In the great debate that we are having about health-care in this country right now, I figured it was time to take a look again in my "free-market method" at a contentious issue and break it down into easier terms. It's what I do.
Any-who, as we can see from this study by the Kaiser Family Foundation
In the United States, which has had both a high level of health spending per capita and a relatively high rate of real growth in that spending, the share of GDP devoted to health grew from 8.8% of GDP in 1980 to 15.2% of GDP in 2003 (Exhibit 5). This almost 7 percentage-point increase in the health share of GDP is larger than increases seen in other high-income countries.
What we have seen, at least through 2003, is a huge jump in the increase of the health care sector's share of our GDP upon a cursory statistical analysis. Now over the course of roughly 23 years, this is a fart in the wind considering some of the life saving and prolonging medicines and technologies that we have developed. On an average evening at home, think of all of the ads that you see for either some heart drug, cholesterol inhibitor or other TV ad that you see for drugs for asthmatics. (Then again, if you are home reading Golf Digest it is a steady diet of Viagra and Cialis ads. Gives me a stiff neck, reading at home.) As the quality of care that we have received has increased so has the cost. Now, to be contrarian, why can't we have both, increased efficiency as well as lower costs. I believe that we can do both within the health-care market.
As we can see in this post from Consumer Reports,
a 32-inch 720p set will sell for $647, down 7 percent from December 2007
• a 37-inch 720p LCD TV will cost $782, down 5 percent
• a 40- or 42-inch 720p LCD TV will sell for $944, down 5 percent
• a 40- or 42-inch 1080p set will sell for $1,123, down 19 percent
• a 46- or 47-inch 1080p set will sell for $1,528, down 17 percent
• a 52-inch 1080p LCD TV will sell for $2,243, down 19 percent
High end expensive items are dropping based on the demand for these products. The supply of these items are meeting the demand. What you have is a fairly fluid market, essentially that there is not so much overhead and regulation that it is difficult for upstarts to get into the business of making a product and supplying a service that people want. How many TV making companies are there, I can think of several; Sony, Samsung, Pioneer, Westinghouse, Vizio etc. A good amount of them. What we have within the market for HDTV's is true competition. Lets' say that Samsung and Sony are servicing the "super prime" market, Pioneer and Westinghouse are serving the "prime" market and Vizio is the upstart, serving the rest of the general public. Sony and Samsung are competing with one another to make a product that the "super prime" consumer wants to purchase. At the same time, we have upstarts like Vizio who are trying to break into the market and make a profit by providing a similar, not better or discernibly worse product, by targeting a certain type of consumer who wants to have the HD technology but doesn't want to pay for the pomposity of the Sony or Samsung name brand. This is good for you and me, the average consumer, even though Samsung and Sony are not in a direct competition with Vizio as they will adjust their prices to try and pull from Pioneer and Westinghouse who are serving people in the "prime" part of the market. These forces drive the prices down for all consumers.
Now, this is a pretty crude picture that I've painted here, but the lesson to take away is that general competition between actors on an even stage will lead to lower prices for all consumers as each company is competing from a pool of consumers who wants to purchase their product.
On the other hand, what we don't have is a Czar of TV Pixelation who is dictating what each company needs to include within each television and how many pixels per inch that each TV should provide the viewer. The consumer is left to make that decision for themselves. Do they want the high end product, with the special gadgets and the mini robot which makes deviled eggs during half time, or the less expensive product which will only boil the eggs for you.
The "problem" with our health care system is that it is over regulated, overtaxed and overburdened with tort cases which have driven up the cost of providing medicine. Now, do I want just any Tom, Dick or Harry to set up a practice and begin to sell snake oil to the masses, of course not. The current health care debate isn't about "bending the cost curve" or insuring the uninsured. If it was, we would have broken down the barriers between purchasing health insurance across state lines and allowing in all states the kinds of plans that the uninsured would more than likely purchase, high deductible insurance to cover catastrophic accidents, not normal doctors visits. Or, we would have reformed tort law to cap the monies that could be won when Aunt Flo got a bad boob job and they came out lumpy. This is not the idea, the idea is control.
When the government is in charge of health care, they, the government underneath of the idea of cost cutting and trying to service the masses will have alot of say over what we can and cannot do with our lives. Hey, sorry Mr. Carlton, put that cigarette out as it will drive up costs. There is no greater control than the control over ones on day to day health.
Now, I would like to leave you with a thought, and hopefully if anyone reads this, a point we can debate. Since 1980 we have seen an increase in the cost of health care as a percentage of GDP grow by 7% points. Could it be from the government involvement and the slow creep of a socialized health care system? The health care markets have only become less free and the consumer has only lost choice. Where do we go from here?
Update
This story pertains pretty well to cost. Here
Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
Monday, August 17, 2009
Monday, June 15, 2009
SANFORD / ATLAS: Alternatives to government health takeover - Washington Times
SANFORD / ATLAS: Alternatives to government health takeover - Washington Times
Shared via AddThis
Mark Sanford, the current governor of that rakish southern state of South Carolina, has proposed a free-market solution to the health care crisis that the country currently faces. What I believe we are seeing is the tables aligning for his run for President in 2012. This is the blueprint that conservatives and Libertarians should be following in the battle against Leviathan.
• We believe there's benefit to decoupling employment from health insurance coverage by ridding the system of tax preferences for health care. This single change would reduce health expenditures hundreds of billions of dollars while easing the burden of health costs on businesses. A great unspoken truth is that health benefits from employers come at the expense of employees' take-home pay. Raising lost wages would be the first of many benefits to American workers and their families from delinking health insurance and employment.
• We think it's critical that power shifts to the American consumer and away from government, employers and insurers, as evidence shows medical care prices come down when patients pay directly. Government should offer tax relief, such as refundable tax credits, to encourage private health insurance purchasing - especially for low-income families. Similar ideas, like those in the Patients' Choice Act recently put forth by Republican members of Congress, are important for Americans to consider. We would do well also to consider creative ideas such as changing federal payments to state-based medicaid plans to individual vouchers or expanding health savings accounts, as has been done in South Carolina.
• Government can lower the price of health insurance and increase choice for Americans shopping for their own coverage by breaking down arbitrary barriers such as state lines and reducing costly and unnecessary coverage mandates. For instance, a national market for car or life insurance means South Carolinians can buy an Ohio policy or New Yorkers one from California. It makes similar sense to allow people to buy a health insurance plan, no matter from what state, that best fits their family and their values.
• We believe it's imperative that we fix our medical liability system. By some estimates, abuse of our legal system costs our health system $80 billion annually. Key tort reforms, including reasonable caps on noneconomic damages; freedom to use dispute resolution outside of our courts; and requiring adherence to medical guidelines as a standard for liability in malpractice trials would be a good start.
• Finally, an estimated 80 percent of all the health care innovation in the world springs from American individuals, companies and universities. It is vital that government support an atmosphere that enhances such innovation and discovery rather than restrict it by overregulation. Specifically, the federal government should promote state-based experiments in health care delivery and technology in Medicaid and Medicare pilot programs (in preventive care and home-based nursing, to name two) and also facilitate and aggressively fund scientific research and innovation in both private and public sectors on advances in diagnosis and treatment as well as in disease prevention.
Good Stuff.
Shared via AddThis
Mark Sanford, the current governor of that rakish southern state of South Carolina, has proposed a free-market solution to the health care crisis that the country currently faces. What I believe we are seeing is the tables aligning for his run for President in 2012. This is the blueprint that conservatives and Libertarians should be following in the battle against Leviathan.
