Europe's Other Crisis - WSJ.com
Having lived in the US and now in Europe, the variations in the countries here seem remarkably similar to the differences that used to be more profound (and are now once again getting to be so) between the different American states.
The southern US states many years ago used to be mostly poor and backward. They turned that around - certainly from the 1980's onwards. Meanwhile, economic powerhouses like Michigan, New York and California have overspent and over-socialized and are tax pariahs.
Clearly the unions and governments in Greece and Portugal see higher taxes as a solution to no growth that is truly no-solution. Rather than make themselves attractive places in which to locate a business, they'd rather squeeze the last bit of economic juice they can out of what hasn't left and give it to the left.
Ah well, the implosion usually comes at some point. Hopefully, sanity will prevail and the European banks get forced to take the hit for their fiscal and economic investment blinders - worn, as they were, to ignore the risks of lending to sovereigns when business wasn't interested in borrowing.
Friday, April 30, 2010
Thursday, April 29, 2010
Reruns of That 'Thirties Show? - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
Reruns of That 'Thirties Show? - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
Ah but, look at Basel II (and III coming).
The idea is safety by investing in sovereigns. High risk to lend to business.
And, after all, in the US and Europe, a business person is looking at a $/EUR 500 wage cost for $/EUR 100 in wages. So the deck is already stacked against socialist vs. free market (read: Chinese) labor.
Thus, banks are encouraged to support socialist, redistributionist government largesse, while lending to business is fraught with both regulatory and economic risk (i.e. reserve accounting and in the US, perhaps seizure and closure of the bank).
The populists and socialists don't imagine they are gutting their economies because all they can think of is immediate and promised benefits.
Randy is right on - eventually the bill has to be paid for lending to the improvident who have no hope (or real desire) to repay.
Things still look like 1928 to politicians in most countries. But, is it so?
Ah but, look at Basel II (and III coming).
The idea is safety by investing in sovereigns. High risk to lend to business.
And, after all, in the US and Europe, a business person is looking at a $/EUR 500 wage cost for $/EUR 100 in wages. So the deck is already stacked against socialist vs. free market (read: Chinese) labor.
Thus, banks are encouraged to support socialist, redistributionist government largesse, while lending to business is fraught with both regulatory and economic risk (i.e. reserve accounting and in the US, perhaps seizure and closure of the bank).
The populists and socialists don't imagine they are gutting their economies because all they can think of is immediate and promised benefits.
Randy is right on - eventually the bill has to be paid for lending to the improvident who have no hope (or real desire) to repay.
Things still look like 1928 to politicians in most countries. But, is it so?
Wednesday, April 28, 2010
Ratings Firms' Influence Under Fire - WSJ.com
Ratings Firms' Influence Under Fire - WSJ.com:
"As with US credit agencies giving high ratings to subprime mortgage debt and thus exacerbating the US real estate bubble, so the ratings of sovereign debt by Basel II and the rating agencies has allowed the social spending bubble to grow.
Now that that bubble is being questioned, the government benefit affirming feedback loop is becoming increasingly uncomfortable for governments.
Who will be next? Will the markets catch on that borrowing can't exceed growth and putting savings into government benefits vs. job creating private business isn't something that doesn't have consequences?"
"As with US credit agencies giving high ratings to subprime mortgage debt and thus exacerbating the US real estate bubble, so the ratings of sovereign debt by Basel II and the rating agencies has allowed the social spending bubble to grow.
Now that that bubble is being questioned, the government benefit affirming feedback loop is becoming increasingly uncomfortable for governments.
Who will be next? Will the markets catch on that borrowing can't exceed growth and putting savings into government benefits vs. job creating private business isn't something that doesn't have consequences?"
Greece Junked, Risk Assets Trashed - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
TOO MUCH TODAY, TOO LITTLE TOMORROW: Greece Junked, Risk Assets Trashed - Up and Down Wall Street Daily - R. Forsyth - Barrons.com:
"One of my favorite ruminations is from the study of history also: i.e. when a culture ignores the events on or over the horizon, then the culture is usually overcome and destroyed (from the Sumerians to the Aztecs, etc.).
We (Western culture) has been presented with the horizons of science and outer space. If we decide to fund those who don't produce instead of reaching out to explore these horizons, the future of our society is likely to be the same as the Sumerians.
