processing, money transmission and custodial services, and dozens more small businesses that could not possibly cause a financial crisis. ...."
Tuesday, November 24, 2009
Government Deficits and Private Growth - George Melloan, WSJ.com
EXCERPT:
"For anyone who wondered if last winter's federal seizure of the financial services industry would have adverse economic consequences, an answer is now available. The credit market has been tilted to favor a single borrower with a huge appetite for money, Washington. Private borrowers, particularly small businesses, have been sent to the end of the queue.
The Federal Reserve, which supervises some 7,000 banks, has been telling bankers that they must cut risk. The most spectacular step in that effort was the Fed announcement last month that it will evaluate the salaries of bank officers on how carefully they manage risk."
"For anyone who wondered if last winter's federal seizure of the financial services industry would have adverse economic consequences, an answer is now available. The credit market has been tilted to favor a single borrower with a huge appetite for money, Washington. Private borrowers, particularly small businesses, have been sent to the end of the queue.
The Federal Reserve, which supervises some 7,000 banks, has been telling bankers that they must cut risk. The most spectacular step in that effort was the Fed announcement last month that it will evaluate the salaries of bank officers on how carefully they manage risk."
One in Four Borrowers Is Underwater - WSJ.com
EXCERPTS:
"Homeowners in Nevada, Arizona, Florida and California are more likely to be deeply under water, according to the analysis. In Nevada, for example, nearly 30% of borrowers owe 50% or more on their mortgage than their home is worth, said First American.
More than 40% of borrowers who took out a mortgage in 2006 -- when home prices peaked -- are under water. Prices have dropped so much in some parts of the U.S. that some borrowers who took out loans more than five years ago owe more than their home's value...."
"Homeowners in Nevada, Arizona, Florida and California are more likely to be deeply under water, according to the analysis. In Nevada, for example, nearly 30% of borrowers owe 50% or more on their mortgage than their home is worth, said First American.
More than 40% of borrowers who took out a mortgage in 2006 -- when home prices peaked -- are under water. Prices have dropped so much in some parts of the U.S. that some borrowers who took out loans more than five years ago owe more than their home's value...."
Lunsford put 20% down when he bought his home in Las Vegas for $530,000 in 2004. Now, he said, his home was worth less than $300,000.
"I'm to the point where I feel I will never get my head above water," said Mr. Lunsford, a retired state trooper who works for an insurance company. He said his bank won't modify his loan because he can afford his payments, and he's unwilling to walk away, he said: "We're too honest."
Monday, November 23, 2009
The Coming Deficit Disaster - Douglas Holtz-Eakin, WSJ.com
"Our fiscal situation has deteriorated rapidly in just the past few years. The federal government ran a 2009 deficit of $1.4 trillion—the highest since World War II—as spending reached nearly 25% of GDP and total revenues fell below 15% of GDP. Shortfalls like these have not been seen in more than 50 years."
Saturday, November 14, 2009
Bank of America Hits New Hurdle in CEO Hunt - WSJ.com
"Bank of AmericaCorp. directors are hitting a new hurdle as they hunt for the giant bank's next CEO: Obama administration pay czar Kenneth Feinberg.
William Demchak, senior vice chairman at PNC Financial Services Group Inc., spurned a feeler last week from a recruiter for the Charlotte, N.C., bank, according to a person familiar with the situation.
Mr. Feinberg's required approval of the compensation package for whomever succeeds Kenneth D. Lewis was a major factor in the decision, this person said. Mr. Demchak also didn't see the bank's situation as fixable given the government's heavy influence over the company.
The bank would 'get blasted' for buying out Mr. Demchak's shares in PNC, this person said. The 46-year-old executive helped turn around the Pittsburgh bank and is widely viewed as the likely successor to PNC Chief Executive James Rohr.
Such purchases are common in hirings of top company executives. According to a securities filing, Mr. Demchak earlier this year held PNC shares valued at $34.3 million based on the bank's stock price Friday.
Mr. Feinberg's role as overseer of seven companies that received huge government aid gives him enormous influence in the succession process at Bank of America. Once directors make a decision and negotiate contract terms with their chosen CEO, the compensation package must be submitted to Mr. Feinberg for approval. Mr. Feinberg declined to comment.
Some directors at Bank of America worried even before Mr. Demchak's rejection that the limits imposed by Mr. Feinberg were snarling the succession process, said a person familiar with the board's deliberations. For example, cash salaries paid to the highest-earning executives at the seven companies getting exceptional federal aid were capped at $500,000 for 2009. Without the restrictions, the pool of available candidates to succeed Mr. Lewis would be larger, this person said."
William Demchak, senior vice chairman at PNC Financial Services Group Inc., spurned a feeler last week from a recruiter for the Charlotte, N.C., bank, according to a person familiar with the situation.
Mr. Feinberg's required approval of the compensation package for whomever succeeds Kenneth D. Lewis was a major factor in the decision, this person said. Mr. Demchak also didn't see the bank's situation as fixable given the government's heavy influence over the company.
The bank would 'get blasted' for buying out Mr. Demchak's shares in PNC, this person said. The 46-year-old executive helped turn around the Pittsburgh bank and is widely viewed as the likely successor to PNC Chief Executive James Rohr.
Such purchases are common in hirings of top company executives. According to a securities filing, Mr. Demchak earlier this year held PNC shares valued at $34.3 million based on the bank's stock price Friday.
Mr. Feinberg's role as overseer of seven companies that received huge government aid gives him enormous influence in the succession process at Bank of America. Once directors make a decision and negotiate contract terms with their chosen CEO, the compensation package must be submitted to Mr. Feinberg for approval. Mr. Feinberg declined to comment.
Some directors at Bank of America worried even before Mr. Demchak's rejection that the limits imposed by Mr. Feinberg were snarling the succession process, said a person familiar with the board's deliberations. For example, cash salaries paid to the highest-earning executives at the seven companies getting exceptional federal aid were capped at $500,000 for 2009. Without the restrictions, the pool of available candidates to succeed Mr. Lewis would be larger, this person said."
Thursday, November 12, 2009
Health-Care Bill Doesn't Index for Inflation; Hits Young and Rising Middle Class Hard - WSJ.com
EXCERPT: "Buried in Nancy Pelosi's health-care bill is a provision that will partially repeal tax indexing for inflation, meaning that as their earnings rise over a lifetime these youngsters can look forward to paying higher rates even if their income gains aren't real.
In order to raise enough money to make their plan look like it won't add to the deficit, House Democrats have deliberately not indexed two main tax features of their plan: the $500,000 threshold for the 5.4-percentage-point income tax surcharge; and the payroll level at which small businesses must pay a new 8% tax penalty for not offering health insurance.
This is a sneaky way for politicians to pry more money out of workers every year without having to legislate tax increases. The negative effects of failing to index compound over time, yielding a revenue windfall for government as the years go on. The House tax surcharge is estimated to raise $460.5 billion over 10 years, but only $30.9 billion in 2011, rising to $68.4 billion in 2019, according to the Joint Tax Committee.
Americans of a certain age have seen this movie before. In 1960, only 3% of tax filers paid a 30% or higher marginal tax rate. By 1980, after the inflation of the 1970s, the share was closer to 33%, according to a Heritage Foundation analysis of tax returns...."
The return of the inflation tax demonstrates once again the stealth radicalism that animates ObamaCare. In the case of inflation indexing, Democrats would repeal a 30-year bipartisan consensus that it is unfair to tax unreal gains in income, thus hitting millions of middle-class Americans over time with tax rates advertised as only hitting "the rich...."
