Saturday, October 30, 2010
Tuesday, October 26, 2010
TIPS: Understanding Negative Yields - MarketBeat - WSJ
EXCERPTS:
"We all know interest rates are low, but this is ridiculous.
The Treasury Department had no problem whatsoever selling $10 billion in five-year Treasury Inflation-Protected Securities today at a yield of -0.55%. That’s not a typo: the TIPS bonds sold with a negative yield. First time that’s ever happened.
This suggests investors are so terrified of inflation that they’re willing to pay the government money every year to buy insurance against it.
As with everything in the Treasury market, it’s a little more complicated than that. The negative yield owes partly to the fact that plain-vanilla five-year Treasurys yield just 1.16%, which is barely higher than consumer price inflation for the past year.
The spread between the regular Treasury yield and the negative TIPS yield gets you what investors expect inflation to be in the next five years, and that’s a not-horrifying 1.68%.
Still, yields in both TIPS and Treasurys are low partly because the Federal Reserve is expected to buy a truckload of both as part of its drive to fend of deflation. Investors have front-run the Fed, driving bond prices higher and yields lower, some through the looking glass into negative territory.
If negative TIPS yields represent tremors of inflation anxiety, then the Fed is probably thrilled: Inflation expectations make deflation less likely. But those on deflation watch, including some Fed policy makers, say inflation-adjusted yields on longer-dated bonds are still fairly high given the weakness in the economy. QE2 is still coming, possibly meaning more negative TIPS yields.
"We all know interest rates are low, but this is ridiculous.
The Treasury Department had no problem whatsoever selling $10 billion in five-year Treasury Inflation-Protected Securities today at a yield of -0.55%. That’s not a typo: the TIPS bonds sold with a negative yield. First time that’s ever happened.
This suggests investors are so terrified of inflation that they’re willing to pay the government money every year to buy insurance against it.
As with everything in the Treasury market, it’s a little more complicated than that. The negative yield owes partly to the fact that plain-vanilla five-year Treasurys yield just 1.16%, which is barely higher than consumer price inflation for the past year.
The spread between the regular Treasury yield and the negative TIPS yield gets you what investors expect inflation to be in the next five years, and that’s a not-horrifying 1.68%.
Still, yields in both TIPS and Treasurys are low partly because the Federal Reserve is expected to buy a truckload of both as part of its drive to fend of deflation. Investors have front-run the Fed, driving bond prices higher and yields lower, some through the looking glass into negative territory.
If negative TIPS yields represent tremors of inflation anxiety, then the Fed is probably thrilled: Inflation expectations make deflation less likely. But those on deflation watch, including some Fed policy makers, say inflation-adjusted yields on longer-dated bonds are still fairly high given the weakness in the economy. QE2 is still coming, possibly meaning more negative TIPS yields.
Bernanke Asset Purchases Risk Unleashing 1970s Inflation Genie - Bloomberg
EXCERPTS:
"For the second time since he became chairman in 2006, Ben S. Bernanke is leading the Federal Reserve into uncharted monetary territory.
Bernanke next week is likely to preside over a decision to launch another round of large-scale asset purchases after deploying $1.7 trillion to pull the economy out of the financial crisis, comments from policy makers over the past week indicate. This time, with interest rates already near zero, the Fed will be aiming to increase the rate of inflation and reduce the cost of borrowing in real terms. The goal is to unlock consumer spending and jump-start an economy that’s growing too slowly to push unemployment lower.
Estimates for the ultimate size of the asset-purchase program range from $1 trillion at Bank of America-Merrill Lynch Global Research to $2 trillion at Goldman Sachs Group Inc., with economists at both firms agreeing the Fed will likely start by announcing $500 billion after the Nov. 2-3 meeting. The danger is that once the Fed kindles price increases, inflation will be difficult to control.
“By reducing real interest rates and trying to break the psychology of ‘Why spend today when I can buy goods cheaper tomorrow,’ they are hoping to drive growth that would be more commensurate with a pickup in employment,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York. “The risk is a late 1970s type of scenario where the inflation genie gets out of the bottle.”
The U.S. Treasury Department yesterday sold $10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a U.S. debt auction as investors bet the Fed will be successful in sparking inflation. The securities drew a yield of negative 0.55 percent.
