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POPSNiall Ferguson And The Dollar .... into completely unwarranted European market strength. One wonders (or not) why the G-20 is more than happy to perpetuate the daily raping and pillaging of the DXY. Niall Ferguson discusses US Dollar, Fed Policy Outlook Video: (3:32) http://www.clipsyndicate.com/video/playlist/8178/1166786
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POPS Washington and the Jobs Market The larger measure of joblessness that includes marginal and part-time workers jumped 0.5% to 17.5%. And the average hours worked in a week stayed the same at 33.0, which means that millions of Americans working part-time will have to become full-time before employers start hiring new workers. If Democrats really want to create jobs and save themselves from a debacle in 2010, their best policy option is to stop creating so much investment uncertainty and additional barriers to business hiring. Stop trying to raise business costs by making it easier to unionize via "card check." Stop trying to raise energy costs with a cap-and-tax bill. Stop adding to the deficit and future tax burden with a 12% increase in domestic spending for 2010. Above all, stop trying to ram through Congress on a partisan vote a health-care bill that imposes a 5.4-percentage-point income tax "surcharge" on anyone making more than $500,000 a year......
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POPSIs the Economy Recovering? The Curious Case of 1920 vs. 1929
The basic questions we need to ask here are: 1. Why do economies recover? 2. Are we recovering? Q. Why do economies recover? A. They recover because bad investments made during the bubble are liquidated, valuable capital is no longer being wasted on them, new capital is formed from savings, and profitable enterprises attract new capital to expand. Low real interest rates caused by increased savings encourage borrowing, manufacturers use the capital to make new machines, producers of consumer goods buy them, cash goes through the system, consumers see things are getting better, more consumer goods are produced, and consumers buy them. It has to happen this way or the recovery will fail. The difficult part of a recovery is ugly. Bankrupt firms need to fail so that valuable capital resources are not wasted on their continuing activities. This means that unemployment rises (10.2% now) and business bankruptcies are high. Trillions of dollars of asset values are wiped out.
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POPSPerhaps the Coolest iPhone App Yet If you have an iPhone 3GS or Android device you can install the Layar app for free and then search for "recovery" or "sunlight" within Layar to find this layer. The layer works best near large cities where you are most likely to find recovery contracts, below is an example of what it looks like on the streets of Washington DC. This data is taken from the recovery.gov Where Is The Money Going? map which provides a KML file containing all recipient reported Contracts. As of October 30th this data will be updated with the final contract, grants, and loans. How We Made It If you're a developer you might be interested in how we made this. Fortunately Layar makes it quite easy and we've taken a further step to make it even easier if you're already using Django. http://sunlightlabs.com/blog/2009/recoverygov-contracts-your-phone/
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POPSThe Forgotten Depression of 1920 The experience of 1920–21 reinforces the contention of genuine free-market economists that government intervention is a hindrance to economic recovery. It is not in spite of the absence of fiscal and monetary stimulus that the economy recovered from the 1920–21 depression. It is because those things were avoided that recovery came. The next time we are solemnly warned to recall the lessons of history lest our economy deteriorate still further, we ought to refer to this episode – and observe how hastily our interrogators try to change the subject.
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POPSJohn Maynard Keynes: Don't call it a comeback And yet today, you can't click your way three links through the econoblogosphere without stumbling into a flame war between reenergized triumphalist Keynesian supporters of government intervention in the economy and bewildered, angry market fundamentalists who have just watched their painstakingly constructed world crumble around them. Just a few years ago the heat of the debate would have been unthinkable -- Keynes seemed to have about as much relevance to current economic policymaking as Winston Churchill does for the Middle East peace process.
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POPSHappy Cost of Government Day As a result, taxpayers have to work 224 days out of the year just to meet the cost imposed by all levels of government. As in previous years, this year’s report seeks to shed light on the burden government imposes on taxpayers. A new feature of the report is a series of case studies taking a closer look at some of the more recent spending initiatives and other proposals that are currently threatening taxpayers. For a broader perspective, for the first time, we have included several narratives authored by lawmakers and think tank representatives analyzing the cost of government at the state level. The recent federal spending spree paints a bleak picture for taxpayers. It started with the passage of the financial market bailout and continued with the “stimulus,” the $410 billion earmark-stuffed “omnibus,” the $3.55 trillion budget, and more bailouts leading to current threats of a national energy tax and a government takeover of health care.
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POPSMoney For Nothing Incredibly, the lesson Obama draws from history is that past administrations didn't spend enough..."The real problem was that Roosevelt slowed down on public spending in the first two years," the president said, according to one congressman who was in the room. "If he'd just kept on spending that money, we'd have gotten out of the Depression quicker."
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POPSKeynesian Foolishness I don't care how prominent, credentialed, or "accomplished" an economist is. If he says that burying cash in the ground can be a boon to society, then he should be immediately dismissed from public and academic discourse.