Large numbers of people believe in various degrees of religious experience that are also myopic and obscure any embracing of a larger world view.
It would seem fair to give a fair chance to those who wish to look beyond the narrowness of Earth, at least equal to the demands to provide for those who don't want or feel the need to make anything of their lives.
Greece is a perfect example (as is the Obama administration) of those who want to consume today and forget about the frontier or tomorrow."
"One of my favorite ruminations is from the study of history also: i.e. when a culture ignores the events on or over the horizon, then the culture is usually overcome and destroyed (from the Sumerians to the Aztecs, etc.).
We (Western culture) has been presented with the horizons of science and outer space. If we decide to fund those who don't produce instead of reaching out to explore these horizons, the future of our society is likely to be the same as the Sumerians.
Large numbers of people believe in various degrees of religious experience that are also myopic and obscure any embracing of a larger world view.
It would seem fair to give a fair chance to those who wish to look beyond the narrowness of Earth, at least equal to the demands to provide for those who don't want or feel the need to make anything of their lives.
Greece is a perfect example (as is the Obama administration) of those who want to consume today and forget about the frontier or tomorrow."
Letters to the Editor: Greek Debt Raises Extensive Issues - WSJ.com
Letters to the Editor: Greek Debt Raises Extensive Issues - WSJ.com:
"If Greece doesn't show that it can reduce its spending, then helping them continue their ridiculous policies will be the worst possible outcome - it may seem salubrious to the blind, but its like giving a family living beyond its means and unable to even make the minimum payments on its current credit cards, yet another credit card.
It postpones and compounds the problem.
And, since the 'new' Greek credit card is coming from other over-leveraged countries, it begins to pull the previously surviving (e.g. Germany) into the group of failed states.
Helping Greece is the opposite of an answer unless they can follow through with draconian cuts - which, are likely to fail and cause major civil unrest.
Greece and its unions and retirees are like drug addicts. They don't want to quit, they just want an assured supply of new hits."
"If Greece doesn't show that it can reduce its spending, then helping them continue their ridiculous policies will be the worst possible outcome - it may seem salubrious to the blind, but its like giving a family living beyond its means and unable to even make the minimum payments on its current credit cards, yet another credit card.
It postpones and compounds the problem.
And, since the 'new' Greek credit card is coming from other over-leveraged countries, it begins to pull the previously surviving (e.g. Germany) into the group of failed states.
Helping Greece is the opposite of an answer unless they can follow through with draconian cuts - which, are likely to fail and cause major civil unrest.
Greece and its unions and retirees are like drug addicts. They don't want to quit, they just want an assured supply of new hits."
Bernanke Urges Deficit-Cutting, Scrutiny of Tax Code - WSJ.com
Bernanke Urges Deficit-Cutting, Scrutiny of Tax Code - WSJ.com:
"All the news about Europe, and especially southern Europe (Greece and Portugal the last few days), might give Americans some intimation about what happens when one combines too generous a public sector (e.g. US public employee unions) and too generous and expensive (read: high direct and indirect taxes) entitlement programs (e.g. Obamacare, current redistribution and social benefit programs in the US).
The end result is a slow-growing (at best) economy. Demand is continually supported by government borrowing and high taxes that discourage both hiring local employees (largely due to indirect taxes that employers pay on employment that the employee is hidden from seeing - because government wants people to think there is a 'free lunch') and expanding and starting businesses.
The Democrats will never see the need to support business if it means giving less to those they feel entitled to social support. The Republicans get side-tracked by the religious right and their medieval beliefs.
Bernanke is right to be worried. He'll be on the hot seat to keep interest rates down. But, as with the 1970's, it was a losing battle - because there is no free lunch and the pricing increases by materials suppliers show that even with demand at 50%, the costs are going up."
"All the news about Europe, and especially southern Europe (Greece and Portugal the last few days), might give Americans some intimation about what happens when one combines too generous a public sector (e.g. US public employee unions) and too generous and expensive (read: high direct and indirect taxes) entitlement programs (e.g. Obamacare, current redistribution and social benefit programs in the US).
The end result is a slow-growing (at best) economy. Demand is continually supported by government borrowing and high taxes that discourage both hiring local employees (largely due to indirect taxes that employers pay on employment that the employee is hidden from seeing - because government wants people to think there is a 'free lunch') and expanding and starting businesses.
