|
"Elections have been lost by just 537 votes." -Michael Moore |
Aboot Reader's Rep Home RSS Feed Posts By Topic 2008 Election Baseball Beer Drinking Economics Global Warming Hockey Media-Local Media-National NARN Politics-Local Politics-National Religion Separated At Birth? Travel Contributors The Elder: rightwinger23 at hotmail.com Saint Paul: saintp at excite.com JB Doubtless: abunodisceomnes at hotmail.com Atomizer: atomizer77 at yahoo.com
FEATURES ATOMIZER's A-LIST JB's SACK SITES SAINT PAUL'S SHOW STOPPERS ELDER's ELITE THE USUAL SUSPECTS IN AGGREGATE CENTER OF GRAVITY INVISIBLE AIRWAVES |
Friday, August 01, 2008
Last week, while discussing a bad commercial flight experience he recently had experienced Dennis Prager mentioned that the only time he really envied the truly wealthy was when he had to travel by air. Being able to fly in a private jet and avoid the hassles of the modern airline experience are a definite luxury that makes life better. (Usually.)
I'm a simple man when it comes to most things, but I too can appreciate the benefits that wealth brings when it comes to flying. There are two other such areas that come to mind for me where I can see where having a large stash of filthy lucre would be most handy. We live very close to a private country club. I don't golf much these days, but when I walk by the pristine grounds sparsely populated by happy golfers enjoying a leisurely round I understand why people shell out the big ching for a membership. Golfing at public courses usually involves scheduling, waiting, crowds and other hassles that have diminished my enjoyment of the game over the years. Earlier in the week, we attended a family reunion in Wisconsin. One night, we were guests at a lake-side home. We enjoyed a barbecue, a few drinks, and a boat ride. Its been a while since I've been out on a lake and I forgot how pleasant and relaxing it can be. Living on the water is definitely a quality of life privilege that comes with big money. Labels: Economics Monday, July 28, 2008
The WSJ interviews Harvard economist Edward Glaeser on the State of the City (sub req):
WSJ: What about looking to European cities, where more people walk and rely on mass transit, as a model for the U.S.? MR. GLAESER: There's been a segment of urban developers who have been enthusiastic about the model in Europe for quite some time [because] it's much more environmentally sensitive. But there are bad aspects as well. While there certainly seem to be some smart things done in Europe, it's a mistake to think they've got it right and we've got it wrong. There are many good things that came out of giving Americans the opportunity to live in big houses on the edge of urban areas. If you think about the lifestyle of ordinary Americans living on the fringe of Houston or Dallas, for example, compared to what their lifestyle would be in an older European city -- living in a walk-up apartment there compared to a 2,500-square-foot house here they bought for $130,000 with a 24-minute commute -- it's extraordinary in the low-cost areas of this country what a $60,000 family income gets you. There's a reason Atlanta, Dallas, Houston and Phoenix are our four fastest-growing areas. They offer an astonishingly high standard of living for ordinary Americans. New York City is a great place to be really rich and not a terrible place to be really poor, but it's a pretty hard place to live on $60,000 a year. You don't experience anywhere near the basic standard of living you would in Houston on the same income. Labels: Economics Thursday, July 24, 2008
Usually I'm not one to complain about the "throw away" products that result from our consumption driven market society. But allow my to wax curmudgeonly for a moment here about something I encountered yesterday.
A few years ago, I purchased a Black and Decker cordless lawn trimmer. It's powered by a 12v battery and came with a plug-in charger. It's been a nice little tool for yard work and I've been quite satisfied with its performance. However, during our recent household relocation the charger cord was severed due to improper packing (my bad). So far, the trimmer has had enough stored juice to keep working, but at some point soon, it will need to be charged. After failing to find a replacement charger at local stores, I went online. It didn't take long to find a couple of different sites that offered it for sale. For $32. I also discovered the same model lawn trimmer for sale. I could purchase the entire trimmer, brand new with charger for $50. That just doesn't seem right. I don't want a new trimmer. I don't need a new trimmer. But yet it seems stupid for me to shell out thirty-two bones for the charger alone when I can get an entire brand new trimmer for only eighteen more. Just another example of the cognitive dissonance that the modern consumer occasionally encounters. Labels: Economics Thursday, May 08, 2008
Bert e-mails to hep us to a story on what sales of Scotch may tell us about the economy:
For those trying to see through the current global economic fog and work out how bad things may get, enlightenment can come in many forms. Sales of scotch whisky are regarded by some as a fair, if unusual, barometer of economic prospects and how confident people feel about the present and the future. "I tend to believe there is a correlation between the two," says Paul Hughes, director of the International Centre for Brewing and Distilling at Heriot Watt University. The reason for this is fairly simple. Scotch is a truly global product sold in more than 200 countries. Though it may not be a staple item Well maybe not in your house. or a commodity, like oil, which is traded by the second and whose price is tracked in minute detail, it is enjoyed in most corners of the world and therefore a decent indicator of broader buying patterns. Historically, scotch sales have tended to follow the global economic curve. In the last 30 years, the value of sales has only fallen three times: in 1983, 1998 and 2004. This makes sense. If you are going to cut back, one of the areas that would likely be impacted would be booze. Not that you would quit drinking, but instead of a fifty dollar bottle of single malt Scotch, you might opt for a fifteen dollar domestic whiskey instead. I used to think that the liquor industry was fairly recession proof, but a friend who owns a store here reports that rising gas prices and the softening economy have directly impacted his sales. Again, it's not that people aren't drinking anymore. They're just drinking more frugally. Labels: Economics Friday, May 02, 2008
David Brooks has an interesting column on the realities and challenges of The Cognitive Age:
Globalization is real and important. It's just not the central force driving economic change. Some Americans have seen their jobs shipped overseas, but global competition has accounted for a small share of job creation and destruction over the past few decades. Capital does indeed flow around the world. But as Pankaj Ghemawat of the Harvard Business School has observed, 90 percent of fixed investment around the world is domestic. Companies open plants overseas, but that's mainly so their production facilities can be close to local markets. Nor is the globalization paradigm even accurate when applied to manufacturing. Instead of fleeing to Asia, U.S. manufacturing output is up over recent decades. As Thomas Duesterberg of Manufacturers Alliance/MAPI, a research firm, has pointed out, the U.S.'s share of global manufacturing output has actually increased slightly since 1980. The chief force reshaping manufacturing is technological change (hastened by competition with other companies in Canada, Germany or down the street). Thanks to innovation, manufacturing productivity has doubled over two decades. Employers now require fewer but more highly skilled workers. Technological change affects China just as it does the America. William Overholt of the RAND Corporation has noted that between 1994 and 2004 the Chinese shed 25 million manufacturing jobs, 10 times more than the U.S. The central process driving this is not globalization. It's the skills revolution. We're moving into a more demanding cognitive age. In order to thrive, people are compelled to become better at absorbing, processing and combining information. This is happening in localized and globalized sectors, and it would be happening even if you tore up every free trade deal ever inked. Trying to stop or even slow this transition into the cognitive age is not only futile, but could have disastrous consequences for the United States. Politicians who pander by pretending that we can return to the "good old days" of relatively high-paying, low-cognitively-skilled jobs are doing a disservice both to the voters they claim to care about and the country itself. Instead of attempting to halt the inevitable, it would be better for all to accept the new reality and make plans for how we are going to adopt to it. Labels: Economics Monday, April 28, 2008