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POPSSprott: "It's The Real Economy, Stupid" Anything that starts with "We are now in the early stages of a depression" is a must read. (Sprott Asset Management pdf file) via Zero Hedge http://zerohedge.blogspot.com/2009/07/sprott-its-real-economy-stupid.html US Housing Market Failure: The annual pace of new home sales is now 342,000, a whopping 32.8% below the rate in May 2008. At the current sales pace, there is 10.2 months worth of inventory overhang sitting on the market, dragging down prices and encouraging potential buyers to wait it out as prices deflate... New home sales are down 73% from the all time high of 1,283,000 new homes sold in 2005 (mild recession?)... Rail Car Loadings Suffering: For the first 26 weeks of 2009, US railroads reported cumulative volume of 6,806,892 carloads, down 19.2% from 2008. Stock Market ...at the end of June 2009, the S&P 500 traded at an inflation adjusted P/E ratio of 16.08 And now the Democrats want to destroy healthcare by
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POPSCalling All Blue Dog Democrats CNSNews.com reports that congressional Democrats want abortion to be included as a health benefit in both government and private insurance plans -- using taxpayer money to fund abortion on demand. This exposes the lie that they want to reduce the number of abortions. Please. The plan would also inevitably result in government rationing of care, and the liberals driving the plan. The plan would result in government bureaucrats, rather than your doctor, having the final say over your care options. Then there's the wealth-redistribution mentality forever driving President Obama -- his obsession with leveling the economic playing field that underlies all of his major policy initiatives. This obsession explains why he supports capital gains tax increases even though they would hurt everyone, his endless appetite for soaking the rich with increasingly confiscatory taxes, and his single-minded determination to bankrupt this nation through no-growth deficit spending. . . .
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POPSWhite House: Budget deficit to top $1.8T Today Obama's scraping together savings of $1Trillion in savings over 10 years by putting the boot to the neck of taxpayers and business owners. Does he think we forgot that his annual deficit spending will reach 7.1 Trilliion over the same period?
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POPS The Stimulus Spending That Didn't Stimulate Barack Obama has fatally undermined our currency, our solvency, our financial stability and -- ultimately -- our economy, all to spend money that has had no economic effect! But the results are in: None of Obama's spending is doing anything to help the economy. Of course, the process of household savings, designed to pay down debt, is very healthy. Economists call it de-leveraging. By the start of the recession, the debt American households owe had risen from 70 percent of their annual income in 1995 to 140 percent (excluding mortgages). Now it's on its way back down again. And, eventually, that will lead to a real recovery -- if Obama doesn't wreck the currency and bring on mega-inflation before then (but he probably will).
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POPS Keynesian Economics Is Strangling Our Economy So if Keynesian spending is theoretically flawed and doesn’t work in the real world, why are politicians on a spending binge? As I state in the conclusion, they love spending other people’s money. youtube video (7:29)
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POPS Earth: Too Big To Fail It seems Geithner has finally seen the counter-Keynesian light. You can't enrich yourself by taking money from one pocket and putting it in the other (particularly when the hand facilitating the transfer is a governmental hand with governmentally sticky fingers) Handcrafted by suitabltyflip on March 13, 2009 Geithner boosts NASA funds to probe cosmos for bail-out cash By Scott Ott Examiner Columnist | 3/13/09 5:21 AM "Let's face it," said an unnamed Treasury source, "Earth is too big to fail. We can all boost funding to the IMF, but at some point that's like scooping water out of a bucket to fill the same bucket. The fundamental problem is that Earth is a closed economic system. To rescue the global economy we need help that's literally out of this world." Just a day after U.S. Treasury Secretary Timothy Geithner proposed increasing U.S. contributions to his former employer, the International Monetary Fund (IMF) by $100 billion . . . . . .
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POPSOhio Rep. Thinks FDR Caused Depression The above remarks were made to the Columbus Dispatch of Ohio. Turns out that Mitch McConnell's not the only GOPer to have no idea what he's talking about with the depression. Don't you just love how he says, "That's just history?" It could only get better if he added, "Everyone knows that!" Writes Matthew Yglesias, "Probabilities indicate that this is not the stupidest conservative in congress." Probably not even in the top five.
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POPSOkun's Law For my part, I tend to lean away from the Keynesian view that sees recessions as times of inadequate “aggregate demand.” Rather, recessions are essentially times when there is a mismatch between the mix of goods and services demanded by individuals in the economy, and the mix of goods and services that was previously supplied. The clear area of mismatch here is in housing, as well as various sectors of the economy that have made a business of irresponsibly increasing the debt burden of the nation (including mortgage companies, investment banks, and other purveyors of leverage). Those mismatched sectors are experiencing enormous losses, as they should. The job of economic policy is to ease that transition in a way that reduces the spillover onto the broader economy.
