David Malpass Beyond the Gold and Bond Bubbles - WSJ.com
EXCERPTS:
"Treasury bond yields have been at near-record lows and gold prices at record highs, attracting millions of investors into idle assets through coins, exchange-traded funds and even warehousing facilities. This reflects fear about inflation and the stability of the financial system and, for some, the coming breakdown of society under the weight of $3.6 trillion in annual Washington spending and transfer payments.
***
"Mr. Bernanke should directly confront the fear index imbedded in high gold prices and low bond yields. Gold at more than $1,800 per ounce is a loud public statement of no confidence in our central bank. It means people would rather buy gold than hire workers or start businesses—that they don't trust the central bank to maintain the value of their money.
Former Fed Chairman Paul Volcker thought of high gold prices as his enemy and repeatedly said so as a way to build confidence in the central bank. In the 1970s, high gold prices reflected Fed incompetence that had produced inflation, stagnation and malaise. Jimmy Carter named Mr. Volcker to replace G. William Miller as Fed chairman in 1979, a rare moment of Washington accountability. Gold then fell in the 1980s and '90s in what was called affectionately "The Great Moderation." Inflation and oil prices followed gold prices down, tax rates were cut, and jobs became plentiful. Foreign capital beat a path to America's door, the mirror image of the exodus of growth capital the Fed's weak dollar is fueling.
Wednesday, August 31, 2011
Social Security: Is It a Ponzi Scheme? | Michael D. Tanner | Cato Institute: Commentary
Yes, It Is a Ponzi Scheme | Michael D. Tanner | Cato Institute: Commentary
This short article provides a useful overview of the Social Security System.
This short article provides a useful overview of the Social Security System.
Monday, August 29, 2011
Friday, August 26, 2011
Thursday, August 25, 2011
The Bond Bubble and the Case for Stocks - WSJ.com
Jeremy Siegel and Jeremy Schwartz: The Bond Bubble and the Case for Stocks - WSJ.com
Excerpts:
"One market that now makes no sense to us is the popular Treasury Inflation Protected Securities (TIPS), where recent yields should be enshrined in Ripley's "Believe It or Not!" The yield on the benchmark 10-year TIPS turned negative for the first time in history, meaning investors are now lending money to the government with the hope of receiving a sum 10 years from now that is worth less in purchasing power than the dollars they fork over today.
"This astounding situation can only be justified by extraordinary pessimism about the prospects for the U.S. economy. Economic theory predicts that the real yield on long-term TIPS should approximate the real growth in the economy. And when these securities were first floated in 1997, investors received a 3.4% yield, which was very close to the 3.6% average GDP growth over the previous 50 years. The average yield on the 10-year TIPS since it was floated has been 2.5%.
***
"Investors have flocked to inflation hedges like TIPS and gold out of fears about out-of-control government debt and deficits. The S&P downgrade of the U.S. credit rating heightened concern that the Fed would turn on the printing presses. But equities, like precious metals, are also real assets whose return has compensated investors for inflation. Per share dividends of the S&P 500 firms have grown at 5% per year over the last half-century, which handily beat the average rate of inflation of 4% during the period. In fact, dividend growth has beat inflation both during the low inflation periods of the 1960s, 1990s and 2000s, and the high inflation periods of the 1970s and early 1980s.
Excerpts:
"One market that now makes no sense to us is the popular Treasury Inflation Protected Securities (TIPS), where recent yields should be enshrined in Ripley's "Believe It or Not!" The yield on the benchmark 10-year TIPS turned negative for the first time in history, meaning investors are now lending money to the government with the hope of receiving a sum 10 years from now that is worth less in purchasing power than the dollars they fork over today.
"This astounding situation can only be justified by extraordinary pessimism about the prospects for the U.S. economy. Economic theory predicts that the real yield on long-term TIPS should approximate the real growth in the economy. And when these securities were first floated in 1997, investors received a 3.4% yield, which was very close to the 3.6% average GDP growth over the previous 50 years. The average yield on the 10-year TIPS since it was floated has been 2.5%.
