"The forces of the market are just that: They are forces; they are like the wind and the tides; they are things that if you want to try to ignore them, you ignore them at your peril, and ... if you find a way of ordering your life that is compatible with these forces, indeed which harnesses these forces to the benefit of your society, that's the way to go." -- Arnold Harberger, University of Chicago Economist
"Bernanke and several of his central bank colleagues around the world have unleashed a new era of monetary policy, marked by zero-bound nominal interest rates coupled with unprecedented and massive balance sheet expansion. In this post-financial crisis world, the Fed has taken a Keynesian edict and turned it on its head: instead of the government stepping in after a crisis to make up for the loss of aggregate demand from the private sector, it has fallen to central banks.
"Through that process, the Federal Reserve has become the most important market participant, flooding markets with liquidity and owning more than a third of the Treasury market by the end of next year, according to Barclays’ economics team. The latest iteration of their asset purchases, or QE4, consists of $40 billion a month in RMBS purchases and $45 billion in unsterilized Treasury purchases, meaning the Fed’s balance sheet will grow at a rate of $85 billion until the Fed sees a substantial improvement in labor markets.
The so-called fiscal cliff isn't the only hazard looming at year's end if Congress doesn't act.
With failure to pass a Farm Bill comes what's been called the "dairy cliff": reversion to a 1949 law that could double the price of milk overnight.
But dairy farmers aren't as happy as you might think.
The current 2008 Farm Bill -- a massive $300 billion piece of legislation covering everything from food stamps to rural economic development -- expired at the end of September. The Senate has passed a 2012 Farm Bill, but the House of Representatives has yet to bring its version to the floor.
Within the farm bill are crop subsidy programs, including the Milk Income Loss Contract, which supported dairy farmers with direct payments when market prices dropped too low. That program, which this year paid more than $83 million to nearly 12,000 Wisconsin farmers, expired with the bill in September.
Under a separate safety net program, the government will buy storable dairy products -- such as cheese -- at a set price, though market prices have been strong enough to render that program unnecessary in recent years, said Chris Galen, spokesman for the National Milk Producers Federation.
When a Farm Bill expires, if it is not replaced, support programs revert to permanent law, in this case the Agriculture Act of 1949, which would set the government purchase price around $40 per hundredweight -- roughly twice the current market price.
With soaring feed prices pushing production costs above bulk milk prices -- meaning conventional dairy farmers lose about $3 for every hundred pounds of milk -- that should come as good news for farmers.
But it's not that simple.
"As a producer, it'd be great to get that $40, but we also have to look at what's going to happen on the consumer side," said Darin Von Ruden, a Westby dairy farmer and president of the Wisconsin Farmers Union. "It would be too much of a price shock for consumers."
Galen likens it to going on a bender -- there may be some immediate pleasure followed by some serious pain.
The long-term result would disrupt the economy, Galen said. And dairy is just the first commodity that would be covered by the law.
Most observers don't see that happening.
Much like the fiscal cliff -- a combination of drastic spending cuts and tax increases set to kick in at the beginning of the year -- the provision is designed to be so onerous that Congress has no choice but to work out a compromise solution.
"Congress will do almost anything to avoid having that happen," Galen said.
His organization, which represents more than 32,000 dairy farmers, supports both the Senate's farm bill and a version approved by the House agriculture committee.
Kara Slaughter, government relations director for the Wisconsin Farmers Union, expects that if Congress doesn't pass a new bill it will extend the current version.
Like the NMPF, the Farmers Union opposes an extension of the current bill, which was more costly than the proposed replacement and which artificially inflated feed prices with crop subsidies.
"In times like this where corn prices are at record highs, it's absurd for government to be giving farmers incentives to grow corn," she said. "They have all the incentive they need to grow corn."
Rep. Ron Kind has called for the Republican House leadership to bring the new farm bill to the floor.
"We can't be going back to 1949 policy," said Kind, a Democrat from La Crosse. "That's ridiculous."
Reporter Elizabeth Dohms of the Chippewa Herald contributed to this story.
EXCERPTS: WASHINGTON — Forget the fiscal crisis and the automatic budget cuts. Come Jan. 1, there is a threat that milk prices could rise to $6 to $8 a gallon if Congress does not pass a newfarm billthat amends farm policy dating back to the Truman presidency.
Lost in the political standoff between the Obama administration and Congressional Republicans over the budget is a virtually forgotten impasse over a farm bill that covers billions of dollars in agriculture programs. Without last-minute Congressional action, the government would have to follow an antiquated 1949 farm law that would force Washington to buy milk at wildly inflated prices, creating higher prices in the dairy case. Milk now costs an average of $3.65 a gallon.
Higher prices would be based on what dairy farm production costs were in 1949, when milk production was almost all done by hand. Because of adjustments for inflation and other technical formulas, the government would be forced by law to buy milk at roughly twice the current market prices to maintain a stable milk market.
But the market would be anything but stable. Farmers, at first, would experience a financial windfall as they rushed to sell dairy products to the government at higher prices than those they would get on the commercial market. Then the prices customers pay at the supermarket would surge as shortages developed and fewer gallons of milk were available for consumers and for manufacturers of products like cheese and butter.
***
“But it would be short-term euphoria followed by a long hangover that would be difficult for us to recover from,” said Mr. Norton, who is president of the New York Farm Bureau. “I don’t think customers and food processors are going to pay double what they are paying now for dairy products.”
The Senate passed a farm bill in July. A House version of the bill made it out of committee, but House leaders have yet to bring its version to the floor.
Under the current program, the government sets a minimum price to cover dairy farmers’ production costs. If the market price drops below that, the government buys dairy products from farmers to buoy prices and increase demand. Since milk prices have remained above that minimum price in recent years, dairy farmers usually do better by selling their products commercially rather than to the government.
But if 1949 rules go into effect, the government would be required to buy dairy products at around $40 per hundredweight — roughly twice the current market price — to drive up the price of milk to cover dairy producers’ cost.
“It would be bad for consumer demand in the long run,” said Chris Galen, a spokesman for the National Milk Producers Federation, which represents more than 32,000 dairy farmers.
Mr. Galen and others in the dairy industry said reverting to 1949 policies could probably force the makers of butter, cheese, yogurt and other dairy products to look for cheaper alternatives, like imported milk from countries like New Zealand.
***
In a conference call with reporters on Thursday, Tom Vilsack, the agriculture secretary, said the department was exploring all its options to deal with the possibility of the 1949 law going into effect.
