As the narrator says; "if you care about improving people's lives, then you really care about economic freedom..." Watch...
http://www.youtube.com/watch?v=v1U1Jzdghjk&feature=channel_video_title
Thursday, June 30, 2011
The rich bastards can afford it.... But...
If you're to any degree a news-watcher, right about now the words "corporate jets" are ringing in your ears... In the few minutes I spent watching the President's Wednesday news conference I heard "corporate jets" easily a half-dozen times... Over the past 24 hours "corporate jets" has become the talking point for the gang of policymakers championing the fight to increase taxes to justify increasing our nation
Wednesday, June 29, 2011
Never deal with a crisis today that you can put off till tomorrow
Prior to the Euro, lending to Greece earned you an eye-popping 18% - that is if it could ever pay you back... Of course the high interest rate was due to its lack of creditworthiness... Upon entering the Eurozone, the same country (same economy, same stupidity) suddenly got to borrow at 4%...
So of course its socialist policymakers used that once in a lifetime opportunity to get their country's fiscal house in order, right? Well of course they did NOT! They instead went on a borrowing binge and grew their government to a place where even today's bailout offers little hope of anything other than an eventual debt restructuring - i.e., default... The EU is praying that it can postpone the inevitable to a time when its members' banks can better handle it...
Wall Street of course loves today
Monday, June 27, 2011
Sunday, June 26, 2011
A Simple Look at Keynesianism vs Free Markets
John Maynard Keynes (1886–1946) was the British economist who literally wrote the book on modern macroeconomics (Keynes, The General Theory of Employment, Interest and Money, 1936/2009). His theory, which presently dominates US economic policy, holds that “private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector”(1). In other words, Keynesians believe that during recessions, an increase in government spending is necessary to offset a drop in consumption, thereby saving jobs and circumventing a deeper downturn.
The headline appeal of Keynes’s theory lies in its promise of moderation—in the notion that the contraction can be mitigated through government intervention. Its political appeal lies in the belief that injecting money into the system will indeed goose the economy, at least through the next election cycle. Aside from the risk of inflating asset bubbles (as the flood of liquidity finds a home)—stimulus programs tend to take political root, leaving the government with yet greater influence over the allocation of resources.
The antithesis of Keynesian economics is free-market capitalism, championed through the years by the likes of Scotland’s Adam Smith (1723–1790), Austria’s Frederich A. Hayek (1899–1992) and America’s Milton Friedman (1912–2006): “Within an ideal free market, property rights are voluntarily exchanged at a price arranged solely by the mutual consent of sellers and buyers”. “Price is the result of buying and selling decisions en masse as described by the theory of supply and demand” (2).
Truly each of us has a bent; mine is toward capitalism. Therefore, as I effort to convince you of the efficacy of a free market relative to the alternative, my objective is doomed to no small degree by my lack of objectivity. I’ll therefore narrow my argument down to a simple question (and forget economics for the moment): Would you prefer to live in a world where a paternalistic government determines who wins, who loses, who pays, who survives the inevitable recession (in support of the greater good, as it determines, or a politically influential organization), and in effect perpetuates the existence of poorly managed institutions? Or would you prefer a world where a free market determines the winners and losers, where individuals and institutions succeed or fail based on the value they deliver to one another, and on their ability to prudently manage their affairs? I'll take the latter.
1. Sullivan, Arthur; Steven M. Sheffrin (2003). Economics: Principles in Action. Upper Saddle River: Pearson Prentice Hall.
2. Rothbard, Murray. The Concise Encyclopedia of Economics
The headline appeal of Keynes’s theory lies in its promise of moderation—in the notion that the contraction can be mitigated through government intervention. Its political appeal lies in the belief that injecting money into the system will indeed goose the economy, at least through the next election cycle. Aside from the risk of inflating asset bubbles (as the flood of liquidity finds a home)—stimulus programs tend to take political root, leaving the government with yet greater influence over the allocation of resources.
The antithesis of Keynesian economics is free-market capitalism, championed through the years by the likes of Scotland’s Adam Smith (1723–1790), Austria’s Frederich A. Hayek (1899–1992) and America’s Milton Friedman (1912–2006): “Within an ideal free market, property rights are voluntarily exchanged at a price arranged solely by the mutual consent of sellers and buyers”. “Price is the result of buying and selling decisions en masse as described by the theory of supply and demand” (2).