***
"Investors have flocked to inflation hedges like TIPS and gold out of fears about out-of-control government debt and deficits. The S&P downgrade of the U.S. credit rating heightened concern that the Fed would turn on the printing presses. But equities, like precious metals, are also real assets whose return has compensated investors for inflation. Per share dividends of the S&P 500 firms have grown at 5% per year over the last half-century, which handily beat the average rate of inflation of 4% during the period. In fact, dividend growth has beat inflation both during the low inflation periods of the 1960s, 1990s and 2000s, and the high inflation periods of the 1970s and early 1980s.
Wednesday, August 24, 2011
Saturday, August 20, 2011
Instructions For External Proctors
WHAT IS NEEDED.
The exam will be taken online. The student will need a computer with an internet connection. The computer will need to have the Respondus Lockdown browser installed on it. (If the Lockdown browser needs to be installed on the computer it can be downloaded from http://www.respondus.com/lockdown/information.pl?ID=722313312 .
Installation takes only a few minutes but does require administrative rights to the computer and should be done before the day of the exam. The student can use their own computer or one that belongs to your institution.
To access the exam a password is required. The password for this exam is ____ [this will be supplied two days before the exam]. Give this password to the student once they are ready to begin the exam. (They can take the exam only once so they should not log on until they are ready to begin.)
DATE: The exam can be taken anytime between 7:30 AM ___ [exact exam dates will be sent two days before the exam].
WHEN THE STUDENT ARRIVES FOR THE EXAM. Although you may have known this student prior to this course you should look at their photo ID and verify that the person taking the exam is in fact the person who is registered for the course. Please copy the name on the student's ID onto a piece of paper, then include that name on the subject line of the email you send me once they have finished the exam.
Please remove all books, notes, and cell phones from the area where the student will be sitting. They are allowed to have two or three totally blank pieces of paper, a pencil or pen, and a calculator.
The student will access the exam by clicking the Respondus Lockdown icon on the desktop of the computer. The browser will ask you to select which server to use. Of the three options listed, choose “Moodle.” The browser will open on the NSU Moodle site. The student will enter their username and password, then go to the Econ 2000 page. In the middle column, below the picture of Adam Smith, and above “Welcome to Economics,” they will find “EXAM ONE.” Students are allowed up to 90 minutes for the exam but most students will finish in less than an hour.
DURING THE EXAM. Each student is to work alone under your supervision during the entire testing period. No “split” or “continued” testing sessions are allowed. Once the exam begins the student is to work in an uninterrupted manner until they have completed the exam.
When the student is ready to stop they must click “submit all and finish” at the bottom of the page. The exam cannot be graded if it is not submitted. Once the exam has been submitted the student should log off and close the Respondus browser.
If at any time you believe the testing procedure has been compromised you should terminate the exam and contact me as soon as possible.
AFTER THE EXAM. As soon as the student finishes the exam please send me an email confirming that the student did complete the exam in the specified manner. On the subject line of the email put the student's name as it appears on their ID.
Again, thank you for serving as a proctor for this exam.
Dr. Bob Jones
Economics
Economics
Northwestern State University of Louisiana
http://beconsistent.blogspot.com
http://beconsistent.blogspot.com
Friday, August 19, 2011
FDR's New Dea - | Jim Powell | Cato Institute: Commentary
FDR's New Deal, Obama's New New Deal and High Unemployment | Jim Powell | Cato Institute: Commentary
This article gives a good summary of policy changes under FDR's New Deal, and of the economic conditions that resulted.
This article gives a good summary of policy changes under FDR's New Deal, and of the economic conditions that resulted.
Good Things - Thomas Sowell
EXCERPTS:
"Life has many good things. The problem is that most of these good things can be gotten only by sacrificing other good things. We all recognize this in our daily lives. It is only in politics that this simple, common sense fact is routinely ignored.
In politics, there are not simply good things but some special Good Things -- with a capital G and capital T -- which are considered always better to have more of.
Many of the things advocated by environmental extremists, for example, are things that most of us might think of as good things. But, in politics, they become Good Things whose repercussions and costs are brushed aside as unworthy considerations.
Nobody wants to breathe dirty air or drink dirty water. But, if either becomes 98 percent pure, 99 percent pure or 99.9 percent pure, there is some point beyond which the costs skyrocket and the benefits become meager or non-existent.