In order to raise enough money to make their plan look like it won't add to the deficit, House Democrats have deliberately not indexed two main tax features of their plan: the $500,000 threshold for the 5.4-percentage-point income tax surcharge; and the payroll level at which small businesses must pay a new 8% tax penalty for not offering health insurance.
This is a sneaky way for politicians to pry more money out of workers every year without having to legislate tax increases. The negative effects of failing to index compound over time, yielding a revenue windfall for government as the years go on. The House tax surcharge is estimated to raise $460.5 billion over 10 years, but only $30.9 billion in 2011, rising to $68.4 billion in 2019, according to the Joint Tax Committee.
Americans of a certain age have seen this movie before. In 1960, only 3% of tax filers paid a 30% or higher marginal tax rate. By 1980, after the inflation of the 1970s, the share was closer to 33%, according to a Heritage Foundation analysis of tax returns...."
The return of the inflation tax demonstrates once again the stealth radicalism that animates ObamaCare. In the case of inflation indexing, Democrats would repeal a 30-year bipartisan consensus that it is unfair to tax unreal gains in income, thus hitting millions of middle-class Americans over time with tax rates advertised as only hitting "the rich...."
Tuesday, October 27, 2009
Dismantling America - Thomas Sowell
"Just one year ago, would you have believed that an unelected government official, not even a Cabinet member confirmed by the Senate but simply one of the many 'czars' appointed by the President, could arbitrarily cut the pay of executives in private businesses by 50 percent or 90 percent...."
Monday, October 26, 2009
Allan Meltzer: Deficits and the Next Financial Crisis - WSJ.com
"The United States is headed toward a new financial crisis. History gives many examples of countries with high actual and expected money growth, unsustainable budget deficits, and a currency expected to depreciate. Unless these countries made massive policy changes, they ended in crisis. We will escape only if we act forcefully and soon."
Saturday, October 17, 2009
The ABC Dilemma of Health Reform - WSJ.com
Vernon L. Smith: The ABC Dilemma of Health Reform - WSJ.com: "The ABC Dilemma of Health Reform"
Senate proposals put premium on healthy living
 MSNBC.com |
Overweight? Smoker? Health bills hit hard
Bills could put workers under pressure to lose weight, stop smoking
By David S. Hilzenrath
The Washington Post
updated 8:18 p.m. CT, Thurs., Oct . 15, 2009
Get in shape or pay a price.
That's a message more Americans could hear if the health care reform bills passed by the Senate Finance and Health committees become law.
By more than doubling the maximum rewards and penalties that companies can apply to employees who flunk medical evaluations, the bills could put workers under intense financial pressure to lose weight, stop smoking or even lower their cholesterol.
The initiative, largely eclipsed in the health care debate, builds on a trend that is already in play among some corporations and that more workers will see in the packages they bring home during this month's open enrollment. Some employers offer lower premiums to people who complete personal health assessments; others offer only limited benefit packages to smokers.
The current legislative effort takes the trend a step further. It is backed by major employer groups, including the U.S. Chamber of Commerce and the National Association of Manufacturers. It is opposed by labor unions and groups devoted to combating serious illnesses, such as the American Heart Association, the American Cancer Society, and the American Diabetes Association.
A colossal loophole?
President Obama and members of Congress have declared that they are trying to create a system in which no one can be denied coverage or charged higher premiums based on their health status. The health insurance lobby has said it shares that goal. However, so-called wellness incentives could introduce a colossal loophole. In effect, they would permit insurers and employers to make coverage less affordable for people exhibiting risk factors for problems like diabetes, heart disease and stroke.
"Everybody said that we're going to be ending discrimination based on preexisting conditions. But this is in effect discrimination again based on preexisting conditions," said Ann Kempski of the Service Employees International Union.
The legislation would make exceptions for people who have medical reasons for not meeting targets.
Supporters say economic incentives can prompt workers to make healthier choices, thereby reducing medical expenses. The aim is to "focus on wellness and prevention rather than just disease and treatment," said Business Roundtable president John J. Castellani.
BeniComp Group, an Indiana company that manages incentives for employers, says on its Web site that the programs can save employers money in a variety of ways. Medical screenings will catch problems early. Employers will shift costs to others. Some employees will "choose other health care options."
Douglas J. Short, BeniComp's chief executive, said the incentives he uses focus on outcomes, not conditions.
"I can't give you an incentive based on being a diabetic or not being a diabetic, but whether you're managing your blood glucose level — I can give you an incentive based on that," Short said.
National epidemic of obesity
The incentives could attack a national epidemic of obesity. They also cut to a philosophical core of the health care debate. Should health insurance be like auto insurance, in which good drivers earn discounts and reckless ones pay a price, thereby encouraging better habits? Or should it be a safety net in which the young and healthy support the old and sick with the understanding that youth and good health are transitory?
Under current regulation, incentives based on health factors can be no larger than 20 percent of the premium paid by employer and employee combined. The legislation passed by the Health and Finance committees would increase the limit to 30 percent, and it would give government officials the power to raise it to 50 percent.
A single employee whose annual premiums cost him and his employer the national average of $4,824 could have as much as $2,412 on the line. At least under the Health Committee bill, the stakes could be higher for people with family coverage. Families with premiums of $13,375 — the combined average for employer-sponsored coverage, according to a recent survey — could have $6,687.50 at risk.
An amendment passed unanimously by the Health Committee would allow insurers to use the same rewards and penalties in the market for individual insurance, though legislative language subsequently drafted by the committee's Democratic staff does not reflect that vote, Sen. Mike Enzi (Wyo.), for the committee's ranking Republican, has said. The bill drafted by the Senate Finance Committee would set up a trial program allowing insurers in 10 states to use wellness-based incentives for individuals.
America's Health Insurance Plans, an industry lobby, has argued that insurers should be allowed to consider participation in wellness programs when setting individual premiums.
Wellness incentives voluntary
Employers and other advocates of expanded wellness incentives say taking steps to get healthier would be voluntary. Sen. John Ensign, a Nevada Republican and lead sponsor of the Finance Committee's wellness provision, said his proposal "would guarantee that the incentive is strong enough for Americans to want to participate."
Wellness incentives have been spreading rapidly in the corporate world. Unlike the legislative proposals, which address incentives based on results, the corporate programs typically compensate employees based on effort alone — for example, enrolling in smoking cessation programs even if they fail to kick the habit, or undergoing detailed medical assessments regardless of the findings. But there are exceptions: The Safeway supermarket company allows certain employees to reduce their premiums by meeting standards for body mass and other measures. Safeway chief executive Steve Burd has framed it as an issue of personal responsibility.
Valeo, a supplier of auto parts, four years ago raised the deductible on an employee health plan to $2,200 from $200 for individual coverage and to $4,400 from $400 for family coverage. Then it gave employees the opportunity to reduce the deductible to its starting point by being nonsmokers and meeting goals for blood pressure, cholesterol, and body mass index, said Robert Wade, Valeo's director of human resources for North America.
"If they don't comply they end up being penalized, if you will, but we refer to it as a Healthy Rewards program," Wade said.
Workers who choose not to submit to yearly medical assessments have been offered a different health plan that carries higher premiums, Wade said.
Results are mixed for some programs
The results are mixed. The number of employees meeting some targets in the Healthy Rewards program has risen while the number meeting others has fallen, Wade said. On average, employees have succeeded in bringing their deductibles down to about $600 in the case of individual coverage. Meanwhile, Valeo has managed to keep annual increases in health care costs per employee down to about 1 percent, he said, which is far below average.
Higher deductibles alone could explain some of the savings. They can make people more cost-conscious when deciding whether to go to the doctor or obtain other medical services.
Paychex, a payroll management company, offers incentives for participation in wellness programs but refrains from pegging them to biometric targets.