There's an old adage in economics that the cure for high prices is high prices. Another adage not heard enough these days is that at times the cure for economic pain is economic pain. In Friday's WSJ, Ronald McKinnon urged the Fed to recall the lessons of 19th century economist Walter Bagehot:
How does Bagehot's Rule apply to today's credit crunch? Bagehot was worried about gold losses to foreigners that would cause domestic credit markets to seize up even more and, worse, weaken the pound in the foreign exchanges. Now, foreigners are disinvesting from private U.S. financial assets, which itself worsens conditions in American markets. Additionally, foreign central banks, to stem the appreciations of their currencies against the dollar, are building up large dollar exchange reserves--much of which are invested in U.S. Treasury bonds. But U.S. Treasurys are the prime collateral for borrowing and lending in the multitrillion dollar U.S. interbank markets. Thus there is a foreign "drain" of prime collateral from the already-impacted private U.S. markets. The depreciating dollar also greatly exacerbates inflation in the U.S. Consequently, there is a strong case for raising the fed funds rate as much as is necessary to strengthen the dollar in the foreign exchanges--as Bagehot would have it--and to cooperate with foreign governments to halt and reverse the appreciations of their currencies against the dollar. The Fed should quit pulling out stops to try to prevent the American economy was officially falling into a recession (if we're not already in one). There are worse things than a recession (especially if its relatively short and mild) and the continued weakening of the dollar is setting us down a path to just such a thing. It's time to bite the bullet and endure the pain. The Fed can cut rates again and put some more morphine into the drip, but it's not going to help the long-term health of the economy. Mister, we could use a Fed Chairman like Paul Volker again. By the way, when guys like this (WSJ-sub req) are worried, I'm worried: Peter Bernstein has witnessed just about every financial crisis of the past century. As a boy, he watched his father, a money manager, navigate the Depression. As a financial manager, consultant and financial historian, he personally dealt with the recession of 1958, the bear markets of the 1970s, the 1987 crash, the savings-and-loan crisis of the late 1980s and the 2000-2002 bear market that followed the tech-stock bubble. Mr. Bernstein, whose books include "Against the Gods: The Remarkable Story of Risk," sees two culprits. One is the abuse of securitization -- the trend for banks to hold fewer loans on their books and instead turn them into securities that were sold to other investors. The other is simply years of overborrowing by financial institutions and consumers alike. From the interview: WSJ: How long do you think this whole process will take, before we get back to normal? Mr. Bernstein: Longer than people think. The people who think we will have turned in 2009 are wrong. There has to be a respite along the way. Nothing goes in one direction forever. But it will take longer than people think. If that weren't the case, I would be talking entirely differently. I would be saying, "What an opportunity we have got." And I just can't believe that the opportunity is here yet. There is too much to unwind. WSJ: Can you explain the reason you think it will take a long time? Mr. Bernstein: We have to go back to a moment when people have the courage to borrow and lenders have the courage to lend. Until credit is going up instead of down, you can't have growth. Housing has got to be a very important part of that; it always has been. You have to reach a point where somebody says, "This house is cheap, I am going to buy it," or where some businessman says, "This is a great opportunity for us to expand our business. Everything is available to us." If China goes into a recession, God knows. The Iraq war and the whole situation with terrorism, we really don't know where that is going to come out. There are so many things that have got to get buttoned down before you say that the future looks good enough to take a risk. Labels: Economics Friday, April 25, 2008
Recently, Hillary and Obama have been trying to gin up votes by trumpeting their superior understanding of the economy and plans for saving us from "the shambles" that is the US economy at the present time.
"John McCain admits he doesn't understand the economy -- and unfortunately he's proving it in this campaign," Clinton told the Pennsylvania AFL-CIO union group. After seven disastrous years of George Bush and Dick Cheney, the stakes in this election couldn't be higher and the need to change course couldn't be more urgent. But John McCain is only offering more of the same," the New York senator said. Obama, an Illinois senator, said all McCain offers "is four more years of the same George W. Bush policies that have gotten us into this pickle." He noted McCain's support for extending Bush's tax cuts, which Obama said would help the wealthy, and his support for trade agreements that Obama said do not protect U.S. workers. With their weak qualifications in the realms of foreign policy, national defense, and general leadership, it is understandable that these two Democrats would attempt to make something else the decisive issue for this election. The current downturn/recession gives them an opportunity. And the typical Democrat platform of promising that the government will give the citizens more and more stuff for nothing can be a seductive pitch. However, trouble may lie ahead for even this appeal. Thomas Barnett is a long-time Democrat. During his appearance on NARN last year he made known his fondness for the "centrism" of a Hillary Clinton. And even he has a problem with the economic rhetoric and schemes being peddled by the Democrats running for President. Both Clinton and Obama, if elected, present the frightening spectacle of a pandering Democratic White House looking for easy wins with an angry citizenry on protectionism because getting such wins on Iraq will be almost impossible. Both Clinton and Obama now bash NAFTA, China and oppose the free trade pact proposed with Colombia, the rejection of which would constitute one big F.U. to Uribe and the magnificent effort he's put in despite our still foolish, supply-side-focus on the drug "war." McCain would scare me on many levels, but a Dem prez plus strengthened Dem majorities in both houses? Yikes, that's got Smoot-Hawley written all over it, and that would be significantly more damaging to world stability than even nuking Iran--I kid you not. The longer such nonsense gets pushed by the Dem candidates, the more presidential McCain looks--I kid you not. McCain and the Republican party establishment will no doubt be making similar criticisms and arguments in the general election campaign to come. When they are shouted down as fear-mongering, lying, extremists, we'll have to remember to send Barnett a membership card for the Right Wing Noise Machine. Labels: Economics Wednesday, April 23, 2008
With gas prices again on the rise, Senate Democrats have an answer. More Congressional investigations. Democrats Demand Probe Of Oil-Market Speculation (WSJ-sub req):
"I think the quickest fix is for the president's fraud task force within the Department of Justice to initiate an oil and gas market fraud investigation," Sen. Cantwell said. "I think that they should work with the Federal Trade Commission, they should work with the Commodity Futures Trading Commission and others to get to the bottom of whether there is manipulation in the speculation of oil prices." Sen. Klobuchar added, "we need to have the Justice Department investigate the entire state of the oil and gas industry." I believe that the Congress has counducted several such investigations of the oil and gas industry in the last few years. Despite the fact that every single one revealed no collusion, "price gouging," or fraud occuring within the industry, this is the best (and only) answer Dems seem able to come up with. Unless you count this gem from Diane Feinsten which seems to suggest that the government should shut down the futures markets for oil and gas: With Earth Day as a backdrop to the concern about use of fossil fuels, Sen. Dianne Feinstein (D. Calif.), said that "until we build the replacements for gasoline...there ought to be a prohibition on market speculation." Speculation meaning people betting that oil and gas prices will go higher and then realizing gains off their investments. Yeah, shutting down futures trading will surely fix the whole rising price problem. No need to talk about little things like supply and demand when you can just look to more government intervention to solve the problem. Labels: Economics Monday, April 14, 2008
A headline at MSNBC's website today reads Poll: Growing majority avoid buying homes with a scare sub-header of "Americans' pessimism over housing crisis seen growing." The story goes to detail the drastic impact the housing "crisis" is having on ordinary Americans:
"This is a great time to buy, but not necessarily to sell," said Robert Jackson, who lives in a two-bedroom house in Ferguson, Mo., with his wife and four young children. He said he would love to purchase a larger home, but can't because even if he found a buyer, he would probably lose thousands on his house, which he bought less than two years ago. "We're just going to have to slap a Band-Aid on it and stay here until the market gets a little bit better," Jackson, 30, said in a follow-up interview. Yes, it's sounding more and more like the Great Depression all over again. In the fifth 'graph, we learn exactly what "growing majority" really means: Sixty percent said they definitely won't buy a home in the next two years, up from 53 percent who said so in an AP-AOL poll in September 2006. At the same time, just 11 percent are certain or very likely to buy soon, down from 15 percent two years ago. Maybe it's just my natural optimism, but is this really such devastating news? After all the wheeling, dealing, and moving about that transpired in the last ten years is it really that surprising that fewer Americans are considering a move now that housing prices are falling? Isn't that a natural and prudent reaction to market conditions? I'm actually surprised that 40% aren't ruling out buying a house in what is really a pretty short time horizon. Housing prices rise and fall. At times the market favors the buyer, at others the seller. Since many moves involve both selling and buying a home, the net impact isn't that much different if the market is weak or strong. You either get more and pay more or visa versa. Having had recent experience with both ends of the equation, I am encouraged by the fact that most of the poll respondents appreciate the opportunity current market conditions provide: Fifty-nine percent think now is a good time to buy. A very good time indeed. Labels: Economics Wednesday, April 09, 2008
Losing a pet along with the house:
The families started coming in during the winter, parents and kids gathered in the cramped lobby of the Montgomery County Humane Society shelter to hand over their pets. It's a largely hidden consequence of the housing meltdown: a spike in the number of animals being turned in or abandoned as families are forced from their homes. Here we go. I can imagine the new face of the mortgage crisis is going to be a sad puppy. God help those predatory lenders now. Not all area jurisdictions are reporting similar activity. In the District, animal control officials said they have no way of determining whether the animals they receive are economic refugees. Economic refugees? We're talking cats and dogs here, cats and dogs. Pets are not people. Is a little perspective too much to ask? Labels: Economics Tuesday, April 08, 2008
Seinfeld The Chicken Roaster:
Kramer: Hey, stay away from the chicken, bad chicken, mess you up. Seth: That's not going to be good for business. Jerry: That's not going to be good for anybody. The economy is clearly not in good shape. Whether we are already in a recession or heading toward one, most of the indicators signal growing economic weakness. And this being an election year, Democrats have not shied away from jumping on and exaggerating every bit of bad economic news that comes outs. We're hearing again how this is the worst economy since the Great Depression and George W. Bush is the latter day version of Herbert Hoover. To a certain extent, it's understandable for them to try to emphasize our current economic problems to make the case to elect them in November. But what's not understandable is the way that some on the left actually seem to celebrate bad economic news. It's not Democratic pols so much as it is certain members of the media and many left-wing blogs. Their reaction to any sign of economic trouble is often gleeful and gloating. More job losses? Ha, told you so. Financial firms collapse? Good riddance. The dollar weakens? We're getting what we deserve. These cheerleaders for recession almost seem as invested in defeat for the US economy as they are invested in defeat for the US military in Iraq. Funny, but last time I checked the economy didn't belong to one political party. A strong and healthy economy should be something that ALL Americans would want. During the 1990s, I didn't share many of President Clinton's political views, but I always wanted the economy to be good. In 1996, I wasn't hoping for an economic downturn to help get Bob Dole in the White House. A strong economy is good for the country, good for business, and good for the individual American. A recession is not going to be good for business. And that's not going to be good for anybody. Labels: Economics Thursday, April 03, 2008
An editorial in today's Wall Street Journal reminds Democrats that if they're really looking for the Herbert Hoover of our time, they might want to check the mirror:
To hear Mr. Schumer and his fellow-traveling columnists tell it, Hoover's great policy blunder was to do nothing, all the while insisting that everything was fine. But the problem with Hoover's economic policy isn't that it was passive but that it was actively destructive. In 1930, he signed the Smoot-Hawley Tariff Act, setting off a wave of protectionist retaliation that undid the globalization of the preceding decades and did far more harm to the world economy than the stock-market crash ever did. Two years later, amid a bad recession, he undid the Calvin Coolidge-Andrew Mellon tax cuts, raising the top marginal income-tax rate to 63% from 25%. The recession became a Depression. Now, since we're talking Hoover, which Presidential candidate has a similar agenda of protectionism and tax increases? Hmmm. Labels: Economics Tuesday, March 11, 2008
One of the first questions that I had when the Spitzer news came out yesterday was how any prostitute could command $5500 an hour. My wife was wondering the same thing when we discussed the matter last night: what are you getting for that price that's so much better?
Obviously, it's a step up from the soiled dove you pick up on the street corner, but what's the difference between $500 an hour, $1000 an hour, and $5500 an hour whores? Discretion? Appearance? Certain "skills"? Or are you just paying a ridiculous luxury premium that's doesn't correlate to the actual service provided? Seems like a subject that one of them dismal scientist guys would want to explore further. UPDATE: My favorite headline on l'affaire de Spitzer so far is.... Spitzer scandal seen as setback for climate change reforms That's a shame. UPDATE II: Steve from Grand Forks--a man apparently wise in the ways of high-end call girls (although in Grand Forks "high-end" usually means "she has most of her teeth")--e-mails to clarify: I thought I would let you in on the secrets of what makes a hooker worth $5,500 an hour, you naive, unlettered man not of the world. It has, in Willie Nelson's words, something to do with the chrome on a trailer hitch. Actually, of course, as Charlie Sheen famously said, quoting better men than he: "We don't pay 'em for the sex, we pay 'em to go away afterward." And men of wealth and taste, of course, have millions more reasons why they need them to go away with only a bang, not a whimper. Or as one of my colleagues, a former sports goon, said quickly, as he does everything: "Hey, wonder if she would pro-rate that down to a minute and a half?" Didja see Letterman last night? "Do you think it's too early to hit on Mrs. Spitzer?" PS: Our own Gov. John Hoeven, you know, immediately released a statement, "I've never paid for it in my life!" Labels: Economics Monday, March 10, 2008
In Saturday's WSJ, Sports Illustrated's Richard Hoffer listed his five favorite books on gambling (sub req). This book blurb caught my attention:
2. The Man With the $100,000 Breasts By Michael Konik Huntington, 1999 The action gene -- whatever it is that makes us bet on the turn of a card or, say, the flight of geese -- isn't mapped here or otherwise decoded. But it is proposed as the source of 90% of our fun. The action- obsessed people that Michael Konik profiles in "The Man With the $100,000 Breasts" all have astonishing tolerances for risk. The thrill may be lost on most of us: The only thing harder to comprehend than a man's willingness to accept a $100,000 bet that he won't be able to wear size 38C breast implants for a year is his reluctance to part with them once he collects his money. But the exhilaration of people quite certain that they can guess the future is oddly inspiring. More details available on the bet here. $100K to get breast implants for a year? Seems a little on the light side to me. Seriously, imagine what you would have to put up with for a year. Wearing a I was thinking about what I would have to be offered to go through with it. $1 million is still not enough. Ten million? It would be tough to say no to that. Everyone has their price. What would yours be? Sorry ladies, guys only. Labels: Economics Friday, March 07, 2008
There's a good opinion piece in today's Wall Street Journal called Freedom Means Responsibility that looks at government paternalism in various facets of economic life.