Truly each of us has a bent; mine is toward capitalism. Therefore, as I effort to convince you of the efficacy of a free market relative to the alternative, my objective is doomed to no small degree by my lack of objectivity. I’ll therefore narrow my argument down to a simple question (and forget economics for the moment): Would you prefer to live in a world where a paternalistic government determines who wins, who loses, who pays, who survives the inevitable recession (in support of the greater good, as it determines, or a politically influential organization), and in effect perpetuates the existence of poorly managed institutions? Or would you prefer a world where a free market determines the winners and losers, where individuals and institutions succeed or fail based on the value they deliver to one another, and on their ability to prudently manage their affairs? I'll take the latter.
1. Sullivan, Arthur; Steven M. Sheffrin (2003). Economics: Principles in Action. Upper Saddle River: Pearson Prentice Hall.
2. Rothbard, Murray. The Concise Encyclopedia of Economics
Friday, June 24, 2011
Spendorphin Production
The 1975 Energy Policy and Conservation Act (EPCA) states that the Strategic Petroleum Reserve (SPR) is to be tapped only in the event of a severe supply disruption... I don
Thursday, June 23, 2011
The Market Wants QE3
The very gent who coined "irrational exuberance" in the late 90s, upon finding himself in the eye of the tech-bubble-bursting-storm of the early 2000s, embarked on a monetary stimulus campaign that, for a time, won him rock star status on Wall Street. A campaign that, ten years later, many credit for creating an irrationally exuberant real estate market and a credit bubble for the ages...
As I type the Dow's down triple digits... I suspect that had Mr. Greenspan's successor, in yesterday's post FOMC comments, suggested that QE3 (QE's 1 and 2 having trumped Greenspan's decade-earlier effort in terms of dollars spent) was in the offing, the Dow would be up triple digits...
I once heard that Wall Street traders have a shelf-life of something like 3 years... And I suspect that goes a long way in explaining why, when they should know better, they're such short-term thinkers... I.e., they're either drinking Keynesian (the theory that the economy can't survive a contraction without government intervention) Kool-Aid or they just can't see past the end of their careers...
In essence, as has always been the case, reactionary traders rule the market - short-term... In the long-run however, it's corporate earnings that count...
Stay tuned...
As I type the Dow's down triple digits... I suspect that had Mr. Greenspan's successor, in yesterday's post FOMC comments, suggested that QE3 (QE's 1 and 2 having trumped Greenspan's decade-earlier effort in terms of dollars spent) was in the offing, the Dow would be up triple digits...
I once heard that Wall Street traders have a shelf-life of something like 3 years... And I suspect that goes a long way in explaining why, when they should know better, they're such short-term thinkers... I.e., they're either drinking Keynesian (the theory that the economy can't survive a contraction without government intervention) Kool-Aid or they just can't see past the end of their careers...
In essence, as has always been the case, reactionary traders rule the market - short-term... In the long-run however, it's corporate earnings that count...
Stay tuned...
Wednesday, June 22, 2011
June 22, 2011 Market/Economic Report (video)
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Monday, June 20, 2011
Hair of the Dog
Fitch Ratings is throwing Europe a huge curve this morning - it says that any rollover of existing Greek debt would be deemed a default and the country's credit rating would be downgraded accordingly... At first blush I'm thinking that's a legitimate move, Fitch is just assessing the situation for what it truly is - if Greece doesn't have the wherewithal to pay its debts when due, regardless of whether its creditors are kind enough to take on a new term, it's in default...
At second blush, however, it's a bit more than just calling it like they see it... In fact Fitch is in essence putting pressure on Europe to go all in with bailout money - i.e., if the EU will commit to an entire taxpayer funded "solution", Greece's rating will remain above default status... I bet they even raise it...
Fitch also issued similar comments with regard to the U.S.; threatening a default rating if the debt ceiling isn't raised accordingly... I.e., if we don't extend our credit limit so that we can borrow more to pay for our existing debt they'll lower our credit rating ("we" being the taxpayers)...
Now what if we were talking your personal finances? Of course for one; you'd be miserable... And two; it'd never happen - by then your credit rating would be a nightmare and no reputable lender would touch you...
Bottom line, when it comes to sovereign debt (us taxpayers' collectively)the credit agencies, like the Fed, like the Treasury and like your run-of-the-mill politician, believe they can actually fix things with a lot of "hair of the dog that bit ya
At second blush, however, it's a bit more than just calling it like they see it... In fact Fitch is in essence putting pressure on Europe to go all in with bailout money - i.e., if the EU will commit to an entire taxpayer funded "solution", Greece's rating will remain above default status... I bet they even raise it...