"Employees could be doing everything right and still not achieve the desired outcome. And so then you're holding them accountable for something that may not be achievable," said Jake Flaitz, the company's director of benefits.
Workers at a company called Bemis, which makes packaging, went on strike this year partly because the firm was insisting that they and their spouses submit to health risk assessments to remain eligible for their health insurance, the Workers United union said in an August news release. The union called the assessments "invasive."
North Carolina has angered some state employees by introducing a wellness program that would limit the most generous benefits package to those who meet body mass targets and don't smoke. The state would allow employees to satisfy the requirement by enrolling in weight management or smoking cessation programs.
When fully implemented, the program is projected to reduce the state health plan's medical expenses by 1.2 percent, spokeswoman Linda McCrudden said by e-mail.
The top executive at the health plan, Jack W. Walker, predicted that over the long run the federal government will pay for North Carolina's success. State workers who live longer will spend more time collecting benefits from Medicare, the federal insurance program for older Americans, he said.
© 2009 The Washington Post Company
URL: http://www.msnbc.msn.com/id/33336289/ns/politics-washington_post/
Friday, October 16, 2009
Czar Blocks BofA Chief's Pay - WSJ.com
Czar Blocks BofA Chief's Pay - WSJ.com: "By DEBORAH SOLOMON and DAN FITZPATRICK
WASHINGTON—The Treasury Department's pay czar pushed outgoing Bank of America Corp. Chief Executive Kenneth D. Lewis into giving back about $1 million he received so far this year and forgoing the rest of his $1.5 million salary for 2009, say people familiar with the matter.
The move makes Mr. Lewis the biggest target so far of Kenneth Feinberg, the Treasury's 'special master' for compensation. He also asked that Mr. Lewis pass up any 2009 bonus from the Charlotte, N.C., bank.
Mr. Feinberg pushed for the deal because he thought the package of retirement benefits and unvested stock Mr. Lewis takes with him when he steps down at year's end—currently worth at least $69.3 million, according to securities filings—was large enough, and possibly too big."
WASHINGTON—The Treasury Department's pay czar pushed outgoing Bank of America Corp. Chief Executive Kenneth D. Lewis into giving back about $1 million he received so far this year and forgoing the rest of his $1.5 million salary for 2009, say people familiar with the matter.
The move makes Mr. Lewis the biggest target so far of Kenneth Feinberg, the Treasury's 'special master' for compensation. He also asked that Mr. Lewis pass up any 2009 bonus from the Charlotte, N.C., bank.
Mr. Feinberg pushed for the deal because he thought the package of retirement benefits and unvested stock Mr. Lewis takes with him when he steps down at year's end—currently worth at least $69.3 million, according to securities filings—was large enough, and possibly too big."
Monday, October 5, 2009
The Young and the Jobless
"The September teen unemployment rate hit 25.9%, the highest rate since World War II and up from 23.8% in July. Some 330,000 teen jobs have vanished in two months. Hardest hit of all: black male teens, whose unemployment rate shot up to a catastrophic 50.4%. It was merely a terrible 39.2% in July.
The biggest explanation is of course the bad economy. But it's precisely when the economy is down and businesses are slashing costs that raising the minimum wage is so destructive to job creation. Congress began raising the minimum wage from $5.15 an hour in July 2007, and there are now 691,000 fewer teens working.....
Economic data and Treasury security prices - WSJ Oct. 3, 2009
The following reports the effect of a disappointing employment report (increase in the unemployment rate, decrease in payroll employment) on the market for U.S. Treasury securities.
Coming Auctions Weigh On Treasury Prices
"Another strong week for Treasurys ended on the skids, as investors turned their attention from disappointing U.S. economic data to the $71 billion of auctions ahead.
The market registered no more than a temporary burst on Friday's poor jobs figures, having exhausted its ability to capitalize on conflicting economic data.
Heavy buying in long-dated Treasurys after the nonfarm payrolls report pushed yields, which move inversely to prices, down sharply. The 10-year note hit 3.10% and looked as if it might be headed for the year's April low.
Late Friday in New York, the 10-year note was down 10/32 point, or $3.125 for each $1,000 invested, at 103 10/32. Its yield rose to 3.230% from 3.194% late Thursday. The 30-year bond fell 1 2/32 points to yield 4.018%.
Saturday, September 26, 2009
Doubling Down on a Flawed Insurance Model - WSJ.com
"The mandates will lead to large increases in the cost of health insurance for everyone. Research studies have shown that as people become insured, especially under a health plan that offers broad coverage and low copayments, they consume more health-care services. The best estimates indicate that each newly insured person will approximately double his or her health spending.
With 30 million to 40 million newly insured persons under the administration's plan, aggregate health-care demand will increase significantly. But when demand expands prices increase. We estimate that the higher demand will increase health insurance premiums for the typical family plan by about 10%. Because an employer-sponsored family insurance plan cost $12,680 in 2008, this translates into an increase of about $1,200 in the typical annual premium.
The mandates will also have adverse additional longer-run consequences. According to provisions in both House and Senate bills, mandated plans must have low copayments and provide coverage of health-care services that is at least equal in scope to a typical, current employer-sponsored plan. But these are the very flaws that are responsible for high and rising health-care costs, flaws that stem directly from the misguided tax exclusion for and the extensive state regulation of health insurance. By locking in these flaws, the mandates will inhibit precisely the innovation needed to reform U.S. health care. Ultimately, as government seeks to rein in costs, it will curtail access to health-care services by erecting barriers between patient and health-care provider."
With 30 million to 40 million newly insured persons under the administration's plan, aggregate health-care demand will increase significantly. But when demand expands prices increase. We estimate that the higher demand will increase health insurance premiums for the typical family plan by about 10%. Because an employer-sponsored family insurance plan cost $12,680 in 2008, this translates into an increase of about $1,200 in the typical annual premium.
The mandates will also have adverse additional longer-run consequences. According to provisions in both House and Senate bills, mandated plans must have low copayments and provide coverage of health-care services that is at least equal in scope to a typical, current employer-sponsored plan. But these are the very flaws that are responsible for high and rising health-care costs, flaws that stem directly from the misguided tax exclusion for and the extensive state regulation of health insurance. By locking in these flaws, the mandates will inhibit precisely the innovation needed to reform U.S. health care. Ultimately, as government seeks to rein in costs, it will curtail access to health-care services by erecting barriers between patient and health-care provider."
Thursday, September 24, 2009
The Great Escape - Thomas Sowell
"Many of the issues of our times are hard to understand without understanding the vision of the world that they are part of. Whether the particular issue is education, economics or medical care, the preferred explanation tends to be an external explanation-- that is, something outside the control of the individuals directly involved...."
Tuesday, September 22, 2009
The Keynesians Were Wrong Again - WSJ.com
"From the beginning, our representatives in Washington have approached this economic downturn with old-fashioned, Keynesian economics. Keynesianism—named after the British economist John Maynard Keynes—is the theory that you fight an economic downturn by pumping money into the economy to 'encourage demand' and 'create jobs.' The result of our recent Keynesian stimulus bills? The longest recession since World War II—21 months and counting—with no clear end in sight. Borrowing close to a trillion dollars out of the private economy to increase government spending by close to a trillion dollars does nothing to increase incentives for investment and entrepreneurship...."
To Outfox the Chicken Tax, Ford Strips Its Own Vans - WSJ.com
"BALTIMORE -- Several times a month, Transit Connect vans from a Ford Motor Co. factory in Turkey roll off a ship here shiny and new, rear side windows gleaming, back seats firmly bolted to the floor.