Among the options: the agriculture secretary could drag his heels on the milk purchases until Congress passes a new farm bill or an extension of the 2008 one that expired in September, said Vincent Smith, a professor of agriculture at Montana State University in Bozeman.
“This is a totally antiquated law that has nothing to do with farming conditions today,” Professor Smith said. “It was put as a poison pill to get Congress to pass a farm bill by scaring lawmakers with the prospect of higher support prices for milk and other agriculture products. Letting it go into effect for even a few months would be particularly disastrous for consumers and food processors. “
"In recent years, the nation has seen astonishing technological innovation in the natural-gas sector. Companies have discovered vast, gas-rich shale deposits under US soil. And they’ve developed new, high-tech means of extraction. The estimated reserves of recoverable domestic gas are now over 2.2 trillion cubic feet.
"The expansion in supply has already brought a dramatic drop in natural-gas prices, now at a 10-year low. Other countries, mostly in Asia, are eager to buy some of America’s low-cost gas. So 17 US energy companies have applied to export gas. And two proposals for new gas-export terminals — at Coos Bay and the Port of Astoria, both in Oregon — now await federal approval.
***
"The argument against natural-gas exports is also economically backward.A nation prospers through international trade precisely by exporting those goods and services that it can produce at relatively low cost.
"Indeed, the Energy Department report found that gas exports benefit the economy despite higher domestic prices — in part because they also mean a corresponding fall in the prices that Americans pay for other goods and services that we import. That is, lucrative exports allow our nation to import more of those goods and services that can be produced at home only at relatively high costs.
"My kind of Tory party would make no secret of its belief in individual freedom and individual prosperity, in the maintenance of law and order, in the wide distribution of private property, in rewards for energy, skill and thrift, in diversity of choice, in the preservation of local rights in local communities.
"Size is not all, any more than economic growth is all. Even efficiency is not enough. People come first—their needs, their hopes, their choice, their values and ideals. We have to understand these first—to be seen to be listening with sympathy and concern. It is important to be able to lead, certainly. But you cannot for long lead people where they do not want to go."
"The implied monthly inflation rate for September [in Iran] was 69.6%. Since the hurdle rate to qualify for hyperinflation – as defined by US economist Philip Cagan – is 50% per month, Iran registered what appears to be the start of the world's 58th hyperinflation episode.
"Many people think of labor unions as organizations to benefit workers, and think of employers who are opposed to unions as just people who don't want to pay their employees more money. But some employers have made it a point to pay their employees more than the union wages, just to keep them from joining a union.
"Why would they do that, if it is just a question of not wanting to pay union wages? The Twinkies bankruptcy is a classic example of costs created by labor unions that are not confined to paychecks.
"The work rules imposed in union contracts required the company that makes Twinkies, which also makes Wonder Bread, to deliver these two products to stores in separate trucks. Moreover, truck drivers were not allowed to load either of these products into their trucks. And the people who did load Twinkies into trucks were not allowed to load Wonder Bread, and vice versa.
"All of this was obviously intended to create more jobs for the unions' members. But the needless additional costs that these make-work rules created ended up driving the company into bankruptcy, which can cost 18,500 jobs. The union is killing the goose that laid the golden egg.
"There’s good reason for the widespread condemnation of anti-gouging laws: they are—almost—universally harmful. There’s no public good or special interest benefited by the laws. And especially when it comes to necessities like gasoline, the harm they do is sharply felt by a large part of the population.
"So why do we have these stupid laws at all?
***
"As it turns out there is one set of actors who does benefit from these laws—politicians. Anti-gouging laws allow politicians to appear as if they are defending the interests of the people in a time of crisis—even if they are actually doing nothing of the sort. The politicians who vote for the laws tout them as “consumer protection” and the politicians who enforce them almost always do so loudly and obviously, condemning profiteers. The typical impotence of politicians in the face of a crisis is concealed by their intervention against higher prices.
"This malarkey is made possible because there is no visible, directly observable connection between the shortage and the price-control. It takes at least a moment’s concentration to connect the dots, and the politicians do everything they can do prevent such concentration from happening.
"Hurricane Sandy and its aftermath continue to offer lessons in Economics 101, if not in political good judgment. One of them flows from the widespread notion that it is somehow wrong to allocate scarce resources to those willing to pay for them.
First we had the contrasting spectacles in New York and New Jersey over gasoline. New Jersey rationed the supply with some degree of success by declaring that cars with odd and even license plates could buy on alternate days. But New York Governor Andrew Cuomo decided residents of hard hit areas would be getting an allotment of 10 gallons for "free." Chaos requiring National Guard intervention was the result. New York City and Long Island have now imposed a version of the New Jersey rationing scheme, to much better effect.
Now comes word that the Attorneys General of both states intend to prosecute people for "price gouging." New York Attorney General Eric Schneiderman has subpoenaed the Craigslist website for the identities of people who advertised gas for sale at high prices. Mr. Schneiderman is doing this in the name of a New York law that forbids charging an "unconscionably excessive price" during an "abnormal disruption in the market."
But "unconscionable" isn't exactly the clear red line one might want in something calling itself a law. One man's unconscionable price might be another's job-saving gasoline supply. So among all the potential crimes he might look to prosecute, Mr. Schneiderman is throwing his department's scarce resources in pursuit of the mobster housewives selling their surplus gas. Maybe we need a law against "political gouging."
New Jersey's law is clearer, but more draconian and as wrong-headed. It says merchants can't charge more than a 10% mark-up for a 30-day period following a state of emergency. State Attorney General Jeffrey Chiesa announced cases against eight businesses, including gas stations and a lodging provider, on Friday.
The danger of all this is obvious. Why would you want to discourage the private sector from moving goods to a needy region in crisis? The cost of doing so might easily justify a mark-up well in excess of 10%. Natural disasters are precisely when we most need market incentives for the provision of things like gas, power, clean water and lodging.
It's not as if the Federal Emergency Management Agency has shown itself up to the job. Price gouging suits are an awfully convenient way for government to point the finger of blame away from its failures to provide even basic services in emergencies. Ask John Shepperson, who was jailed for the crime of trying to bring generators from Kentucky, at a mere double his cost, to the victims of Hurricane Katrina.
Which makes us wonder: If "unconscionable" is going to be the standard, might New York taxpayers have a case against the government for the high taxes that couldn't produce a competent response to Hurricane Sandy?