Subprime lending: Much paternalist scrutiny has recently centered on personal economics, including calls to regulate subprime mortgages. With liberalized credit rules, many people with limited income could access a mortgage and choose, for the first time, if they wanted to own a home. And most of those who chose to do so are hanging on to their mortgages. According to the national delinquency survey released yesterday, the vast majority of subprime, adjustable-rate mortgages are in good condition,their holders neither delinquent nor in default. There's no question, however, that delinquency and default rates are far too high. But some of this is due to bad investment decisions by real-estate speculators. These losses are not unlike the risks taken every day in the stock market. The real question for policy makers is how to protect those worthy borrowers who are struggling, without throwing out a system that works fine for the majority of its users (all of whom have freely chosen to use it). If the tub is more baby than bathwater, we should think twice about dumping everything out. Health care: Health-care paternalism creates another problem that's rarely mentioned: Many people can't afford the gold-plated health plans that are the only options available in their states. Buying health insurance on the Internet and across state lines, where less expensive plans may be available, is prohibited by many state insurance commissions. Despite being able to buy car or home insurance with a mouse click, some state governments require their approved plans for purchase or none at all. It's as if states dictated that you had to buy a Mercedes or no car at all. Payday lending: Economic paternalism takes its newest form with the campaign against short-term small loans, commonly known as "payday lending." With payday lending, people in need of immediate money can borrow against their future paychecks, allowing emergency purchases or bill payments they could not otherwise make. The service comes at the cost of a significant fee -- usually $15 for every $100 borrowed for two weeks. But the cost seems reasonable when all your other options, such as bounced checks or skipped credit-card payments, are obviously more expensive and play havoc with your credit rating. Anguished at the fact that payday lending isn't perfect, some people would outlaw the service entirely, or cap fees at such low levels that no lender will provide the service. Anyone who's familiar with the law of unintended consequences should be able to guess what happens next. Researchers from the Federal Reserve Bank of New York went one step further and laid the data out: Payday lending bans simply push low-income borrowers into less pleasant options, including increased rates of bankruptcy. Net result: After a lending ban, the consumer has the same amount of debt but fewer ways to manage it. Making people accept the financial consequences of their decisions, limiting government regulation, and talking about the law of unintended consequences? All of these views echo arguments made for years by free-market conservatives. Must have been written by a disciple of Milton Friedman, champion of the "Free to Choose" school of economics, right? Try George McGovern. Yes, THAT George McGovern. The candidate of amnesty, abortion, and acid who in 1972 proposed a $6,500 "guaranteed minimum income" for Americans has apparently seen at least a few rays of economic light in his later years. As he says in today's piece: Since leaving office I've written about public policy from a new perspective: outside looking in. I've come to realize that protecting freedom of choice in our everyday lives is essential to maintaining a healthy civil society. Why do we think we are helping adult consumers by taking away their options? We don't take away cars because we don't like some people speeding. We allow state lotteries despite knowing some people are betting their grocery money. Everyone is exposed to economic risks of some kind. But we don't operate mindlessly in trying to smooth out every theoretical wrinkle in life. The nature of freedom of choice is that some people will misuse their responsibility and hurt themselves in the process. We should do our best to educate them, but without diminishing choice for everyone else. Amen. If George McGovern can finally come around, there's hope for everyone. UPDATE: It only took thirty-six years for King to feel clean again. Now, if he would just shave off that hippie beard... Labels: Economics Wednesday, February 13, 2008
In our heads, we all know that there is no such as the Tooth Fairy as Arthur Laffer reminds us in today's WSJ in a piece called That Stimulus Nonsense (free for all):
In this world of ours, those resources going to the rebate recipients don't come from the Tooth Fairy. They have to come from workers and producers. If the resources come from workers and producers who thereby receive less for their work than they otherwise would have received, won't they in turn spend less? Of course they'll spend less, and the people who now supply them with less will also spend less, and so on down the line. As my former colleague and friend Milton Friedman liked to say, "There's no such thing as a free lunch," and this rebate is exactly what he meant. The net effect is that the reduction in demand from those who pay the real resources will be exactly the same size as the increase in demand from the rebate recipients. It's sad but true. Income effects always net to zero in a closed system. But at the same time in our hearts we all want to know what we're going to find under the pillow. Another piece in today's WSJ by Tom Herman provides The Skinny on the Stimulus Plan (sub req): What's in it for me? That's the question millions of taxpayers are asking after Congress approved an economic-stimulus package last week that includes one-time payments to more than 131 million households. President Bush is planning to sign the package into law today, and a Treasury Department spokesman says the payments are expected to begin flowing in May. Under the legislation, most people who pay federal income taxes will get up to $600 for individuals, or as much as $1,200 for married couples, with an additional $300 per child. Which will likely lead to a short-term stimulus for sellers of plasma TVs. Unless of course you happen to be among the wealthiest of Americans: The amounts begin to phase out for incomes above $75,000 for individuals and $150,000 for married couples who file jointly. Some of you greedy "wealthy" folks out there probably want to know why you're being left out in the cold: Q: Why did Congress impose income limits? A: Lawmakers wanted to get the money into the hands of people most likely to spend it quickly and help reinvigorate the economy. "The rebates will go to middle-income Americans and those aspiring to it," says a statement from House Speaker Nancy Pelosi, a California Democrat. "The wealthiest taxpayers are not eligible for this relief." Feel better now? Don't worry about people who don't pay incomes taxes either, for they will be taken care of: Many low-income Americans who pay little or no federal income tax will get something, too. So those who pay the majority of all taxes will get nothing, while those who pay nothing will get something? Seems fair. Nothing like a little good old fashioned income redistribution to stimulate the economy, is there? Laffer concludes his piece by reminding us of the dangers we face when politicians unite in a spirit of bipartisanship: But there's also collateral damage. Few in Congress understand or care. They think their actions either don't matter or that they would see a positive impact from their actions if only they did more. If the economy worsens and when their political sensors become alarmed, they'll up the dose, and goodness knows just how far this vicious cycle will take us. A quick glance back at the 16 years of presidencies of Lyndon Johnson, Richard Nixon, Gerald Ford and Jimmy Carter should give you pause. Whenever you observe bipartisan cooperation, hold on to your wallet and run to the basement. With it appearing increasingly likely that we're going to have a choice between President McCain or President Obama come November, you better make sure your basement is well-stocked for a long stay. Labels: Economics Friday, January 25, 2008
Arthr Laffer writes on the folly on trying to "soak the rich" in today's Wall Street Journal (free for all):