QUESTIONS:
1. How can the yield on a security be negative?
2. What is it about the current economic environment that is causing this yield to be negative right now?
"For the second time since he became chairman in 2006, Ben S. Bernanke is leading the Federal Reserve into uncharted monetary territory.
Bernanke next week is likely to preside over a decision to launch another round of large-scale asset purchases after deploying $1.7 trillion to pull the economy out of the financial crisis, comments from policy makers over the past week indicate. This time, with interest rates already near zero, the Fed will be aiming to increase the rate of inflation and reduce the cost of borrowing in real terms. The goal is to unlock consumer spending and jump-start an economy that’s growing too slowly to push unemployment lower.
Estimates for the ultimate size of the asset-purchase program range from $1 trillion at Bank of America-Merrill Lynch Global Research to $2 trillion at Goldman Sachs Group Inc., with economists at both firms agreeing the Fed will likely start by announcing $500 billion after the Nov. 2-3 meeting. The danger is that once the Fed kindles price increases, inflation will be difficult to control.
“By reducing real interest rates and trying to break the psychology of ‘Why spend today when I can buy goods cheaper tomorrow,’ they are hoping to drive growth that would be more commensurate with a pickup in employment,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York. “The risk is a late 1970s type of scenario where the inflation genie gets out of the bottle.”
The U.S. Treasury Department yesterday sold $10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a U.S. debt auction as investors bet the Fed will be successful in sparking inflation. The securities drew a yield of negative 0.55 percent.
QUESTIONS:
1. How can the yield on a security be negative?
2. What is it about the current economic environment that is causing this yield to be negative right now?
Sunday, October 24, 2010
Saturday, October 23, 2010
Explaining Income Inequality
EXCERPTS:
"The highest-income quintile has four times more people working per household than the lowest quintile (2.08 earners vs. 0.48), and individuals in those households are far more likely to be well-educated, married and working full-time in their prime earning years. In contrast, those individuals with low incomes are far more likely to be less-educated and working part-time, and either very young or very old living in single-parent households. Given these significant differences in household characteristics, it's not too surprising that there are huge differences in incomes among American households. It's also very likely that those individuals in the highest quintile were once in the lower quintiles before they acquired job experience and education, and they'll likely be in a lower quintile again when they retire.
Understanding the factors explaining income inequality would also help explain why income inequality changes over time. For example, compared to previous years, in 2009 there were both: a) more single-parent households, and b) more married, dual-earner households, following trends going back to the 1960s, and both of those trends would explain rising income inequality over time.
"The highest-income quintile has four times more people working per household than the lowest quintile (2.08 earners vs. 0.48), and individuals in those households are far more likely to be well-educated, married and working full-time in their prime earning years. In contrast, those individuals with low incomes are far more likely to be less-educated and working part-time, and either very young or very old living in single-parent households. Given these significant differences in household characteristics, it's not too surprising that there are huge differences in incomes among American households. It's also very likely that those individuals in the highest quintile were once in the lower quintiles before they acquired job experience and education, and they'll likely be in a lower quintile again when they retire.
Understanding the factors explaining income inequality would also help explain why income inequality changes over time. For example, compared to previous years, in 2009 there were both: a) more single-parent households, and b) more married, dual-earner households, following trends going back to the 1960s, and both of those trends would explain rising income inequality over time.
China Bashing is for Losers - Shikha Dalmia - Uncommon Sense - Forbes
EXCERPTS:
"The idea that selling abroad creates jobs at home and buying abroad destroys jobs at home is an old mercantilist fallacy that Adam Smith handily refuted more than 200 years ago. Back then it at least had intuitive plausibility, but today it is obviously false given that the manufacturing chain spans the whole globe. Indeed, under the intricate global division of labor that currently exists, the whole idea of “Made in China” is largely a bureaucratic fiction.
Think about the IPod, for instance. It is designed in America and its 451 parts are made in dozens of different countries. But just because it is finally assembled in China, it officially counts as a Chinese import and therefore a contributor to America’s trade deficit — never mind that the Chinese add only $4 to the IPod’s $150 final value. Imposing duties on IPods to slash the deficit, then, won’t just cost Chinese jobs in Beijing assembly plants, but American jobs in Cupertino (Apple’s headquarters) computer labs.