"His election has revealed that the American people chose someone who wants the US to be more like Europe–more statist and paternalistic. I have heard people who feel like giving up. If we can’t beat this guy, it’s over. We’re on the road to serfdom. Could be. But I think the glass is more half-full than half-empty. So here is some cheer for those of you who are pessimistic about the future.
"Yes, a little over half of the people who voted, a little over 60 million people, thought Obama deserved a second term. But about 59 million (the combined Romney and Gary Johnson votes) disagreed. That’s pretty close. Politics is winner-take-all, a zero-sum game. But those totals tell you just how close it was and how little it will take to change the outcome.
"More than 400 possible cases of price gouging of gasoline and other essentials, including a $10 box of matches and $7 loaf of bread, have been reported in New York before and after Sandy.
Reports are being investigated in New York City, the Hudson Valley and on Long Island by state Attorney General Eric Schneiderman.
Schneiderman said Monday that he's investigating an increasing number of reports of spikes in prices for essential goods including gasoline, food, bottled water, generators, batteries and flashlights. The probe can include sharp, unwarranted increases in the cost of prices by retailers including supermarkets, hardware stores, bodegas, delis, hotels and taxis, he said.
In one report, the cost of a bag of potatoes jumped to $7, up from $3 before the storm hit. The cost of the box of matches appears more than three times the usual cost, and the loaf of bread is more than double the usual cost.
New Yorkers can report price gouging by telephone at 800-771-7755 or through his office website.
"We are actively investigating hundreds of complaints we've received from consumers of businesses preying on victims of Hurricane Sandy," Schneiderman said. "Our office has zero tolerance for price gouging."
No arrests were reported as of Monday. Schneiderman wouldn't discuss details of the reports or the investigation.
Vendors may defend higher prices if they can show an increased cost of obtaining goods from wholesalers or in delivering services, making prosecutions difficult.
State business law prohibits an "unconscionably excessive price" during an "abnormal disruption of the market" that unfairly takes advantage of consumers.
Last summer, Schneiderman sued some gas stations for price gouging following Tropical Storm Irene. The reports of price gouging were relative low during that storm, which ravaged parts of upstate New York. Schneiderman had sent warning letters to major vendors before Irene and before Sandy.
In August, a Yonkers gas station increased its price from $3.89 a gallon before Irene hit to $4.79 two days later, drawing from the same delivery of gas received before the storm hit. The station lowered the price again, to $3.83, when Irene left. The company settled the suit without admitting guilt for $7,500, Schneiderman said.
A Farmingdale gas station on Long Island raised its price 84 cents per gallon when Irene hit. That gas station settled the lawsuit against it for $3,000.
"More New Yorkers got power Saturday for the first time since Superstorm Sandy struck the region, but frustrations mounted over gasoline shortages as refueling sites turned into traffic jams of horn-honking confusion.
Gas rationing went into effect in northern New Jersey, while crowds lined up at free fuel distribution sites in New York's boroughs, where a limit of 10 gallons per person was imposed. New York officials then said emergency vehicles had the priority over the public.
"It's chaos, pandemonium out here," said Chris Damon, whose family was displaced from his home in the Queens neighborhood of Far Rockaway and are staying with relatives in Brooklyn. He circled the block for 3½ hours at the Brooklyn Armory, where the National Guard was directing traffic.
"It's ridiculous. No one knows what's going on," he said.
New York Gov. Andrew Cuomo had announced that the 5,000-gallon trucks from the Defense Department would set up the emergency mobile gas stations at five locations around the New York City metropolitan area.
"Do not panic. I know there is anxiety about fuel," he said.
The scene was more orderly in hard-hit Staten Island, where a line of cars stretched for two miles under the supervision of police and National Guard troops. Another 400 people were on foot, carrying gas cans.
As gas rationing went into effect at noon in northern New Jersey, police began enforcing rules to allow only motorists with odd-numbered license plates to refuel. Those with even-numbered plates must wait until Sunday.
Jessica Tisdale of Totowa waited in her Mercedes SUV for 40 minutes at a gas station in Jersey City, but didn't quite understand the rules and was ordered to pull away because of her even-numbered plate.
"Is it the number or the letter?" she asked around 12:10 p.m. "I don't think it's fair. I've been in the line since before noon. I don't think it's fair. There's no clarity."
The officer who waved her out of line threw up his hands and shrugged.
At an Exxon station in Wall, N.J., Kathryn Davidson was unaware of the start of rationing but beat the noon deadline despite a 45-minute wait in line and an even-numbered plate.
"How are people supposed to know?" said Davidson, 53, who said it reminded her of the 1970s, when a similar plan was in place.
"There were fistfights and everything. It got nasty," she said. "Everyone seems pretty pleasant as of right now."
BRICK, N.J. (CBSNewYork) — New Jersey Gov. Chris Christie spoke Friday afternoon and said the state was “inching closer to normalcy” following the devastation of Superstorm Sandy.
But things seemed far from normal after the governor issued a gas rationing system to ease the strain several hours later. Starting at noon Saturday, New Jersey will move to an odd-even gas rationing system in 12 counties as part of a “limited state of energy emergency.”
Christie ordered odd-even fuel sales to help ease shortages and long gas lines that have occurred since Sandy decimated the coast earlier this week.
Residents with license plates ending in an odd number can make gas purchases on odd-numbered days of the month Residents with plates ending in an even number will be able to buy gas on even-numbered days, the governor said.
Not everybody was in love with the idea.
“I think it’ll hurt. I think they should just let people line up and get gas — first come first served,” Secaucus resident John Lambert told CBS 2′s Derricke Dennis on Friday night.
“Come on. People got jobs, gotta go to work. What difference does it make — odd days or even days? It really doesn’t matter,” added Todd Swain of Passaic.
MYFOXNY.COM -
"The New Jersey Division of Consumer Affairs issued subpoenas to 65 businesses across the state Friday after more than 500 consumer complaints about alleged price gouging.
"Having seen firsthand the suffering people are experiencing, I assure New Jersey's residents and retailers that we are taking a zero-tolerance approach to price gouging," said Governor Christie. "We are not asking businesses to function as charities. We require that they obey New Jersey's laws – or pay significant penalties."
Attorney General Chiesa noted that the Division has received allegations of price gouging from all regions of the state, with complaints particularly prominent in Bergen, Essex, Middlesex, Monmouth, Ocean, and Passaic counties.