Their first stop in America is a low-slung, brick warehouse where those same windows, never squeegeed at a gas station, and seats, never touched by human backsides, are promptly ripped out. The fabric is shredded, the steel parts are broken down, and everything is sent off along with the glass to be recycled.
Why all the fuss and feathers? Blame the 'chicken tax.'
The seats and windows are but dressing to help Ford navigate the wreckage of a 46-year-old trade spat. In the early 1960s, Europe put high tariffs on imported chicken, taking aim at rising U.S. sales to West Germany. President Johnson retaliated in 1963, in part by targeting German-made Volkswagens with a tax on imports of foreign-made trucks and commercial vans.
The 1960s went the way of love beads and sitar records, but the chicken tax never died. Europe still has a tariff on imports of U.S. chicken, and the U.S. still hits delivery vans imported from overseas with a 25% tariff. American companies have to pay, too, which puts Ford in the weird position of circumventing U.S. trade rules that for years have protected U.S. auto makers' market for trucks.
Their first stop in America is a low-slung, brick warehouse where those same windows, never squeegeed at a gas station, and seats, never touched by human backsides, are promptly ripped out. The fabric is shredded, the steel parts are broken down, and everything is sent off along with the glass to be recycled.
Why all the fuss and feathers? Blame the 'chicken tax.'
The seats and windows are but dressing to help Ford navigate the wreckage of a 46-year-old trade spat. In the early 1960s, Europe put high tariffs on imported chicken, taking aim at rising U.S. sales to West Germany. President Johnson retaliated in 1963, in part by targeting German-made Volkswagens with a tax on imports of foreign-made trucks and commercial vans.
The 1960s went the way of love beads and sitar records, but the chicken tax never died. Europe still has a tariff on imports of U.S. chicken, and the U.S. still hits delivery vans imported from overseas with a 25% tariff. American companies have to pay, too, which puts Ford in the weird position of circumventing U.S. trade rules that for years have protected U.S. auto makers' market for trucks.
The company's wiggle room comes from the process of defining a delivery van. Customs officials check a bunch of features to determine whether a vehicle's primary purpose might be to move people instead. Since cargo doesn't need seats with seat belts or to look out the window, those items are on the list. So Ford ships all its Transit Connects with both, calls them "wagons" instead of "commercial vans." Installing and removing unneeded seats and windows costs the company hundreds of dollars per van, but the import tax falls dramatically, to 2.5 percent, saving thousands.
Saturday, September 19, 2009
New Government Policy Imposes Strict Standards on Garage Sales Nationwide
"Americans who slap $1 pricetags on their used possessions at garage sales or bazaar events risk being slapped with fines of up to $15 million, thanks to a new government campaign."
Wednesday, September 16, 2009
Greenspan Sees Threat U.S. Congress Will Hamper Fed (Update2) - Bloomberg.com
"Sept. 16 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said he’s worried that lawmakers will hamper U.S. central bank efforts to rein in its monetary stimulus, and that inflation might “swamp” the bond market.
“It’s the politics in the United States that worries me, whether the Congress will basically feel comfortable” with the Fed withdrawing its stimulus, Greenspan said in a broadcast to Tokyo clients of Deutsche Bank Securities Inc. today. He later said that “if inflation rears its head, it will swamp long-term markets,” referring to bonds."
“It’s the politics in the United States that worries me, whether the Congress will basically feel comfortable” with the Fed withdrawing its stimulus, Greenspan said in a broadcast to Tokyo clients of Deutsche Bank Securities Inc. today. He later said that “if inflation rears its head, it will swamp long-term markets,” referring to bonds."
Saturday, September 5, 2009
A New Push to Play God from Washington - Thomas Sowell
"What we also should stop to think about is the mindset behind this legislation, which is very consistent with the mindset behind other policies of this administration, whether the particular issue is bailing out General Motors, telling banks who to lend to or appointing 'czars' to tell all sorts of people in many walks of life what they can and cannot do...."
"There are a whole array of Obama administration officials who take it as their job to pick winners and losers in the economy and tell companies how much they can and cannot pay their executives."
"There are a whole array of Obama administration officials who take it as their job to pick winners and losers in the economy and tell companies how much they can and cannot pay their executives."
The genius of America (according to Tocqueville) - WSJ.com
"The genius of America in the early nineteenth century, Tocqueville thought, was that it pursued 'productive industry' without a descent into lethal materialism. Behind America's balancing act, the pioneering French social thinker noted, lay a common set of civic virtues that celebrated not merely hard work but also thrift, integrity, self-reliance, and modesty—virtues that grew out of the pervasiveness of religion, which Tocqueville called 'the first of [America's] political institutions, . . . imparting morality' to American democracy and free markets. Some 75 years later, sociologist Max Weber dubbed the qualities that Tocqueville observed the 'Protestant ethic' and considered them the cornerstone of successful capitalism. Like Tocqueville, Weber saw that ethic most fully realized in America, where it pervaded the society. Preached by luminaries like Benjamin Franklin, taught in public schools, embodied in popular novels, repeated in self-improvement books, and transmitted to immigrants, that ethic undergirded and promoted America's economic success."
Deception is at the Heart of Dems' [Healthcare] Plans - Thomas Sowell
"Barack Obama fully understood the 'entering wedge' political strategy that has allowed so many government programs to start off small, and apparently innocuous-- and then grow to gigantic size and scope over the years."
Friday, September 4, 2009
The Airport for No One - WSJ.com
"If you hate the hubbub of crowded airports, you might want to consider flying out of Johnstown, Pa. The airport sees an average of fewer than 30 people per day, there is never a wait for security, you can park for free right outside the gate, and you are almost guaranteed a row to yourself on any flight.... In 20 years, [Congressman] Murtha has successfully doled out more than $150 million of federal payments to what is now being called the airport for no one."
Tuesday, September 1, 2009
What Happened to the ‘Depression’? - Allan Meltzer - WSJ.com
"The facts we face today are very different than the grim reality Americans confronted between 1929 and 1932. True, this recession is not over. But it would have to get improbably worse before it came close to the 42-month duration of the Great Depression, or the 25% unemployment rate in 1932. Then, the only safety net was the soup line.
The current recession is also much less severe than the 1937-38 Depression. A more accurate comparison is to the 1973-75 recession. Today's recession is as deep and most likely won't be much longer than the one we experienced some three decades ago. By pointing this out, I do not intend to minimize the damage that the economic crisis has had on individuals and businesses. But as policy makers make decisions in order to alleviate the recession, they are not helped when economists overstate its severity."
The current recession is also much less severe than the 1937-38 Depression. A more accurate comparison is to the 1973-75 recession. Today's recession is as deep and most likely won't be much longer than the one we experienced some three decades ago. By pointing this out, I do not intend to minimize the damage that the economic crisis has had on individuals and businesses. But as policy makers make decisions in order to alleviate the recession, they are not helped when economists overstate its severity."
Monday, August 31, 2009
Economists Are Split on Inflation - 8/31/09 WSJ.com
"Business economists are split on whether the Federal Reserve's massive infusion of credit into the economy will lead to inflation in the next couple of years.
Half of 266 members of the National Association for Business Economics surveyed in August said the Fed's decisions to increase the money supply won't lead to inflation in the next few years, the NABE said Monday. Some 41% disagreed, though, citing 'lagged effects of policies now in effect,' 'monetization of the debt' and 'ineffective exit strategy' as their primary concerns.
The economists overall said they expect inflation excluding food and energy to average 3% from 2014 to 2018. 'This may reflect their view that an excessively stimulative fiscal policy and a complicated exit from its quantitative easing policies over the medium term will result in the Fed tolerating a higher level of inflation than it desires,' the NABE report said. The Fed aims to keep inflation between 1.5% and 2%.