But now we get to the secret sauce, and the essence of what really happens in the realm of tax rates, incomes and tax payments by the rich. We have accurate data on both the total taxes paid by the top 1% of income earners, and on their comprehensive household income as measured by the Congressional Budget Office. From these two data series we can calculate the effective average tax rate for the top 1% of all income earners. Surprise, surprise: The effective average tax rate for the top 1% of income earners barely wiggles as Congress changes tax codes after tax codes, and as the economy goes from boom to bust and back again (see chart). The question is, how can that effective average tax rate be so stable? The answer is simply that the very highest income earners are and have always been able to vary their reported income and thus control the amount of taxes they pay. Whether through tax shelters, deferrals, gifts, write-offs, cross income mobility or any of a number of other measures, the effective average tax rate barely budges. But this group's total tax payments are incredibly volatile. For the low- and middle-income earners, the effective average tax rate has tumbled over the past 25 years, and so have tax revenues no matter how they're measured. Using recent data, in other words, it would appear on its face that the Democratic proposal to raise taxes on the upper-income earners, and lower taxes on the middle- and lower- income earners, will result in huge revenue losses on both accounts. But some academic advisers to Democratic candidates have a hard time understanding the obvious, devising outlandish theories as to why things are different now. Well they aren't! When will they ever learn? Labels: Economics Wednesday, January 23, 2008
But don't play games with the economy. Writing in today's Journal, George Melloan explains that despite what Hillary Clinton may believe, there is no such thing as a free stimulus (or a free lunch) (free for all):
Keynesianism crashed in the 1970s, when the U.S. suffered slow economic growth and high inflation: "stagflation." There was nothing in Keynesianism to explain this phenomenon. But there was an easy explanation available in classical economics, the simple principles that Ronald Reagan -- who learned at an early age that he had to work to eat -- understood very well. The so-called "supply-side" movement was nothing less or more than a return to these simple principles. The explanation was this: If a government hampers production through heavy taxes and economic regulation -- or by inflating the currency -- production will slow down and there will be less to consume. To revive production, government must reduce the tax and regulatory burden and kill inflation -- which Reagan did to such good effect. Tossing dollars from planes doesn't do it; neither did Hoover's attempts to help farmers through protectionism, which proved disastrous, nor FDR's unconstitutional scheme to help producers with price-fixing cartels. Clearly stock markets around the world aren't cheered by all the current talk of stimulus and a further cheapening of the dollar: They know all too well how politicians can convert adversity into catastrophe. Instead, the right policy is to make the Bush tax cuts permanent and pull up regulatory weeds, like Sarbanes-Oxley. Sound money and relief for producers is the best anti-recession prescription. It worked in 1981 because it was good policy. Say's Law is just as valid today as it was 200 years ago. Labels: Economics Tuesday, January 22, 2008
It's not easy to hold fast to your free market economic principles these days. The Democrats are trying to out demagogue each other on the horrible state of the economy and how the only answer to our woes is government, government, and yes MORE government. Most of the Republican candidates aren't much better. From the populism of Hucakabee to the corporatism of Romney, there's not a lot for a free marketeer to get excited about.
Then there's the various stimulus plans. On a policy level, they are all variations on the theme of "feeling good while accomplishing little." As Alan Reynolds explains in today's Journal (free for all): All proposals for fiscal stimulus claim to "jump-start" the economy by having the government borrow money from Smith and give it to Jones. Unfortunately, Smith is paid interest on that IOU, which implies a higher tax burden on somebody. That future taxpayer is, as usual, the forgotten man. All the attention is instead focused on Jones -- trying to get the Jones family to spend more on what Mr. Bush alluded to as "basic necessities." Investors know such consumer staples are the least cyclical component of the economy. The most recession-prone household purchases are those that can most easily be postponed, such as new homes, cars, appliances and furniture. Increasing the generosity of unemployment benefits, home heating subsidies, and food stamps is no help to such cyclical industries. An indiscriminate spurt in "aggregate demand" is essentially irrelevant to longer-term economic problems concentrated in particular industries and particular areas. Food stamps don't buy condos in Las Vegas or new cars from Detroit. Subsidies to lower-income households are also very difficult for Congress to take back and therefore unlikely to prove temporary. Extending unemployment benefits "increases the average duration of unemployment by about two weeks," according to the Congressional Budget Office. That is certainly no stimulus. The resulting higher unemployment rate then provides an ironic rationale for more spending, which hurts rather than helps. Transfer payments discourage work. Federal purchases absorb real resources such as skilled labor, real estate and equipment that would otherwise be available at a lower cost to private business. But on a personal level, I feel a bit like Krusty debating whether he should vote for Sideshow Bob: Krusty: Well, he framed me for armed robbery, but man, I'm aching for that upper-class tax cut. [votes for Bob] Well, I know the stimulus plans are a joke, but man, I'm aching for that $1600 tax rebate. Same with today's interest rate cut by the Fed: The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, cut its target for the federal funds rate by three-quarters of a percentage point to 3.5%, the biggest single cut in interest rates since August 1982. Given the weakness of the dollar and some other frightening signs that we're already slumping towards a Seventies style era of stagflation, a rate cut by the Fed is not what I would prefer from a policy perspective. But as someone who's been trying to sell a house in a soft market and hopefully purchase another one soon, lower interest rates sound pretty damn appealing right now. It's a tough time to separate the politics from the personal. Labels: Economics Wednesday, December 12, 2007
An editorial in today's Wall Street Journal suggests that if we really are interested in staving off a recession, we should stop cutting interest rates and start cutting taxes:
Even if you expect a recession, relying on the Fed as savior is a mistake. Monetary policy is only one economic policy lever, and it has to be used with care. The other, better tool is fiscal policy -- specifically a tax cut. On present Washington course, we are falling back into the 1970s' policy mix of easy money amid tax increases. Whenever the economy slowed in the 1970s, everyone clamored for the Fed to ease. The result was ever shorter recoveries amid steadily rising prices. The better policy mix is the one implemented by Ronald Reagan and Paul Volcker that broke stagflation in the 1980s. The Fed restored dollar credibility and avoided asset bubbles, while tax cuts spurred incentives to work and invest. Even on Keynesian grounds, a tax cut now makes sense if you're worried that the housing recession will slow consumer spending. An across the board tax cut on marginal personal and corporate income tax rates would also attract capital from around the world, increase the demand for dollars, and thus make the Fed's job easier. We realize it's heresy to suggest a tax cut in today's Beltway, but we were outliers in the 1970s too. Sooner or later, investors and Wall Street will both rediscover that easy money has its limitations. The smart Presidential candidate will be the one who starts talking about a tax cut before everyone else. With the weakness of the economy increasingly becoming a significant concern for voters, this is an issue begging for a strong voice to emerge from the contenders for the White House in 2008. It seems like an opportune time for Romney to call for tax cuts now and cap off the trifecta (his speech last week and yesterday's National Review endorsement). Labels: Economics Monday, December 10, 2007
The recent sub-prime mortgage bailout plan proposed by the Bush administration touches free-market conservative nerves for a number of reasons. It's an unneeded government intervention in the marketplace with dubious benefits for a select few that shifts responsibility and likely will have adverse long term impacts. Other than that, it's a great plan. In Saturday's Wall Street Journal, there were no less than six letters to the editor decrying the idea.