Fitch also issued similar comments with regard to the U.S.; threatening a default rating if the debt ceiling isn't raised accordingly... I.e., if we don't extend our credit limit so that we can borrow more to pay for our existing debt they'll lower our credit rating ("we" being the taxpayers)...
Now what if we were talking your personal finances? Of course for one; you'd be miserable... And two; it'd never happen - by then your credit rating would be a nightmare and no reputable lender would touch you...
Bottom line, when it comes to sovereign debt (us taxpayers' collectively)the credit agencies, like the Fed, like the Treasury and like your run-of-the-mill politician, believe they can actually fix things with a lot of "hair of the dog that bit ya
Bait and Switch
The champions of FINREG (Financial Regulatory Reform) hail the new set of rules governing the financial industry as protection for the consumer against the big bad banking system... And I
Friday, June 17, 2011
Why I Don't Read the Paper...
My *!#% wake-the-dead doorbell nearly knocked me to the floor during a recent Saturday morning writing session... A mere six minutes later, without even a faint acknowledgment of the meanest scowl I could muster, the charming young salesperson convinced me to break a longstanding vow; I took a trial subscription to the Sunday paper...
For the following three Sabbath-day mornings, upon hearing that old (memories of youth) familiar thud on the front step, I would promptly collect the Bee, remove the rubber band (something for my money) and, without reading a word, drop it, and its 30 million ads, into the royal blue container in my garage...
Then came last weekend... Don't ask me why (I'm virtually never bored), but I forwent the recycle bin and decided I'd give the paper a once-over (figuring the risk was relatively low since I recently had a physical and my blood pressure was a-okay...)
On my drive to Walgreens a short while later (they have that free blood pressure thing), temples pounding, I pondered the real world to which I just exposed my tender cardiovascular system... Here's my take on the two articles I braved:
1. Public employee unions of the literally broke state of California are pushing back against a proposal that would bump full retirement to age 62 (the early retirement age for social security)... Oh the injustice!!
I nearly trashed it then (feeling entirely vindicated in my momentarily-broken vow) but surely, I thought, I
For the following three Sabbath-day mornings, upon hearing that old (memories of youth) familiar thud on the front step, I would promptly collect the Bee, remove the rubber band (something for my money) and, without reading a word, drop it, and its 30 million ads, into the royal blue container in my garage...
Then came last weekend... Don't ask me why (I'm virtually never bored), but I forwent the recycle bin and decided I'd give the paper a once-over (figuring the risk was relatively low since I recently had a physical and my blood pressure was a-okay...)
On my drive to Walgreens a short while later (they have that free blood pressure thing), temples pounding, I pondered the real world to which I just exposed my tender cardiovascular system... Here's my take on the two articles I braved:
1. Public employee unions of the literally broke state of California are pushing back against a proposal that would bump full retirement to age 62 (the early retirement age for social security)... Oh the injustice!!
I nearly trashed it then (feeling entirely vindicated in my momentarily-broken vow) but surely, I thought, I
Why I Don't Read the Paper...
My *!#% wake-the-dead doorbell nearly knocked me to the floor during a recent Saturday morning writing session... A mere six minutes later, without even a faint acknowledgment of the meanest scowl I could muster, the charming young salesperson convinced me to break a longstanding vow; I took a trial subscription to the Sunday paper...
For the following three Sabbath-day mornings, upon hearing that old (memories of youth) familiar thud on the front step, I would promptly collect the Bee, remove the rubber band (something for my money) and, without reading a word, drop it, and its 30 million ads, into the royal blue container in my garage...
Then came last weekend... Don't ask me why (I'm virtually never bored), but I forwent the recycle bin and decided I'd give the paper a once-over (figuring the risk was relatively low since I recently had a physical and my blood pressure was a-okay...)
On my drive to Walgreens a short while later (they have that free blood pressure thing), temples pounding, I pondered the real world to which I just exposed my tender cardiovascular system... Here's my take on the two articles I braved:
1. Public employee unions of the literally broke state of California are pushing back against a proposal that would bump full retirement to age 62 (the early retirement age for social security)... Oh the injustice!!
I nearly trashed it then (feeling entirely vindicated in my momentarily-broken vow) but surely, I thought, I
For the following three Sabbath-day mornings, upon hearing that old (memories of youth) familiar thud on the front step, I would promptly collect the Bee, remove the rubber band (something for my money) and, without reading a word, drop it, and its 30 million ads, into the royal blue container in my garage...
