Category Archives: Economy

Stiglitz Stinks

Debt, Economy, Left-Liberalism And Progressivisim, Political Economy, Republicans

“In 2002, Joseph Stiglitz, the Nobel economics prize winner and two co-authors (Jonathan Orszag and Peter Orszag), published an article (‘Implications of the New Fannie Mae and Freddie Mac Risk-based Capital Standard’) in Fannie Mae Papers. They argued that Fannie Mae’s and Freddie Mac’s risk-based capital standard made it very unlikely that the two GSEs (government-sponsored enterprises) would ever require a government bailout. Their results suggested that ‘the risk to the government from a potential default on GSE debt is effectively zero,’ even in ‘the financial and economic conditions of the Great Depression.’ The authors apparently underestimated the possible credit losses from a deep recession, besides ignoring the possibility that the quasi-nationalized housing market and the GSEs could themselves generate a recession. Fannie Mae and presumably the learned authors are not especially proud of this paper, which has disappeared from the GSE’s site,” but our friend Pierre Lemieux, Canadian economist and libertarian extraordinaire, has reproduced it on his site.

So what if Stiglitz is wrong most of the time? Other than some libertarians and devotees of the school of Austrian economics, most pundits make a perfectly good living being mostly wrong.

Public goodwill runs eternal for these failed “experts.” Neoconservative talking twits had been wrong all along about the invasion of Iraq; They consistently dished out dollops of ahistoric, unintuitive, and reckless verbiage. Yet they’ve retained their status as philosopher-kings.

Why not left-liberals like the Keynesian Stiglitz? (Not to be outdone, Republicans are also Keynesians. Or Republikeynsians.)

Stimulating … The Printing Press

Economy, Fascism, Government, Labor, Media, Political Economy, Propaganda

As someone once observed, “They All Lie For Someone.” The Associated Press finally stopped bowing and scraping to The Celestial One, got off its collective duff and did some digging. Note how the NPR begins the report from the White House’s defensive retort, rather than with the meat of the news item. (Bad reporting or a meta-message about what matters?)

“The AP reviewed a sample of federal contracts, not all 9,000 reported to date, and discovered errors in one in six jobs credited to the $787 billion stimulus program — or 5,000 of the 30,000 jobs claimed so far.

Even in its limited review, the AP found job counts that were more than 10 times as high as the actual number of paid positions; jobs credited to the stimulus program that were counted two and sometimes more than four times; and other jobs that were credited to stimulus spending when none was produced.”

More.

If we are to believe the most pessimistic report, this being it, $787 billion was paid in order to create 30,000 minus 5000 jobs. Of course, we know it’s far grimmer than that, as,

“Government consuming what it appropriates, prints or pirates from the nation’s dwindling savings cannot generate plenty; it can only destroy or crowd wealth out.”

Update III: Dollar Doubts

Business, Capitalism, Debt, Economy, Free Markets, Socialism, The State, Uncategorized

“[D]iscussion on the greenback is heating up,” notes Peter Schiff. “And while real insight on the topic is hard to find, the debate centers on the battle between two conventional opinions—both of which are wrong.”

“The first camp, which is generally supportive of government intervention in the economy, argues that dollar’s decline is a positive for both the economy and the stock market. The second camp, which tends to fall on the more conservative end of the political spectrum, views the dollar’s decline as a problem but feels that tough talk and slightly higher interest rates are all that is needed to restore ‘King Dollar’ to its throne.”

“First of all, a weak dollar is no better for Americans than a lower paying job is for a worker. And although I would prefer that the dollar remain strong, I know that currency values are a function of supply and demand, not wishful thinking. The past years of reckless monetary and fiscal policy have created conditions that must push the dollar down. Vastly expanded debt levels and monetary expansion have created a greater supply of dollars, while poor investment performance and diminished industrial capacity have lessened the demand for dollars.

The regrettable truth is that while the weak dollar will help rebalance the global economy, it is not a panacea for the U.S. The fall is no more worthy of celebration than a student celebrating falling grades on his report card. If the dollar does not recover eventually, Americans will suffer diminished living standards. To avoid this we must make difficult reforms now. If we continue our current policies, we run the risk of a complete dollar collapse. Far from helping to solve our problems, this would be a true nightmare scenario.”