In today's paper, Alan Reynolds dissects the Bailout Plan (sub req) and finds its underlying premises wanting: The political excuse for getting the government involved in helping a few politically-favored borrowers is based on false assumptions that subprime mortgages were usually used to buy a house, that a huge percentage of subprime loans face foreclosure, and that the main reason for foreclosure is rising interest rates. All three conventional assumptions were undone by a new study from the Boston Fed. Its research shows that "most subprime loans are refinances of a previous mortgage." It estimates that "about 18% of people who finance home purchases with subprime mortgages will eventually experience foreclosure" within a 12-year period. Most importantly, the Boston Fed economists found that most foreclosures do not result from adjustable rates going up, but from local house prices going down.They "attribute most of the dramatic rise in foreclosures in 2006 and 2007 in Massachusetts to the decline in house prices that began in the summer of 2005. Subprime lending played a role but that role was in creating a class of homeowners who were particularly sensitive to declining house price appreciation, rather than, as is commonly believed, by placing people in inherently problematic mortgages." If you owe more money on a house than the house is worth, foreclosure can be a perfectly rational choice. Suppose Mr. Smith bought a house for $300,000 with no money down, but the value of that house has now fallen to $270,000. If he refinances or sells the house, he would still owe the mortgage servicer an extra $30,000. Falling home prices in many areas provide a powerful incentive to default on the loan, live rent-free for many months, and then hand the keys to the bank. Those who bought homes with no money down have nothing to lose by walking away if they can't resell their homes at a profit. Perhaps that explains why only those with substandard credit ratings are singled out for special treatment under the Bush administration's plan. The "hope now" behind this plan is that people who have good reasons to default will keep paying anyway, even if the value of their houses keeps falling. Again, other than that, it's a great plan. Reynolds also destroys the notion that there's anything "free-market" about it: Some in the news industry have described all this heavy-handed political intervention as the Bush administration's "free-market approach" to the threat of nonperforming mortgages. On the contrary, honoring contracts and property rights is absolutely essential to the proper functioning of a free society and free economy. A mortgage is a binding contract between consenting adults. A mortgage-backed security is private property. It is the antithesis of a free market for the government to fix prices, pressure mortgage service companies into renegotiating contracts, and thereby expropriate property rights of those stuck holding mortgage-backed securities. I'm waiting for the day when a politician proposes a bailout plan for those of us who make sound decisions to buy homes that we can afford based on realistic financial expectations and an understanding of the contracts that we VOLUNTARILY enter into. The plan would be simple: no more bailing for us. Call me a dreamer. Labels: Economics Friday, November 16, 2007
Trying to get a grasp on the factors that drive currency valuation and what can be done to strengthen the US dollar (if indeed it shoud be strengthened) against other countries currencies is not easy. There's a lot of confusion and misinformation swirling around on this. In yesterday's Wall Street Journal, Alan Reynolds tried to bring a little clarity with a piece on Interest Rates and Dollar Fundamentals (sub req):
The spectacular rise of the Canadian dollar was more closely tied to the price of oil than to interest rates, although the Bank of Canada did raise interest rates in July, just before the Fed began nudging rates down. While prices of oil and gold were soaring, exporters of oil and gold such as Canada could trade their wares for more U.S. technology and services. Such improved "terms of trade" typically raise the global demand for the assets of commodity-producing countries and thereby raise their currencies. Other commodity exporting countries, such as Australia and to some extent the U.K., also see their currencies rise whenever the price of their exports rises faster than the price of their imports. Trade deficits have nothing to do with it. Australia's current account deficit is a bit larger than that of the U.S., as a share of GDP, and Britain's deficit is not much smaller. Labels: Economics Tuesday, November 13, 2007
If there is a "war on the middle class" as some pundits claim, this editorial in today's Wall Street Journal (free for all) indicates that the middle class is winning:
The Treasury study examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile. Of those in the second lowest income quintile, nearly 50% moved into the middle quintile or higher, and only 17% moved down. This is a stunning show of upward mobility, meaning that more than half of all lower-income Americans in 1996 had moved up the income scale in only 10 years. Also encouraging is the fact that the after-inflation median income of all tax filers increased by an impressive 24% over the same period. Two of every three workers had a real income gain--which contradicts the Huckabee-Edwards-Lou Dobbs spin about stagnant incomes. This is even more impressive when you consider that "median" income and wage numbers are often skewed downward because the U.S. has had a huge influx of young workers and immigrants in the last 20 years. They start their work years with low wages, dragging down the averages. This is one factor that's rarely mentioned by those who like to site income and wage averages as evidence of middle class decline. UPDATE: King has more. Labels: Economics Wednesday, October 24, 2007
Stephen J. Rose looks at The Myth of Middle-Class Job Loss in today's WSJ (sub req):
It is certainly true that many jobs in manufacturing clothing, steel, metal products and automobiles have gone overseas. Plant closures not only devastate the workers who are displaced, but they have also undermined the vitality of whole communities in North Carolina, Pennsylvania, New York, Michigan, Ohio and Wisconsin, to name just a few places. But while such communities are a clear sign of the decline in some sectors of the economy, there has been strong employment growth in many other sectors. In research just published by the Progressive Policy Institute, I show that incomes and employment have grown by substantial amounts in every state (even in the so-called Rust Belt) since the passage of the North American Free Trade Agreement in 1993. In fact, there is no convincing, data-driven proof that trade has led to any overall job loss during the last 30 years. To the contrary, the economy has grown at a slow but steady rate (a few brief recessions notwithstanding) with trade and employment rising in tandem. Before you dismiss Rose's rosey-eyed views as neo-capitalist apologetics for free markets and trade, consider his cred: Mr. Rose is senior economic fellow at the Progressive Policy Institute, where he recently authored a report titled "The Truth About Middle Class Jobs." He has worked both for the Joint Economic Committee of Congress and as an adviser to former Secretary of Labor Robert Reich. He goes on to look at who has gained the most in middle-class employment: Nevertheless, there has clearly been a sharp increase in female middle-class employment. As recently as 1979, 61% of female workers were in jobs that paid less than $25,000, and only 3% earned more than $50,000 a year. By contrast, more than 36% of new jobs that opened since 1979 for women pay more than $50,000 and only 17% pay less than $25,000. Critics who bemoan the trajectory of the American economy over the past three decades somehow find it convenient to overlook or play down this historic improvement in the employment status and income levels of women. While women still lag in pay compared to men of similar educational attainment, the extraordinary rise in women's income since 1979 is a fact at odds with the notion of an overall decline in the American middle class. And who lost: For men, the change in employment since 1979 has not been quite as clear-cut, or as positive. There has been a tremendous growth in the number of men in high-paying jobs: In 1979, just 10% of male workers earned above $75,000, while fully 34% of new jobs since 1979 have paid this amount or more. However, there was also growth in the share of male workers earning less than $25,000 a year, from 23% in 1979 to 36% by 2005. This rise of low-paying jobs hit less-educated men particularly hard. For those with just a high school diploma, 87% of the new jobs paid $25,000 or less. Here's the bottom line: For three-quarters of the workforce (women and the top half of male earners), economic growth translated into earnings gains. But for male workers in the bottom half of the earnings distribution, the decline of unionized manufacturing employment has led to the drying up of some middle-class jobs for those with no post-secondary education. Rose goes on to say that increasing unionization and the minimum wage would help improve the situation for middle-class men with no college degree. However, he neglects to mention the impact that immigration (legal & illegal) has had on this group. Lawyers, engineers, corporate managers, and other white collar workers probably enjoy a net benefit from immigration (especially the illegal kind) in lower costs for goods and services. It's the "working man" that has paid the price in stagnate wages and no amount of increased unionization or minimum wage is going to change that until something is done to stop the largely unfettered stream that continually refills the pool of cheap immigrant labor. Unfortunately, our current political leaders seem more concerned with limiting trade (not the cause of the problem!) than immigration. Labels: Economics Thursday, October 18, 2007
David Harsanyi writes on one of the silliest "crimes" still on the books in many places. Scalping:
In the end, I'm not sure why it's fair to allow monopolies to sell tickets and not individuals. Turning a profit on your investment doesn't sound like a crime to me. It sounds like America. Amen. How much precious time and resources have law enforcement officials wasted over the years trying to stop two people from conducting a free market exchange for a legal product? Labels: Economics Friday, October 12, 2007
In case you were wondering, the housing market is still "soft." Softer than a baby's bottom. Softer than a cloud. Softer than extra fluffy, ultra-Angel Soft toilet paper. Softer than the Gophers passing defense. Yes, that soft.