Then came last weekend... Don't ask me why (I'm virtually never bored), but I forwent the recycle bin and decided I'd give the paper a once-over (figuring the risk was relatively low since I recently had a physical and my blood pressure was a-okay...)
On my drive to Walgreens a short while later (they have that free blood pressure thing), temples pounding, I pondered the real world to which I just exposed my tender cardiovascular system... Here's my take on the two articles I braved:
1. Public employee unions of the literally broke state of California are pushing back against a proposal that would bump full retirement to age 62 (the early retirement age for social security)... Oh the injustice!!
I nearly trashed it then (feeling entirely vindicated in my momentarily-broken vow) but surely, I thought, I
Profit and LOSS System - or - The Risk of Eliminating Risk
Stock index futures pointed to a fabulous open as I began typing this morning's message... Of course, given the events of the week, I knew it'd be all about Greece. Some headline boasting a plan that would save creditors from a Greek default... Notice I said save "creditors" as opposed to save "Greece"... Of course the headline won't make mention of the true intent of the next bailout scheme...
Sure enough, the headline reads; Germany, France Say United on Greek Aid Solution...
I'd change it to; Germany, France Say United on Greek's Creditors' Aid Solution...
What do you suppose is the ultimate consequence of this if-you're-systemically-relevant-you-won't-suffer message we forever send to Nations, to U.S. States (California, etc.), to Wall Street executives and to big-money private financiers? How about egregious imprudence on the part of Nations and States, and reckless stupidity on the part of Wall Street execs and financiers...
Milton Friedman said the free enterprise system is a profit and LOSS system... The risk of loss is essential in that it inspires prudence at virtually every level...
Sure enough, the headline reads; Germany, France Say United on Greek Aid Solution...
I'd change it to; Germany, France Say United on Greek's Creditors' Aid Solution...
What do you suppose is the ultimate consequence of this if-you're-systemically-relevant-you-won't-suffer message we forever send to Nations, to U.S. States (California, etc.), to Wall Street executives and to big-money private financiers? How about egregious imprudence on the part of Nations and States, and reckless stupidity on the part of Wall Street execs and financiers...
Milton Friedman said the free enterprise system is a profit and LOSS system... The risk of loss is essential in that it inspires prudence at virtually every level...
Wednesday, June 15, 2011
Victims of Socialism
Just watched a CNBC interview featuring dueling politicians... The Maybe-Former-Spendthrift from Georgia made the case for cutting entitlements... While the Still-A-Spendthrift from Maryland said "Screw that! We simply need to raise the debt ceiling and increase taxes on businesses..."
Let's say your finances are a virtual microcosm of your government's... I.e., you're in dire straits; and you're looking to hire some help: Advisor A suggests you stop eating out, stop shopping at Nordstrom, sell the Range Rover and pay cash for a used Yugo... Advisor B says "Screw that! Apply for an increase in your Visa limit and we'll find someone to sue in the meantime..." Of course B is out of his friggin mind. Right? Say Yes!!
Three Athens families lost dear loved ones last May as protestors torched the bank where they worked... I was certain I was viewing a clip of that event when I turned on the telly this morning... Unfortunately Molotov cocktails are exploding in downtown Athens as I type... These victims of socialism, these public employees who've been living unsustainable debt-financed lifestyles, can't understand why they just don't print more euro... And they'll literally kill to maintain the status quo...
I assure you, the gent from Maryland sees job security in appeasing the beneficiaries of America's brand of socialism... The Georgian believes a lasting career in politics rests on his ability to turn this ship around... In essence, these blokes are interchangeable; they're simply interpreting the political winds...
Warranted cynicism or not, we have to assume that the only way we don't become Greece times a billion (we're not there just yet) is to push very very hard on our policymakers...
I assume you know in which direction to push...
Monday, June 13, 2011
Why I Remain the Optimist
Your typical pessimist, as I say here on occasion, believes himself the realist, and the optimist the idealist... I've suggested however that, given how far we've come (generally-speaking), the optimist has clearly cornered the market on realism...