"The idea that selling abroad creates jobs at home and buying abroad destroys jobs at home is an old mercantilist fallacy that Adam Smith handily refuted more than 200 years ago. Back then it at least had intuitive plausibility, but today it is obviously false given that the manufacturing chain spans the whole globe. Indeed, under the intricate global division of labor that currently exists, the whole idea of “Made in China” is largely a bureaucratic fiction.
Think about the IPod, for instance. It is designed in America and its 451 parts are made in dozens of different countries. But just because it is finally assembled in China, it officially counts as a Chinese import and therefore a contributor to America’s trade deficit — never mind that the Chinese add only $4 to the IPod’s $150 final value. Imposing duties on IPods to slash the deficit, then, won’t just cost Chinese jobs in Beijing assembly plants, but American jobs in Cupertino (Apple’s headquarters) computer labs.
Fools Rush In Where Europe Rushes Out - Jonah Goldberg
EXCERPTS:
"As of this writing, France is paralyzed. By the time you read this, it might be in flames.
In Britain, where politics is more polite but the problems are perhaps just as dire, the government is proposing budget cuts on a scale not seen for nearly a century.
In Greece, well, the less said about Greece the better.
All of these countries--and many more--are going through painful retrenchments because they spent too much money, made too many promises, and expected too little from their citizens. The era of European austerity is upon us, because the Europeans--or at least those in charge--understand the mess they've made of their economies.
This should present a real problem for Barack Obama and the vast (though shrinking) chorus of experts, editorialists, and activists who support his agenda. In broad terms, all of the policies Obama and the Democrats have pushed are the sorts of policies the British, the French, and other Europeans had for years, even decades.
As far as I am aware, no one has asked President Obama a simple question: If your philosophy is so great, how come the countries that have embraced it for generations are so much poorer than we are?
Nor have they asked: If guaranteed health care for everyone will make us so much more "competitive," how come we've been doing so much better than our "competitors" who already have socialized medicine, high tax rates, and lavish pensions?
Nor has the president been queried about the incongruity of saying his policies have laid a "new foundation" for economic growth and job creation when the countries he's trying to emulate are trying to dismantle the very same foundations in order to survive.
***
What's irrational about saying that we shouldn't be rushing into a condemned building everyone else in the developed world is rushing out of?
"As of this writing, France is paralyzed. By the time you read this, it might be in flames.
In Britain, where politics is more polite but the problems are perhaps just as dire, the government is proposing budget cuts on a scale not seen for nearly a century.
In Greece, well, the less said about Greece the better.
All of these countries--and many more--are going through painful retrenchments because they spent too much money, made too many promises, and expected too little from their citizens. The era of European austerity is upon us, because the Europeans--or at least those in charge--understand the mess they've made of their economies.
This should present a real problem for Barack Obama and the vast (though shrinking) chorus of experts, editorialists, and activists who support his agenda. In broad terms, all of the policies Obama and the Democrats have pushed are the sorts of policies the British, the French, and other Europeans had for years, even decades.
As far as I am aware, no one has asked President Obama a simple question: If your philosophy is so great, how come the countries that have embraced it for generations are so much poorer than we are?
Nor have they asked: If guaranteed health care for everyone will make us so much more "competitive," how come we've been doing so much better than our "competitors" who already have socialized medicine, high tax rates, and lavish pensions?
Nor has the president been queried about the incongruity of saying his policies have laid a "new foundation" for economic growth and job creation when the countries he's trying to emulate are trying to dismantle the very same foundations in order to survive.
***
What's irrational about saying that we shouldn't be rushing into a condemned building everyone else in the developed world is rushing out of?
Saturday, October 16, 2010
Unemployment, Marriage, and the 2010 Economics Nobel | Acton Institute
EXCERPTS:
"In some markets -- where information is low-cost and individual buyers and sellers are not particularly unique -- parties can quickly find each other and engage in mutually-beneficial exchanges. Any buyer is happy to trade with any seller as long as the price seems reasonable to each.
But in other markets the fit matters more. And, as Diamond’s early work in the 1970s suggested, sometimes fit matters a lot. An extreme example is the “market” for spouses. Because marriage is a lifelong joint endeavor, men and women search extensively for partners with whom their eventual marital union may fully flourish as God intends.