• We believe there's benefit to decoupling employment from health insurance coverage by ridding the system of tax preferences for health care. This single change would reduce health expenditures hundreds of billions of dollars while easing the burden of health costs on businesses. A great unspoken truth is that health benefits from employers come at the expense of employees' take-home pay. Raising lost wages would be the first of many benefits to American workers and their families from delinking health insurance and employment.
• We think it's critical that power shifts to the American consumer and away from government, employers and insurers, as evidence shows medical care prices come down when patients pay directly. Government should offer tax relief, such as refundable tax credits, to encourage private health insurance purchasing - especially for low-income families. Similar ideas, like those in the Patients' Choice Act recently put forth by Republican members of Congress, are important for Americans to consider. We would do well also to consider creative ideas such as changing federal payments to state-based medicaid plans to individual vouchers or expanding health savings accounts, as has been done in South Carolina.
• Government can lower the price of health insurance and increase choice for Americans shopping for their own coverage by breaking down arbitrary barriers such as state lines and reducing costly and unnecessary coverage mandates. For instance, a national market for car or life insurance means South Carolinians can buy an Ohio policy or New Yorkers one from California. It makes similar sense to allow people to buy a health insurance plan, no matter from what state, that best fits their family and their values.
• We believe it's imperative that we fix our medical liability system. By some estimates, abuse of our legal system costs our health system $80 billion annually. Key tort reforms, including reasonable caps on noneconomic damages; freedom to use dispute resolution outside of our courts; and requiring adherence to medical guidelines as a standard for liability in malpractice trials would be a good start.
• Finally, an estimated 80 percent of all the health care innovation in the world springs from American individuals, companies and universities. It is vital that government support an atmosphere that enhances such innovation and discovery rather than restrict it by overregulation. Specifically, the federal government should promote state-based experiments in health care delivery and technology in Medicaid and Medicare pilot programs (in preventive care and home-based nursing, to name two) and also facilitate and aggressively fund scientific research and innovation in both private and public sectors on advances in diagnosis and treatment as well as in disease prevention.
Good Stuff.
Wednesday, June 10, 2009
File this under " No Shit item of the Day."
Get Ready for Inflation and Higher Interest Rates:
Normally I would quote liberally from Dr. Laffer's editorial as he is one of my favorite economists. However, what i want to discuss this morning is the inflation that we are currently seeing, especially with gas prices. Milton Friedman referred to inflation as "two many dollars chasing too few goods." I believe that we are seeing that in the rising oil prices.
As we can see from the chart above, the money supply has advanced at the fastest rate in the last fifty years. This was necessary according to Friedman. The money quote is at 1:38.
With the precipitous drop in housing prices being the central trigger in a deflationary spiral, Chairman Bernanke followed Friedman's advice and flooded the financial system with capital to maintain some level of price stability. This was a necessary step in halting a crisis that did have the possibility of throwing us into a Depression. However, what we are seeing now, with the Federal Reserve's monetizing of Treasury debt is something I believe will lead to a fairly ruinous situation.
In regards to oil prices, Since September, members of the Organization of the Petroleum Exporting Countries have pledged cuts totaling 4.2 million barrels a day, or nearly 12 percent of their capacity, a record in such a short time.
According to our own Energy Information Administration,
Oil prices rose for the third consecutive month in May, driven in part by expectations of a global economic recovery and future increases in oil consumption. In addition, a weaker dollar and increasing financial market activity are prompting higher prices for commodities, overshadowing weak oil supply and demand fundamentals. The weaker dollar may indicate that economic activity abroad, especially in Asia, is stronger than currently estimated, which would provide an upside risk to the oil price forecast. Downside risks, such as continuing weak demand as indicated by sluggish first quarter 2009 oil consumption data, high inventories, and increased surplus production capacity levels within the Organization of the Petroleum Exporting Countries (OPEC) could moderate the upward price pressure, especially if the global economic recovery is delayed and/or weaker than expected.
Interesting, why would we have a weak dollar. Possibly because
we have increased the monetary base over %100. Too many dollars chasing too few goods. It would seem to me that we have a large problem on our hands that we should get a handle on as soon as possible. An inflationary spike in commodity prices, oil specifically will ground to a halt a real recovery in the economy. It is time to stop the printing presses and suck some of that cash out of the system, it will be painful but a "real" recovery will not happen if we don't. To put a finer point on it , The Federal Reserve is caught between a rock and a hard place. To satisfy the demands of the White House, they need to keep the presses moving and printing dollars to fund the spending spree that the current administration is going on. The Chairman is in a tight spot, as this excellent piece from the American covers:
One has to pity Ben Bernanke as he tries to attain the Federal Reserve’s dual mandate of promoting economic growth while maintaining price stability. For the currency and bond markets are increasingly focusing on the long-run inflationary impact of the Obama administration’s budget, which according to the Congressional Budget Office will double the U.S. public debt-to-GDP ratio from 41 percent in 2008 to 82 percent by 2019. And the markets are also focusing on the Federal Reserve’s newly announced policy of “quantitative easing,” which they fear could be tantamount to monetizing the administration’s ballooning deficit.
Rising oil prices will severely affect economic growth and skew the budget deficit to an even higher percentage of GDP as tax receipts fall. Rough seas ahead my friends.
Normally I would quote liberally from Dr. Laffer's editorial as he is one of my favorite economists. However, what i want to discuss this morning is the inflation that we are currently seeing, especially with gas prices. Milton Friedman referred to inflation as "two many dollars chasing too few goods." I believe that we are seeing that in the rising oil prices.
As we can see from the chart above, the money supply has advanced at the fastest rate in the last fifty years. This was necessary according to Friedman. The money quote is at 1:38.
With the precipitous drop in housing prices being the central trigger in a deflationary spiral, Chairman Bernanke followed Friedman's advice and flooded the financial system with capital to maintain some level of price stability. This was a necessary step in halting a crisis that did have the possibility of throwing us into a Depression. However, what we are seeing now, with the Federal Reserve's monetizing of Treasury debt is something I believe will lead to a fairly ruinous situation.
In regards to oil prices, Since September, members of the Organization of the Petroleum Exporting Countries have pledged cuts totaling 4.2 million barrels a day, or nearly 12 percent of their capacity, a record in such a short time.
According to our own Energy Information Administration,
Oil prices rose for the third consecutive month in May, driven in part by expectations of a global economic recovery and future increases in oil consumption. In addition, a weaker dollar and increasing financial market activity are prompting higher prices for commodities, overshadowing weak oil supply and demand fundamentals. The weaker dollar may indicate that economic activity abroad, especially in Asia, is stronger than currently estimated, which would provide an upside risk to the oil price forecast. Downside risks, such as continuing weak demand as indicated by sluggish first quarter 2009 oil consumption data, high inventories, and increased surplus production capacity levels within the Organization of the Petroleum Exporting Countries (OPEC) could moderate the upward price pressure, especially if the global economic recovery is delayed and/or weaker than expected.