The top complaint categories are:
-Gasoline, with gas prices in some cases allegedly rising by $1 or more per gallon immediately following the storm, in some cases allegedly exceeding $5 per gallon. The Division has also received complaints about gas stations charging more to fill up hand-held canisters than to fill car gas tanks, in apparent violation of state Motor Fuels Act protections related to fuel prices.
-Generators, Batteries and Non-Gasoline Fuels such as propane; with generator prices allegedly doubling from pre-storm prices.
-Food, including reports of unexpectedly high prices at convenience stores and restaurants in certain areas, affecting consumers who are unable to cook a hot meal at home due to power outages.
-Lodging, including complaints about hotels and motels significantly raising their prices, allegedly for rooms that were rented at much lower rates before the storm.
Consumers who suspect price gouging or any other violation of consumer protection laws, particularly as a result of Hurricane Sandy, are urged to call the Division of Consumer Affairs at (800) 242-5846.
"New Jersey’s price gouging statute makes it illegal to set excessive price increases during a declared state of emergency or for 30 days after the termination of the state of emergency.
"Price increases are deemed excessive under the law if they are more than 10 percent above the price at which the good or service was sold during the normal course of business before the state of emergency.
"The law does allow that, if the merchant faces additional costs imposed by suppliers or legitimate logistical concerns, a price increase is considered excessive if it is more than 10 percent above the amount of markup from cost, compared with the markup normally applied.
"As a reminder of the penalties, Christie pointed out the case of a Sussex County gas station accused of raising fuel prices more than 16 percent last year during Irene. To settle an enforcement action by the Division of Consumer Affairs, that business recently agreed to pay $50,000.
"Prices are how scarce goods get allocated in markets in accordance with actual conditions. When demand increases, prices go up, all other things being equal. It's not immoral. If orange groves are frozen over (or devastated by Hurricane Charley), leading to fewer oranges going to market, the price of oranges on the market is going to go up as a result of the lower supply. And if demand for a good suddenly lapses or supply of that good suddenly expands, prices will go down. Should lower prices be illegal too?"
So far in this course we've seen that government has significant effects on the economy. One of the key issues about which people disagree is the question "what role should government play in the economy, and in regulating how people live and how businesses operate? What are the consequences when government takes an active role in answering the basic three economic questions?"
If you think these are interesting questions to ponder, I recommend to you a movie currently showing in theaters: Atlas Shrugged: Part II. It is part 2 of a trilogy based on the 1957 novel, Atlas Shrugged, by Russian-born novelist Ayn Rand.
In a 1991 survey conducted by the Library of Congress, people were asked which books, of all the books they had read, had been the most influential in their own lives. Atlas Shrugged was listed at number 2. (For me it would probably be number 6.)
People generally react strongly to Rand's work. They tend to love it or hate it. Either way, she definitely makes you think. If you're looking for something to do this weekend, check it out.
BOSSIER CITY, La. (AP) — Bossier City police say a woman trying to avoid an Air Force deployment had her husband shoot her before lying to investigators that an intruder was to blame.
Police say 25-year-old Judy Groomes was treated for wounds on both of her legs from one round from a handgun fired by her husband, 26-year-old Christopher Tyquan Groomes. Both are active military based at nearby Barksdale Air Force Base.
Groomes allegedly claimed an intruder shot her early Friday while her husband and two children slept. But police say she convinced her husband to shoot her to avoid military service.
QUESTION:
What is the opportunity cost of being healthy? For this woman it was being with her family, which she apparently considered to be a very high opportunity cost. This high opportunity cost changed her incentive to be healthy and consequently her behavior. That doesn't mean shooting yourself to avoid your commitments is morally acceptable, but it does make such behavior more understandable.
Hysterical MSNBC Host's On Air Meltdown
COMMENT:
This video makes a valid point: those who are poor face more risk to their personal safety than do those who are wealthy. So why do we hear so much about business owners bearing risk?
Because the risk business owners bear is risk they bear only if they choose to make investments (start new businesses, build new factories, etc.). They will choose to bear that risk only if they are compensated for doing so.
If government tax policy punishes businesses that are successful this reduces the incentive business have to take risks. And if they choose to not take risks, new businesses aren't started, new factories aren't built, new jobs aren't created, the economy doesn't grow, and the opportunity for those who are poor today to become better off in the future, diminishes.
MIAMI (CBS4) — Some South Florida drivers double checked their gas bills as they pulled away from the pumps ahead of Tropical Storm Isaac and wondered why it cost so much to fill up.
It’s no surprise now to learn the State of Florida could be very busy with alleged price-gouging cases around South Florida.
Cory Davis thinks the $4.49 a gallon price tag of regular unleaded at his local North Miami Beach gas station gouges local consumers.
He thinks the price hike came as desperate drivers were looking to fill up as Tropical Storm Isaac threatened South Florida.
“They‘re taking advantage of us man, $4.49, the gas prices are ridiculous. Come on man,” complained Davis. CBS4 found other gas stations in the area selling unleaded regular from about $3.79 to $3.89 a gallon. The $4.49 price tag at the station Cory Davis visited is about sixty-cents more a gallon than other stations in the area.
Under the state’s price gouging laws, it’s illegal to raise prices on critical emergency supplies like gas, but only after a state of emergency is declared.
Formal complaints can be filed with The State Division of Consumer Services at 800-HELPFL or 800-435-7352.
Attorney General Pam Bondi also activated the Price Gouging Hotline on Saturday.
She urged Floridians to report any suspected price gouging at 1-866-9-NO-SCAM (1-866-966-7226).
The cashier at the station charging $4.49 said he doesn’t know when prices were raised and told CBS4′s Al Sunshine that the manager was not working.
If any business is found to have violated state or local price-gouging laws, they can face up to a $10,000 fine.
"Nike is selling LeBron James' newest sneaker for over $300. According the Wall Street Journal, LeBron's next shoe, the "LeBron X" will cost around $315. The shoe debuted at the 2012 Olympic gold-medal game between Spain and the United States.
This will be LeBron's 10th shoe release. His first shoe was released in 2003. It was called the Nike Zoom Generation and cost around $110. Nike told the Journal that it is passing along price increases because of the increased cost of materials like cotton.
"Despite having no horses, the water and sewerage department for the city of Detroit employs a horseshoer.
Yet even with a department so bloated that it has a horseshoer and no horses, the local union president said it is "not possible" to eliminate positions.
Union rules have turned the department into a government jobs program, some critics say.
The horseshoer’s job description is "to shoe horses and to do general blacksmith work … and to perform related work as required." The description was last updated in 1967.