And because searching for just the right person takes time, effort, and perhaps many first dates, plenty of eligible men and women remain single at any given moment. Web sites like match.com and eHarmony are popular with singles because those sites help reduce search costs by improving the amount of information available to singles about potential mates.
Diamond, Mortensen, and Pissarides [the recipients of this year's Nobel Prize for Economics] have studied extensively markets with such search costs. When both buyers and sellers are unique, it requires considerable searching for each to find just the right fit. Even in a well-functioning housing market with plenty of available homes, buyers may struggle to find homes they like. So the buyers keep looking.
All three recipients of this year’s prize have carefully extended Diamond’s work to better understand why we may observe persistent unemployment in the labor market even when there are plenty of job openings available, and with interesting policy implications -- especially for unemployment insurance programs. Their work shows that more generous unemployment insurance programs will unambiguously lead to longer average unemployment spells: a result with very strong empirical support.
There are two ways to interpret this policy conclusion, and neither is incorrect. On one hand, quite generous welfare benefits may -- at the margin -- backfire in the sense that they make finding employment less urgent than it would be otherwise, resulting in less search effort by job seekers. This interpretation provided part of the motivation behind the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (the “welfare reform” bill), which shortened the amount of time individuals may receive welfare payments without working. The bill made unemployment look less attractive.
But on the other hand, meaningful work is a gift. God desires that men and women -- the only creatures that He made in his image -- imitate him through their creative work. Work is our collaboration with God’s creative purposes. Reformers such as John Calvin and Martin Luther stressed the idea, gleaned from Scripture, that every believer is called by God to certain work -- a vocation -- and has a duty to respond to that call. And John Paul II, in his letter on human labor, observed that work is “one of the fundamental dimensions of [a person’s] earthly existence and of his vocation.”
Thus while low unemployment is an important goal, we should not be too quick to put policies in place that force unemployed persons to settle too quickly for jobs that are not a good match. Doing so would deny people the opportunity to pursue their unique callings -- ones in which each person can exercise stewardship to the glory of the Creator.
"In some markets -- where information is low-cost and individual buyers and sellers are not particularly unique -- parties can quickly find each other and engage in mutually-beneficial exchanges. Any buyer is happy to trade with any seller as long as the price seems reasonable to each.
But in other markets the fit matters more. And, as Diamond’s early work in the 1970s suggested, sometimes fit matters a lot. An extreme example is the “market” for spouses. Because marriage is a lifelong joint endeavor, men and women search extensively for partners with whom their eventual marital union may fully flourish as God intends.
And because searching for just the right person takes time, effort, and perhaps many first dates, plenty of eligible men and women remain single at any given moment. Web sites like match.com and eHarmony are popular with singles because those sites help reduce search costs by improving the amount of information available to singles about potential mates.
Diamond, Mortensen, and Pissarides [the recipients of this year's Nobel Prize for Economics] have studied extensively markets with such search costs. When both buyers and sellers are unique, it requires considerable searching for each to find just the right fit. Even in a well-functioning housing market with plenty of available homes, buyers may struggle to find homes they like. So the buyers keep looking.
All three recipients of this year’s prize have carefully extended Diamond’s work to better understand why we may observe persistent unemployment in the labor market even when there are plenty of job openings available, and with interesting policy implications -- especially for unemployment insurance programs. Their work shows that more generous unemployment insurance programs will unambiguously lead to longer average unemployment spells: a result with very strong empirical support.
There are two ways to interpret this policy conclusion, and neither is incorrect. On one hand, quite generous welfare benefits may -- at the margin -- backfire in the sense that they make finding employment less urgent than it would be otherwise, resulting in less search effort by job seekers. This interpretation provided part of the motivation behind the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (the “welfare reform” bill), which shortened the amount of time individuals may receive welfare payments without working. The bill made unemployment look less attractive.
But on the other hand, meaningful work is a gift. God desires that men and women -- the only creatures that He made in his image -- imitate him through their creative work. Work is our collaboration with God’s creative purposes. Reformers such as John Calvin and Martin Luther stressed the idea, gleaned from Scripture, that every believer is called by God to certain work -- a vocation -- and has a duty to respond to that call. And John Paul II, in his letter on human labor, observed that work is “one of the fundamental dimensions of [a person’s] earthly existence and of his vocation.”
