Apr 30 2005
It was interesting to see the Post Gazette digging into this issue.
I think the layman understands that politics can affect economies, especially in the Pittsburgh region. Of course, Pittsburghers are not alone in expecting too much magic from government solutions — after all, government is the instrument of politically connected for better, or, too often, worse. Continue Reading »
Apr 29 2005
Apr 28 2005
The New York Times published a suggestion from Princeton economics professor, Alan B. Krueger, on how bubbles like the most recent one in Internet stocks that burst might be avoided in the future. Of course, like so many in the economics profession, he completely ignored a massive contributing factor — credit and money supply expansion.
The article is still a good read, even if Krueger’s conclusion (that more open-disclosure on who is holding how much of any stock would help improve “efficient markets”) is a bit shortsighted. It gives a little historic background noting the South Sea bubble. That’s a good reference because it was very much promoted by fraudulent means, and folks identify that with our most recent bubble.
Unfortunately, although fraud is popularly promoted as the near exclusive reason for the net bubble and the subsequent economic slide (the latter is also attributed to 9-11), such an explanation is grossly oversimplified even if it naturally supports Krueger’s conclusion. If only the truth were as simple as just mutual fund scandals, Enron, and Martha Stewart. Continue Reading »
Apr 28 2005
It is the nature of every person to error, but only the fool perseveres in error.
—Marcus Tullius Cicero (c. 106-43 B.C.)
Apr 27 2005
As the old cautionary wisdom warns, things are seldom as they seem. And, Llewellyn Rockwell is as good as anyone at cutting through the deep stuff when it comes to our core subject matter. Over at Mises.org, Lew posted up a good discussion on the nature of official policy and how it is tied to our economic security, for better and often worse. With it, he blends in a critique of conventional ways of thinking about these issues, pointing out the many critical blind spots. Also, if you are short on time, skip down to his list of Bush’s Top Ten Economic errors — Direct and to the point.
Somewhat surprisingly, though, Lew expects the worst from the policy side to be counteracted by “the best” from everyone else. Can’t say I have so much faith, but check out Rockwell’s critique of the past on into the future for yourself.
Apr 26 2005
China’s new auto line is targeted at being the world’s next Toyota. Much flashier than older Chinese models, these new vehicles are not so bad looking. I couldn’t help but notice how western this auto show is. And this can’t be good for US automakers on the hook for agreements with Auto unions in an era before Japan was a capable competitor.
View Chinese Automakers Here (Requires RealPlayer)
Apr 26 2005
Everyone blames cheap foreign labor for jobs moving overseas. Few want to look at the domestic hurdles our nation elects to place on our own competitiveness. I just read that that according to the IRS, America Spend 6.6 Billion Hours dealing with the US tax code. Talk about an anti-competitive waste of energy and resources.
Wealth gravitates towards where it can operate most efficiently. Wasting 6.6 billion hours on taxes is simply insane. And, so, this is just one of the many non-labor reasons why US consumers can’t afford to make their budgets work buying US made goods, and consequently why fewer businesses and industries stick with the US as a base for production and jobs.
Apr 25 2005
Financial
Personal
Apr 23 2005
— Attributed to Mark Twain
Apr 23 2005
At Ernharth we profoundly believe that history tells us just as much about what the future economy may bring as any set of economics charts or formulas. Core to that distinction is where the Austrian School of Economics parts ways heavily with the other mainstream schools: it considers economics a humanity instead of a science, directed as much by unpredictable human action — from free markets to politics — as it is by policies firmly rooted in economic formulas and calculations designed to predict the economic weather. (I chose the weather analogy rather by accident, before I was reminded of a common quip in the investment industry, that the only profession wrong more frequently than meteorologists are economists.)
Bill Bonner has another great post over at Lew Rockwell’s site in which he frames our current economic situation in historic and very human terms. Continue Reading »
Apr 22 2005
Reading Greenspan’s latest testimony, I had to chuckle. Paul Sarbanes (D-Md) had the gal to lecture the Fed Chief on being wrong for encouraging tax cuts AND cuts in government spending and growth, because he was well aware that lawmakers wouldn’t heed the second part of his recommendation, only the first. (2001 Tax Cuts Encouraged Deficit, SFC.)
Hah! That’s a rare and honest indictment of complete fiscal irresponsibility laid at the feet of his congressional counterparts! And then, what can we make of Sarbanes himself who thinks Greenspan should withhold his prescribed treatment because Congress can’t handle the truth?
Indeed, we’ve fallen into a modern version of Alice’s Wonderland rabbit hole. Around my home I can’t go for long spending more than I earn, even if Continue Reading »
Apr 22 2005
Taxing million dollar athletes to help pay for abusing local taxpayers with the burdens of building their stadiums is not such a bad idea. After all, what businessperson couldn’t afford to pay himself and his employees a great deal more if someone subsidized a large chunk of his overhead? (Athlete taxes Grow Popular: CNNMoney)
But if such plans become the norm, it should not distract from the cold hard fact that all taxpayers bear the big hit for such corporate welfare. Moreover, throwing good money after bad into the government trough doesn’t seem all that great a deal since politicians can’t seem to retire debt faster than they can justify creating more of it. Any and all excuses are used to justify more spending, so why provide an incentive? Absent eliminating debt, the economy is better if the athlete takes twenty of his closest friends to dinner, builds a new addition to his home, or buys the latest tricked-out Hummer. Continue Reading »
Apr 21 2005
One problem with printing money and sending it into the economy is that, as more of it is circulating, it gives the illusion of growing wealth. In reality, new dollars in circulation gain their spending power at the expense of those responsible enough to save dollars. Yet sectors of the economy operate with the impression that there actually is economic growth. However, much of that growth depends on Continue Reading »
Apr 21 2005
Jim Juback at TheStreet.com gives a quick rundown on why he thinks the market might remain weak for some time to come in his article, “Seven Reasons Why the Bears Might Be Right.”
Jim hits on a few good points — interest rates, the deficit and oil prices for example — that should cause concern. But the other points strike me as simply pointing out symptoms of the problem, mixed in with a tinge of run-of-the-mill short term technical analysis fluff.
Missing are a few of the key tie-ins. First, there is a near total breakdown of the store of savings in the US. At 1.5%, our rate is down from an average of 12% or so… What happens to consumption when savings gets back into vogue? Continue Reading »