The Detroit Water and Sewerage Department (DWSD) has a large debt, rising water prices and inefficient services — using almost twice the number of employees per gallon as other cities like Chicago.
"Campaigning in Missouri Valley, Iowa, yesterday, President Obama announced yet another government spending program -- this time designed to inflate meat prices in Midwest swing states. "Today the Department of Agriculture announced that it will buy up to $100 million worth of pork products, $50 million worth of chicken, and $20 million worth of lamb and farm-raised catfish," Obama explained to reporters in front of a drought-stricken cornfield.
"Prices are low, farmers and ranchers need help, so it makes sense," Obama explained. "It makes sense for farmers who get to sell more of their product, and it makes sense for taxpayers who will save money because we're getting food we would have bought anyway at a better price."
QUESTIONS:
1. Who will benefit from the government purchasing more agricultural products (increasing the demand)? 2. Who will be hurt (bear the cost) by this plan?
"Civilization can only advance when individuals are both encouraged and rewarded for excellence. The men and women who designed, built, and succeeded in placing the new SUV-sized rover on Mars receive and deserve our acclaim. The late Steve Jobs is widely admired for creating the world's most valuable company and for being a genius in product innovation and marketing. Thomas Edison was even more innovative a century earlier — the light bulb, the phonograph, the electrical generation and distribution system, etc. — and he also built one of the world's largest companies, General Electric.
The good side of humanity is revealed when we praise and reward such people. The bad side of humanity is shown by those who wish to punish success. According to legend, Ivan the Terrible was so impressed by the stellar achievement of the architect he had commissioned to design St. Basil's Cathedral in Moscow that he had him blinded so no other ruler could hire him to produce an equal or greater feat.
The modern day equivalents of Ivan the Terrible are those who pander to the envious and jealous by demanding higher and higher tax rates on the successful. They seek to punish success with the childish demand that they "give back." We pay our successful athletes and musicians a great deal of money because their performances "give" us great pleasure. Sam Walton made tens of billions of dollars because he developed and "gave" us a superior marketing and distribution system that enabled all of us to buy tens of thousands of products at lower prices. Those "evil" real estate developers are the ones who take great risks to build hugely expensive buildings and hire great architects who "give" the rest of us the profile and structures of the cities where we live and work.
We want an economy that produces many well-paying jobs. These are produced by entrepreneurs and businessmen, many of whom have spent considerable time developing their skills, learning from their own mistakes, and often risking their own money. Every job they create is "giving" something to those who are not as equally ambitious, talented, resourceful, hard working or skilled. Why then should the job creators be expected to "give" even more?"
"Too many folks still don't have a sense that tomorrow will be better than today. And so, the question in this election is which way do we go?" President Obama asked at a fundraiser in Chicago on Sunday.
"Do we go forward towards a new vision of an America in which prosperity is shared?" Obama asked. "Or do we go backward to the same policies that got us in the mess in the first place?"
"I believe we have to go forward," Obama said. "I believe we have to keep working to create an America where no matter who you are, no matter what you look like, no matter where you come from, no matter what your last name is, no matter who you love, you can make it here if you try. That's what's at stake in November. That's what is why I am running for a second term as president of the United States of America."
PUEBLO, Colo. – President Obama, while villifying Mitt Romney for opposing the auto industry bailout, bragged about the success of his decision to provide government assistance and said he now wants to see every manufacturing industry come roaring back.
“I said, I believe in American workers, I believe in this American industry, and now the American auto industry has come roaring back,” he said.
“Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry.
“I don’t want those jobs taking root in places like China, I want those jobs taking root in places like Pueblo,” Obama told a crowd gathered for a campaign rally at the Palace of Agriculture at the Colorado State Fairgrounds here.
QUESTIONS:
1. If the government tries to provide assistance to every industry, will there be any unintended consequences?
2. If every industry is supported by the government, who's going to bear the cost of providing this assistance?
3. President Obama says he doesn't want manufacturing jobs to "take root" in China. If you agree, which jobs do you think should take root in China? If no jobs take root in China, and China doesn't produce anything, would that make people in the U.S. better off or worse off? (Before you answer, check your television to see where it was produced.)
"But at least as important as Friedman's scholarship was his lucid and energetic public advocacy of limited government and free markets. He explained with unmatched clarity how a modern economy's complexities, nuances, and dynamism almost always thwart even the best-intentioned efforts by government officials to intervene into markets.
In a scene from the opening episode of his successful 10-part 1980 PBS series "Free to Choose," Friedman held in his hand an ordinary pencil. Looking into the camera, and speaking without a script, he explained that a pencil — so seemingly simple — requires for its production the knowledge and labors of millions of people from around the world.
Some workers cut down the trees; other workers make the chainsaws used to cut down the trees; yet other workers make the steel used to manufacture the chainsaws; and yet other workers specialize in mining the iron ore used to make the steel. Still other workers mine the graphite to make the "lead" for the pencil, while many others work in factories to make the yellow paint that commonly adorns pencils, while still other workers perform the many tasks required to produce the rubber for each pencil's eraser.
Just to list the number of different, highly specialized jobs that must be performed to produce a commonplace pencil would take volumes. Few of these workers know each other, and none of them knows how to do any more than one or two of the countless jobs that must be done if we are to be well-supplied with pencils.
Friedman explained how free-market prices, along with the lure of profit and the fear of loss, guide entrepreneurs, firms, and workers from across the globe to produce just the right amounts of wood, graphite, paint, erasers, and the many other parts of pencils.
No government commissars are involved. There's no central plan for the production of pencils. Yet we have high-quality pencils in abundance and for sale at low prices. What's true for pencils, of course, is true also for more complex items such as automobiles, electric lighting, MRI machines, and on and on — that is, for nearly every good commonly found in modern industrial society.
"No one converted Milton Friedman, either in economics or in his views on social policy. His own research, analysis and experience converted him. As a professor, he did not attempt to convert students to his political views. I made no secret of the fact that I was a Marxist when I was a student in Professor Friedman's course, but he made no effort to change my views. He once said that anybody who was easily converted was not worth converting."
"Milton Friedman, who would have turned 100 [today, July 31st], helped to make free markets popular again in the 20th century. His ideas are even more important today"
PITTSBURGH (KDKA) — It’s been a hundred years since James Cash Penney opened his first store in Wyoming. Now, the retail chain – with more than a thousand outlets – is struggling to turn a profit even though lots of people love the store.
