Wednesday, April 27, 2011
Tuesday, April 26, 2011
What Can He Say?
Tomorrow's Ben Bernanke press conference is being billed as a can't-miss for serious investors. I wonder what he'll say:
Do you suppose he'll confess his fears? Will he use the Fed's mandate (to essentially keep the world's economy afloat) to justify the bailouts and intervention (in the trillions)? Will he tell of sleepless nights as he lies in wonder of whether the massive injection of liquidity is something he can truly reign in when he deems necessary? Will he tell of his fear that he may have created an epic bubble in the bond market? Will he tell of his fear of following in his predecessor's footsteps, whose policies during the last recession were likely the biggest factor leading to the real estate bubble and bust? Will he tell of his fear that perhaps Milton Friedman was right when he said "inflation is always and everywhere a monetary phenomenon"?
Or
Will he take credit for the economic rebound? Will he assign responsibility for the stock market's recovery to the programs the Fed implemented during and post the recession? Will he blame record commodities prices on purely supply/demand factors (not meaning the supply of newly printed dollars growing faster than newly produced goods)? Will he in essence suggest that the timing of Fed action relative to higher commodities prices reflects correlation but not causality - after proudly declaring that the improving economy/stock market reflects causality and not just correlation?
The latter's a safe bet...
In terms of going forward policy; I don't suspect he'll tell us that the Fed will be measurably less accommodative anytime soon. I imagine we'll hear that it's their intent to complete QE2, and that QE3 is probably not necessary - but not out of the cards should the economy take an unanticipated dip.
Myopic Wall Street will eat it up... Free Marketers will boo and hiss...
I personally feel for the guy, he's doing what he thinks is best. But I can't help but wonder, if he were on the outside looking in, if someone else were doing this bidding, if he wouldn't be an outspoken critic....
Do you suppose he'll confess his fears? Will he use the Fed's mandate (to essentially keep the world's economy afloat) to justify the bailouts and intervention (in the trillions)? Will he tell of sleepless nights as he lies in wonder of whether the massive injection of liquidity is something he can truly reign in when he deems necessary? Will he tell of his fear that he may have created an epic bubble in the bond market? Will he tell of his fear of following in his predecessor's footsteps, whose policies during the last recession were likely the biggest factor leading to the real estate bubble and bust? Will he tell of his fear that perhaps Milton Friedman was right when he said "inflation is always and everywhere a monetary phenomenon"?
Or
Will he take credit for the economic rebound? Will he assign responsibility for the stock market's recovery to the programs the Fed implemented during and post the recession? Will he blame record commodities prices on purely supply/demand factors (not meaning the supply of newly printed dollars growing faster than newly produced goods)? Will he in essence suggest that the timing of Fed action relative to higher commodities prices reflects correlation but not causality - after proudly declaring that the improving economy/stock market reflects causality and not just correlation?
The latter's a safe bet...
In terms of going forward policy; I don't suspect he'll tell us that the Fed will be measurably less accommodative anytime soon. I imagine we'll hear that it's their intent to complete QE2, and that QE3 is probably not necessary - but not out of the cards should the economy take an unanticipated dip.
Myopic Wall Street will eat it up... Free Marketers will boo and hiss...
I personally feel for the guy, he's doing what he thinks is best. But I can't help but wonder, if he were on the outside looking in, if someone else were doing this bidding, if he wouldn't be an outspoken critic....
Monday, April 25, 2011
Who Needs 12 Flavors of Yogurt Anyway?
As the debate rages on over deficits and debt-limits, and due to feedback I've received from recent posts on the subject, let's briefly revisit the popular idea that increasing taxes on the wealthy, particularly (for this essay's sake) the mega-wealthy, might serve a constructive economic end.
note; I have no special affinity for the super-rich (i.e., billionaires), I don't know any, I don't always agree with their politics, and I absolutely believe they should pay their taxes. I will confess however that in the case of a few tech-geniuses who come to mind - as I here type on a feather-light wireless keyboard linked to a paper-thin notebook (all for less than a thousand U.S. bucks) - I so appreciate how they exploited every opportunity to pursue their separate interests...