That said, as recent columns attest, my bleary-eyedness has been waning a bit of late (I see the glass half full about half the time these days)... I just can't resist voicing/penning my frustration with the present (and previous) administration's reckless exploitation of the resources (the printing press in particular) we've entrusted to them... They are inexcusably ignorant of the fact that all of history's major financial crises have one glaring element in common; excessive debt... And, sadly, the just-endured Greatest Recession since the Great Depression didn't even come close to curing that ill. In fact, in true Keynesian fashion, it exacerbated it...
In the end however, I remain [legitimately] optimistic... For, the above notwithstanding, there is yet plenty for even the most practical optimist to hang his hat on. Such as:
The device on which I type, etc.... Technology is a wonderful, world-changing thing. Companies are gaining efficiencies we couldn't imagine just the other day...
Corporate balance sheets... Unlike most governments, most companies have cleaned up their acts and now sport cash-rich, very clean balance sheets... Vastly different than where they were three years ago...
Consumer balance sheets... Recent data suggests the consumer has cleaned up his act measurably as well... Vastly different than where he was three years ago...
Frontier Markets... According to African Entrepreneur June Urunga, merely 300,000 Kenyans had access to a telephone ten years ago. Today over 10,000,000 own their own cell!!
*International trade... Like it or not, the lines are thinning... And make no mistake, the measure of our future prosperity will be determined largely by our ability to tap the rich resources that lie beyond our borders... Politicians, labor unions and the sorely misinformed consumer are the headwinds we absolutely must buck...
A general air of skepticism... I would concur with the late great Sir John Templeton; "Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria"...
*Please take a moment and listen to Milton Friedman on trade:
http://www.youtube.com/watch?v=j0pl_FXt0eM&feature=youtube_gdata_player
That said, as recent columns attest, my bleary-eyedness has been waning a bit of late (I see the glass half full about half the time these days)... I just can't resist voicing/penning my frustration with the present (and previous) administration's reckless exploitation of the resources (the printing press in particular) we've entrusted to them... They are inexcusably ignorant of the fact that all of history's major financial crises have one glaring element in common; excessive debt... And, sadly, the just-endured Greatest Recession since the Great Depression didn't even come close to curing that ill. In fact, in true Keynesian fashion, it exacerbated it...
In the end however, I remain [legitimately] optimistic... For, the above notwithstanding, there is yet plenty for even the most practical optimist to hang his hat on. Such as:
The device on which I type, etc.... Technology is a wonderful, world-changing thing. Companies are gaining efficiencies we couldn't imagine just the other day...
Corporate balance sheets... Unlike most governments, most companies have cleaned up their acts and now sport cash-rich, very clean balance sheets... Vastly different than where they were three years ago...
Consumer balance sheets... Recent data suggests the consumer has cleaned up his act measurably as well... Vastly different than where he was three years ago...
Frontier Markets... According to African Entrepreneur June Urunga, merely 300,000 Kenyans had access to a telephone ten years ago. Today over 10,000,000 own their own cell!!
*International trade... Like it or not, the lines are thinning... And make no mistake, the measure of our future prosperity will be determined largely by our ability to tap the rich resources that lie beyond our borders... Politicians, labor unions and the sorely misinformed consumer are the headwinds we absolutely must buck...
A general air of skepticism... I would concur with the late great Sir John Templeton; "Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria"...
*Please take a moment and listen to Milton Friedman on trade:
http://www.youtube.com/watch?v=j0pl_FXt0eM&feature=youtube_gdata_player
Saturday, June 11, 2011
Friday, June 10, 2011
Righting the Ship
Stocks are off this morning on news that China's economy is slowing and U.S. import costs are rising... The thing is, China is actively tightening its purse strings to ward off inflation... I.e., they, unlike us, are not ignoring the latter...
Ben Bernanke not offering up any hints of QE3 in last Tuesday's chat with the world banking community sparked a 90 point sell-off in the Dow... I think he'd love to do QE3... I think short-sighted Wall Street would love it as well... Printing more money however is politically untenable at the moment...
Two weeks ago, when Germany backed away from plans to force a Greek near-term debt restructuring, a triple-digit rally ensued... A restructuring would levy huge losses onto Greece's creditors... Ultimately however, I suspect there's no alternative... Germany, in effect, just kicked the can down the road...
Over the past year U.S. consumers have been paying down debt and growing their savings... That's not good in (near-term) economic-recovery terms... Now wouldn't you think, given the debt-induced hell the world just endured, that any semblance of long-term prudence would be welcome? You might, but yours and my perception of long-term, say 10 years, differs vastly from that of your everyday Wall Street trader, say 10 seconds...