“I love Penney’s. I’ve always liked Penney’s,” says Mary Jane Hallisey of Hopewell. “Oh, I like it a lot. They have a lot of good stuff in there. I go all the time,” adds Olivia Kuhn of Brighton Heights.
But the store is getting a makeover – specialized boutiques within the store like a denim bar – and more.
The CEO of JCPenney is the former retail chief of Apple, and he wants to shake things up to restore the company to profitability. But one of his ideas – replacing clerks with a self-check-out system – well, that doesn’t go over too well with some customers.
“I think it’s a bad idea all way around if you ask me,” says Jack Soffel of Robinson. Soffel shops at Penney’s and worries that the change will result in poor customer service. “I don’t want to walk into a place that’s so austere that it’s nothing but mechanics and automation,” he adds. “I like to talk to people, they help me, they ask me, they take me to find things.”
Penney’s CEO Ron Johnson says the store will switch the traditional bar codes on price tags to RFID’s – or radio frequency identification chips – and use self-service checkout machines found in many grocery stores.
“That’s taking away jobs from people,” notes Kuhn. “People need to work and make money. Plus, if I’m coming to the store, I want to have someone there to help me.”
Now, JCPenney will not be eliminating store clerks all together. Each of the proposed boutiques within the store will have its staff. But beginning in 2014, at check-out you’ll be on your own.
In an email, a Penny’s spokesman would not say how many jobs would be lost, saying instead this new check-out would actually free employees to help customers in other ways.
"If you've got a business, you didn't build that." If the World's Greatest Orator turns out to be a one-term president, it is likely to go down as the most memorable utterance of his career. Mitt Romney certainly hopes that happens. HotAir.com's Ed Morrissey has highlights of Mitt Romney's response, in a speech yesterday at Irwin, Pa.:
The idea to say that Steve Jobs didn't build Apple, that Henry Ford didn't build Ford Motor, that Papa John didn't build Papa John Pizza, that Ray Kroc didn't build McDonald's, that Bill Gates didn't build Microsoft, you go on the list, that Joe and his colleagues didn't build this enterprise, to say something like that is not just foolishness, it is insulting to every entrepreneur, every innovator in America, and it's wrong.
And by the way, the president's logic doesn't just extend to the entrepreneurs that start a barber shop or a taxi operation or an oil field service business like this and a gas service business like this, it also extends to everybody in America that wants to lift themself [sic] up a little further, that goes back to school to get a degree and see if they can get a little better job, to somebody who wants to get some new skills and get a little higher income, to somebody who have, may have dropped out that decides to get back in school and go for it. . . . The president would say, well you didn't do that. You couldn't have gotten to school without the roads that government built for you. You couldn't have gone to school without teachers. So you didn't, you are not responsible for that success. President Obama attacks success and therefore under President Obama we have less success and I will change that.
I've got to be honest, I don't think anyone could have said what he said who had actually started a business or been in a business. And my own view is that what the President said was both startling and revealing. I find it extraordinary that a philosophy of that nature would be spoken by a president of the United States. It goes to something that I have spoken about from the beginning of the campaign. That this election is, to a great degree, about the soul of America. Do we believe in an America that is great because of government or do we believe in an America that is great because of free people allowed to pursue their dreams and build our future?
There's a website called didntbuildthat.com with a variety of hilarious treatments of the Obama philosophy. Of course, whoever's running the site didn't build that. As he acknowledges, Al Gore did. And hey, remember Julia, Barack Obama's composite girlfriend? At 42, she starts a Web business. Under President Obama, she didn't build that.
Obama may be God's gift to comedy, but Romney is right that the philosophical stakes here are serious. The president's remark was a direct attack on the principle of individual responsibility, the foundation of American freedom. If "you didn't build that," then you have no moral claim to it, and those with political power are morally justified in taking it away and using it to buy more political power. "I think that when you spread the wealth around, it's good for everybody," Obama said in another candid moment, in 2008.
This isn't even Obama's only such revelatory comment of the past week. Politico.com reports that the president, in an interview with WTOL-TV of Toledo, Ohio, let the mask slip again when asked about the ObamaCare mandate tax. "It's less a tax or a penalty than it is a principle--which is you can't be a freeloader on other folks when it comes to your health care, if you can afford it," he said.
Of course this is a dodge. The administration claimed that the mandate was not a tax for political purposes but was a tax for legal purposes. Chief Justice John Roberts tied himself in knots to accept the argument Obama is now running away from. Between them, the solicitor general and the chief justice look as if they were too clever by 1.
What's objectionable about Obama's comment, however, is not "tax" or "penalty" or even "principle." It's the way he uses the word "freeloader."
Normally we think of a freeloader as somebody who sponges off others, which in the context of public policy means the government. A freeloader is an able-bodied welfare recipient, or someone who fakes a disability to collect Supplemental Security income, or who waits until his unemployment runs out before looking for a job.
Associated Press
The sweat of his brow made America great.
Now, think about how the ObamaCare mandate tax is structured. As Roberts noted in his opinion for the court in NFIB v. Sebelius, "It does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold in the Internal Revenue Code. For taxpayers who do owe the payment, its amount is determined by such familiar factors as taxable income, number of dependents, and joint filing status."
The only people who pay the ObamaCare mandate tax are people who make a living. Actual freeloaders are exempt. What Obama calls a freeloader is someone who makes his own money and pays his taxes but does not spend his money in the government-approved way.
The Obama campaign hotly disputes Romney's contention that the president meant what he said. A "fact check" from the Obama-Biden "Truth Team" (formerly Attack Watch) claims that Romney "is taking President Obama's words out of context" to produce "a complete distortion." Here is the full context, as presented by the Truth Team:
If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you've got a business, you didn't build that. Somebody else made that happen. The Internet didn't get invented on its own. Government research created the Internet so that all the companies could make money off the Internet. The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.
The Team then explains: "The President's full remarks show that the 'that' in 'you didn't build that' clearly refers to roads and bridges--public infrastructure we count on the government to build and maintain."
That's bunk, and not only because "business" is more proximate to the pronoun "that" and therefore its more likely antecedent. The Truth Team's interpretation is ungrammatical. "Roads and bridges" is plural; "that" is singular. If the Team is right about Obama's meaning, he should have said, "You didn't build those."
Barack Obama is supposed to be the World's Greatest Orator, the smartest man in the world. Yet his campaign asks us to believe he is not even competent to construct a sentence.
"I'm running because I believe that in American no one should go bankrupt because they get sick," Obama said. To “try and move forward and make sure that every American has affordable health insurance and that the insurance companies are treating them fairly. That’s what we fought for, that’s what we're going to keep. We are moving forward.”