Interesting, why would we have a weak dollar. Possibly because
we have increased the monetary base over %100. Too many dollars chasing too few goods. It would seem to me that we have a large problem on our hands that we should get a handle on as soon as possible. An inflationary spike in commodity prices, oil specifically will ground to a halt a real recovery in the economy. It is time to stop the printing presses and suck some of that cash out of the system, it will be painful but a "real" recovery will not happen if we don't. To put a finer point on it , The Federal Reserve is caught between a rock and a hard place. To satisfy the demands of the White House, they need to keep the presses moving and printing dollars to fund the spending spree that the current administration is going on. The Chairman is in a tight spot, as this excellent piece from the American covers:
One has to pity Ben Bernanke as he tries to attain the Federal Reserve’s dual mandate of promoting economic growth while maintaining price stability. For the currency and bond markets are increasingly focusing on the long-run inflationary impact of the Obama administration’s budget, which according to the Congressional Budget Office will double the U.S. public debt-to-GDP ratio from 41 percent in 2008 to 82 percent by 2019. And the markets are also focusing on the Federal Reserve’s newly announced policy of “quantitative easing,” which they fear could be tantamount to monetizing the administration’s ballooning deficit.
Rising oil prices will severely affect economic growth and skew the budget deficit to an even higher percentage of GDP as tax receipts fall. Rough seas ahead my friends.
Tuesday, June 9, 2009
Miracles Happen Everyday
Here is a heartening piece from the WSJ:
The U.S. Treasury Department announced Tuesday that 10 of the nation's largest banks have met the necessary requirements to repay funds they received from the government's financial-rescue fund, making way for $68 billion to possibly be returned to Treasury.
"These repayments are an encouraging sign of financial repair, but we still have work to do," said Treasury Secretary Timothy Geithner in a statement.
We don't need a pay Czar now, right Timmy?
The 10 banks are: J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley, BB&T, U.S. Bancorp, American Express Co., Capital One Financial Corp. Bank of New York Mellon Corp., Northern Trust Corp. and State Street Corp.
I will be opening accounts with these banks today with my eight dollar tax cut. I might also by some G.M stock through Morgan Stanley as my brokerage firm. If my math is right I could afford 850,000 shares of "Government Motors."
This is my favorite blurb from the article:
Morgan Stanley said Tuesday that it is "pleased to be repaying its $10 billion in TARP Capital with an attractive return for taxpayers." J.P. Morgan Chase said Tuesday it plans to repay its $25 billion in TARP funds. Translated into non BS talk
Morgan Stanley said Tuesday that it is pleased " to be running as far as possible away from creepy Tim Geithner, the new PAY CZAR, and Joe Biden's douchebaggedness."
This should be a good thing, that we now have banks that are feeling comfortable enough with their capital situation and are able to raise private capital. It amazes me that private investors are willing to invest in these banks when they know that Chrysler and GM investors were bent over the barrel. But I digress. The street should be doing a dance today, no more government control, no pay czar, finally bankers can go back to Spago.
But then again will the FEDS let go and return TARP to the dungeon it belongs in along with wage and price controls:
In Tuesday's announcement, the Treasury said much of the money would be returned to its general fund and would "help to reduce Treasury's borrowing and national debt." Mr. Geithner has described plans to reuse TARP funds that come back into the fund, recently announcing that he'd open up the funds to smaller banks.
The announcements comes as large banks have eagerly declared intentions to repay government aid given the restrictions on dividends and executive pay that go along with TARP. Meanwhile, the public and Congress have shown greater signs of bailout fatigue, leaving firms uncertain about what new restrictions they'd have to face for tapping into the financial-rescue fund.
I don't like the " plans to reuse TARP funds that come back to the fund, recently announcing that he'd open up the funds to smaller banks." Me no likey. How about we suck that money out of circulation, or use it for small business tax relief. While things could be much, much worse I tend to fall under the skeptical heading. If this method, propping up zombie banks, or keeping that money available for the next failing institution, which will happen, how are these banks any more free to engage in non coercive market activity. We don't know all of the specifics yet but I think that the Presidents remarks are prescient.
"I've said repeatedly that I have no interest in managing these banks -- or running auto companies or other private institutions, for that matter," Mr. Mr. Obama said. "But I also want to say: the return of these funds does not provide forgiveness for past excesses or permission for future misdeeds. It is critical that as our country emerges from this period of crisis, that we learn its lessons; that those who seek reward do not take reckless risk; that short-term gains are not pursued without regard for long-term consequences."
TARP is not gone, it is only sleeping.
The U.S. Treasury Department announced Tuesday that 10 of the nation's largest banks have met the necessary requirements to repay funds they received from the government's financial-rescue fund, making way for $68 billion to possibly be returned to Treasury.
"These repayments are an encouraging sign of financial repair, but we still have work to do," said Treasury Secretary Timothy Geithner in a statement.
We don't need a pay Czar now, right Timmy?
The 10 banks are: J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley, BB&T, U.S. Bancorp, American Express Co., Capital One Financial Corp. Bank of New York Mellon Corp., Northern Trust Corp. and State Street Corp.
I will be opening accounts with these banks today with my eight dollar tax cut. I might also by some G.M stock through Morgan Stanley as my brokerage firm. If my math is right I could afford 850,000 shares of "Government Motors."
This is my favorite blurb from the article:
Morgan Stanley said Tuesday that it is "pleased to be repaying its $10 billion in TARP Capital with an attractive return for taxpayers." J.P. Morgan Chase said Tuesday it plans to repay its $25 billion in TARP funds. Translated into non BS talk
Morgan Stanley said Tuesday that it is pleased " to be running as far as possible away from creepy Tim Geithner, the new PAY CZAR, and Joe Biden's douchebaggedness."
This should be a good thing, that we now have banks that are feeling comfortable enough with their capital situation and are able to raise private capital. It amazes me that private investors are willing to invest in these banks when they know that Chrysler and GM investors were bent over the barrel. But I digress. The street should be doing a dance today, no more government control, no pay czar, finally bankers can go back to Spago.
But then again will the FEDS let go and return TARP to the dungeon it belongs in along with wage and price controls:
In Tuesday's announcement, the Treasury said much of the money would be returned to its general fund and would "help to reduce Treasury's borrowing and national debt." Mr. Geithner has described plans to reuse TARP funds that come back into the fund, recently announcing that he'd open up the funds to smaller banks.
The announcements comes as large banks have eagerly declared intentions to repay government aid given the restrictions on dividends and executive pay that go along with TARP. Meanwhile, the public and Congress have shown greater signs of bailout fatigue, leaving firms uncertain about what new restrictions they'd have to face for tapping into the financial-rescue fund.
I don't like the " plans to reuse TARP funds that come back to the fund, recently announcing that he'd open up the funds to smaller banks." Me no likey. How about we suck that money out of circulation, or use it for small business tax relief. While things could be much, much worse I tend to fall under the skeptical heading. If this method, propping up zombie banks, or keeping that money available for the next failing institution, which will happen, how are these banks any more free to engage in non coercive market activity. We don't know all of the specifics yet but I think that the Presidents remarks are prescient.
"I've said repeatedly that I have no interest in managing these banks -- or running auto companies or other private institutions, for that matter," Mr. Mr. Obama said. "But I also want to say: the return of these funds does not provide forgiveness for past excesses or permission for future misdeeds. It is critical that as our country emerges from this period of crisis, that we learn its lessons; that those who seek reward do not take reckless risk; that short-term gains are not pursued without regard for long-term consequences."
TARP is not gone, it is only sleeping.
You can't make this shit up... but the President can.
White House Cites Progress on Economy Under Plan
WASHINGTON — The rising unemployment rate is giving President Obama’s critics an opportunity to raise questions about the effectiveness of his recovery plan and his economic leadership. The huge budget deficit is focusing fresh concern on the national debt.