The Democrats will never see the need to support business if it means giving less to those they feel entitled to social support. The Republicans get side-tracked by the religious right and their medieval beliefs.
Bernanke is right to be worried. He'll be on the hot seat to keep interest rates down. But, as with the 1970's, it was a losing battle - because there is no free lunch and the pricing increases by materials suppliers show that even with demand at 50%, the costs are going up."
No Upturn for Building Materials Suppliers - WSJ.com
No Upturn for Building Materials Suppliers - WSJ.com:
"As noted in this article, building material suppliers are raising prices even though demand is way down. The reasons why are no mystery.
Either an economy supports investment and growth or, as now with Democrats in power, it doesn't.
Thus, if demand is supported by redistributionist borrowing and production doesn't increase, the old equation of supply and demand suggests inflation.
Bernanke is now harping on this as well (recently), because (a la Greece), he knows the Fed may have to print money to keep government borrowing rates down if the markets decide they'll lent the Democrats enough money already."
"As noted in this article, building material suppliers are raising prices even though demand is way down. The reasons why are no mystery.
Either an economy supports investment and growth or, as now with Democrats in power, it doesn't.
Thus, if demand is supported by redistributionist borrowing and production doesn't increase, the old equation of supply and demand suggests inflation.
Bernanke is now harping on this as well (recently), because (a la Greece), he knows the Fed may have to print money to keep government borrowing rates down if the markets decide they'll lent the Democrats enough money already."
Tuesday, April 27, 2010
First-Quarter GDP is History; Beware a 2011 Slowdown - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
First-Quarter GDP is History; Beware a 2011 Slowdown - Up and Down Wall Street Daily - R. Forsyth - Barrons.com:
"Let's see? We increase production (i.e. which would require lower tax rates) or, we (at best) keep production steady and borrow money to let the 'disadvantaged' buy?
Now, what is the Obama administration doing? Can we say the latter!
And, as with a battleship suddenly running into a typhoon, no matter how strong and resilient the economic ship may be, the eventual market tiring of sovereign debt (esp. in the face of unmitigated entitlement spending) may well be that the best the next Congress can do will be to try and steer the economy out of the maelstrom tide of higher interest rates that is striking all developed economies.
Can we call this round 3? Who knows."
"Let's see? We increase production (i.e. which would require lower tax rates) or, we (at best) keep production steady and borrow money to let the 'disadvantaged' buy?
Now, what is the Obama administration doing? Can we say the latter!
And, as with a battleship suddenly running into a typhoon, no matter how strong and resilient the economic ship may be, the eventual market tiring of sovereign debt (esp. in the face of unmitigated entitlement spending) may well be that the best the next Congress can do will be to try and steer the economy out of the maelstrom tide of higher interest rates that is striking all developed economies.
Can we call this round 3? Who knows."
HEARD ON THE STREET: Greece's Moment of Truth - WSJ.com
HEARD ON THE STREET: Greece's Moment of Truth - WSJ.com
One clear policy change holding Portugal back is the socialist supportive labor policies.
The union workers think they are being protected, while they are actually being bled to death and denied the ability to grow.
But, there is probably nothing that can be done. All those job protections seem great until there are 'no' jobs.
Also, all those benefits seem great, until the employer leaves because it can't afford them and they are uncompetitive.
The incentives to more-than-just-get-by seem to encourage leaving Portugal rather than staying in Portugal and starting or expanding a business.
There seems to be a contagious 'free-lunch' disease that is a plague on developed countries that many Asian countries seem to be immune too.
One clear policy change holding Portugal back is the socialist supportive labor policies.
The union workers think they are being protected, while they are actually being bled to death and denied the ability to grow.
But, there is probably nothing that can be done. All those job protections seem great until there are 'no' jobs.
Also, all those benefits seem great, until the employer leaves because it can't afford them and they are uncompetitive.
The incentives to more-than-just-get-by seem to encourage leaving Portugal rather than staying in Portugal and starting or expanding a business.
There seems to be a contagious 'free-lunch' disease that is a plague on developed countries that many Asian countries seem to be immune too.