"We will not go back to the days when insurance companies pray on the sick," Obama said
WASHINGTON (Reuters) - At the Henry Ford Hospital in Detroit, pharmacists are using old-fashioned paper spreadsheets to track their stock of drugs in short supply - a task that takes several hours each day.
Most of the hospital's medicines - with usage estimated at $100 million a year - are tracked by automated systems that allow for quick reorders when the supply runs low. But these automated systems, designed to help the hospital avoid purchases and storage costs of unused pills and vials, do not work if it is uncertain when the next batch of drugs will come in.
A few hundred medicines make the list of drugs in short supply: anesthetics, drugs for nausea and nutrition, infection treatments and diarrhea pills. A separate list has scarce cancer drugs for leukemia or breast cancer.
"Now we have to go through the pharmacy and count those drugs on a daily basis ... to make sure we don't run out," said Ed Szandzik, director of pharmacy services at the hospital for over a decade.
The growing scarcity of sterile, injectable drugs is one of the biggest issues confronting hospitals across the country, and will be a key issue at the annual American Society of Clinical Oncology meeting in Chicago this weekend.
Health officials blame the shortages on industry consolidation that has left only a handful of generic manufacturers of these drugs, even as the number of drugs going off patent is growing. Some drugmakers have been plagued by manufacturing problems that have shut down multiple plants or production lines, while others have stopped producing a treatment when profit margins erode too far.
Some medicines have been periodically short in the past, doctors and pharmacists say, but the number of drug shortages has escalated in recent years, jumping from 56 in 2006 to 250 last year, according to U.S. Food and Drug Administration figures.
Generic drugmakers like U.S.-based Hospira Inc and Teva Pharmaceutical Industries, an Israeli company, say they are building new facilities to prevent future shortages.
But in the meantime, pharmacies around the country are counting pills, begging neighboring hospitals for extra supplies and scouring the Internet for news of additional supply disruptions.
When rumors surface of an impending shortage, some pharmacies rush to buy up more than they need, likely leading to bigger shortages, analysts and other pharmacists said.
All of this requires regular attention from hospitals to manage the crisis. At Children's National Medical Center in Washington, D.C., pharmacists and administrators meet weekly to discuss just how dire the situation is for different medicines.
"Every Wednesday before we have that (meeting), I have a bit of anxiety," said Ursula Tachie-Menson, acting chief of the hospital's pharmacy division. She spends about 30 percent of her time each week addressing shortage-related problems.
"Out of all the (21) years I have been practicing, these drug shortages have been one of the biggest challenges," she said.
EARLY WARNING SYSTEM
The FDA has been acting under an October executive order from President Barack Obama to fill in the gaps. It has had success getting an early warning from drug companies when they foresee a new shortage, allowing the agency to persuade other manufacturers to increase their production or look overseas to guarantee supply.
"I can tell you that there's not a single company I'm aware of out there that isn't talking to the FDA," said David Gaugh, head of regulatory sciences at the Generic Pharmaceutical Association, referring to the trade group's members.
The FDA said early notification has helped prevent shortages of 128 drugs in six months. It also estimates the rate of new shortages is slowing, with half the number of new scarce drugs this year compared with 2011.
There are currently about 130 drugs in short supply listed on the FDA's website.
But surveys and anecdotes keep piling up, showing doctors' efforts to find scarce drugs have not become easier. This month, a website for U.S. oncologists, MDLinx, surveyed 200 doctors and found more than 90 percent of them have experienced shortages of key cancer drugs.
CANCER, ANESTHESIA AND NUTRITION
A clinical nutrition group, the American Society for Parenteral and Enteral Nutrition (ASPEN), found that 70 percent of its 800 members who responded to an online survey, said they had seen shortages of adult injectable multi-vitamins, used for basic nutrition for patients with intestinal issues. ASPEN members responding to the survey included doctors, nurses and pharmacists.
More than a quarter were not giving their patients multi-vitamins because of the shortages, placing them at risk of severe vitamin deficiencies that can lead to issues like anemia, due to a lack of folate, or scurvy, which happens when people do not get vitamin C.
In extreme cases, a deficiency of a type of B vitamin called thiamine can lead to cardiac arrest or death.
"This is an act of daily living for people now," said Jay Mirtallo, president of the group. "How that can be acceptable, I don't understand."
When a drug is not available, doctors have to seek alternatives, which may not work as well or cost more money. Others have to ration limited supplies of a life-saving treatment to only those who need it most.
Dr. Steven Allen, a specialist in blood cancers at North Shore University Hospital in New York, recently treated a young woman who had suffered several relapses of a life-threatening cancer known as acute lymphoblastic leukemia.
Allen found a combination that involved thiotepa, an older drug his patient had not tried and could tolerate.
"When I ordered it, I was informed that there was none available, and it couldn't be obtained," said Allen, also chair of the committee on practice at the American Society of Hematology. He substituted a similar drug, but one that the woman had already taken. "We tried to make up a dose that was equivalent to thiotepa and hoped for the best. ... But I think it may have compromised her care."
On May 14, the FDA announced it would allow temporary imports of thiotepa made by Italian company Adienne Pharma & Biotech, to relieve manufacturing delays at Bedford, Ohio-based Bedford Laboratories, a unit of the private German company Boehringer Ingelheim that is the only approved manufacturer for the United States. Bedford said in April it did not know when further shipments would be available once its supplies ran out.
Imports have not helped anesthesiologists like Dr. Jason Soch, who hears about a new shortage nearly every week during his rotations at several surgical centers in Philadelphia. These are often "workhorse" drugs such as fentanyl, midazolam and propofol, used every day during surgery.
"It seems like as soon as one drug is no longer in shortage, we get an email from the hospital pharmacist that they're on their last box of another," he said.
Every disruption forces doctors to change dosing, or give new drug combinations they may not be as familiar with.
"I didn't envision this when I went to anesthesia," Soch said. "I'd figured we'd have whatever we needed."
SCRAMBLING FOR A FIX
The problem has inspired some creative solutions, like a drug shortages mobile application called RxShortages that allows medical and pharmacy staff to track new drug shortages posted on websites, including the FDA's. Mick Schroeder, a pharmacy resident who created the app, said it has been downloaded about 25,000 times.
Brooke Bernhardt, an oncology pharmacist at Texas Children's Hospital, said she checks RxShortages at least once a day.