Recent debate over the Fed's strategy for reducing its large holdings of government bonds and mortgage-backed securities has centered on timing. If the Fed waits too long to bring the programs to a close, the economy runs the risk of inflation. But if it attempts to wind them down too soon, while the economy is still weak, it could hinder the recovery....
Half of 266 members of the National Association for Business Economics surveyed in August said the Fed's decisions to increase the money supply won't lead to inflation in the next few years, the NABE said Monday. Some 41% disagreed, though, citing 'lagged effects of policies now in effect,' 'monetization of the debt' and 'ineffective exit strategy' as their primary concerns.
The economists overall said they expect inflation excluding food and energy to average 3% from 2014 to 2018. 'This may reflect their view that an excessively stimulative fiscal policy and a complicated exit from its quantitative easing policies over the medium term will result in the Fed tolerating a higher level of inflation than it desires,' the NABE report said. The Fed aims to keep inflation between 1.5% and 2%.
Recent debate over the Fed's strategy for reducing its large holdings of government bonds and mortgage-backed securities has centered on timing. If the Fed waits too long to bring the programs to a close, the economy runs the risk of inflation. But if it attempts to wind them down too soon, while the economy is still weak, it could hinder the recovery....
Wednesday, August 26, 2009
Monday, August 24, 2009
Policy Makers Seek to Learn From 1937's Stalled Comeback - WSJ.com
"The Great Depression was W-shaped. The stock-market collapse led to a steep economic decline. But by 1933, the economy had rebounded. Then a series of monetary and fiscal blunders drove the country back into a deep recession at the end of 1937.
That episode is at the heart of the debate over how quickly the government and the U.S. Federal Reserve should unwind the emergency measures they have taken to fend off a Depression-like contraction."
Wednesday, August 19, 2009
Obama on Government-provided health care and the post office - Bloomberg.com
From Bloombergs:
"Impromptu Obamanomics is getting scarier by the day. For all the president’s touted intelligence, his un-teleprompted comments reveal a basic misunderstanding of capitalist principles.
For example, asked at the Portsmouth town hall how private insurance companies can compete with the government, the president said the following:
“If the private insurance companies are providing a good bargain, and if the public option has to be self-sustaining -- meaning taxpayers aren’t subsidizing it, but it has to run on charging premiums and providing good services and a good network of doctors, just like any other private insurer would do -- then I think private insurers should be able to compete.”
"Impromptu Obamanomics is getting scarier by the day. For all the president’s touted intelligence, his un-teleprompted comments reveal a basic misunderstanding of capitalist principles.
For example, asked at the Portsmouth town hall how private insurance companies can compete with the government, the president said the following:
“If the private insurance companies are providing a good bargain, and if the public option has to be self-sustaining -- meaning taxpayers aren’t subsidizing it, but it has to run on charging premiums and providing good services and a good network of doctors, just like any other private insurer would do -- then I think private insurers should be able to compete.”
... Government programs aren’t self-sustaining by definition. They’re subsidized by the taxpayer. If they were self-financed, we’d be off the hook.
Llewellyn Rockwell Jr., chairman of the Ludwig von Mises Institute in Auburn, Alabama ... put it this way in an Aug. 13 commentary on Mises.org:
“The only reason for a government service is precisely to provide financial support for an operation that is otherwise unsustainable, or else there would be no point in the government’s involvement at all....”
Tuesday, August 18, 2009
The Panel - WSJ.com
"The people behind the long table do not know what they've become. The drug of power has been sugared over in their mouths with a flavoring of righteousness. Someone has to make these decisions, they tell their friends at dinner parties. It's all very difficult for us. But you can see it in their eyes: It isn't really difficult at all. It feels good to them to be the ones who decide."
Monday, August 17, 2009
Households Start to Rival the Chinese in Treasury Market - WSJ.com
"China is center stage when it comes to fears that buyers will one day spurn U.S. Treasurys. The bond market has been the source of much political theater between the U.S. and China in recent months, with Chinese officials passing up few chances to lecture the U.S. on its profligacy.
But that has obscured an important change: The market for Treasury bonds is now more reliant on U.S. buyers -- including the Federal Reserve after its recent buying spree -- than the Chinese.
China held $801.5 billion in Treasury debt at the end of May. The Fed at that time held about $598 billion, although that has now risen to $704 billion. The latest figures for U.S. households, from the first quarter, showed holdings of $643.9 billion -- more than double the $266.6 billion in the fourth quarter of 2008."
But that has obscured an important change: The market for Treasury bonds is now more reliant on U.S. buyers -- including the Federal Reserve after its recent buying spree -- than the Chinese.
China held $801.5 billion in Treasury debt at the end of May. The Fed at that time held about $598 billion, although that has now risen to $704 billion. The latest figures for U.S. households, from the first quarter, showed holdings of $643.9 billion -- more than double the $266.6 billion in the fourth quarter of 2008."
Friday, August 14, 2009
YouTube - Reagan - A great 1964 speech!
YouTube - Reagan - A great 1964 speech!: "Reagan - A great 1964 speech!"
Thursday, August 13, 2009
Charles Murray: Tax Withholding and a Separate Payroll Tax Hide the True Burden of Government - WSJ.com
"Let's start with the rich, whom I define as families in the top 1% of income among those who filed tax returns. In 2007, the year with the most recent tax data, they had family incomes of $410,000 or more. They paid 40% of all the personal income taxes collected.
Yes, you read it right: 1% of American families paid 40% of America's personal taxes.
The families in the rest of the top 5% had family incomes of $160,000 to $410,000. They paid another 20% of total personal income taxes. Now we're up to three out of every five dollars in personal taxes paid by just five out of every 100 American families.
Turn to the bottom three-quarters of the families who filed income tax returns in 2007—not just low-income families, but everybody with family incomes below $66,500. That 75% of families paid just 13% of all personal income taxes. Scott Hodge of the Tax Foundation has recast these numbers in terms of a single, stunning statistic: The top 1% of American households pay more in federal taxes than the bottom 95% combined."
Yes, you read it right: 1% of American families paid 40% of America's personal taxes.
The families in the rest of the top 5% had family incomes of $160,000 to $410,000. They paid another 20% of total personal income taxes. Now we're up to three out of every five dollars in personal taxes paid by just five out of every 100 American families.
Turn to the bottom three-quarters of the families who filed income tax returns in 2007—not just low-income families, but everybody with family incomes below $66,500. That 75% of families paid just 13% of all personal income taxes. Scott Hodge of the Tax Foundation has recast these numbers in terms of a single, stunning statistic: The top 1% of American households pay more in federal taxes than the bottom 95% combined."
Wednesday, August 12, 2009
Lead Limits and Penalties Hurt Businesses - WSJ.com
"Jewelry makers now join the legions of other businesses on the hook for millions of dollars in lost sales, inventory or testing costs despite products that pose little to no risk of lead poisoning to children. In the spring, thrift-store operators like Goodwill and the Salvation Army predicted that without regulatory relief they would have to destroy more than $100 million of inventory. Toy stores expected some $600 million in playthings that would have to be trashed and another $2 billion in losses across the industry. Motorcycle and ATV makers predicted total losses and business disruptions around $1 billion. Children's clothing stores have suffered huge losses, with Gymboree losing 40% of its market value overnight after reporting losses related to the House's lead-paint panic."
Tuesday, August 11, 2009
Don’t Ruin Venture Capital Firms by Over-Regulation - WSJ.com
"The proposal now to tighten how venture firms operate suggests that we are in a stage of the regulatory cycle closer to the New Deal than to the entrepreneurial era that followed. Adding regulatory burdens would do nothing to help the investors in venture funds who are willing to take the big risks, knowing that about half of venture-backed companies fail. It would only increase the costs of doing business and make risk-takers more risk-averse.