In a recent column I suggested that
Ben Bernanke not offering up any hints of QE3 in last Tuesday's chat with the world banking community sparked a 90 point sell-off in the Dow... I think he'd love to do QE3... I think short-sighted Wall Street would love it as well... Printing more money however is politically untenable at the moment...
Two weeks ago, when Germany backed away from plans to force a Greek near-term debt restructuring, a triple-digit rally ensued... A restructuring would levy huge losses onto Greece's creditors... Ultimately however, I suspect there's no alternative... Germany, in effect, just kicked the can down the road...
Over the past year U.S. consumers have been paying down debt and growing their savings... That's not good in (near-term) economic-recovery terms... Now wouldn't you think, given the debt-induced hell the world just endured, that any semblance of long-term prudence would be welcome? You might, but yours and my perception of long-term, say 10 years, differs vastly from that of your everyday Wall Street trader, say 10 seconds...
In a recent column I suggested that
Wednesday, June 8, 2011
Prudence is Imperative
In yesterday's market-numbing speech Fed Chief Ben Bernanke blamed the first quarter's anemic growth on the price of oil, Japan's tsunami, etc... Clearly, in his view, exogenous forces stand in the way of an all-out recovery... Any suggestion that current monetary policy is anything but pro-growth is utter nonsense...
While granted, the pumping of liquidity into the economy virtually has to stimulate growth (or so you'd think), I can't help but wonder; would the economy be growing right about now, given the timing, without the stimulus? Does it indeed cause, or, given the timing, simply correlate with economic growth? Or could it be that the stimulus is somehow retardant?
That last question is entirely counterintuitive... How on earth could added liquidity retard growth? The answer would have to be 'awareness'. The awareness among the hoarders of cash that the last go-round of stimulus culminated in a bubble-bursting recession for the ages. The awareness that the people ultimately pay the bills incurred by a government of the people... The awareness that now, more than ever, prudence is imperative...
Bernanke expects the economy will improve measurably the second half of this year, and I wouldn't disagree. I do however think that, given this newfound awareness, the rate will be on the lower end of expectations... Trust me, long-term, this is a very good thing...
While granted, the pumping of liquidity into the economy virtually has to stimulate growth (or so you'd think), I can't help but wonder; would the economy be growing right about now, given the timing, without the stimulus? Does it indeed cause, or, given the timing, simply correlate with economic growth? Or could it be that the stimulus is somehow retardant?
That last question is entirely counterintuitive... How on earth could added liquidity retard growth? The answer would have to be 'awareness'. The awareness among the hoarders of cash that the last go-round of stimulus culminated in a bubble-bursting recession for the ages. The awareness that the people ultimately pay the bills incurred by a government of the people... The awareness that now, more than ever, prudence is imperative...
Bernanke expects the economy will improve measurably the second half of this year, and I wouldn't disagree. I do however think that, given this newfound awareness, the rate will be on the lower end of expectations... Trust me, long-term, this is a very good thing...
Tuesday, June 7, 2011
Politicking Being the Biggest!
You breathe deep, squeeze the nozzle, then watch in horror... Two minutes later, you've traded $92.37 for a tank full of fuel... You think ""they" have got to do something about the price of gas!" Of course this "they" you're referring to, conscious of it or not, is the government. At least that's what the government thinks...
Enter South Carolina Senator Dick Elliott... He's proposed a bill that would cap the wholesale price of gasoline for a full year... His opening statement on a CNBC debate this morning: "I'm a big believer in the free enterprise system, but the escalating price of gasoline is really breaking the budgets of families, it's taking the money out of business accounts that they could be using to hire new employees with, and just wrecking our economy until we can stabilize the price of gas and hopefully get it down. That was the reason that I introduced the bill."
With all due respect to Mr. Elliott, notwithstanding his good intentions, we're all "big believers in the free enterprise system" as long as things are going our way... I.e., when a sitting senator's constituents ain't happy, capitalism is forever a wonderful scapegoat...
What Mr. Elliott supposedly believes (but I suppose doesn't understand) is that the price of a given commodity, left to nature, will ultimately reflect its supply relative to its demand... Cap its price and you create supply issues...
Example; let's say the wholesale price-cap translates to $3.00 at the pump. Assuming the [global] economy picks up, demand then rises, but suppliers can
Enter South Carolina Senator Dick Elliott... He's proposed a bill that would cap the wholesale price of gasoline for a full year... His opening statement on a CNBC debate this morning: "I'm a big believer in the free enterprise system, but the escalating price of gasoline is really breaking the budgets of families, it's taking the money out of business accounts that they could be using to hire new employees with, and just wrecking our economy until we can stabilize the price of gas and hopefully get it down. That was the reason that I introduced the bill."