"Unfortunately, at any point we expect a drug to go on back order," she said.
Szandzik, the pharmacy director at Henry Ford Hospital in Detroit, admits he would buy a larger quantity of drugs than usual if it became available.
"If I have to get one or two months' supply, I'll buy it, because our patients need it," he said. "Hoarding is in the eye of the beholder."
Some distributors and manufacturers prevent hoarding by allocating drugs based on historical demand. Other pharmacists say it is natural to want to buy more to ensure supply.
"Why did it ever have to get to this point in the first place?" Szandzik asked. "It takes a lot of hours, a lot of labor, a lot of luck to make sure our patients are safe. ... And I don't see it getting better for a while."
(Reporting by Anna Yukhananov; Editing by Michele Gershberg, Jackie Frank and Jan Paschal)
QUESTIONS:
1. Why you do you think there is a shortage of these drugs?
2. Did the article say anything about what has happened to the price of these drugs?
3. Based on what the article says, and doesn't say, who or what is being relied on to direct how resources in the drug sector of the economy will be used, government planners or market forces?
4. What would happen if producers of these drugs were free to charge whatever prices they wanted?
In the real world, many things are done simply because they have to be done, not because doing them brings immediate pleasure to those who do them. Some people take justifiable pride in working to take care of their families, whether or not the work itself is great.
Some of our more Utopian intellectuals lament that many people work "just for the money." They do not like a society where A produces what B wants, simply in order that B will produce what A wants, with money being an intermediary device facilitating such exchanges.
Some would apparently prefer a society where all-wise elites would decide what each of us "needs" or "deserves." The actual history of societies formed on that principle -- histories often stained, or even drenched, in blood -- is of little interest to those who mistake wishful thinking for idealism.
CARACAS, Venezuela — By 6:30 a.m., a full hour and a half before the store would open, about two dozen people were already in line. They waited patiently, not for the latest iPhone, but for something far more basic: groceries.
“Whatever I can get,” said Katherine Huga, 23, a mother of two, describing her shopping list. She gave a shrug of resignation. “You buy what they have.”
Venezuela is one of the world’s top oil producers at a time of soaring energy prices, yet shortages of staples like milk, meat and toilet paper are a chronic part of life here, often turning grocery shopping into a hit or miss proposition.
Some residents arrange their calendars around the once-a-week deliveries made to government-subsidized stores like this one, lining up before dawn to buy a single frozen chicken before the stock runs out. Or a couple of bags of flour. Or a bottle of cooking oil.
The shortages affect both the poor and the well-off, in surprising ways. A supermarket in the upscale La Castellana neighborhood recently had plenty of chicken and cheese — even quail eggs — but not a single roll of toilet paper. Only a few bags of coffee remained on a bottom shelf.
Asked where a shopper could get milk on a day when that, too, was out of stock, a manager said with sarcasm, “At Chávez’s house.”
At the heart of the debate is President Hugo Chávez’s socialist-inspired government, which imposes strict price controls that are intended to make a range of foods and other goods more affordable for the poor. They are often the very products that are the hardest to find.
“Venezuela is too rich a country to have this,” Nery Reyes, 55, a restaurant worker, said outside a government-subsidized store in the working-class Santa RosalÃa neighborhood. “I’m wasting my day here standing in line to buy one chicken and some rice.”
Venezuela was long one of the most prosperous countries in the region, with sophisticated manufacturing, vibrant agriculture and strong businesses, making it hard for many residents to accept such widespread scarcities. But amid the prosperity, the gap between rich and poor was extreme, a problem that Mr. Chávez and his ministers say they are trying to eliminate.
They blame unfettered capitalism for the country’s economic ills and argue that controls are needed to keep prices in check in a country where inflation rose to 27.6 percent last year, one of the highest rates in the world. They say companies cause shortages on purpose, holding products off the market to push up prices. This month, the government required price cuts on fruit juice, toothpaste, disposable diapers and more than a dozen other products.
“We are not asking them to lose money, just that they make money in a rational way, that they don’t rob the people,” Mr. Chávez said recently.
But many economists call it a classic case of a government causing a problem rather than solving it. Prices are set so low, they say, that companies and producers cannot make a profit. So farmers grow less food, manufacturers cut back production and retailers stock less inventory. Moreover, some of the shortages are in industries, like dairy and coffee, where the government has seized private companies and is now running them, saying it is in the national interest.
"It's difficult to be a good economist and simultaneously be perceived as compassionate. To be a good economist, one has to deal with reality. To appear compassionate, often one has to avoid unpleasant questions, use "caring" terminology and view reality as optional.
*****
"You say, "Williams, the White House and Congress should do something." The track record of doing nothing is pretty good compared with doing something. None of our economic downturns in the century and a half prior to 1930 lasted as long as the Great Depression."
"Race is just one of the areas in which the rhetoric and the reality often go in opposite directions. Political rhetoric is intended to do one thing -- win votes. Whether the policies that accompany that rhetoric make people better off or worse off is far less of a concern to politicians, if any concern at all.
***
"One of the many reasons why rhetoric does not automatically translate into reality is that the ramifications of so many government policies produce results completely different from what was claimed, or even believed, when these policies were imposed.
"The critique from the right is that the continued steps to stimulate the economy are both unnecessary, given that the financial crisis has passed, and inflationary. Allan Meltzer, an economist and historian of the Fed, says Bernanke is trying to do what is beyond his powers. “The current high unemployment is not a monetary problem,” Meltzer says, meaning we are past the point where further rate cuts will stimulate hiring. Bernanke has been accused of trying too many remedies with poor odds of success. Possibly, he would plead guilty to this. He has said he admires Franklin Roosevelt’s catchall approach to fighting the Depression, which was less an ideology than an enthusiasm for enthusiasms. The fear now is that the Fed’s balance sheet—that $2.9 trillion—represents kindling for inflation that one day will catch.
The mechanism for ignition would be as follows: Each time the Fed purchases a Treasury security or a mortgage-backed bond, it credits the selling bank with a “reserve” in the same dollar amount. Bank reserves exist as electronic notations, but they represent real money available for loans, and much of that money is sitting idle today, partly because loan demand is weak. If banks, presently, were to lend all their excess reserves, say in the form of cash, the supply of currency would nearly triple overnight, and the price of a burger would, you can bet, do the same. And if the Fed were faced with such an onslaught, and chose to soak up the excess reserves by quickly selling its assets, the deluge would overwhelm markets, send interest rates soaring, and snuff out the recovery.
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