More.

I am not as confident as Mr. Schiff that the dollar can be rehabilitated. The country is moving away from markets and toward the central control of the economy and the rearranging of the income curve. What with the daily growth of debt and unfunded liabilities, I hate to be cynical, but could Mr. Schiff’s optimism have anything to do with his political aspirations?

Update I (Oct. 26): Involvement in politics invariably means convincing the masses that there is a panacea to what are intractable problems. Politics are about peddling hope against all hope. Pollyanna sentiments notwithstanding—comments about waving the wand of liberty to dissolve $60 trillion in growing government liabilities are worse than useless.

If the trend in public and political sensibilities was toward liberty—decentralization and deregulation—I’d say hope is warranted.

On the theme of cynicism—and when all else fails—perhaps the Pollyannas among us can adopt the tack taken in this WSJ article; debt can hasten recovery:

“[H]ousehold debt, including mortgage debt, [is] at about $13.7 trillion, or 125% of annual after-tax income…. the U.S. government … is building up debt as fast as households are shedding it. Net U.S. government debt could reach 85% of annual economic output by 2014, up from about 58% now, according to the International Monetary Fund.”

The impetus is in the direction of serfdom.

Update II (Oct. 27): The Economist: “America needs a weak dollar to help revive its economy and reorient it towards exports and away from consumer spending.”

Would that it will. However, a weak dollar is a symptom of all these things it’s supposed to cure; it’s not a cause of over-consumption and under production.

Update III: À la Zimbabwe (and via Bloomberg): “Forty years ago, the U.S. government said the $100 bill would be the highest-denomination note. With the Federal Reserve now trying to print its way out of the financial crisis, it may be time to revisit that decision.

Reinstating $10,000 or $100,000 notes — which existed in limited fashion years ago — won’t cut it. In today’s, ‘Brother, can you spare a trillion dollars?’ economy, we need to think bigger — a $1 million bill may be in order.”

The Blond Squad & The Economcis of Contraband

Conservatism, Crime, Drug War, Economy, Free Markets, Gender, Intelligence, Regulation

Brains are a hindrance to advancement in the age of the idiot; being a lightweight blond is helpful. Heredity is handy too.

Margaret Hoover “is an American political commentator, political strategist, and blogger. She is the great-granddaughter of former President Herbert Hoover,” a factor which probably explains her popularity on Fox News, for it is certainly not humor, originality or cerebral agility that explain the ubiquity of the Blond Squad (BS) on Fox News. O’Reilly especially prefers his women guests to be his inferiors.

In any case, the Blond Squad brainiacs–also called Culture Warriors (comprising MH and another compromised blond)—were bitching in unison about one of Obama’s praise-worthy initiatives. (The first of which was not doing squat about the Iranians’ revolt. I’ve documented the others in successive posts.)

This particular rare good news story the BS was condemning was the decision by the Obama administration to cease “criminalizing cancer and AIDS patients for using a substance that is (a) prescribed by their doctors and (b) legal under the laws of their state. …”

When I told Sean the reason Hoover gave for her objection to decriminalization, he rolled his eyes. I’m sure you will too. According to this woman’s calculus, once you decriminalize a drug, criminal enterprise corners the market.

Babe, it’s exactly the opposite. I know, it’s a hard concept, but the section “THE COSTS OF ILLEGAL MARKETS” in “Addicted To The Drug War” may help (on the other hand…):

“Prohibition—not drug use—is responsible for the current crime and chaos. Prohibition makes the price of drugs far in excess of their cost of production. The production costs of common drugs are low. These chemicals are derived from hardy plants. A poppy is not an orchid. Neither is cannabis a particularly fragile plant. As with other illegal commodities, the price is pushed up by the high costs of circumventing the law as well as by the reduced supply brought on by prohibition. The price of pure heroin for medicinal purposes is a fraction of its street price. The difference amounts to a state subsidy for organized crime. … When supply is reduced … prices shoot up. And what happens when prices go up? The potential profit causes a renewed influx of dealers into the trade, resulting in more crime. In the war on drugs, success is failure. A free market in drugs, however, will bring prices down drastically, inclining fewer pushers to enter the trade.”

Blonds would be more fun if idiots were not so scary.