Capital Journal: Washington Must Admit Deficit Addiction - WSJ.com
Capital Journal: Washington Must Admit Deficit Addiction - WSJ.com:
"It might also be worth considering how things have changed economically with current and past Fed easing:
In the past the Fed lowered rates and banks lent to businesses and consumers to restart the economy.
This time, the Fed has lowered rates and the banks have bought Treasury securities. Thus, most of the stimulus has been to expand government spending.
Is this the harbinger of a sustainable recovery? If productive capacity hasn't increased much but rates move up, what will be the impact? Etc., etc."
"It might also be worth considering how things have changed economically with current and past Fed easing:
In the past the Fed lowered rates and banks lent to businesses and consumers to restart the economy.
This time, the Fed has lowered rates and the banks have bought Treasury securities. Thus, most of the stimulus has been to expand government spending.
Is this the harbinger of a sustainable recovery? If productive capacity hasn't increased much but rates move up, what will be the impact? Etc., etc."
Friday, April 23, 2010
No 11% Solution for Greece - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
No 11% Solution for Greece - Up and Down Wall Street Daily - R. Forsyth - Barrons.com:
"Most people in US bought into the housing bubble.
As for Europe, high taxes and social spending have stifled growth and initiative in a manner not too remote from the Roman empire's stifling of democracy in the countries they conquered.
Will the winds blow towards more government and even less private sector encouragement; or, will the winds blow out some socialist government spending forever?
Who knows?"
"Most people in US bought into the housing bubble.
As for Europe, high taxes and social spending have stifled growth and initiative in a manner not too remote from the Roman empire's stifling of democracy in the countries they conquered.
Will the winds blow towards more government and even less private sector encouragement; or, will the winds blow out some socialist government spending forever?
Who knows?"
Tuesday, April 20, 2010
Hans-Werner Sinn: How to Save the Euro - WSJ.com
GREEK MATH (2 MINUS 1 = 4): Hans-Werner Sinn: How to Save the Euro - WSJ.com
What's missing from this article is the alternative that all of the disillusioned socialized developed countries face - i.e. that the market will determine that all of them are out-of-control in terms of social spending compared to rewards for work and investment.
As such, one sees investment moving generally out of these countries and high unemployment.
So far, the lack of investment opportunities has led the banks to buy sovereign debt. But, as with Greece, the liklihood of losing principal is getting higher and higher.
With respect to the dollar, it may well be the 'real' value of the dollar that gets sacrificed.
None of these countries are modifying fiscal policies to promote growth and job creation - rather, just the opposite.
And, they are all counting on 'growth' to bale them out of their overspending and borrowing. It rather begs the credulity to argue that 2 - 1 = 4.
What's missing from this article is the alternative that all of the disillusioned socialized developed countries face - i.e. that the market will determine that all of them are out-of-control in terms of social spending compared to rewards for work and investment.
As such, one sees investment moving generally out of these countries and high unemployment.
So far, the lack of investment opportunities has led the banks to buy sovereign debt. But, as with Greece, the liklihood of losing principal is getting higher and higher.
With respect to the dollar, it may well be the 'real' value of the dollar that gets sacrificed.
None of these countries are modifying fiscal policies to promote growth and job creation - rather, just the opposite.
And, they are all counting on 'growth' to bale them out of their overspending and borrowing. It rather begs the credulity to argue that 2 - 1 = 4.
Thursday, April 15, 2010
J.P. Morgan Net Surges 55% - WSJ.com
PROFITS OR THE FLEECING OF THE UNWARY? J.P. Morgan Net Surges 55% - WSJ.com: "The linked article from Bloomberg:
http://www.bloomberg.com/apps/news?pid=20601109&sid=a30KHZKX1WJo&pos=10
casts another light on how these banks are making money.
One can interpret the facts as one will, but I recall Orange County, CA got involved in stuff like this and went bankrupt.
Perhaps there is too much financial engineering where the greedy (i.e. politicians who want to spend more than they have) end up being fleeced.
But, when lots of entities get fleeced, they may fight back and laws can be changed and taxes can be tailored.
Just something to ponder."
http://www.bloomberg.com/apps/news?pid=20601109&sid=a30KHZKX1WJo&pos=10
casts another light on how these banks are making money.
One can interpret the facts as one will, but I recall Orange County, CA got involved in stuff like this and went bankrupt.