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POPSEven Keynes Wasn't This Keynesian According to an Associated Press report: “Overall, only $26 billion out of $274 billion in infrastructure spending would be delivered into the economy by the Sept. 30 end of the budget year, just 7 percent. Just one in seven dollars of a huge $18.5 billion investment in energy efficiency and renewable energy programs would be spent within a year and a half.” Now listen to Keynes in 1942: “Organized public works, at home and abroad, may be the right cure for a chronic tendency to a deficiency of effective demand. But they are not capable of sufficiently rapid organisation (and above all cannot be reversed or undone at a later date), to be the most serviceable instrument for the prevention of the trade cycle.” (Keynes, Collected Works, vol. XXVII, p.122 ). http://thinkmarkets.wordpress.com/2009/01/25/keynes-as-public-works-skeptic/#more-746
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POPSObama's Public Spending Program: A Very Expensive Farce was an enormous amount of excess capacity. By pouring billions of dollars into these schemes, Obama will be drawing labour and capital away from other lines of production. Because capital consists of heterogeneous producer goods of varying degrees of specificity, only a very small amount of these goods could be transferred to public works programs. By pouring billions into these financial sinks he will ensure that resources will be directed away from the higher stages of production and into consumption. This exposes a fundamental and fatal flaw in the big-spending theory of vulgar Keynesians like Krugman. These expenditures will resolve themselves into incomes and hence spending on consumer goods. This will skew the relative price structure in favour of increased consumption and so raise the ratio of consumption to savings by attracting resources away from the higher stages of production to the stages closest to consumption. A process guaranteed to damage recovery.
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POPS "Are They All Democrats Now?" Almost at the end of FDR's second term, the economy was getting worse, with unemployment at more than 20 percent. Folsom cites the words of FDR's treasury secretary and one-time confidant, Henry Morgenthau Jr., to make his case. These words should serve as a chilling reminder to all politicians even considering jumping on Obama's FDR big-spending bandwagon: "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this Administration we have just as much unemployment as when we started. And an enormous debt to boot." Burton W. Folsom Jr. in "New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America."
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POPS The Romney Plan We've got an inbound administration whose rhetoric in the face of economic turmoil is equal parts Roosevelt, Hoover, and Carter; and the public by and large is signing on as if we hadn't been to this rodeo before. Spoiler alert: it ends poorly.
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POPSKeynesian Borrowing Won't Solve Our Economic Problems Similarly, President Clinton and the Republican Congress applied the balanced budget rule in the mid 1990s, producing a long period of steady economic growth. Washington's response to the recession has been ever-expanding borrowing for stimulus packages and bailouts: (1) $150 billion in February; (2) $850 billion in October, and, coming soon; (3) Obama's $800 billion stimulus package. These packages are implementations of Keynesian economics which advocates increased government borrowing during recessions. But government borrowing has severe long-term costs. The late Milton Friedman, founder of the fiscally conservative alternative known as monetarism, often pointed out: "There ain't no free lunch!"
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POPSThe Dirty Secret of the Financial Crisis: Our Banking System's Broken
The Levy institute suggests that some banks are "too big to save." … "Time to Bail Out: Alternatives to the Bush-Paulson Plan," by Dimitri Papadimitriou and Randall Wray. Their perspective is Keynesian, not market worship. They argue … that the bailout is proceeding backward. Instead of saving Wall Street first, government should devote its heavy firepower to reviving jobs, incomes and business enterprises. The banks will not get well or begin normal lending until there is overall economic recovery. The financial system, meanwhile, can be managed much as it was during the Depression, with regulators weeding out doomed banks and closing them, putting troubled banks under conservatorship and supervising healthy ones closely to prevent excesses. "If we are going to leave insolvent institutions open, it is critically important to replace or at least control management," the Levy paper explains. "Business as usual would be a disaster."
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POPS The Myths Of Clintonomics The media assume the Clinton tax hikes somehow stimulated the economy, and are cheering on Obama's plan. Obama would raise the top rate "back to where Bill Clinton had it at the time of the greatest bull market, the greatest economic growth in the history of the country," Best Life editor Jack Otter told CNN. "Bill Clinton's tax rate was not a punitive tax rate. It didn't harm the economy." In fact, the economy grew in spite of, not because of , the Clinton tax hikes. The bull market took off precisely when then-Fed Chairman Alan Greenspan took his foot off the brakes and hit the gas in 1995. It was also then that Republicans took control of Congress — further blunting the effects of the Clinton tax torpedo that had taken effect the previous year. Their "deficit-reduction plan" didn't create the surpluses at all. They were a direct result of a tidal wave of capital-gains revenues generated by the GOP-led stock boom.
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POPSOn Adopting China's Keynesian Economic Policies Why was Bernanke so eager to accept responsibility for a failure that occurred more than seventy years before he joined the Board? Because otherwise he and the economics profession in general would have had to concede John Maynard Keynes’ claim that a free market system is not self-regulating.
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