And yes, my wife and I are "motivated" sellers. Motivated by a deep desire to end the waiting game of open houses and showings (however infrequent) and get on with the moving. Sigh. Make one pine for the good ol' days of predatory lenders, sub-prime borrowers, and Ninja loans. Labels: Economics Thursday, October 04, 2007
Front pager in today's WSJ notes says Republicans Grow Skeptical On Free Trade (sub req):
By a nearly two-to-one margin, Republican voters believe free trade is bad for the U.S. economy, a shift in opinion that mirrors Democratic views and suggests trade deals could face high hurdles under a new president. The sign of broadening resistance to globalization came in a new Wall Street Journal-NBC News Poll that showed a fraying of Republican Party orthodoxy on the economy. While 60% of respondents said they want the next president and Congress to continue cutting taxes, 32% said it's time for some tax increases on the wealthiest Americans to reduce the budget deficit and pay for health care. Six in 10 Republicans in the poll agreed with a statement that free trade has been bad for the U.S. and said they would agree with a Republican candidate who favored tougher regulations to limit foreign imports. How about some tariffs? They work wonders for the economy. That represents a challenge for Republican candidates who generally echo Mr. Bush's calls for continued trade expansion, and reflects a substantial shift in sentiment from eight years ago. The idea that you can somehow "resist" globalization is both frightening and foolhardy. It's like thinking that you can resist the change in seasons. You may not like the fact that it's going to get colder here in Minnesota pretty soon, just as you may not like the fact that the US businesses increasingly face global competition. But it's going to happen whether you make the necessary changes--like wearing a coat--and adapt or not. In both cases, failure to do so is only going to leave you out in the cold. UPDATE: Even the warm afterglow of last night's Sox win can't hide King's disappointment with this news. Labels: Economics Monday, October 01, 2007
A few weeks ago on the NARN First Team, John and I were discussing the falling dollar and wondering whether it was a good or bad sign for the economy. A front page article in today's Wall Street Journal explains that--like many other economic questions--the answer in this case is it depends (sub req):
Yet currency rates are so intertwined with other crosscurrents in the economy that the impact varies from one individual or company to another, even within the same business. Someone who works for a company that relies heavily on foreign trade or a hotel catering to European visitors might get a plump raise or avoid a layoff because of the weaker greenback. An employee of a hotel getting less foreign business -- or one whose company has lots of foreign hotels catering to American tourists -- may fare worse. If the dollar falls too far and too fast, it could spur a run-up in interest rates and shake the stock market -- which would be bad for the economy. A rapidly falling dollar would raise the price of imports, stoking inflation, and in an extreme case could prompt foreign investors to dump U.S. bonds, pushing their yields higher. But as long as the dollar's decline is gradual, most economists see it as a modest plus overall. Joshua Feinman, chief economist at Deutsche Asset Management, wrote in a recent note to investors that the export upswing is one of the factors "poised to help cushion the impact of the housing correction." Real exports have grown faster than real imports for nearly two years, notes Mr. Feinman, and he expects this trend to continue. U.S. exports rose 2.7% to a record $137.68 billion in July, according to the Commerce Department. Mr. Feinman estimates stronger exports have contributed a half percentage point of added growth to gross domestic product since 2005. Slower please. Labels: Economics Sunday, September 30, 2007
Why are some countries rich and others poor? In the past we've heard a litany of rationalizations for the divide such as natural resources, advantageous geography, legacy of colonialism, etc. In yesterday's Wall Street Journal, Ronald Bailey notes a new report from the World Bank that shows the real keys are the laws and institutions that allow for the creation of intangible wealth (sub req):
Two years ago the World Bank's environmental economics department set out to assess the relative contributions of various kinds of capital to economic development. Its study, "Where is the Wealth of Nations?: Measuring Capital for the 21st Century," began by defining natural capital as the sum of nonrenewable resources (including oil, natural gas, coal and mineral resources), cropland, pasture land, forested areas and protected areas. Produced, or built, capital is what many of us think of when we think of capital: the sum of machinery, equipment, and structures (including infrastructure) and urban land. But once the value of all these are added up, the economists found something big was still missing: the vast majority of world's wealth! If one simply adds up the current value of a country's natural resources and produced, or built, capital, there's no way that can account for that country's level of income. The rest is the result of "intangible" factors -- such as the trust among people in a society, an efficient judicial system, clear property rights and effective government. All this intangible capital also boosts the productivity of labor and results in higher total wealth. In fact, the World Bank finds, "Human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries." For more on the absolute importance of property rights in development, read Hernando De Soto's The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. Once one takes into account all of the world's natural resources and produced capital, 80% of the wealth of rich countries and 60% of the wealth of poor countries is of this intangible type. The bottom line: "Rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity." Some of the richest countries in the world have little "natural" wealth to speak while some of the poorest are flush with it. This raises questions about the best ways to help poor countries cross the divide. Without the foundations of stable and efficient institutions and the rule of law, no amount of external aid is going to lead to long-term improvements. The World Bank study bolsters the deep insights of the late development economist Peter Bauer. In his brilliant 1972 book "Dissent on Development," Bauer wrote: "If all conditions for development other than capital are present, capital will soon be generated locally or will be available . . . from abroad. . . . If, however, the conditions for development are not present, then aid . . . will be necessarily unproductive and therefore ineffective. Thus, if the mainsprings of development are present, material progress will occur even without foreign aid. If they are absent, it will not occur even with aid." Labels: Economics Tuesday, September 25, 2007
Tom e-mails with more on the Loonie:
Last week I was in Alberta on (as you might say) bidness when parity occurred. (I was going to call in to speak with John and you Saturday, but I was on two kid, two sport transport duty and I'm not capable of both reminding the kids for the fifth time to change uniforms as we drove between events while also attempting to make the salient and succinct points each caller to the NARN is required to make.) Although I was in Edmonton the evening the Oil Kings made their return to the Western Hockey League after a twenty some year absence, I was not able to secure tickets to the event (didn't care enough to try either). From my view, the reason their economy is doing so well has nothing to do with any Canadian government policy and has a lot to to do with U.S. government policy. The provinces most beholden to Ottawa/big government policy - i.e. the provinces to the East of Manitoba - are doing poorly with the Maritimes experiencing 25% and greater unemployment and a population that is heading for the exit (Western Canada). The Western provinces - which are more conservative politically - are carrying the nation with low unemployment (unemployment is around 2.5% in Alberta). The Liberals even lost a couple of seats in Quebec last week, an event so extrordinary that the CBC made it sound like a situation where the DFL lost a seat in the Star Tribune building if the Star Tribune building were its own congressional district. Here is why I think it is U.S. government policy pumping their economy up: Where we won't drill in ANWR or exploit other energy opportunities, their government encourages and if you believe the recent Alberta Government's Report of Oil & Gas Royalties is gouging, er, taxing their energy industry less than they could because they realize - even the CBC pointed this out - that energy is the goose laying the golden eggs that are leading to large surpluses; and Western Canada's farmers are harvesting wheat at record prices given the shortage of that commodity due to U.S. farmers planting corn from fence line to fence line to score all of that fine ethanol subsidy cash. The CBC also blames U.S. deficits and tax cuts where I would blame out of control spending leading to deficits. There wasn't much crowing about parity other than on a "Daily Show" type program where the host claimed that the last time the two currencies were at parity the U.S. was in an un-winnable war and had an unpopular president. The last time the currencies were at parity was 1976; the U.S. wasn't at war and Ford wasn't unpopular he just wasn't as popular as Jimmah. So I don't know wtf that guy was talking about. Other than that, most of the commentary I heard was that it wouldn't last--commodity prices go up and go down; that the exchange rate was wrecking their tourist industry with tourism in general off nearly 35% and manufacturing would suffer as everything exported to the South would be more expensive. On the plus side, all NHL contracts are renumerated in U.S. dollars, so with the exchange rate windfall the Canadian teams might have some left over money to pay for better facilities. The Edmonton paper ran a feature on the Oilers new locker room with its up-to-date facilities complete with a trophy case large enough to hold their five Stanley Cup replicas with room for a sixth. No mention of extra outlets for all of the additional "hot combs" the players will surely be buying. It's not too late to jump on the Flames (or Canucks or Oilers or whoevers) bandwagon, just be prepared to pay through the exchange rate nose if you ever want to attend a home game. Labels: Economics Monday, September 24, 2007
Among the thirty-seven topics we covered in the first hour of Saturday's NARN First Team show was the surprising news--at least to us non-dismal science talking guys--that the Canadian dollar had reached parity with the US greenback. A story in Saturday's Wall Street Journal explains why the Loonie is no longer the object of ridicule and scorn it once was. Canada Is Giddy About the Loonie And Twitting U.S. (sub req):
The Canadian dollar's rise to parity with the U.S. dollar has several causes: high commodity prices globally, the overall weakness of the U.S. dollar, the strength of the Canadian economy and the Canadian government's enviable fiscal surplus. The article also looks at some of the implications of said parity in various areas. Shopping: The rise is a boon for Canadians looking to buy American real estate, stocks or just about anything for sale at the Mall of America in Bloomington, Minn., which has seen a 15% uptick in the number of Canadian customers this year. Oh good, more Canadians. I can only imagine the deluge of Canuck shoppers in places like Grand Forks. Imports: But it isn't good news for Canadian hotels or tourist destinations, or exporters of everything from beer and maple syrup to lumber and wheat. Hockey: In hockey, the six Canadian-based NHL teams haven't brought a Stanley cup back home since 1993, but Ian Clarke, executive vice president of business development for the Toronto Maple Leafs, said even though the team would stay under the league's salary cap, the strength of the loonie has enabled the organization to invest in facilities: better locker rooms, better weight rooms, nicer coaches' offices. Another Stanley Cup? "It's going to help all the Canadian teams," Mr. Clarke says. And last, but not least, strip clubs: With the Canadian dollar surging against the U.S. greenback, Robert Katzman is dealing with situations they don't teach in Economics 101. The owner of five strip clubs in Detroit and Windsor, Ontario, says American dancers are heading to Canada to earn the strengthened Canadian currency, and Canadian customers are heading to Detroit because their dollars go further there. He's fighting back by advertising more in the U.S. and offering free limo service to get Detroit men to visit his Windsor clubs. Labels: Economics Wednesday, February 14, 2007
In a piece in today's WSJ (sub req) Brian S. Wesbury says the easiest way to screw up the economy is by trying to "fix" it:
It's the best of times. It's the scariest of times. Last year, U.S. exports, industrial production, real hourly compensation, corporate profits, federal tax revenues, retail sales, GDP, productivity, the number of people with jobs, the number of students in college, airline passenger traffic and the Dow Jones Industrial Average all hit record levels. For the third consecutive year, global growth was strong, continuing to lift (and hold) millions of people out of poverty. From 30,000 feet, heck from 1,000 feet, it sure looks like the best of times. In relative terms, the first five years of the current recovery have been much better than the first five years of the 1990s recovery. But all this has not softened the pessimism of many pundits and politicians who are either unimpressed or expect the whole thing to come crashing down any minute. That is, unless the government firmly grabs the reins of the global economy and steers it clear of disaster. Many believe that the debate is over on global warming, nationalized health care, tax hikes, rich-versus-poor, the trade deficit and "obscene" oil company profits. Forgotten in this rush to pass judgment on capitalism is the fact that the last two times government seriously tried to control the U.S. economy -- in the 1930s and in the 1970s -- they made a terrible mess of it. Keep your hands off the wheel. Please. Labels: Economics Thursday, November 30, 2006
Robert T. Miller takes Pope Benedict XVI to task (gently of course) for economic ignorance in a post at FIRST THINGS: Speaking about the many people in the world who go hungry, Pope Benedict XVI says that we need "to eliminate the structural causes linked to the system of government of the world economy, which allocates the greater part of the planet's resources to a minority of the population." In focusing on the allocation of goods, however, Benedict misdiagnoses the problem, which really concerns economic growth. Like most non-economists, he speaks as if the world's stock of goods and services were fixed, the only issue being how properly to distribute them. In fact, the total amount of goods and services in the world has been increasing very rapidly for a long time. Miller goes on to provide a stark comparison: But economic growth is very uneven, with the economic output of some countries increasing much faster than that of others. If you want to know why some countries have become wealthy and others have stayed poor, therefore, you need only compare the growth of their respective GDPs per capita. Consider South Korea and Zimbabwe. In 1970, their respective GDPs per capita were virtually identical: $290 for Zimbabwe and $291 for South Korea. By 2004, Zimbabwe's GDP per capita had hardly budged, having increased to just $351, meaning that the average Zimbabwean was only marginally better off in 2004 than 1970. In South Korea, however, GDP per capita |
![[Powered by Blogger]](bloggerbutton1.gif){kind=small}