No venture capital firm has asked to be bailed out, and none are too big to fail. As hard as it is for regulators to understand, the nature of venture capital is such that it should not even aspire to be a low-risk enterprise."
No venture capital firm has asked to be bailed out, and none are too big to fail. As hard as it is for regulators to understand, the nature of venture capital is such that it should not even aspire to be a low-risk enterprise."
Saturday, August 8, 2009
Data Mining Isn't Good Bet for Investors - WSJ.com
"Mr. Leinweber got so frustrated by 'irresponsible' data mining that he decided to satirize it. After casting about to find a statistic so absurd that no sensible person could possibly believe it could forecast U.S. stock prices, Mr. Leinweber settled on annual butter production in Bangladesh. Over an 13-year period, he found, this statistic 'explained' 75% of the variation in the annual returns of the Standard & Poor's 500-stock index.
By tossing in U.S. cheese production and the total population of sheep in both Bangladesh and the U.S., Mr. Leinweber was able to 'predict' past U.S. stock returns with 99% accuracy."
By tossing in U.S. cheese production and the total population of sheep in both Bangladesh and the U.S., Mr. Leinweber was able to 'predict' past U.S. stock returns with 99% accuracy."
'You Are Terrifying Us' - Peggy Noonan - WSJ
"The Democrats should not be attacking, they should be attempting to persuade, to argue for their case."
Friday, August 7, 2009
Cash-strapped Cuba says toilet paper running short
"HAVANA (Reuters) – Cuba, in the grip of a serious economic crisis, is running short of toilet paper and may not get sufficient supplies until the end of the year, officials with state-run companies said on Friday. Officials said they were lowering the prices of 24 basic goods to help Cubans get through the difficulties...."
Thursday, August 6, 2009
Utopia Versus Freedom - Thomas Sowell
"Back in the 18th century, Edmund Burke said, 'It is no inconsiderable part of wisdom, to know much of an evil ought to be tolerated' and 'I must bear with infirmities until they fester into crimes.'"
Tuesday, August 4, 2009
Buyers Brace for New Wave of Sales - Size of Treasury Auctions Last Week Took Many by Surprise - WSJ August 3, 2009
"After having to swallow a record $200 billion in new debt in just three days, the market for Treasurys is anxiously awaiting news this week on how much more is coming its way.
The Treasury Department is scheduled to issue a quarterly update Monday about its forthcoming borrowing needs. Wednesday, it will announce a series of auctions to be held next week, this time for three-year, 10-year and 30-year notes and bonds.
Few doubt the numbers will again be big, as the government seeks to finance a record budget deficit and to fund a continuing effort to stimulate the recession-bound economy.
The Treasury announcements are "going to set the tone for any new debt, to show how they are going to deal with the massive amount they still have to sell," said Jim Vogel, a strategist at FTN Financial.
Mr. Vogel said the large two-year, five-year and seven-year auctions "caught people off guard" last week.
Both the two-year and the five-year auction saw big declines in their bid-to-cover ratios and a drop in indirect bidders, which stoked fears that foreign central banks are losing interest in buying Treasurys. Such concerns could be heightened by the dollar, which dropped sharply Friday....
Saturday, August 1, 2009
GDP advance estimate, Q2 2009
"Highlights
The economy is coming closer to the end of recession based on the advance estimate for second quarter GDP. The economy contracted in the second quarter by only 1.0 percent, following a revised 6.4 percent drop in the first quarter. The second quarter was close to the market consensus for a 0.7 percent dip. Today's report contains historical benchmark revisions to GDP. The previous estimate for the first quarter decline was 5.5 percent.
Weakness in the current quarter was almost offset by component strength. Pulling down GDP in the latest quarter were business fixed investment, housing, personal consumption, and inventories. Strength was found in a sharp narrowing in the trade gap and a rebound in government spending."
The economy is coming closer to the end of recession based on the advance estimate for second quarter GDP. The economy contracted in the second quarter by only 1.0 percent, following a revised 6.4 percent drop in the first quarter. The second quarter was close to the market consensus for a 0.7 percent dip. Today's report contains historical benchmark revisions to GDP. The previous estimate for the first quarter decline was 5.5 percent.
Weakness in the current quarter was almost offset by component strength. Pulling down GDP in the latest quarter were business fixed investment, housing, personal consumption, and inventories. Strength was found in a sharp narrowing in the trade gap and a rebound in government spending."
The current recession (Dec. 2007 - ?)
This link is to the NBER's announcement of the current recession. Note the time lag: on December 1, 2008 the NBER is announcing that the economy went into recession in December 2007.
"The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months."
"The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months."
Recession and Business Cycle Dates
The official beginnng and ending dates for past recessions are shown at the link to the National Bureau of Economic Research's site. Wondering what a recession is? According to the NBER, the official arbiter of when recessions begin and end,
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion."
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion."
GDP Revisions: Deeper 2008-09 Contraction, Milder 2001 Recession - Real Time Economics - WSJ
"The update moves the current recession past the late-1950s downturn as the worst (in GDP terms) since the Great Depression. (Of course, the 2009 data could be revised next summer so you can’t say for sure.) The BEA now says inflation-adjusted GDP increased just 0.4% in 2008. Earlier estimates had put the growth at 1.1%. GDP is now shown dropping in last year’s first quarter (reported earlier as a gain), posting a smaller gain in the second quarter than shown earlier, a larger drop in the third quarter and a slightly-less-large tumble in the fourth quarter. From the fourth quarter of 2007 to fourth quarter of 2008, real GDP is shown dropping at a 1.9% annual rate compared with the earlier estimate of 0.8%."
Wednesday, July 29, 2009
Magician Politics - Thomas Sowell on Government Medical Care
"The government does not have some magic wand that can 'bring down the cost of health care.' It can buy a smaller quantity or lower quality of medical care, as other countries with government-run medical care do.
It can decide not to spend as much money on the elderly as is being spent now. That can save a lot of money-- if you think having a parent die earlier is a bargain."
It can decide not to spend as much money on the elderly as is being spent now. That can save a lot of money-- if you think having a parent die earlier is a bargain."
Tuesday, July 21, 2009
The Fed's Exit Strategy - Ben Bernanke
"My colleagues and I believe that accommodative policies will likely be warranted for an extended period. At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road. The Federal Open Market Committee, which is responsible for setting U.S. monetary policy, has devoted considerable time to issues relating to an exit strategy. We are confident we have the necessary tools to withdraw policy accommodation, when that becomes appropriate, in a smooth and timely manner...."
Monday, July 20, 2009
"Powerful GM" - John Stossel's Take
"GM has/had no armies with which it can invade other companies. It had no power for force anyone to work there. It couldn’t force anyone to buy GM cars.
Your average two-bit government bureaucrat has more 'power.' He can send people with guns to take your money (tax collection). He can lock you up, seize your property, tell you what you cannot do on your property, summon you to court, and so on. Government has the monopoly on power...."
Business, to survive, must be a supplicant: it must work hard to please its customers, constantly adapt to meet their changing tastes, beg them to even visit the showroom to consider a purchase. Business is good. There are a few cheaters—I made a career reporting on them—but they are exceptions. Overwhelmingly, business serves us very well." - John Stossel
Your average two-bit government bureaucrat has more 'power.' He can send people with guns to take your money (tax collection). He can lock you up, seize your property, tell you what you cannot do on your property, summon you to court, and so on. Government has the monopoly on power...."