Perhaps there is too much financial engineering where the greedy (i.e. politicians who want to spend more than they have) end up being fleeced.
But, when lots of entities get fleeced, they may fight back and laws can be changed and taxes can be tailored.
Just something to ponder."
Tuesday, April 13, 2010
Contrarian Alert: Everybody Hates Treasuries - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
Contrarian Alert: Everybody Hates Treasuries - Up and Down Wall Street Daily - R. Forsyth - Barrons.com:
"Ah, the drama of it all.
Producers get to keep less; non-producers - they get insulated from variability.
It's hard to see how, with less going to producers and shoppers funded on credit, the underpinnings of a resurrected economy are there?
If the old rubric of people remembering the past more than they think about the future, then everyone assumes the economy will recover and fails to consider that less to producers and heavy borrowing to fund non-producer buying may, in fact, be a false feeling of well-being.
Who knows? Maybe you'll be glad to work hard to pay for some public employee or UAW member retiring at age 50 while you're struggling to buy groceries at age 70? Anything is possible."
"Ah, the drama of it all.
Producers get to keep less; non-producers - they get insulated from variability.
It's hard to see how, with less going to producers and shoppers funded on credit, the underpinnings of a resurrected economy are there?
If the old rubric of people remembering the past more than they think about the future, then everyone assumes the economy will recover and fails to consider that less to producers and heavy borrowing to fund non-producer buying may, in fact, be a false feeling of well-being.
Who knows? Maybe you'll be glad to work hard to pay for some public employee or UAW member retiring at age 50 while you're struggling to buy groceries at age 70? Anything is possible."
Monday, April 12, 2010
Robert Reich: The Jobs Picture Still Looks Bleak - WSJ.com
DEMOCRATIC FISCAL AND ENTITLEMENT POLICY IS A BANE TO REAL JOB CREATION: Robert Reich: The Jobs Picture Still Looks Bleak - WSJ.com:
"What Reich omits clarifying is that with entitlements being richly bestowed by Democrats (and some Republicans), these entitlements have had to be paid for by borrowing (Obama is big time into this), taxes (both direct and indirect), future promises (public unions really go for this), etc.
Bottom line: for every $100 paid to a worker, the employer may have to calculate a total cost of $500. And, the worker may only keep $40-60 of his or her $100 in pay.
Thus, society thinks it is doing a good job of providing for the downtrodden and those needing entitlements, but, by so doing, society skews the rewards for employment.
Thus, an employer might have lots of $300 per hour jobs and the worker might see lots of jobs they'd do for $100. But when the $100 worker pay costs the employer $500, then the math doesn't work. As a result there is 'no' job created.
Similarly, when government basically determines that society is going to have to pay some $20,000 just for health insurance for a family of 4, this is an added disincentive to employ.
Reich should hammer the reasons why a bit more clearly.
I'd also like to see a solution where entitlements drop significantly, thus creating much more opportunity for job creation. Again, such an idea is anathema to Mr. Reich."
"What Reich omits clarifying is that with entitlements being richly bestowed by Democrats (and some Republicans), these entitlements have had to be paid for by borrowing (Obama is big time into this), taxes (both direct and indirect), future promises (public unions really go for this), etc.
Bottom line: for every $100 paid to a worker, the employer may have to calculate a total cost of $500. And, the worker may only keep $40-60 of his or her $100 in pay.
Thus, society thinks it is doing a good job of providing for the downtrodden and those needing entitlements, but, by so doing, society skews the rewards for employment.
Thus, an employer might have lots of $300 per hour jobs and the worker might see lots of jobs they'd do for $100. But when the $100 worker pay costs the employer $500, then the math doesn't work. As a result there is 'no' job created.
Similarly, when government basically determines that society is going to have to pay some $20,000 just for health insurance for a family of 4, this is an added disincentive to employ.
Reich should hammer the reasons why a bit more clearly.
I'd also like to see a solution where entitlements drop significantly, thus creating much more opportunity for job creation. Again, such an idea is anathema to Mr. Reich."
Friday, April 9, 2010
Fouad Ajami: Afghanistan and the Decline of American Power - WSJ.com
Fouad Ajami: Afghanistan and the Decline of American Power - WSJ.com: "
It was interesting to see the emphasis of Obama on 'equality'.