So Mr. Obama began a new effort on Monday to show that his stimulus plan was yielding concrete benefits, saying that his administration expects to save or create 600,000 more jobs this summer, as the federal government spends billions to expand care at health centers, spruce up national parks, hire teachers and improve military facilities.
At a meeting with Mr. Obama and the cabinet, Vice President Joseph R. Biden Jr. outlined 10 major initiatives that he said would “build momentum and accelerate job growth” over the next 100 days. After Mr. Biden ticked off a list of programs — including water and waste projects in rural America and rehabilitation of 98 airports and 1,500 highways — the president took aim at his critics.
“Now I know that there are some who, despite all evidence to the contrary, still don’t believe in the necessity and promise of the recovery act,” Mr. Obama said, “and I would suggest to them that they talk to the companies who, because of this plan, scrapped the idea of laying off employees and in fact decided to hire employees. Tell that to the Americans who receive that unexpected call saying, ‘Come back to work.’ “
How stupid does the administration believe that the American people are; seriously?
Obama Drastically Scales Back Goals For America After Visiting Denny's
Its not like they haven't tried. Hell, I could save or create a job this weekend by hiring a babysitter and getting my snotty nosed neighbor's son to mow my lawn, but isn't that just a "McJob" I'm not going to promote my babysitter or lawn care specialist to prune my petunias, that is done by Korean man-servant Kato, no pay. Where are these jobs that have been saved? How about these jobs? I remember, this recovery plan was going to save those jobs at the Caterpillar plant right?
I wish that I could pull this off. I'm going to let my professors know that I am going to save or create my dissertation in the next several weeks by investing my time in playing Call of Duty 4. Of course the White House press corps is eating this up. Bill McGurn hit the nail on the head in the WSJ today.
The Obama numbers are pure fiction.
WASHINGTON — The rising unemployment rate is giving President Obama’s critics an opportunity to raise questions about the effectiveness of his recovery plan and his economic leadership. The huge budget deficit is focusing fresh concern on the national debt.
So Mr. Obama began a new effort on Monday to show that his stimulus plan was yielding concrete benefits, saying that his administration expects to save or create 600,000 more jobs this summer, as the federal government spends billions to expand care at health centers, spruce up national parks, hire teachers and improve military facilities.
At a meeting with Mr. Obama and the cabinet, Vice President Joseph R. Biden Jr. outlined 10 major initiatives that he said would “build momentum and accelerate job growth” over the next 100 days. After Mr. Biden ticked off a list of programs — including water and waste projects in rural America and rehabilitation of 98 airports and 1,500 highways — the president took aim at his critics.
“Now I know that there are some who, despite all evidence to the contrary, still don’t believe in the necessity and promise of the recovery act,” Mr. Obama said, “and I would suggest to them that they talk to the companies who, because of this plan, scrapped the idea of laying off employees and in fact decided to hire employees. Tell that to the Americans who receive that unexpected call saying, ‘Come back to work.’ “
How stupid does the administration believe that the American people are; seriously?
Obama Drastically Scales Back Goals For America After Visiting Denny's
Its not like they haven't tried. Hell, I could save or create a job this weekend by hiring a babysitter and getting my snotty nosed neighbor's son to mow my lawn, but isn't that just a "McJob" I'm not going to promote my babysitter or lawn care specialist to prune my petunias, that is done by Korean man-servant Kato, no pay. Where are these jobs that have been saved? How about these jobs? I remember, this recovery plan was going to save those jobs at the Caterpillar plant right?
I wish that I could pull this off. I'm going to let my professors know that I am going to save or create my dissertation in the next several weeks by investing my time in playing Call of Duty 4. Of course the White House press corps is eating this up. Bill McGurn hit the nail on the head in the WSJ today.
The Obama numbers are pure fiction.
Told you so...
China airs fears on U.S. Debt
Senior Chinese leaders have privately voiced fear over the soaring US budget deficit and are increasingly looking to diversify from the dollar, a Republican congressman said.
"We heard across the board -- in private -- substantial, continuing and rising concern," Representative Mark Kirk said after a trip to China that included talks with government officials and central bank chief Zhou Xiaochuan.
This is what happens when you borrow more than you can afford. We have taken out a giant subprime mortgage and it appears that the bank is already contemplating cutting off our equity. Like it or not, China is a larger holder of Treasury debt and is our largest trading partner. We don't want to make them think we are going to inflate our way out of this problem.(Although that is what will happen whether or not the FED does it on purpose.)
Kirk's assessment differed with that of Treasury Secretary Timothy Geithner, who said last week on a separate visit that Chinese leaders had expressed "justifiable confidence" on the future of the recession-hit US economy.
Kirk traveled with Representative Rick Larsen, a member of President Barack Obama's Democratic Party, who also painted a less gloomy picture of Chinese officials' views.
China is the largest creditor to the United States with some 700 billion dollars invested in Treasury bonds. Zhou earlier this year floated the idea of replacing the dollar with a basket of currencies as the benchmark global unit.
Instead of a basket of currencies how about we make the global benchmark Kathie Lee Gifford blouses and copies of Mao's Little Red Book. What we always say, at least me to my friends, is that the Chinese would never call in the debt that we owe them as it would kill their economy which is heavily reliant on exports of cheap plastic shit to sell at Wal-Mart. What we have seen in the past several years since Bush starting running up his deficits is a rise in the Chinese Middle Class, as well as a global middle class which will be competing for ever more scarce resources. Per the Wharton School of business.
China is expected to become the world's third-largest consumer market by 2025 as an expected transition from an investment-led economy to a more consumer-focused model brings about continued growth. The McKinsey Global Institute projects China's middle class will increase from 43% of the population today to 76% by 2025. "The shift from investment to increasing consumption overall -- and as a share of GDP -- is very important to sustainable growth in the long-term. China has maxed out on the input model," says Diana Farrell, the Institute's director. India has been more open to consumption, but like China it has a very high savings rate that Farrell says should be converted to consumer spending to strengthen the overall economy.
So, let's look at this. We have a huge consumer base which has been saving money and being dutiful in a way that the American consumer has forgotten. The global currency which will be in vogue, so long as we don't cave on some kind of supra currency, is the dollar. What is the one thing that runaway inflation kills more than anything else... savings my friends. My hypothesis is that the Chinese will continue purchasing T-Bills, but they are going to want a higher RoR. This will push interest rates up for the average consumer.
Of course, this is just a guess, but then again we never thought that the ChiComs would prattle on about wanting to diversify their portfolio. Time to bring back King Dollar. What I believe that Ben Bernanke will begin to do after the repayment of some of the TARP monies to the FED is gradually raise the FED interbank rates, we need to begin to suck up some of the excess capital that is floating around and get it into circulation. Hopefully, this will satisfy the Chinese as well as bring a little order back to incentives to save money. Investment will come later.
Senior Chinese leaders have privately voiced fear over the soaring US budget deficit and are increasingly looking to diversify from the dollar, a Republican congressman said.
"We heard across the board -- in private -- substantial, continuing and rising concern," Representative Mark Kirk said after a trip to China that included talks with government officials and central bank chief Zhou Xiaochuan.
This is what happens when you borrow more than you can afford. We have taken out a giant subprime mortgage and it appears that the bank is already contemplating cutting off our equity. Like it or not, China is a larger holder of Treasury debt and is our largest trading partner. We don't want to make them think we are going to inflate our way out of this problem.(Although that is what will happen whether or not the FED does it on purpose.)
Kirk's assessment differed with that of Treasury Secretary Timothy Geithner, who said last week on a separate visit that Chinese leaders had expressed "justifiable confidence" on the future of the recession-hit US economy.