With all due respect to Mr. Elliott, notwithstanding his good intentions, we're all "big believers in the free enterprise system" as long as things are going our way... I.e., when a sitting senator's constituents ain't happy, capitalism is forever a wonderful scapegoat...
What Mr. Elliott supposedly believes (but I suppose doesn't understand) is that the price of a given commodity, left to nature, will ultimately reflect its supply relative to its demand... Cap its price and you create supply issues...
Example; let's say the wholesale price-cap translates to $3.00 at the pump. Assuming the [global] economy picks up, demand then rises, but suppliers can
Friday, June 3, 2011
The Burden of Thrift
Are you sitting down? Good... Here are two excerpts (the first one's a killer) from Friday's AP article Bleak Jobs Report Dampens Hopes of Steady Growth:
Heidi Shierholz, an economist at the liberal Economic Policy Institute, expects employers to add about 150,000 jobs a month for the next few months. Up to 300,000 new jobs a month would be needed to significantly drive down the unemployment rate. "What we need is more government spending to create jobs. The 2009 stimulus package is largely spent", she said...
White House economist Austan Goolsbee said the burden is now on the private sector. "You've seen corporate profits high," he said. "It's now time to get that translated ... into the adding of jobs, building of factories and buying of equipment here at home."
Make sense? Really? I am forever struck by how those who should know better (the likes of the two aforementioned academics) lose sight of the fact that, in the end, increased government spending equates to increased taxes and/or higher inflation and interest rates. I.e., the government can only spend that which it ultimately takes from the private sector. Therefore the private sector, knowing that it'll ultimately pay the government's tab, has no choice but frugality... The burden (of thrift) is indeed now on the private sector...
If Ms. Shierholz gets her way, I’m afraid Mr. Goolsbee is going to be sorely disappointed… Apparently neither has had much in the way of private sector experience…
Heidi Shierholz, an economist at the liberal Economic Policy Institute, expects employers to add about 150,000 jobs a month for the next few months. Up to 300,000 new jobs a month would be needed to significantly drive down the unemployment rate. "What we need is more government spending to create jobs. The 2009 stimulus package is largely spent", she said...
White House economist Austan Goolsbee said the burden is now on the private sector. "You've seen corporate profits high," he said. "It's now time to get that translated ... into the adding of jobs, building of factories and buying of equipment here at home."
Make sense? Really? I am forever struck by how those who should know better (the likes of the two aforementioned academics) lose sight of the fact that, in the end, increased government spending equates to increased taxes and/or higher inflation and interest rates. I.e., the government can only spend that which it ultimately takes from the private sector. Therefore the private sector, knowing that it'll ultimately pay the government's tab, has no choice but frugality... The burden (of thrift) is indeed now on the private sector...
If Ms. Shierholz gets her way, I’m afraid Mr. Goolsbee is going to be sorely disappointed… Apparently neither has had much in the way of private sector experience…
Thursday, June 2, 2011
Greece Didn't Have Greece
In Moody's Threatens U.S. Debt Rating Cut, Thursday's Wall Street Journal reported on the rating agency's announcement that it "might review the government's Aaa debt rating for a possible downgrade as early as next month if there is no progress toward a deal in Washington to increase the $14.294 trillion federal borrowing limit and cut deficits." Now doesn't that send a chill down your spine? For me it's a tingle... l might even be giddy if the line read "Moody's, having just woken to the fact that the world's premier government must increase its self-induced debt-limit to make its interest payments, has announced a downgrade to BBB. As it would any other shoddily run organization..."
Of course I can make such a reckless pronouncement - knowing that a major downgrade would send interest rates into orbit and the economy into the cellar - for I am absolutely certain it's not happening...
Yet I can't help but wonder; what if Moody's had downgraded Greece a $few-hundred-billion ago? You think maybe they'd have gotten their house in order way back then? You think maybe they wouldn't be so irreparably upside down at the moment?
But, alas, it didn't happen in Greece then and it ain't happening in the U.S. now... But take heart my friends, for we do have something today that Greece didn't a $few-hundred-billion ago; we have Greece... We'll surely learn from their example... won't we?