Thus while low unemployment is an important goal, we should not be too quick to put policies in place that force unemployed persons to settle too quickly for jobs that are not a good match. Doing so would deny people the opportunity to pursue their unique callings -- ones in which each person can exercise stewardship to the glory of the Creator.
Wednesday, October 13, 2010
The Education of President Obama - NYTimes.com
EXCERPTS:
"During our hour together, Obama told me he had no regrets about the broad direction of his presidency. But he did identify what he called “tactical lessons.” He let himself look too much like “the same old tax-and-spend liberal Democrat.” He realized too late that “there’s no such thing as shovel-ready projects” when it comes to public works.
Remember this when we talk about the transmission lag in chapter 10 on fiscal policy.
"During our hour together, Obama told me he had no regrets about the broad direction of his presidency. But he did identify what he called “tactical lessons.” He let himself look too much like “the same old tax-and-spend liberal Democrat.” He realized too late that “there’s no such thing as shovel-ready projects” when it comes to public works.
COMMENT:
Remember this when we talk about the transmission lag in chapter 10 on fiscal policy.
Friday, October 8, 2010
$1,300 Price of Gold - All-time High?
EXCERPTS:
"After adjusting for inflation, today’s price is nowhere near the all-time high of January 1980. Back then, gold hit $850, or well over $2,000 in today’s dollars. But January 1980 was arguably a “freak peak” during a period of heightened geo-political instability. At $1,300, today’s price is probably more than double very long-term, inflation-adjusted, average gold prices. So what could justify another huge increase in gold prices from here?
One answer, of course, is a complete collapse of the US dollar. With soaring deficits, and a rudderless fiscal policy, one does wonder whether a populist administration might recklessly turn to the printing press. And if you are really worried about that, gold might indeed be the most reliable hedge.
Sure, some might argue that inflation-indexed bonds offer a better and more direct inflation hedge than gold. But gold bugs are right to worry about whether the government will honor its commitments under more extreme circumstances. In fact, as Carmen Reinhart and I discuss in our recent book on the history of financial crises, This Time is Different, cash-strapped governments will often forcibly convert indexed debt to non-indexed debt, precisely so that its value might be inflated away. Even the United States abrogated indexation clauses in bond contracts during the Great Depression of the 1930’s. So it can happen anywhere.
"After adjusting for inflation, today’s price is nowhere near the all-time high of January 1980. Back then, gold hit $850, or well over $2,000 in today’s dollars. But January 1980 was arguably a “freak peak” during a period of heightened geo-political instability. At $1,300, today’s price is probably more than double very long-term, inflation-adjusted, average gold prices. So what could justify another huge increase in gold prices from here?
One answer, of course, is a complete collapse of the US dollar. With soaring deficits, and a rudderless fiscal policy, one does wonder whether a populist administration might recklessly turn to the printing press. And if you are really worried about that, gold might indeed be the most reliable hedge.
Sure, some might argue that inflation-indexed bonds offer a better and more direct inflation hedge than gold. But gold bugs are right to worry about whether the government will honor its commitments under more extreme circumstances. In fact, as Carmen Reinhart and I discuss in our recent book on the history of financial crises, This Time is Different, cash-strapped governments will often forcibly convert indexed debt to non-indexed debt, precisely so that its value might be inflated away. Even the United States abrogated indexation clauses in bond contracts during the Great Depression of the 1930’s. So it can happen anywhere.
Thursday, October 7, 2010
Fed Officials Mull Inflation as a Fix - WSJ.com
EXCERPTS:
"The Federal Reserve spent the past three decades getting inflation low and keeping it there. But as the U.S. economy struggles and flirts with the prospect of deflation, some central bank officials are publicly broaching a controversial idea: lifting inflation above the Fed's informal target.
The rationale is that getting inflation up even temporarily would push 'real' interest rates—nominal rates minus inflation—down, encouraging consumers and businesses to save less and to spend or invest more.
Both inside and outside the Fed, though, such an approach is controversial. It could undermine the anti-inflation credibility the Fed won three decades ago by raising interest rates to double-digits to beat back late-1970s price surges. "It's a big mistake," said Allan Meltzer of Carnegie Mellon University, a central bank historian. "Higher inflation is not going to solve our problem. Any gain from that experience would be temporary," adding that the economy would suffer later.