Kirk traveled with Representative Rick Larsen, a member of President Barack Obama's Democratic Party, who also painted a less gloomy picture of Chinese officials' views.
China is the largest creditor to the United States with some 700 billion dollars invested in Treasury bonds. Zhou earlier this year floated the idea of replacing the dollar with a basket of currencies as the benchmark global unit.
Instead of a basket of currencies how about we make the global benchmark Kathie Lee Gifford blouses and copies of Mao's Little Red Book. What we always say, at least me to my friends, is that the Chinese would never call in the debt that we owe them as it would kill their economy which is heavily reliant on exports of cheap plastic shit to sell at Wal-Mart. What we have seen in the past several years since Bush starting running up his deficits is a rise in the Chinese Middle Class, as well as a global middle class which will be competing for ever more scarce resources. Per the Wharton School of business.
China is expected to become the world's third-largest consumer market by 2025 as an expected transition from an investment-led economy to a more consumer-focused model brings about continued growth. The McKinsey Global Institute projects China's middle class will increase from 43% of the population today to 76% by 2025. "The shift from investment to increasing consumption overall -- and as a share of GDP -- is very important to sustainable growth in the long-term. China has maxed out on the input model," says Diana Farrell, the Institute's director. India has been more open to consumption, but like China it has a very high savings rate that Farrell says should be converted to consumer spending to strengthen the overall economy.
So, let's look at this. We have a huge consumer base which has been saving money and being dutiful in a way that the American consumer has forgotten. The global currency which will be in vogue, so long as we don't cave on some kind of supra currency, is the dollar. What is the one thing that runaway inflation kills more than anything else... savings my friends. My hypothesis is that the Chinese will continue purchasing T-Bills, but they are going to want a higher RoR. This will push interest rates up for the average consumer.
Of course, this is just a guess, but then again we never thought that the ChiComs would prattle on about wanting to diversify their portfolio. Time to bring back King Dollar. What I believe that Ben Bernanke will begin to do after the repayment of some of the TARP monies to the FED is gradually raise the FED interbank rates, we need to begin to suck up some of the excess capital that is floating around and get it into circulation. Hopefully, this will satisfy the Chinese as well as bring a little order back to incentives to save money. Investment will come later.
Thursday, April 30, 2009
Tuesday, April 7, 2009
Barack Bucks!
Form the USA Today, er, today;
Communities print their own currency to keep cash flowing
"We wanted to make new options available," says Jackie Smith of South Bend, Ind., who is working to launch a local currency. "It reinforces the message that having more control of the economy in local hands can help you cushion yourself from the blows of the marketplace."
So the plan is to use these Barack Bucks to help local business' weather the recession. Why not cure two birds with one stone. How about you can use the Barack Bucks to purchase an automobile.
Hold on, South Bend is pretty close to Chicago... I think I know someone who may need a job in this current recession.
I got what this is really about; you can use the Barack Bucks down at Crazy Uncle Jeremiah's Auto Show-Place...
"With all of the savings of Barack Bucks, all my customers are coming home to ROOST!"
Communities print their own currency to keep cash flowing
"We wanted to make new options available," says Jackie Smith of South Bend, Ind., who is working to launch a local currency. "It reinforces the message that having more control of the economy in local hands can help you cushion yourself from the blows of the marketplace."
So the plan is to use these Barack Bucks to help local business' weather the recession. Why not cure two birds with one stone. How about you can use the Barack Bucks to purchase an automobile.
Hold on, South Bend is pretty close to Chicago... I think I know someone who may need a job in this current recession.
I got what this is really about; you can use the Barack Bucks down at Crazy Uncle Jeremiah's Auto Show-Place...
"With all of the savings of Barack Bucks, all my customers are coming home to ROOST!"
Monday, April 6, 2009
Bernanke's "Green Shoots"
From Bloomberg this morning.
The Labor Department’s April 3 report that the economy shed an additional 663,000 jobs last month, while the unemployment rate rose to 8.5 percent, will be followed by months more of bad-news headlines, economists say. The recession, now in its 17th month, has already cost 5.1 million Americans their jobs, the worst drop in the postwar era; unemployment may hit 9.4 percent this year, according to the median estimate in a Bloomberg News survey, and may top out above 10 percent in 2010.
The risk is that the jobs picture turns even more bleak than forecast or the drumbeat of bad news still to come causes consumers, whose spending has firmed up in recent months, to hunker down again.
“If something happens to spook consumers and they crawl back into their tortoise shells, that would be terrible news,” says Alan Blinder, former Fed vice chairman and now an economics professor at Princeton University.
Consumer spending, which accounts for more than 70 percent of the economy, rose 0.2 percent in February after climbing 1 percent in January, breaking a six-month string of declines.
“Whether the little wisps of improvement in spending are sustained needs watching,” says Stephen Stanley, chief economist at RBS Securities Inc. in Greenwich, Connecticut.
Interest Rates
Declining interest rates on mortgages and business loans led Bernanke, 55, to tell CBS Corp.’s “60 Minutes” on March 15 that he sees “green shoots” in some financial markets, and that the pace of economic decline “will begin to moderate.”
Fueled by optimism that the economy may finally be stabilizing, the Standard & Poor’s 500 Index last month gained 8.5 percent, the most in seven years. Still, “I would be careful about chasing this rally,” Jason Trennert, chief investment strategist at Strategas Research Partners in New York, said in a March 27 interview.
With the Obama administration borrowing to finance record budget deficits, U.S. debt sales will almost triple this year to a record $2.5 trillion, according to estimates from Goldman Sachs Group Inc.
The borrowings may send 10-year yields as high as 6 percent by the end of 2010 from 2.9 percent on April 4, Trennert says, adding that it’s “hard to get optimistic” about stock prices “if you’re in a situation where it’s reasonable to expect long- term interest rates to be higher.”
Stock-Price Plunge
Another plunge in stock prices is just one of the things economists say might derail any recovery. Others include the disorderly collapse of General Motors Corp., Chrysler LLC or a major financial firm; or the failure of the Obama administration’s bank-rescue plan.
A one-month jump in the jobless rate of more than 0.6 percentage point would be a severe blow to confidence, says Alan Blinder, former Fed vice chairman and now an economics professor at Princeton University. So would monthly job losses that continue to top 600,000 into the second half of the year, says Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.
Payrolls have been shrinking by more than that every month since December. Losses need to come down below 500,000 in the next few months and drop close to 100,000 by year-end to confirm that the worst of the recession is over, Zandi says.
“If we continue to lose 600,000-plus jobs a month, that will burn out those green shoots pretty quickly,” he says. “If you lose jobs like that, it continues to undermine consumer spending and confidence.”
I think that Big Ben has this right. We are seeing lots of "green shoots" or "mustard seeds" that will lead to a long term economic recovery. We have a crash in energy prices, as well as retailers that are offering the barn to try and stoke retail sales upward again. Also, the low, low interest rates lead to an upturned yield curve for banks that are borrowing to responsible lenders so bank balance sheets are becoming less leveraged. Also, we want to remember that unemployment is a lagging indicator so going forward we shouldn't look at the last quarters numbers as much as at the leading indicators. Also, with bargains abounding in the stock market the bear hopefully will go into hibernation within the next few quarters.
All of the indicators are pointing to recovery in the financials, but we are still struck down by a bout of fear.I think that this is capital's fear of the impending tax hike as well as fear of hyper-inflation. The President should retreat from his call for tax hikes until the economy has recovered, as we can not afford to lose any capital investment that would come our way.