P.s. With regard to today's jobs number; the bad news is the number was way below consensus expectations, the good news is the number was way below consensus expectations... Washington has to understand that we can print money till we pop, and businesses, in this regulatory-rich environment, still won't hire... Instead they'll hoard a little, they'll innovate a lot (buy new technology) and they'll make a few acquisitions. And of course a weak dollar/higher commodities prices hits them hard in terms of input costs. In that sense, printing simply makes matters worse...
Stay tuned...
Of course I can make such a reckless pronouncement - knowing that a major downgrade would send interest rates into orbit and the economy into the cellar - for I am absolutely certain it's not happening...
Yet I can't help but wonder; what if Moody's had downgraded Greece a $few-hundred-billion ago? You think maybe they'd have gotten their house in order way back then? You think maybe they wouldn't be so irreparably upside down at the moment?
But, alas, it didn't happen in Greece then and it ain't happening in the U.S. now... But take heart my friends, for we do have something today that Greece didn't a $few-hundred-billion ago; we have Greece... We'll surely learn from their example... won't we?
P.s. With regard to today's jobs number; the bad news is the number was way below consensus expectations, the good news is the number was way below consensus expectations... Washington has to understand that we can print money till we pop, and businesses, in this regulatory-rich environment, still won't hire... Instead they'll hoard a little, they'll innovate a lot (buy new technology) and they'll make a few acquisitions. And of course a weak dollar/higher commodities prices hits them hard in terms of input costs. In that sense, printing simply makes matters worse...
Stay tuned...
Greece Didn't Have Greece
In Moody's Threatens U.S. Debt Rating Cut, Thursday's Wall Street Journal reported on the rating agency's announcement that it "might review the government's Aaa debt rating for a possible downgrade as early as next month if there is no progress toward a deal in Washington to increase the $14.294 trillion federal borrowing limit and cut deficits." Now doesn't that send a chill down your spine? For me it's a tingle... l might even be giddy if the line read "Moody's, having just woken to the fact that the world's premier government must increase its self-induced debt-limit to make its interest payments, has announced a downgrade to BBB. As it would any other shoddily run organization..."
Of course I can make such a reckless pronouncement - knowing that a major downgrade would send interest rates into orbit and the economy into the cellar - for I am absolutely certain it's not happening...
Yet I can't help but wonder; what if Moody's had downgraded Greece a $few-hundred-billion ago? You think maybe they'd have gotten their house in order way back then? You think maybe they wouldn't be so irreparably upside down at the moment?
But, alas, it didn't happen in Greece then and it ain't happening in the U.S. now... But take heart my friends, for we do have something today that Greece didn't a $few-hundred-billion ago; we have Greece... We'll surely learn from their example... won't we?
P.s. With regard to today's jobs number; the bad news is the number was way below consensus expectations, the good news is the number was way below consensus expectations... Washington has to understand that we can print money till we pop, and businesses, in this regulatory-rich environment, still won't hire... Instead they'll hoard a little, they'll innovate a lot (buy new technology) and they'll make a few acquisitions. And of course a weak dollar/higher commodities prices hits them hard in terms of input costs. In that sense, printing simply makes matters worse...
Stay tuned...
Of course I can make such a reckless pronouncement - knowing that a major downgrade would send interest rates into orbit and the economy into the cellar - for I am absolutely certain it's not happening...
Yet I can't help but wonder; what if Moody's had downgraded Greece a $few-hundred-billion ago? You think maybe they'd have gotten their house in order way back then? You think maybe they wouldn't be so irreparably upside down at the moment?
But, alas, it didn't happen in Greece then and it ain't happening in the U.S. now... But take heart my friends, for we do have something today that Greece didn't a $few-hundred-billion ago; we have Greece... We'll surely learn from their example... won't we?
P.s. With regard to today's jobs number; the bad news is the number was way below consensus expectations, the good news is the number was way below consensus expectations... Washington has to understand that we can print money till we pop, and businesses, in this regulatory-rich environment, still won't hire... Instead they'll hoard a little, they'll innovate a lot (buy new technology) and they'll make a few acquisitions. And of course a weak dollar/higher commodities prices hits them hard in terms of input costs. In that sense, printing simply makes matters worse...
Stay tuned...
Bad-News-is-Good-News is Bad News
Notwithstanding the market's knee-jerk reaction to yesterday's stats, I suspect traders (the bulls that is) are breathing a collective sigh of relief... Seriously, all this bad news,
Wednesday, June 1, 2011
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