Others warn that pushing inflation higher than the target could create public confusion and risk fueling financial bubbles and market instability. They say Fed policy already is weakening the dollar and as a result prompting a gold and commodity boom. "The Fed is treading upon a mine-laden path that has never been tip-toed through in this country," said Andrew Busch, a currency strategist at BMO Capital Markets.
QUESTION:
If the Fed decides to pursue a policy that will cause more inflation, and people start to expect higher inflation, what effect is this likely to have on nominal interest rates?
"The Federal Reserve spent the past three decades getting inflation low and keeping it there. But as the U.S. economy struggles and flirts with the prospect of deflation, some central bank officials are publicly broaching a controversial idea: lifting inflation above the Fed's informal target.
The rationale is that getting inflation up even temporarily would push 'real' interest rates—nominal rates minus inflation—down, encouraging consumers and businesses to save less and to spend or invest more.
Both inside and outside the Fed, though, such an approach is controversial. It could undermine the anti-inflation credibility the Fed won three decades ago by raising interest rates to double-digits to beat back late-1970s price surges. "It's a big mistake," said Allan Meltzer of Carnegie Mellon University, a central bank historian. "Higher inflation is not going to solve our problem. Any gain from that experience would be temporary," adding that the economy would suffer later.
Others warn that pushing inflation higher than the target could create public confusion and risk fueling financial bubbles and market instability. They say Fed policy already is weakening the dollar and as a result prompting a gold and commodity boom. "The Fed is treading upon a mine-laden path that has never been tip-toed through in this country," said Andrew Busch, a currency strategist at BMO Capital Markets.
QUESTION:
If the Fed decides to pursue a policy that will cause more inflation, and people start to expect higher inflation, what effect is this likely to have on nominal interest rates?
McDonald's, 29 other firms get health care coverage waivers - USATODAY.com
EXCERPTS:
"Nearly a million workers won't get a consumer protection in the U.S. health reform law meant to cap insurance costs because the government exempted their employers.
Thirty companies and organizations, including McDonald's (MCD) and Jack in the Box (JACK), won't be required to raise the minimum annual benefit included in low-cost health plans, which are often used to cover part-time or low-wage employees.
The Department of Health and Human Services, which provided a list of exemptions, said it granted waivers in late September so workers with such plans wouldn't lose coverage from employers who might choose instead to drop health insurance altogether.
Without waivers, companies would have had to provide a minimum of $750,000 in coverage next year, increasing to $1.25 million in 2012, $2 million in 2013 and unlimited in 2014.
"The big political issue here is the president promised no one would lose the coverage they've got," says Robert Laszewski, chief executive officer of consulting company Health Policy and Strategy Associates. "Here we are a month before the election, and these companies represent 1 million people who would lose the coverage they've got."
COMMENT:
Note that the health reform law that almost caused these workers to lose their health insurance was not repealed. These 30 companies have been granted a waiver, but other employers are still required to comply. Someone who works for an employer in a similar situation, but who isn't able to persuade the government to grant them an waiver, has a problem.
"Nearly a million workers won't get a consumer protection in the U.S. health reform law meant to cap insurance costs because the government exempted their employers.
Thirty companies and organizations, including McDonald's (MCD) and Jack in the Box (JACK), won't be required to raise the minimum annual benefit included in low-cost health plans, which are often used to cover part-time or low-wage employees.
The Department of Health and Human Services, which provided a list of exemptions, said it granted waivers in late September so workers with such plans wouldn't lose coverage from employers who might choose instead to drop health insurance altogether.
Without waivers, companies would have had to provide a minimum of $750,000 in coverage next year, increasing to $1.25 million in 2012, $2 million in 2013 and unlimited in 2014.
"The big political issue here is the president promised no one would lose the coverage they've got," says Robert Laszewski, chief executive officer of consulting company Health Policy and Strategy Associates. "Here we are a month before the election, and these companies represent 1 million people who would lose the coverage they've got."
COMMENT:
Note that the health reform law that almost caused these workers to lose their health insurance was not repealed. These 30 companies have been granted a waiver, but other employers are still required to comply. Someone who works for an employer in a similar situation, but who isn't able to persuade the government to grant them an waiver, has a problem.
Wednesday, October 6, 2010
Interview with Laurence Meyer (former Fed Governor) on the causes of the financial crisis
Good overview of the financial crisis.