Business, to survive, must be a supplicant: it must work hard to please its customers, constantly adapt to meet their changing tastes, beg them to even visit the showroom to consider a purchase. Business is good. There are a few cheaters—I made a career reporting on them—but they are exceptions. Overwhelmingly, business serves us very well." - John Stossel
Saturday, July 18, 2009
The Great Panic (up to July 18, 2009)
“We came very close in October to Depression 2.0.” Ben Bernanke, Chairman of the Federal Reserve
On the World Bank - WSJ.com
"By the late 1970s, I had concluded that, for all the good intentions and abilities of its staff, the [World] Bank was a fatally flawed institution. The most important source of its failures was its commitment to lending, almost regardless of what was happening in the country it was lending to. This was an inevitable flaw since the institution could hardly admit that what it could offer -- money -- would often make little difference."
The Lure of the Czars: It took the Romanovs almost 300 years to produce 18 czars. Obama did it in less than 100 days. - Reason Magazine
"The czar is a perfect techocratic role—appealing to Obama, who has been much praised for 'surrounding himself with smart people.' The appeal of the czar rests on the belief that if we could just figure out the right smart, competent, well-intentioned person to put charge, everything would go more smoothly. This is often true on a micro-level. Having someone in charge of a school field trip, or a division inside a large company is a good idea. But the bigger and more complex the problem, the less likely even the most impressive technocrat will be able to set things in order, especially since these czars lack the very thing that defined the Russian czars: total control over the lives of their subjects."
Friday, June 26, 2009
Obama's Health Future - WSJ.com
"'Look, the first thing for all of us to understand that is we actually have some -- some choices to make about how we want to deal with our own end-of-life care,' Mr. Obama replied. After discussing ways 'we as a culture and as a society [can start] to make better decisions within our own families and for ourselves,' he continued that in general 'at least we can let doctors know and your mom know that, you know what? Maybe this isn't going to help. Maybe you're better off not having the surgery, but taking the painkiller.'"
President Obama is certainly correct that choices have to be made about medical care. The key question is, "who's going to make those choices, and what will the options be?" Will private individuals be allowed to choose between private medical service providers who have to compete with each other for customers? Or, will we have a system in which someone in government decides which services will be provided, and for whom, and in which providers are essentially working for the government, rather than for the individual patient? How these questions are answered will significantly affect how much incentive providers have to provide patients with the care they want.
President Obama is certainly correct that choices have to be made about medical care. The key question is, "who's going to make those choices, and what will the options be?" Will private individuals be allowed to choose between private medical service providers who have to compete with each other for customers? Or, will we have a system in which someone in government decides which services will be provided, and for whom, and in which providers are essentially working for the government, rather than for the individual patient? How these questions are answered will significantly affect how much incentive providers have to provide patients with the care they want.
The Climate Change Climate Change - Kim Strassel - WSJ.com
"The number of skeptics, far from shrinking, is swelling. Oklahoma Sen. Jim Inhofe now counts more than 700 scientists who disagree with the U.N. -- 13 times the number who authored the U.N.'s 2007 climate summary for policymakers. Joanne Simpson, the world's first woman to receive a Ph.D. in meteorology, expressed relief upon her retirement last year that she was finally free to speak 'frankly' of her nonbelief. Dr. Kiminori Itoh, a Japanese environmental physical chemist who contributed to a U.N. climate report, dubs man-made warming 'the worst scientific scandal in history.' Norway's Ivar Giaever, Nobel Prize winner for physics, decries it as the 'new religion.' A group of 54 noted physicists, led by Princeton's Will Happer, is demanding the American Physical Society revise its position that the science is settled."
Wednesday, June 24, 2009
This Boomer Isn't Going to Apologize - Stephen Moore - WSJ.com
"How bad can the legacy of the baby boomers really be? Let's see: We're the generation that spawned Microsoft, Intel, Apple, Google, ATMs and Gatorade. We defeated the evils of communism and delivered the world from the brink of global thermonuclear war. Now youngsters are telling pollsters that they think socialism may be better than capitalism after all. Do they expect us to apologize for winning the Cold War next?"
Tuesday, June 23, 2009
Another "Good Thing" - Thomas Sowell
"No reason is given why one of these numbers is better than another. Apparently the implicit assumption is that education is a 'good thing' that it is always better to have more of. But, if that is the case, why 55 percent rather than 75 percent, 95 percent or 100 percent?
Even food is not a 'good thing' categorically, without limit. We can't live without it but, beyond some point, it causes obesity and shortens our lives."
Even food is not a 'good thing' categorically, without limit. We can't live without it but, beyond some point, it causes obesity and shortens our lives."
Tuesday, June 16, 2009
The Difference It Doesn't Make - Thomas Sowell
"Making a difference makes sense only if you are convinced that you have mastered the subject at hand to the point where any difference you might make would be for the better. Very few people have mastered anything that well beyond their own limited circle of knowledge."
Saturday, June 6, 2009
From Marxism to the Market - Thomas Sowell
Thomas Sowell was at one time a committed Marxist. Over the past 40 years his views have changed dramatically. What caused the change? In this article he explains why he went from being a Marxist to being an aggressive proponent of free market capitalism.
Friday, June 5, 2009
Cafe Hayek: Keynes on Inflation
"By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens." J.M. Keynes
Tuesday, June 2, 2009
The Justice Department's Antitrust Bomb - WSJ.com
"As if commandeering the banking, finance and auto industries weren't enough, a couple of weeks ago the Obama administration decided to throw a bomb at modern antitrust law."
Saturday, May 30, 2009
Perspective on the current recession
"The current recession is severe by any reasonable metric. But it still pales in comparison to the Great Depression." From Donald Marron's blog.
Friday, May 29, 2009
Look Who's a Believer Now - WSJ.com
"Those who later recanted their atheism began to doubt their doubts went on from this common start to begin to doubt their doubts. They gradually decided that their rationalistic method was too narrow: It could pick holes not only in Christianity but in any attempt to distinguish between right and wrong or to articulate the meaning of life. They came to realize that they could only tear down and thus were left intellectually with no habitable place to live."
Missing Milton: Who Will Speak For Free Markets? - WSJ.com
"Milton recalled traveling to an Asian country in the 1960s and visiting a worksite where a new canal was being built. He was shocked to see that, instead of modern tractors and earth movers, the workers had shovels. He asked why there were so few machines. The government bureaucrat explained: "You don't understand. This is a jobs program." To which Milton replied: "Oh, I thought you were trying to build a canal. If it's jobs you want, then you should give these workers spoons, not shovels." But in the energy industry today we are trading in shovels for spoons.
The 'Unseen' Deserve Empathy, Too - WSJ.com
"The rules of law are designed in part to strike the proper balance between the interests of those who are seen and those who are not seen. The purpose of the rules is to enable judges to resist the emotionally engaging temptation to relieve the plight of those they can see and empathize with, even when doing so would be unfair to those they cannot see."
Thursday, May 28, 2009
Wednesday, May 27, 2009
Exploding debt threatens America - John Taylor
"I believe the risk posed by this debt is systemic and could do more damage to the economy than the recent financial crisis."
Monday, May 25, 2009
Wednesday, May 20, 2009
Tuesday, May 19, 2009
Chrysler and the Rule of Law - WSJ.com
"By stepping over the bright line between the rule of law and the arbitrary behavior of men, President Obama may have created a thousand new failing businesses. That is, businesses that might have received financing before but that now will not, since lenders face the potential of future government confiscation."
Wednesday, May 13, 2009
Obama Should Listen to Leviticus: Don't Confuse Justice and Charity
"The core mistake of liberalism involves the confusion of charity and justice."