As shown in the every place it's tried - 'equality' means regression down to an average; and, in economics, this doesn't support the lifestyle Americans really want.
Somehow Americans think the only difference between themselves and the Europeans is that everyone in Europe has the middle class lifestyle that the UAW used to be able to get for its members (or, the public employee unions got); and, that with a bigger role for government, everyone in the US would have this.
Where the funding for this will come from is immaterial. After all, the Treasury seems to be able to borrow with ease and all the Dems want is to tax the rich.
Then, they'll share the wealth and the rich will just have a little less. But, those who produce vs. consume know that the overall pie shrinks when work is less rewarded, savings is less rewarded, investment is less rewarded, risk-taking is less rewarded, etc.
Living in Europe, I'd tell Americans - the Obama lifestyle means your salary gets cut in half (take home) and all prices double.
But, the liberals don't like to believe it - so, best to hunker down for the malestrom on the horizon."
It was interesting to see the emphasis of Obama on 'equality'.
As shown in the every place it's tried - 'equality' means regression down to an average; and, in economics, this doesn't support the lifestyle Americans really want.
Somehow Americans think the only difference between themselves and the Europeans is that everyone in Europe has the middle class lifestyle that the UAW used to be able to get for its members (or, the public employee unions got); and, that with a bigger role for government, everyone in the US would have this.
Where the funding for this will come from is immaterial. After all, the Treasury seems to be able to borrow with ease and all the Dems want is to tax the rich.
Then, they'll share the wealth and the rich will just have a little less. But, those who produce vs. consume know that the overall pie shrinks when work is less rewarded, savings is less rewarded, investment is less rewarded, risk-taking is less rewarded, etc.
Living in Europe, I'd tell Americans - the Obama lifestyle means your salary gets cut in half (take home) and all prices double.
But, the liberals don't like to believe it - so, best to hunker down for the malestrom on the horizon."
The Return of Risk to Global Markets - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
The Return of Risk to Global Markets - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
The U of C work on the monetary part of the Depression are interesting; but, the fiscal side (as discussed by Art Laffer) and clearly evident from the policies of the current administration are now likely the leading causes of the economic maelstrom.
Are we into the second inning or not? (Greece, etc.)
The U of C work on the monetary part of the Depression are interesting; but, the fiscal side (as discussed by Art Laffer) and clearly evident from the policies of the current administration are now likely the leading causes of the economic maelstrom.
Are we into the second inning or not? (Greece, etc.)
Thursday, April 8, 2010
Did 'Great Recession' Live Up to the Name? - WSJ.com
HAS THE ECONOMIC BOAT JUST SETTLED FOR A TIME ON ITS WAY TO THE BOTTOM? Did 'Great Recession' Live Up to the Name? - WSJ.com: "
What is now going on with Greece would appear to be more emblematic of what is actually going on across developed world economies - in other words, we may be far from hitting bottom.
Instead, the benighted 'end' of the recession may be more like the sinking of a great ship where it settles for a time. This settling gives the sailors a chance to get the pumps restarted and to patch some holes.
However, it would appear that Obama and his economy managers have been more intent on adding to the burdens of the economy (additional entitlements).
They've also been intent of letting businesses and investors know that they are going to be looked upon to supply the wherewithal for this largess - along with having to foot the bill for borrowing the money to advance these benefits.
It's also now looking as though the government model of trying to borrow up to a country's credit limits to fund government benefits may have reached a limit with lenders. Limits engendered both by a diminution of available funds to loan and a greatly heightened concern about being paid back (at least in some relation to the same real value of the loan principle).
> Lots of liberal commentators are adamant that government borrowing and largess are dissimilar to that of individuals and families; but it sure doesn't look that way. Greece is spending too much, earning too little and has too much debt. Now everyone is talking bankruptcy and default. Sure sounds akin to an overextended credit card family!"
What is now going on with Greece would appear to be more emblematic of what is actually going on across developed world economies - in other words, we may be far from hitting bottom.
Instead, the benighted 'end' of the recession may be more like the sinking of a great ship where it settles for a time. This settling gives the sailors a chance to get the pumps restarted and to patch some holes.
However, it would appear that Obama and his economy managers have been more intent on adding to the burdens of the economy (additional entitlements).
They've also been intent of letting businesses and investors know that they are going to be looked upon to supply the wherewithal for this largess - along with having to foot the bill for borrowing the money to advance these benefits.
