Category Archives: Economics

Miscellaneous economy stuff

In Which I Agree with President Obama

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…mostly.

In a speech Tuesday in Phoenix, Obama call[ed] for transitioning the business model of Fannie and Freddie into a system where “private capital must be wiped out before the government pays on any form of catastrophic guarantee,” a senior administration official said.

If he really wants to, this is mostly good.  Those taking the risks should be the ones to reap the rewards—and the only ones to suffer the loss.  Taxpayers should not be dragged into a failure at all.

And that’s the “mostly” part: “before the government pays on any form of catastrophic guarantee” should not be a player at all.  This is what private insurance in a free market is for.

Obama will also renew his calls for sweeping mortgage refinancing legislation when he travels to Phoenix Tuesday.

Here, not so much.  The only sweeping legislation necessary is the repeal of the Community Reinvestment Act, a high-minded sounding idea that in the realization has been used only to browbeat lenders into making bad loans to poor credit risks.

…a call for expanding refinancing eligibility for homeowners who do not have government-backed mortgages.

In particular, there’s no need for a government determination of “refinancing eligibility.”  The market will determine that, just fine.  Government distortions from the market do no good at all; they only destroy the pricing information extant.

Keynesian Stimuli

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If the point of Keynesian spending is to inject money into the economy to make up for diminished private demand, then an equally valid Keynesian stimulus would be to reduce taxes and leave the money in the private economy in the first place.

Which, in fact, Keynesians actually recommend: Galbraith, John K, The Great Crash 1929.  And as that Evil Republican (!?) John Kennedy actually did in the early ’60s, that Evil Republican Ronald Reagan did again in the ’80s, and that Evil Republican George Bush the Younger did yet again in the early 2000s.

Spend more, tax less—either one produces the deficit spending that is actually what Keynes thought appropriate.  Except that taxing less—eliminating the government as (inefficient) middleman in the deficit spending—produces the more efficient stimulus, to the extent that government stimulus can have any beneficial effect at all.  And spending more is how politicians buy votes.

Hmm….

Some Thoughts on the Times’ Sale of the Globe

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In no particular order, and…reasonably…disjointed.  Recall that in 1993, The New York Times bought the Boston Globe for $1.1 billion.  Last week, the NYT sold the Globe to the Boston Red Sox owner for $70 million.

In 2001/2002, the current Red Sox owner bought the team, and 80% of the New England Sports Network, for $695 million; today the market values the business at a skosh over $1.3 billion.

In 2011, the Red Sox owner signed a 7-year contract worth $136 million with a pretty solid outfielder (plus some signing and performance bonuses that only amount to jingle money).

In a free market, we set our own priorities and values, individually and as a group, all without need of government oversight.  These purchases and sale, and the contract, show how much our free market values the NLMSM.   They also show how much our free market values the sports form of entertainment relative to the NLMSM form of entertainment.

Economic Disinformation

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President Barack Obama actually said this out loud to The New York Times:

T]hat [Keystone XL pipeline] oil is going to be piped down to the Gulf to be sold on the world oil markets, so it does not bring down gas prices here in the United States.

Because increased supplies don’t actually decrease prices.  Sure.

Actually, that distorting claim is of a piece with Obama’s steady drumbeat of distortions concerning the effects of his economic policy.

Here are the latest employment statistics, which Obama insists demonstrate that effectiveness and why he should be able to spend and tax even more.

Total nonfarm payroll employment increased by 162,000 in July, and the unemployment rate edged down to 7.4%….

That’s against ADP’s mid-week claim of 200,000 new jobs.  And what’s behind that apparent improvement to “only” 7.4% unemployment?

…long-term unemployed (those jobless for 27 weeks or more) was little changed at 4.2 million.  These individuals accounted for 37.0% of the unemployed.
…
The number of persons employed part time…was essentially unchanged at 8.2 million in July.

Additionally, the labor force participation rate (the per cent of our adult population actually trying to find work) dropped last month to 63.4%, approaching a 30-year low, as some 240,000 Americans gave up trying to find work in this stagnated-at-lousy economy.  That drop underlies the seeming drop in the headline unemployment rate.

That’s not all.  We see from The Wall Street Journal that actual economic expansion—the GDP growth rate—while still positive, is falling and has done so for some time.

Because Obama’s Keynesian politics have been so effective, and his claims about the wisdom of them have been so accurate.  Never mind that downward trend over the last 7 quarters.

The Dallas branch of the Fed has some interesting charts, also.  This one compares current unemployment duration with the length of unemployment in past recessions.  Careful readers will recognize the recession of ’74-’75 at the end of Jimmy Carter’s term, and the ’81-’82 recession at the start of Ronald Reagan’s terms.

This next graph shows…graphically…the effectiveness of Obama’s economic policy.  No matter who’s estimating, we just don’t catch up.

Last one.  This graph shows how the Obama Recovery compares with our history of economic recoveries.

But Obama says everything is Jake, and those Evil Republicans should get out of his way, so he can do even more of this.

Pollution and China

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Estimates from state-affiliated researchers say that anywhere between 8% and 20% of China’s arable land, some 25 to 60 million acres, may now be contaminated with heavy metals.  A loss of even 5% could be disastrous, taking China below the “red line” of 296 million acres of arable land that are currently needed, according to the government, to feed the country’s 1.35 billion people.

And

Mr. Zhuang [Guotai, head of the Ecological Department at the Environment Ministry], of the environment ministry, said at his recent news conference that only 35% of the fertilizer used in China was being properly absorbed by crops.  The remaining 65%, he said, was being discharged as pollution that was seriously tainting China’s farmland.  Runoff of nitrogen fertilizer, among the most widely-used varieties in China, can contaminate water sources and lead to soil acidification, soil erosion and lower crop yields.

And

China has long sought to industrialize its countryside, dating to Mao’s disastrous Great Leap Forward beginning in 1958, when he sought rapid industrialization by urging peasants to set up backyard steel furnaces at the expense of agricultural output.  The cumulative impact of decades of building up rural industry is now taking an environmental toll, particularly as industrial growth surges forward in China’s breadbasket.

Because some things are more important than others, and Government Knows Better what those things are:

effort to keep urbanites comfortable and well-fed has also led to the poisoning of parts of the food chain, and some of the pollution is traveling back to the cities in a different—and for many, more frightening—guise.

Cadmium, arsenic, lead, chemical waste from chemical factories, and waste runoff from excessive use of chemical fertilizers—these are all now in the PRC’s food chain, from the soil up.

Unfortunately, the old are much more vulnerable to the privation of inadequate food supply than are the younger and healthier.  The coming starvation from this food debacle might alleviate the coming demographic implosion of the PRC’s aging population, but it’s the wrong way for demographics to be adjusted, even where that’s not the intent.  At least as bad, the children and babies also are extremely vulnerable to the ravages of privation.  Their coming starvation will leave little or no capacity in the population for recovery on the far side of the disaster.

This is an inevitable outcome, if not in detail, of a Know Better government that dictates rather than protects individual capacities.