The Labor Department’s April 3 report that the economy shed an additional 663,000 jobs last month, while the unemployment rate rose to 8.5 percent, will be followed by months more of bad-news headlines, economists say. The recession, now in its 17th month, has already cost 5.1 million Americans their jobs, the worst drop in the postwar era; unemployment may hit 9.4 percent this year, according to the median estimate in a Bloomberg News survey, and may top out above 10 percent in 2010.
The risk is that the jobs picture turns even more bleak than forecast or the drumbeat of bad news still to come causes consumers, whose spending has firmed up in recent months, to hunker down again.
“If something happens to spook consumers and they crawl back into their tortoise shells, that would be terrible news,” says Alan Blinder, former Fed vice chairman and now an economics professor at Princeton University.
Consumer spending, which accounts for more than 70 percent of the economy, rose 0.2 percent in February after climbing 1 percent in January, breaking a six-month string of declines.
“Whether the little wisps of improvement in spending are sustained needs watching,” says Stephen Stanley, chief economist at RBS Securities Inc. in Greenwich, Connecticut.
Interest Rates
Declining interest rates on mortgages and business loans led Bernanke, 55, to tell CBS Corp.’s “60 Minutes” on March 15 that he sees “green shoots” in some financial markets, and that the pace of economic decline “will begin to moderate.”
Fueled by optimism that the economy may finally be stabilizing, the Standard & Poor’s 500 Index last month gained 8.5 percent, the most in seven years. Still, “I would be careful about chasing this rally,” Jason Trennert, chief investment strategist at Strategas Research Partners in New York, said in a March 27 interview.
With the Obama administration borrowing to finance record budget deficits, U.S. debt sales will almost triple this year to a record $2.5 trillion, according to estimates from Goldman Sachs Group Inc.
The borrowings may send 10-year yields as high as 6 percent by the end of 2010 from 2.9 percent on April 4, Trennert says, adding that it’s “hard to get optimistic” about stock prices “if you’re in a situation where it’s reasonable to expect long- term interest rates to be higher.”
Stock-Price Plunge
Another plunge in stock prices is just one of the things economists say might derail any recovery. Others include the disorderly collapse of General Motors Corp., Chrysler LLC or a major financial firm; or the failure of the Obama administration’s bank-rescue plan.
A one-month jump in the jobless rate of more than 0.6 percentage point would be a severe blow to confidence, says Alan Blinder, former Fed vice chairman and now an economics professor at Princeton University. So would monthly job losses that continue to top 600,000 into the second half of the year, says Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.
Payrolls have been shrinking by more than that every month since December. Losses need to come down below 500,000 in the next few months and drop close to 100,000 by year-end to confirm that the worst of the recession is over, Zandi says.
“If we continue to lose 600,000-plus jobs a month, that will burn out those green shoots pretty quickly,” he says. “If you lose jobs like that, it continues to undermine consumer spending and confidence.”
I think that Big Ben has this right. We are seeing lots of "green shoots" or "mustard seeds" that will lead to a long term economic recovery. We have a crash in energy prices, as well as retailers that are offering the barn to try and stoke retail sales upward again. Also, the low, low interest rates lead to an upturned yield curve for banks that are borrowing to responsible lenders so bank balance sheets are becoming less leveraged. Also, we want to remember that unemployment is a lagging indicator so going forward we shouldn't look at the last quarters numbers as much as at the leading indicators. Also, with bargains abounding in the stock market the bear hopefully will go into hibernation within the next few quarters.
All of the indicators are pointing to recovery in the financials, but we are still struck down by a bout of fear.I think that this is capital's fear of the impending tax hike as well as fear of hyper-inflation. The President should retreat from his call for tax hikes until the economy has recovered, as we can not afford to lose any capital investment that would come our way.
Friday, April 3, 2009
Thursday, April 2, 2009
G-20 gives a Trillion
The main Headline on Drudge this afternoon Super Pump: $1 Trillion to IMF, World Bank
An important bit which will not be mentioned. Boring but important:
Brown also says the 20 countries at the summit will enact common policies to crack down on tax havens, regulate hedge funds, and rebuild trust in the financial system to "prevent a crisis such as this from happening again."
He says the G-20 nations will also give emerging powers a greater say in the world economy.
Brown did not outline any new fiscal measures but says that the stimulus packages already announced by major nations have already been the biggest in history.
Obviously, to me at least, that the world leaders at the G-20 Summit never took an economics course above what they needed to sound like they know what they are talking about. (They probably learned to look what they know what they are talking about in Drama Class.) To take this blurb in parts.
1. Crack down on tax havens, regulate hedge funds, and rebuild trust in the financial system. So they want to eliminate tax havens, where capital is stored and used between expenditures. You know, saving before investing. Also, low tax states/countries are the emerging economies in the world. Ireland for instance. Capital didn't start to flee until the Irish raised tax rates. If we weren't bailing out the bets(CDS's, derivatives, etc.) that Hedge Funds have made over the last several years they would have received the haircut that the market wanted to give them, creative destruction. Driving them into the ground to be replaced by more responsible investors and capital. Trust will not be rebuilt in the financial system until new capital can be raised by the LARGEST INVESTOR CLASS, I.E. the middle Class. Raising taxes on them and shrinking economic growth with greater regulation and higher taxation will be ruinous.
2. The G-20 will not help emerging economies. It will stifle and kill their ability to grow through increased regulation and the loss of incentives that these economies should have at their disposal, lower taxes and cheap energy which would level the playing field and attract venture capital.
3. In regards to the stimulus. We have spent more money than I can even fathom to try and increase "liquidity" into the markets. I see this as being an incredibly stupid move. We will never know the true "value" of the world's toxic assets until the real underlying value of the assets can be factored and then sold or written off. Of course this would entail severely restricting our monetary policy to squeeze the real value out of the toxic assets. In simpler terms, who can "afford" those assets and who is floating on credit. This is what the market has been trying to do.
So a quick exit question. With the yield curve for banks, what they are paying to borrow the money vs what they are getting back in payment, making it easy for any banker to make money. Why do we still see a "frozen" credit system. My bet is that the market fears that investors feel that we haven't seen the worst of this big bear yet.
An important bit which will not be mentioned. Boring but important:
Brown also says the 20 countries at the summit will enact common policies to crack down on tax havens, regulate hedge funds, and rebuild trust in the financial system to "prevent a crisis such as this from happening again."
He says the G-20 nations will also give emerging powers a greater say in the world economy.
Brown did not outline any new fiscal measures but says that the stimulus packages already announced by major nations have already been the biggest in history.
Obviously, to me at least, that the world leaders at the G-20 Summit never took an economics course above what they needed to sound like they know what they are talking about. (They probably learned to look what they know what they are talking about in Drama Class.) To take this blurb in parts.
1. Crack down on tax havens, regulate hedge funds, and rebuild trust in the financial system. So they want to eliminate tax havens, where capital is stored and used between expenditures. You know, saving before investing. Also, low tax states/countries are the emerging economies in the world. Ireland for instance. Capital didn't start to flee until the Irish raised tax rates. If we weren't bailing out the bets(CDS's, derivatives, etc.) that Hedge Funds have made over the last several years they would have received the haircut that the market wanted to give them, creative destruction. Driving them into the ground to be replaced by more responsible investors and capital. Trust will not be rebuilt in the financial system until new capital can be raised by the LARGEST INVESTOR CLASS, I.E. the middle Class. Raising taxes on them and shrinking economic growth with greater regulation and higher taxation will be ruinous.