The case for raising taxes on ten-figure Americans rests in the notion that they're flush with ever-increasing idle cash to the tune of tens, if not hundreds, of millions that should be disgorged from their multi-billion dollar estates and allocated elsewhere (for the greater good) by the government.
Now contrary to populist opinion, Bill and Melinda, while they can easily afford to pay higher income taxes, are not hoarding rubber-banded stacks of green pieces of paper behind some revolving bookcase or in a wall safe hidden behind a portrait of Great Grandpappy Gates. Nor are the far-stretching digits and commas representing their bank account balance balanced with the inventory of rubber-banded stacks of green pieces of paper locked away in their bank's vault. Nope, their tax-worthy fortune is in fact sitting in plain view.
It's in that new office complex going up on Main Street, it's in your neighbors' house, it's in the dozen frozen yogurt dispensers at the corner Yodigity, it funded your niece's tuition to Stanford and it's stopped at the red light in front of you. I.e., it's been efficiently distributed throughout the economy. Which begs the question; is it truly in our collective best interest for the likes of the Gateses (even if they themselves believe it is) to pay higher taxes?
Now the wealth-redistribution advocates do not at all appreciate that sentiment. They contend that, on balance, the economy will not take a hit if we simply transfer a few digits and commas from all the top-earners' bank accounts to the U.S. Treasury. That while construction plans would be cancelled, the neighbors' mortgage rate would be higher or they'd be someone else's neighbor in a less attractive neighborhood, your niece would do just fine at Chico State, and who needs twelve flavors of yogurt anyway, overall consumption will remain stable. It's just that our politicians will handle the resource allocation, as opposed to the private sector.
And on that, I rest my case....
Wednesday, April 20, 2011
Absolutely Buy American
According to Diane Sawyer, per her recent TV special, if every American spent just $64 more this year on American-made products, 200,000 new jobs would be created.
As you might imagine, per my previous commentaries, I would question the accuracy (on a net-effect basis) of her assumption. For it entirely ignores, as does virtually every jobs estimate related to targeted spending, the effect of diverting dollars that were previously allocated elsewhere. The estimates never reflect the job-losing impact on the prior recipients of the, in Ms. Sawyer's example, $20 billion...
That said, far be it for me to discourage anyone from spending whatever they please at whatever price they're willing to pay on whatever item they desire from whatever nation it was produced... All I want is the freedom to buy whatever I need from wherever I choose to buy it. If I'm compelled to spend a few extra bucks on an American-made product, I have the freedom to do it. If on the other hand I choose to save a few bucks and buy the product made on the other side of the Pacific and spend my savings at the American-family-owned Yodigity Yogurt, I demand the freedom to do it...
That's all...
As you might imagine, per my previous commentaries, I would question the accuracy (on a net-effect basis) of her assumption. For it entirely ignores, as does virtually every jobs estimate related to targeted spending, the effect of diverting dollars that were previously allocated elsewhere. The estimates never reflect the job-losing impact on the prior recipients of the, in Ms. Sawyer's example, $20 billion...
That said, far be it for me to discourage anyone from spending whatever they please at whatever price they're willing to pay on whatever item they desire from whatever nation it was produced... All I want is the freedom to buy whatever I need from wherever I choose to buy it. If I'm compelled to spend a few extra bucks on an American-made product, I have the freedom to do it. If on the other hand I choose to save a few bucks and buy the product made on the other side of the Pacific and spend my savings at the American-family-owned Yodigity Yogurt, I demand the freedom to do it...
That's all...
Monday, April 18, 2011
Time For a Little Soul-Searching
It seems to me that (aside from those who are physically unable to work) there are two types of people in this world; those who desire freedom and welcome its attendant challenges/opportunities, and those who desire privilege and its attendant indolence
Guido Says We Have a Debt Problem!!
Good News! Standard and Poors just downgraded the U.S. debt outlook to negative. Yes, of course the market
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