*****
"Higher miles per gallon for cars is a Good Thing in politics, even if it leads to cars too lightly built to protect occupants when there is a crash. More students going to college is another Good Thing, even if lowering standards to get them admitted results in lower educational quality for others.
Too much of a Good Thing is bad.
"Life has many good things. The problem is that most of these good things can be gotten only by sacrificing other good things. We all recognize this in our daily lives. It is only in politics that this simple, common sense fact is routinely ignored.
In politics, there are not simply good things but some special Good Things -- with a capital G and capital T -- which are considered always better to have more of.
Many of the things advocated by environmental extremists, for example, are things that most of us might think of as good things. But, in politics, they become Good Things whose repercussions and costs are brushed aside as unworthy considerations.
Nobody wants to breathe dirty air or drink dirty water. But, if either becomes 98 percent pure, 99 percent pure or 99.9 percent pure, there is some point beyond which the costs skyrocket and the benefits become meager or non-existent.
*****
"Higher miles per gallon for cars is a Good Thing in politics, even if it leads to cars too lightly built to protect occupants when there is a crash. More students going to college is another Good Thing, even if lowering standards to get them admitted results in lower educational quality for others.
Too much of a Good Thing is bad.
Thursday, August 18, 2011
"I'll bring back $2 gas" - Aug. 18, 2011
EXCERPTS:
"President Michele Bachmann has a promise: $2 gas. 'Under President Bachmann you will see gasoline come down below $2 a gallon again,' Bachmann told a crowd Tuesday in South Carolina. 'That will happen.'
"Sure, politicians promise all kinds of things on the campaign trail. But Bachmann, a leading contender for the 2012 Republican nomination, is wading into truly tricky territory.
***
"It's certainly true that prices -- now about $3.50 a gallon on average -- have risen since President Obama took office. "The day that the president became president gasoline was $1.79 a gallon," Bachmann said. "Look what it is today."
"Of course, that's not the full story. When Obama took office, the country was mired in a terrible economic contraction. "That was in the 4th inning of the greatest recession of our lifetime," said Tom Kloza, chief oil analyst at the Oil Price Information Service. During recessions, demand for gasoline plummets as trucks pull off the road, companies cut back on travel and laid off workers drive fewer miles.
"President Michele Bachmann has a promise: $2 gas. 'Under President Bachmann you will see gasoline come down below $2 a gallon again,' Bachmann told a crowd Tuesday in South Carolina. 'That will happen.'
"Sure, politicians promise all kinds of things on the campaign trail. But Bachmann, a leading contender for the 2012 Republican nomination, is wading into truly tricky territory.
***
"It's certainly true that prices -- now about $3.50 a gallon on average -- have risen since President Obama took office. "The day that the president became president gasoline was $1.79 a gallon," Bachmann said. "Look what it is today."
"Of course, that's not the full story. When Obama took office, the country was mired in a terrible economic contraction. "That was in the 4th inning of the greatest recession of our lifetime," said Tom Kloza, chief oil analyst at the Oil Price Information Service. During recessions, demand for gasoline plummets as trucks pull off the road, companies cut back on travel and laid off workers drive fewer miles.
Monday, August 8, 2011
No Chance of Default, US Can Print Money: Greenspan - CNBC
EXCERPTS:
"The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default" said Greenspan on NBC's Meet the Press. "What I think the S&P thing did was to hit a nerve that there's something basically bad going on, and it's hit the self-esteem of the United States, the psyche" said Greenspan."
"The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default" said Greenspan on NBC's Meet the Press. "What I think the S&P thing did was to hit a nerve that there's something basically bad going on, and it's hit the self-esteem of the United States, the psyche" said Greenspan."
Thursday, August 4, 2011
Encouraging people to think versus attacking opposing views
This post at Cafehayek is a good example of demonizing those with whom you disagree, rather than encouraging your opponents to think. Joe Nocera is doing the demonizing. Russ Roberts points it out.
$1,500 shoes?
NBC's Mika Upset That "Wealthy" Are Able To Buy Luxury Goods | RealClearPolitics
This video provides interesting material for discussion.
This video provides interesting material for discussion.
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