It's also now looking as though the government model of trying to borrow up to a country's credit limits to fund government benefits may have reached a limit with lenders. Limits engendered both by a diminution of available funds to loan and a greatly heightened concern about being paid back (at least in some relation to the same real value of the loan principle).
> Lots of liberal commentators are adamant that government borrowing and largess are dissimilar to that of individuals and families; but it sure doesn't look that way. Greece is spending too much, earning too little and has too much debt. Now everyone is talking bankruptcy and default. Sure sounds akin to an overextended credit card family!"
Protectionists Kept at Bay, for Now - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
Protectionists Kept at Bay, for Now - Up and Down Wall Street Daily - R. Forsyth - Barrons.com: "The US wants to blame the Chinese for lost jobs and the Greeks blame the Germans.
(After all, if the Germans didn't make such appealing cars, etc., the Greeks wouldn't want to buy them.)
So perhaps the similarity is even deeper. In which case the borrowing and high taxes on producers to give benefits to non or low producers will likely have the same result in the US as in Greece.
For starters, look at the somewhat similar increase in interest rates on government borrowing - the US not yet as high as Greece (4% vs. 7%), but clearly the implications of current Democratic policies in the US is only being looked at from the benefits bestowed position, ignoring the short and long-term costs from the fiscal policies employed."
(After all, if the Germans didn't make such appealing cars, etc., the Greeks wouldn't want to buy them.)
So perhaps the similarity is even deeper. In which case the borrowing and high taxes on producers to give benefits to non or low producers will likely have the same result in the US as in Greece.
For starters, look at the somewhat similar increase in interest rates on government borrowing - the US not yet as high as Greece (4% vs. 7%), but clearly the implications of current Democratic policies in the US is only being looked at from the benefits bestowed position, ignoring the short and long-term costs from the fiscal policies employed."
How Best to Nurture Fragile Recovery? - WSJ.com
THE ECONOMIC CAMEL OF THE DEVELOPED WORLD: How Best to Nurture Fragile Recovery? - WSJ.com: "A well put article.
Somehow developed countries and liberals see no limits on 'public goods' (essentially welfare and income transfer programs).
From the perspective of a developing country that couldn't begin to imagine the largess of developed country liberals, such liberal benefits are unimaginable.
To liberals, they can only tax and borrow and tax and borrow.
Greece may be on the front burner right now for its unbridled largess with borrowing that has gone beyond markets willingness to forbear.
But, liberals don't realize that too much largess and too much borrowing eventually pull down the economy on which they have to rely for productivity and funding.
Throughout the developed world the last straw may have already been put on the proverbial economic camel's back. It may be we haven't gotten there and it may be that the camel just collapse slowly - trying its best to stay on its feet.
Early in April, the unemployment numbers in the US suggest the camel is still settling to the ground - no matter what type of fluff the pundits try to pander. Business can see nothing but taxes and more entitlements on the horizon. This is not the horizon of dawn but of dusk.
4% 10-year Treasury rates still seem reasonable in an historic context; but, there is also an historic context where heavy government borrowing crowds out private borrowing (the early 1980's for example) and rates go way up. Will Bernanke print money to try and hold down rates? Or, will government find a way to spend less or tax a lot more?
Questions like the above certainly discourage business investment."
Somehow developed countries and liberals see no limits on 'public goods' (essentially welfare and income transfer programs).
From the perspective of a developing country that couldn't begin to imagine the largess of developed country liberals, such liberal benefits are unimaginable.
To liberals, they can only tax and borrow and tax and borrow.
Greece may be on the front burner right now for its unbridled largess with borrowing that has gone beyond markets willingness to forbear.
But, liberals don't realize that too much largess and too much borrowing eventually pull down the economy on which they have to rely for productivity and funding.
Throughout the developed world the last straw may have already been put on the proverbial economic camel's back. It may be we haven't gotten there and it may be that the camel just collapse slowly - trying its best to stay on its feet.
Early in April, the unemployment numbers in the US suggest the camel is still settling to the ground - no matter what type of fluff the pundits try to pander. Business can see nothing but taxes and more entitlements on the horizon. This is not the horizon of dawn but of dusk.