2. The G-20 will not help emerging economies. It will stifle and kill their ability to grow through increased regulation and the loss of incentives that these economies should have at their disposal, lower taxes and cheap energy which would level the playing field and attract venture capital.
3. In regards to the stimulus. We have spent more money than I can even fathom to try and increase "liquidity" into the markets. I see this as being an incredibly stupid move. We will never know the true "value" of the world's toxic assets until the real underlying value of the assets can be factored and then sold or written off. Of course this would entail severely restricting our monetary policy to squeeze the real value out of the toxic assets. In simpler terms, who can "afford" those assets and who is floating on credit. This is what the market has been trying to do.
So a quick exit question. With the yield curve for banks, what they are paying to borrow the money vs what they are getting back in payment, making it easy for any banker to make money. Why do we still see a "frozen" credit system. My bet is that the market fears that investors feel that we haven't seen the worst of this big bear yet.
Art Laffer "kills" the Death Tax
In The Wall Street Journal Art Laffer, an economist for the Reagan administration and prominent supply-side economist lays out the case for repealing the death tax.
Indeed, from a societal standpoint, inheritance is an unmitigated good. Passing on to successive generations greater health, wealth and wisdom is what society in general, and America specifically, is all about. Imagine what America would look like today if our forefathers had been selfish and had left us nothing. We have all benefited greatly from a history of intergenerational American generosity. But just being an American is as much an accident of birth as being the child of wealthy parents. If you are an American, it's likely because ancestors of yours chose to become Americans and also chose to have children.
When we generally think of the death tax, it is to prevent the Paris Hilton's of the world from inheriting huge sums of money which will be blown on rhinestone encrusted thongs for an army of show dogs. However, this is not the case.
In its most basic form, it's about as silly an idea as can be imagined that America in the aggregate can increase the standards of living of future generations by taxing individual Americans for passing on higher standards of living to future generations of Americans of their choice. Clearly, taxing estates at death will induce people who wish to leave estates to future generations to leave smaller estates and to find ways to avoid estate taxes. On a conceptual level, it makes no sense to tax estates at death.
Study after study finds that the estate tax significantly reduces the size of estates and, as an added consequence, reduces the nation's capital stock and income. This common sense finding is documented ad nauseam in the 2006 U.S. Joint Economic Committee Report on the Costs and Consequences of the Federal Estate Tax. The Joint Economic Committee estimates that the estate tax has reduced the capital stock by approximately $850 billion because it reduces incentives to save and invest, has excessively high compliance costs, and results in significant economic inefficiencies.
Those crazy market oriented supply-siders, how dare they continue to document facts proving that the death tax isn't about revenue, but retribution.
Today in America you can take your after-tax income and go to Las Vegas and carouse, gamble, drink and smoke, and as far as our government is concerned that's just fine. But if you take that same after-tax income and leave it to your children and grandchildren, the government will tax that after-tax income one additional time at rates up to 55%. I especially like an oft-quoted line from Joseph Stiglitz and David L. Bevan, who wrote in the Greek Economic Review, "Of course, prohibitively high inheritance tax rates generate no revenue; they simply force the individual to consume his income during his lifetime." Hurray for Vegas.
That's it, I got it. The government wants us to spend all of our money during our lifetime as a sop to the SEIU. Of course the idea behind the death tax is to square one for the little guy. If our liberal friends cared about raising revenue, they would eliminate the death tax.
Read the editorial here. Well worth the time.
Indeed, from a societal standpoint, inheritance is an unmitigated good. Passing on to successive generations greater health, wealth and wisdom is what society in general, and America specifically, is all about. Imagine what America would look like today if our forefathers had been selfish and had left us nothing. We have all benefited greatly from a history of intergenerational American generosity. But just being an American is as much an accident of birth as being the child of wealthy parents. If you are an American, it's likely because ancestors of yours chose to become Americans and also chose to have children.
When we generally think of the death tax, it is to prevent the Paris Hilton's of the world from inheriting huge sums of money which will be blown on rhinestone encrusted thongs for an army of show dogs. However, this is not the case.
In its most basic form, it's about as silly an idea as can be imagined that America in the aggregate can increase the standards of living of future generations by taxing individual Americans for passing on higher standards of living to future generations of Americans of their choice. Clearly, taxing estates at death will induce people who wish to leave estates to future generations to leave smaller estates and to find ways to avoid estate taxes. On a conceptual level, it makes no sense to tax estates at death.
Study after study finds that the estate tax significantly reduces the size of estates and, as an added consequence, reduces the nation's capital stock and income. This common sense finding is documented ad nauseam in the 2006 U.S. Joint Economic Committee Report on the Costs and Consequences of the Federal Estate Tax. The Joint Economic Committee estimates that the estate tax has reduced the capital stock by approximately $850 billion because it reduces incentives to save and invest, has excessively high compliance costs, and results in significant economic inefficiencies.
Those crazy market oriented supply-siders, how dare they continue to document facts proving that the death tax isn't about revenue, but retribution.
Today in America you can take your after-tax income and go to Las Vegas and carouse, gamble, drink and smoke, and as far as our government is concerned that's just fine. But if you take that same after-tax income and leave it to your children and grandchildren, the government will tax that after-tax income one additional time at rates up to 55%. I especially like an oft-quoted line from Joseph Stiglitz and David L. Bevan, who wrote in the Greek Economic Review, "Of course, prohibitively high inheritance tax rates generate no revenue; they simply force the individual to consume his income during his lifetime." Hurray for Vegas.
That's it, I got it. The government wants us to spend all of our money during our lifetime as a sop to the SEIU. Of course the idea behind the death tax is to square one for the little guy. If our liberal friends cared about raising revenue, they would eliminate the death tax.
Read the editorial here. Well worth the time.
Is this the end of Capitalism?
Daniel Henninger takes a pair of pliers and a blowtorch to the anti-globalization crowd
An Excerpt:
China wants a new global currency to replace the inflatable dollar. The managing director of the International Monetary Fund, Dominique Strauss-Kahn, has said the world financial system needs an "early warning system," which one guesses the rocket scientists at the IMF would provide. France's Nicolas Sarkozy wants a global "financial regulator." On Sunday the New York Times raised its hand to announce the crisis "has led to a fundamental rethinking of the American way as a model for the rest of the world."
Here's my two cents worth: Beware of real-estate salesmen.
The housing bubble that floated into view in 2007 is turning into the blob that ate the world. Real-estate mortgages and their derivative securities are a significant problem. That discrete problem, however, has been pumped up to an historic "crisis of capitalism."
Capitalism didn't tank the U.S. economy. Overbuilt housing did. Overbuilt housing tanked the economies of the U.K. and Ireland and Spain. If little else, we've learned that artificially cheap housing sets loose limitless moral hazard.
Read the whole thing.
An Excerpt:
China wants a new global currency to replace the inflatable dollar. The managing director of the International Monetary Fund, Dominique Strauss-Kahn, has said the world financial system needs an "early warning system," which one guesses the rocket scientists at the IMF would provide. France's Nicolas Sarkozy wants a global "financial regulator." On Sunday the New York Times raised its hand to announce the crisis "has led to a fundamental rethinking of the American way as a model for the rest of the world."
Here's my two cents worth: Beware of real-estate salesmen.
The housing bubble that floated into view in 2007 is turning into the blob that ate the world. Real-estate mortgages and their derivative securities are a significant problem. That discrete problem, however, has been pumped up to an historic "crisis of capitalism."