Congress Can't Repeal Economics by John Stossel on Creators.com - A Syndicate Of Talent
EXCERPTS:
"It's raining! I don't like it! Why hasn't Congress passed the Good Weather Act and the Everybody Happy Act?
Sound dumb?
Why is it any dumber than a law called the Patient Protection and Affordable Care Act, which promised to cover more for less money?
When Obamacare was debated, we free-market advocates insisted that no matter what the president promised, the laws of economics cannot be repealed. Our opponents in effect answered, "Yes, we can."
Well, Obamacare has barely started taking effect, and the evidence is already rolling in. I hate to say we told them so, but ... we told them so. The laws of economics have struck back.
Health insurers Wellpoint, Cigna, Aetna, Humana and CoventryOne will stop writing policies for all children. Why? Because Obamacare requires that they insure already sick children for the same price as well children.
That sounds compassionate, but — in case Obamacare fanatics haven't noticed — sick children need more medical care. Insurance is about risk, and already sick children are 100 percent certain to be sick when their coverage begins. So if the government mandates that insurance companies cover sick children at the lower well-children price, insurers will quit the market rather than sandbag their shareholders. This is not callousness — it's fiduciary responsibility. Insurance companies are not charities. So, thanks to the compassionate Congress and president, parents of sick children will be saved from expensive insurance — by being unable to obtain any insurance! That's how government compassion works.
In 2014, the same rule will kick in for adults. You now know what to expect.
"It's raining! I don't like it! Why hasn't Congress passed the Good Weather Act and the Everybody Happy Act?
Sound dumb?
Why is it any dumber than a law called the Patient Protection and Affordable Care Act, which promised to cover more for less money?
When Obamacare was debated, we free-market advocates insisted that no matter what the president promised, the laws of economics cannot be repealed. Our opponents in effect answered, "Yes, we can."
Well, Obamacare has barely started taking effect, and the evidence is already rolling in. I hate to say we told them so, but ... we told them so. The laws of economics have struck back.
Health insurers Wellpoint, Cigna, Aetna, Humana and CoventryOne will stop writing policies for all children. Why? Because Obamacare requires that they insure already sick children for the same price as well children.
That sounds compassionate, but — in case Obamacare fanatics haven't noticed — sick children need more medical care. Insurance is about risk, and already sick children are 100 percent certain to be sick when their coverage begins. So if the government mandates that insurance companies cover sick children at the lower well-children price, insurers will quit the market rather than sandbag their shareholders. This is not callousness — it's fiduciary responsibility. Insurance companies are not charities. So, thanks to the compassionate Congress and president, parents of sick children will be saved from expensive insurance — by being unable to obtain any insurance! That's how government compassion works.
In 2014, the same rule will kick in for adults. You now know what to expect.
Politics, Gold, and Inflation - Thomas Sowell
EXCERPTS:
"Inflation is a quiet but effective way for the government to transfer resources from the people to itself, without raising taxes. A hundred dollar bill would buy less in 1998 than a $20 bill would buy in the 1960s. This means that anyone who kept his money in a safe over those years would have lost 80 percent of its value, because no safe can keep your money safe from politicians who control the printing presses.
That is why some people buy gold when they lose confidence in the government's managing of its money. Usually that is when inflation is either under way or looming on the horizon. When many people start transferring their wealth from dollars into gold, that restricts the ability of politicians to steal from them through inflation.
Even though there is currently very little inflation, purchases of gold have nevertheless skyrocketed. Ordinarily, most gold is bought for producing jewelry or for various industrial purposes, more so than as an investment. But, at times within the past two years, most gold has been bought by investors.
What that suggests is that increasing numbers of people don't trust this administration's economic policies, especially their huge and growing deficits, which add up to a record-breaking national debt.
When a national debt reaches an unsustainable amount, there is always a temptation to pay it off with inflated dollars. There is the same temptation when the Social Security system starts paying out more money to baby boom retirees than it is taking in from current workers.
"Inflation is a quiet but effective way for the government to transfer resources from the people to itself, without raising taxes. A hundred dollar bill would buy less in 1998 than a $20 bill would buy in the 1960s. This means that anyone who kept his money in a safe over those years would have lost 80 percent of its value, because no safe can keep your money safe from politicians who control the printing presses.