4% 10-year Treasury rates still seem reasonable in an historic context; but, there is also an historic context where heavy government borrowing crowds out private borrowing (the early 1980's for example) and rates go way up. Will Bernanke print money to try and hold down rates? Or, will government find a way to spend less or tax a lot more?
Questions like the above certainly discourage business investment."
Tuesday, April 6, 2010
Heard on the Street: For Treasurys, It's All in the Timing - WSJ.com
Heard on the Street: For Treasurys, It's All in the Timing - WSJ.com:
"Perhaps one should also consider the fact that the US Treasury and most other developed country governments are in the market for huge amounts of capital.
True, on one side they crowd out private borrowers (plus, of course, their fiscal policies discourage private investment); but, on the other side, the very scale of their ongoing borrowing is like lending to an over-leveraged consumer. In other words, the rate demanded goes up.
And, as suggested by the following geopolitical commentator, one has to ask whether when rates start to go up (which is already happening), governments will resort to buying their own debt (e.g. the US and UK) to try to avoid a second downturn in the economy (read: inflation); or, they will let rates risk and further reduce and raise the price of credit for job creation?
My guess is the government will have the central bank create the dollars to try and hold down interest rates. Thus, the situation is far different than presented in this article.
See: YouTube - Philippa Malmgren on Geopolitics"
"Perhaps one should also consider the fact that the US Treasury and most other developed country governments are in the market for huge amounts of capital.
True, on one side they crowd out private borrowers (plus, of course, their fiscal policies discourage private investment); but, on the other side, the very scale of their ongoing borrowing is like lending to an over-leveraged consumer. In other words, the rate demanded goes up.
And, as suggested by the following geopolitical commentator, one has to ask whether when rates start to go up (which is already happening), governments will resort to buying their own debt (e.g. the US and UK) to try to avoid a second downturn in the economy (read: inflation); or, they will let rates risk and further reduce and raise the price of credit for job creation?
My guess is the government will have the central bank create the dollars to try and hold down interest rates. Thus, the situation is far different than presented in this article.
See: YouTube - Philippa Malmgren on Geopolitics"
Mañana Deserves More Respect - WSJ.com
Mañana Deserves More Respect - WSJ.com
Right on.
An interesting comment thrown out recently was the difference between American and European perspectives on poverty - i.e. Europeans feel people have no choice with respect to being poor, whereas Americans believe people have a choice.
Very similar to the argument about cultures that were based on the Counter Reformation (i.e. resist change, accept poverty as natural) and those of the Reformation (change can bring about results).
Right on.
An interesting comment thrown out recently was the difference between American and European perspectives on poverty - i.e. Europeans feel people have no choice with respect to being poor, whereas Americans believe people have a choice.
Very similar to the argument about cultures that were based on the Counter Reformation (i.e. resist change, accept poverty as natural) and those of the Reformation (change can bring about results).
Monday, April 5, 2010
Saturday, April 3, 2010
Not All Milk and Honey - Up and Down Wall Street - A. Abelson - Barrons.com
Not All Milk and Honey - Up and Down Wall Street - A. Abelson - Barrons.com
The issue that might be added here is the enormous debt that has had to be incurred to get the job market where it ostensibly started to be in March.
The question begs as to whether less costly (but less socialist) government policies might have been able to add many more jobs, much more quickly and with much greater potential longevity.
By running up so much debt and by adding entitlement spending on entitlement spending - combined with what would have been avoidable tax increases - the risk of higher interest rates (only abetted by the Fed printing gobs of green) are likely to upset any modestly positive job gains.
As with sub-prime housing discussed above, the reality of the situation escapes those who think the Greeks had the right economic growth answer. Since this appears to be the Obama philosophy, the future looks less than bright.
The issue that might be added here is the enormous debt that has had to be incurred to get the job market where it ostensibly started to be in March.
The question begs as to whether less costly (but less socialist) government policies might have been able to add many more jobs, much more quickly and with much greater potential longevity.
By running up so much debt and by adding entitlement spending on entitlement spending - combined with what would have been avoidable tax increases - the risk of higher interest rates (only abetted by the Fed printing gobs of green) are likely to upset any modestly positive job gains.
As with sub-prime housing discussed above, the reality of the situation escapes those who think the Greeks had the right economic growth answer. Since this appears to be the Obama philosophy, the future looks less than bright.
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