Capitalism didn't tank the U.S. economy. Overbuilt housing did. Overbuilt housing tanked the economies of the U.K. and Ireland and Spain. If little else, we've learned that artificially cheap housing sets loose limitless moral hazard.
Read the whole thing.
Wednesday, April 1, 2009
Jack Kemp Jr.?
Paul Ryan and Eric Cantor are two of the most exciting neo-supply siders that are currently in the Republican minority. As this editorial from the Wall Street Journal states http://online.wsj.com/article/SB123854083982575457.html
- Deficits/Debt. The Republican budget achieves lower deficits than the Democratic plan in every year, and by 2019 yields half the deficit proposed by the president. By doing so, we control government debt: Under our plan, debt held by the public is $3.6 trillion less during the budget period.
- Spending. Our budget gives priority to national defense and veterans' health care. We freeze all other discretionary spending for five years, allowing it to grow modestly after that. We also place all spending under a statutory spending cap backed up by tough budget enforcement.
- Energy. Our budget lays a firm foundation to position the U.S. to meet three important strategic energy goals: reducing U.S. dependence on foreign oil, deploying more clean and renewable energy sources free of greenhouse gas, and supporting economic growth. We do these things by rejecting the president's cap-and-trade scheme, by opening exploration on our nation's oil and gas fields, and by investing the proceeds in a new clean energy trust fund, infrastructure and further deficit reduction.
- Entitlements. Our budget also takes steps toward fulfilling the mission of health and retirement security, in part by making these programs fiscally sustainable. The budget moves toward making quality health care affordable and accessible to all Americans by strengthening the relationship between patients and their doctors, not the dictates of government bureaucrats. We preserve the existing Medicare program for all those 55 or older; and then, to make the program sustainable and dependable, those 54 and younger will enter a Medicare program reformed to work like the health plan members of Congress and federal employees now enjoy. Starting in 2021, seniors would receive a premium support payment equal to 100% of the Medicare benefit on average. This would be income related, so low-income seniors receive extra support, and high-income seniors receive support relative to their incomes -- along the same lines as the president's Medicare Part D proposal.
We strengthen the Medicaid safety net by converting the federal share of Medicaid payments into an allotment tailored for each state's low-income population. This will enhance state flexibility and sensitivity to spending growth.
In one of the most valued government programs -- Social Security -- our budget begins to develop a bipartisan solution to the program's pending bankruptcy by incorporating some of the reforms advocated by the president's budget director. Specifically, we provide for a trigger that would make small adjustments in the benefits for higher-income beneficiaries if the Social Security Administration determines the Social Security Trust Fund cannot meet its obligations. This is a modest but serious proposal which would not affect those in or near retirement, but is aimed at helping develop a consensus, across party lines, toward saving this important retirement program. We also assure that benefits for lower-income recipients are large enough to keep them out of poverty.
- Tax Reform. Our budget does not raise taxes, and makes permanent the 2001 and 2003 tax laws. In fact, we cut taxes and reform the tax system. Individuals can choose to pay their federal taxes under the existing code, or move to a highly simplified system that fits on a post card, with few deductions and two rates. Specifically, couples pay 10% on their first $100,000 in income (singles on $50,000) and 25% above that. Capital gains and dividends are taxed at 15%, and the death tax is repealed. The proposal includes generous standard and personal exemptions such that a family of four earning $39,000 would not pay tax on that amount. In an effort to revive peoples' lost savings, and to create an incentive for risk-taking and investment, the budget repeals the capital gains tax through 2010 for all taxpayers.
On the business side, the budget permanently cuts the uncompetitive corporate income tax rate -- currently the second highest in the industrialized world -- to 25%. This puts American companies in a better position to lead in the global economy, promotes jobs here at home, and strengthens worker paychecks.
We hope the administration and Democratic leaders in Congress do not distort and preach fear about our Republican plan. Some may be tempted to appeal to the darker emotions of envy and insecurity that surely run high in times like these. Yet we know Americans are stronger, smarter and prouder than this ploy assumes.
This editorial could have appeared in the WSJ or National Review in 1976. What excites me the most is tax reform. Milton Friedman used to say that people(capital) vote with their feet. I can see Paul Ryan sitting around with Art Laffer and, my man, Larry Kudlow talking incentives and how to stimulate real Growth. The one thing that I think that Representative Ryan also could have proposed is a negative income tax to go along with a flat tax. http://en.wikipedia.org/wiki/Negative_income_tax
This is a debate that we can win
Wednesday, March 4, 2009
How about another bubble...?
According to the Wall Street Journal this morning, the genius' who gave us the credit system's massive coronary through government intervention which led to a "shadow market" of credit want to find a way to re-clog our arteries...
http://online.wsj.com/article/SB123609012856118765.html
At the heart of the collapse of our credit markets was the securitization and packaging of debt into more palatable risk for banks and other providers of credit to the public at large. The government demanded that providers of credit extend more credit to individuals who didn't fit into their risk schemes. As with everything that the government does when attempting by edict to make outcomes equal the risk is spread out to consumers who were, or are, credit worthy. Instead of the issuers of credit passing on the risk to their "prime" customers, the loose monetary policy and low interest rates provided by the FED led to the risk being spread amongst institutions. Washington is at fault in this crisis and don't seem to realize that they are the cause of the continued rot of these securities at the heart of our problem. The market found a way around the government intervention to continue to lend to people who couldn't afford to pay.
Instead of trying to reinvent the wheel and making free markets more equitable in their distribution of outcomes, the government needs to be the overseer of the market system in a way that doesn't resemble Hobbes Leviathan. What the feds will never understand is that the market will do more to reward the producers and punish the frauds and cheats than any government czar will be able to do.
Scary times ahead... stay tuned
http://online.wsj.com/article/SB123609012856118765.html
Much is riding on the initiative, known as TALF for Term Asset-Backed Securities Loan Facility. At the height of the credit boom, Wall Street issued more than $1 trillion a year of securities that were backed by consumer credit, and trillions more backed by mortgages. These markets -- sometimes called "the shadow banking system" because they operate outside traditional bank activity -- accounted for roughly 40% of all consumer lending before the financial crisis erupted last year. But the market dried up last year. Issuance of securities tied to consumer loans dropped to less than $8 billion in the final three months of last year.
"There has been somewhat of a collapse of the banking system, but an almost total collapse of the shadow banking system," said Princeton University economist Alan Blinder. "Given our reliance on the latter, we need to get that shadow banking system revived."
At the heart of the collapse of our credit markets was the securitization and packaging of debt into more palatable risk for banks and other providers of credit to the public at large. The government demanded that providers of credit extend more credit to individuals who didn't fit into their risk schemes. As with everything that the government does when attempting by edict to make outcomes equal the risk is spread out to consumers who were, or are, credit worthy. Instead of the issuers of credit passing on the risk to their "prime" customers, the loose monetary policy and low interest rates provided by the FED led to the risk being spread amongst institutions. Washington is at fault in this crisis and don't seem to realize that they are the cause of the continued rot of these securities at the heart of our problem. The market found a way around the government intervention to continue to lend to people who couldn't afford to pay.
Instead of trying to reinvent the wheel and making free markets more equitable in their distribution of outcomes, the government needs to be the overseer of the market system in a way that doesn't resemble Hobbes Leviathan. What the feds will never understand is that the market will do more to reward the producers and punish the frauds and cheats than any government czar will be able to do.
Scary times ahead... stay tuned
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