That is why some people buy gold when they lose confidence in the government's managing of its money. Usually that is when inflation is either under way or looming on the horizon. When many people start transferring their wealth from dollars into gold, that restricts the ability of politicians to steal from them through inflation.
Even though there is currently very little inflation, purchases of gold have nevertheless skyrocketed. Ordinarily, most gold is bought for producing jewelry or for various industrial purposes, more so than as an investment. But, at times within the past two years, most gold has been bought by investors.
What that suggests is that increasing numbers of people don't trust this administration's economic policies, especially their huge and growing deficits, which add up to a record-breaking national debt.
When a national debt reaches an unsustainable amount, there is always a temptation to pay it off with inflated dollars. There is the same temptation when the Social Security system starts paying out more money to baby boom retirees than it is taking in from current workers.
Tuesday, October 5, 2010
Foreclosure? Not So Fast: Homeowners Cite Paperwork Problems to Fight Foreclosure - WSJ.com
EXCERPTS:
"LOXAHATCHEE, Fla.—Israel Machado's foreclosure started out as a routine affair. In the summer of 2008, as the economy began to soften, Mr. Machado's pool-cleaning business suffered and like millions of other Americans, he fell behind on his $400,000 mortgage.
But Mr. Machado's response was unlike most other Americans'. Instead of handing his home over to the lender, IndyMac Bank FSB, he hired Ice Legal LP in nearby Royal Palm Beach to fight the foreclosure. The law firm researched the history of Mr. Machado's loan and found two interesting facts.
First, the affidavits IndyMac used to file the foreclosure were signed by a so-called robo-signer named Erica A. Johnson-Seck, who routinely signed 6,000 documents a week related to foreclosures and bankruptcy. That volume, the court decided, meant Ms. Johnson-Seck couldn't possibly have thoroughly reviewed the facts of Mr. Machado's case, as required by law.
Secondly, IndyMac (now called OneWest Bank) no longer owned the loan—a group of investors in a securitized trust managed by Deutsche Bank did. Determining that IndyMac didn't really have standing to foreclose, a judge threw out the case and ordered IndyMac to pay Mr. Machado's $30,000 legal bill.
***
In Florida, which leads the nation in foreclosure filings, loans remain delinquent for an average of 573 days before going to foreclosure, according to LPS Applied Analytics, a research firm. A year ago it took 423 days, an indication that the foreclosure process is lengthening. Nationwide, the average foreclosure takes 478 days, up from 361 days a year ago. At the height of the housing boom in early 2006, the foreclosure delinquency average stood at 292 days nationwide and 305 days in Florida.
"LOXAHATCHEE, Fla.—Israel Machado's foreclosure started out as a routine affair. In the summer of 2008, as the economy began to soften, Mr. Machado's pool-cleaning business suffered and like millions of other Americans, he fell behind on his $400,000 mortgage.
But Mr. Machado's response was unlike most other Americans'. Instead of handing his home over to the lender, IndyMac Bank FSB, he hired Ice Legal LP in nearby Royal Palm Beach to fight the foreclosure. The law firm researched the history of Mr. Machado's loan and found two interesting facts.
First, the affidavits IndyMac used to file the foreclosure were signed by a so-called robo-signer named Erica A. Johnson-Seck, who routinely signed 6,000 documents a week related to foreclosures and bankruptcy. That volume, the court decided, meant Ms. Johnson-Seck couldn't possibly have thoroughly reviewed the facts of Mr. Machado's case, as required by law.
Secondly, IndyMac (now called OneWest Bank) no longer owned the loan—a group of investors in a securitized trust managed by Deutsche Bank did. Determining that IndyMac didn't really have standing to foreclose, a judge threw out the case and ordered IndyMac to pay Mr. Machado's $30,000 legal bill.
***
In Florida, which leads the nation in foreclosure filings, loans remain delinquent for an average of 573 days before going to foreclosure, according to LPS Applied Analytics, a research firm. A year ago it took 423 days, an indication that the foreclosure process is lengthening. Nationwide, the average foreclosure takes 478 days, up from 361 days a year ago. At the height of the housing boom in early 2006, the foreclosure delinquency average stood at 292 days nationwide and 305 days in Florida.
Subscribe to:
Posts (Atom)