Tuesday, May 12, 2009
Talking Points - Thomas Sowell
"When we look back at history, it is amazing what foolish and even childish things people said and did on the eve of a catastrophe about to consume them."
Monday, May 11, 2009
'Empathy' Versus Law: Part II - Thomas Sowell
"Men should know the rules by which the game is played. Doubt as to the value of some of those rules is no sufficient reason why they should not be followed by the courts." - Supreme Court justice Oliver Wendell Holmes
Saturday, May 9, 2009
Monday, May 4, 2009
Saturday, May 2, 2009
Thursday, April 30, 2009
Monday, April 13, 2009
Thursday, April 9, 2009
Monday, April 6, 2009
SNL: Obama Press Conference (How decisions are made under socialism)
This Saturday Night Live skit is really funny and, unfortunately, painfully accurate about the direction the economy is headed.
Sunday, April 5, 2009
The Radicalization of Ben Bernanke - washingtonpost.com
"He is throwing trillions of dollars at the financial crisis. What happens if his gambles don't pay off?"
Saturday, April 4, 2009
Obama Wants to Control the Banks - WSJ
"Barack Obama Maintains Control Over Banks By Refusing to Accept Repayment of TARP Money"
Tuesday, March 31, 2009
A Rookie President - Thomas Sowell
"In the name of "change," Barack Obama is following policies so old that this generation has never heard of them...."
Saturday, March 28, 2009
Thursday, March 26, 2009
Tuesday, March 24, 2009
As It Starts Programs, Fed Weighs How to Stop Them - WSJ MARCH 23, 2009
Excerpts:
"The Federal Reserve, aiming to pull the U.S. out of its recession, is in the early stages of pumping money into the economy. But the central bank is increasingly being forced to confront what happens at the end stages, when it must unwind its programs as the economy recovers.
"The Fed last week announced it would pump up to $1.15 trillion more into the financial system by buying Treasury bonds and expanding its purchases of mortgage debt. But the huge injections of money into the economy, if left in place, threatens to spur a bout of inflation as spending picks up and unemployment falls.
"... While the government debt will be easy to unload when the time comes, it still could disrupt markets and push some borrowing costs back up more quickly.
"Ending the Fed purchases of Treasurys, when the economy is recovering, "could result in the mother of all bond bear markets," said Alan Ruskin, a strategist at RBS Greenwich Capital. The result "is another example where ameliorating the extent of the downturn is paid for with a weaker eventual recovery," he said.
"The central bank's other interventions, geared toward specific sectors, will prove more difficult to unwind. The Fed has committed to buying up to $1.25 trillion of mortgage-backed securities, enough to satisfy half the nation's home-loan demand this year. Selling that off, even years after an epic housing bust, would likely come against strong opposition from the real-estate industry, which wants low mortgage rates.
"Each of the portfolios will have its own constituencies -- in markets and governments across the country -- that could pressure the Fed not to pull back too quickly, or ever. With each of those programs, the Fed faces the risk of becoming more entangled with political authorities -- undermining its role in setting interest rates.
"The Federal Reserve, aiming to pull the U.S. out of its recession, is in the early stages of pumping money into the economy. But the central bank is increasingly being forced to confront what happens at the end stages, when it must unwind its programs as the economy recovers.
"The Fed last week announced it would pump up to $1.15 trillion more into the financial system by buying Treasury bonds and expanding its purchases of mortgage debt. But the huge injections of money into the economy, if left in place, threatens to spur a bout of inflation as spending picks up and unemployment falls.
"... While the government debt will be easy to unload when the time comes, it still could disrupt markets and push some borrowing costs back up more quickly.
"Ending the Fed purchases of Treasurys, when the economy is recovering, "could result in the mother of all bond bear markets," said Alan Ruskin, a strategist at RBS Greenwich Capital. The result "is another example where ameliorating the extent of the downturn is paid for with a weaker eventual recovery," he said.
"The central bank's other interventions, geared toward specific sectors, will prove more difficult to unwind. The Fed has committed to buying up to $1.25 trillion of mortgage-backed securities, enough to satisfy half the nation's home-loan demand this year. Selling that off, even years after an epic housing bust, would likely come against strong opposition from the real-estate industry, which wants low mortgage rates.
"Each of the portfolios will have its own constituencies -- in markets and governments across the country -- that could pressure the Fed not to pull back too quickly, or ever. With each of those programs, the Fed faces the risk of becoming more entangled with political authorities -- undermining its role in setting interest rates.
Sunday, March 22, 2009
Now Is No Time to Give Up on Markets - WSJ.com
"When the market economy is compared to alternatives, nothing is better at raising productivity, reducing poverty, improving health and integrating the people of the world."
Friday, March 20, 2009
Fed's Gamble: Buying Long Bonds - WSJ.com
"The Federal Reserve's controversial decision to buy long-term Treasury securities is a step Chairman Ben Bernanke has been contemplating for much of this decade in thinking about how to prevent a return of deflation and depression.
He hopes Wednesday's move will push down long-term borrowing rates benchmarked to Treasury bonds, from car loans to mortgage debt to corporate bonds. But it could backfire and fuel fears that the Fed, by using its power to print money to help the government finance soaring budget deficits, is kindling inflation. Those fears could, paradoxically, send Treasury yields higher.
[Fed's Gamble: Buying Long Bonds]
The market's initial reaction was mostly positive. Treasury yields dropped sharply, as previous research conducted by Mr. Bernanke suggested would happen."
He hopes Wednesday's move will push down long-term borrowing rates benchmarked to Treasury bonds, from car loans to mortgage debt to corporate bonds. But it could backfire and fuel fears that the Fed, by using its power to print money to help the government finance soaring budget deficits, is kindling inflation. Those fears could, paradoxically, send Treasury yields higher.
[Fed's Gamble: Buying Long Bonds]
The market's initial reaction was mostly positive. Treasury yields dropped sharply, as previous research conducted by Mr. Bernanke suggested would happen."
Thursday, March 19, 2009
Wednesday, March 18, 2009
Britain apologises for 'Third World' hospital
"We saw patients drinking out of flower vases they were so thirsty."
The current administration plans to revolutionize health care in the U.S. by having government play a bigger role. In Britain health care is provided by the government. This article gives you an indication of the consequences that have resulted from an increased government role.
The current administration plans to revolutionize health care in the U.S. by having government play a bigger role. In Britain health care is provided by the government. This article gives you an indication of the consequences that have resulted from an increased government role.
Saturday, March 14, 2009
Treasury's new plan to solve the financial crisis ( as announced on Saturday Night Live)
Unfortunately, I'm afraid this is pretty accurate.
U.S. Insists China Fears Over Debt Unfounded - WSJ.com
We talked in class about the effects of the dramatic increase in the national debt that will result from the government's efforts to "stimulate" the economy. Our biggest creditor, China, is concerned about this as well.
Thursday, March 12, 2009
The Obama Rosetta Stone
"The economy as most people understand it was a second-order concern of the stimulus strategy. The primary goal is a massive re-flowing of "wealth" from the top toward the bottom, to stop the moral failure they see in the budget's "Top One Percent of Earners" chart."
Wednesday, March 11, 2009
The Fed Didn't Cause the Housing Bubble - Alan Greenspan
"Any new regulations should help direct savings toward productive investments."
Saturday, March 7, 2009
U-6: An alternative measure of unemployment
We saw in lecture that the unemployment rate counts only workers who are without a job and are actively looking for work. The government also calculates several alternative measures of how the labor market is doing.
One of the more interesting measures is called U-6. U-6 is "total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers."
Marginally attached workers are "persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule."
For more information see the BLS site.
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