THIRD RAILS - PROCESS VS. PRODUCT: Dalibor Rohac and Matthew Sinclair: Preparing Another Meltdown - WSJ.com
I recall the Ivy League discussions going back to the 1960's of "process vs. product".
Basel II and now III are clearly of the 'process' variety - i.e. don't use judgment, everyone is the same, happiness of lemmings and no one has to lose.
Clearly sovereign debt is emblematic of the idea of socializing outcomes without any requisite inputs from the recipients of income transfer, high tax benefits.
Another way of describing a bubble is too much for nothing.
As the year winds down, there are many talking about the unsavory outcomes that may await; but, as long as there's a way to finance a 'free lunch', who wants to call a halt?
Governor Christie was recently interviewed and said that the 'third rails' of decision-making are clearly now the only choices for many governors.
Tuesday, December 28, 2010
Saturday, December 25, 2010
Beneficial Manipulation - Barrons.com
IS SOMETHING MISSING?: Beneficial Manipulation - Barrons.com
To build things or provide jobs, it takes capital. And, capital is exactly what gets swallowed up by government consumption based entitlement programs.
The platform economy concept has enabled Americans to benefit from the very things that Donlan mentions - but these are jobs that take education and training.
Simple math shows that the US is not accumulating the capital (or the reward system) to create the jobs everyone would like to have for a middle class lifestyle.
The liberal establishment and unions believe the rich can be taxed to provide the wherewithal for everyone to have the cushy UAW type jobs of years gone by. However, these were years where the US was the dominant economic power and had a vastly disproportionate share of the world's resources. Now there is competition for those resources.
The goal to create jobs is noble; but, a high tax, union mentality economy isn't the needed investment climate needed.
Another question would seem to be if the GDP has supposedly recovered what was lost during the recession, I don't recall productivity statistics to justify the same production with what is now effectively 21% unemployment (add in post 2 weeks and 6 months (9.7, 17, 21%)?
To build things or provide jobs, it takes capital. And, capital is exactly what gets swallowed up by government consumption based entitlement programs.
The platform economy concept has enabled Americans to benefit from the very things that Donlan mentions - but these are jobs that take education and training.
Simple math shows that the US is not accumulating the capital (or the reward system) to create the jobs everyone would like to have for a middle class lifestyle.
The liberal establishment and unions believe the rich can be taxed to provide the wherewithal for everyone to have the cushy UAW type jobs of years gone by. However, these were years where the US was the dominant economic power and had a vastly disproportionate share of the world's resources. Now there is competition for those resources.
The goal to create jobs is noble; but, a high tax, union mentality economy isn't the needed investment climate needed.
Another question would seem to be if the GDP has supposedly recovered what was lost during the recession, I don't recall productivity statistics to justify the same production with what is now effectively 21% unemployment (add in post 2 weeks and 6 months (9.7, 17, 21%)?
Friday, December 24, 2010
Pensions Push Property Taxes Higher - WSJ.com
DEBT AND ENTITLEMENT BUBBLES: Pensions Push Property Taxes Higher - WSJ.com
It's interesting how unions are all 'gimme, gimme, gimme' with no thought for long-term sustainability.
Clearly the US needs to invest in its future, not sell off the proverbial family silver to pay for current consumption.
As for the 9 innings it will probably take to truly turn the US economy around, it would appear to clearly be stuck in Inning 3 - where government hopes that it can keep squeezing more cash (taxes or borrowing) to pay for current entitlement and social consumption and continue to put off both investment into new and the replacement of worn-out or depreciated economic necessities for growth.
Clearly the debt bubble that is building is tied to the entitlement bubble. Since they are both growing bigger....
It's interesting how unions are all 'gimme, gimme, gimme' with no thought for long-term sustainability.
Clearly the US needs to invest in its future, not sell off the proverbial family silver to pay for current consumption.
As for the 9 innings it will probably take to truly turn the US economy around, it would appear to clearly be stuck in Inning 3 - where government hopes that it can keep squeezing more cash (taxes or borrowing) to pay for current entitlement and social consumption and continue to put off both investment into new and the replacement of worn-out or depreciated economic necessities for growth.
Clearly the debt bubble that is building is tied to the entitlement bubble. Since they are both growing bigger....
Thursday, December 23, 2010
Jamie Whyte: Despotic Taxation - WSJ.com
A TWO-ENDED PUSH: Jamie Whyte: Despotic Taxation - WSJ.com
This article touches on a basic disconnect that many liberals have with business economics and investing - i.e. many liberals think that business will invest and create jobs without regard for the hurtle rates mentioned in this article.
The codicil to the above issue of liberal disconnect is that they somehow think the same investment will come about whether the business or investor keeps 100% of the return or maybe just 50% or less.
The lack of basic common sense (or math) is reminiscent of the Mark Twain saying, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."
Liberals do truly have a problem. They want to spend more money than the economy can afford to give them while remaining robust and growing.
Part and parcel of this is the fact that many people feel no need to keep working and as a result, high taxes discourage productivity from one end and high benefits discourage work and investment from the other end.
England is clearly not alone in this - the US has the same dilemma.
This article touches on a basic disconnect that many liberals have with business economics and investing - i.e. many liberals think that business will invest and create jobs without regard for the hurtle rates mentioned in this article.
The codicil to the above issue of liberal disconnect is that they somehow think the same investment will come about whether the business or investor keeps 100% of the return or maybe just 50% or less.
The lack of basic common sense (or math) is reminiscent of the Mark Twain saying, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."
Liberals do truly have a problem. They want to spend more money than the economy can afford to give them while remaining robust and growing.
Part and parcel of this is the fact that many people feel no need to keep working and as a result, high taxes discourage productivity from one end and high benefits discourage work and investment from the other end.
England is clearly not alone in this - the US has the same dilemma.
Wednesday, December 22, 2010
The Euro-Zone Crisis is Speeding up - WSJ.com
LIBERALS ON HUMAN BEHAVIOR AND BASIC MATH: The Euro-Zone Crisis is Speeding up - WSJ.com
It would seem an opposite perspective could be gleaned from the latest census results in the US, which highlight that overspending and overtaxing states in the US are losing population. Do we talk about the dollar breaking up with states like New York, California and Illinois running unsustainable budget deficits?
Let alone the US.
Some people are talking about an early 2011 global liquidity squeeze. After all, the banks and institutions have been funding unsustainable government entitlement policies that constrain growth.
But, to tell a liberal that someone might work less if taxes go up or that somehow there will be less investment if there is less money left to invest with after taxes - well, liberals just don't understand this kind of behavior or math.
It would seem an opposite perspective could be gleaned from the latest census results in the US, which highlight that overspending and overtaxing states in the US are losing population. Do we talk about the dollar breaking up with states like New York, California and Illinois running unsustainable budget deficits?
Let alone the US.
Some people are talking about an early 2011 global liquidity squeeze. After all, the banks and institutions have been funding unsustainable government entitlement policies that constrain growth.
But, to tell a liberal that someone might work less if taxes go up or that somehow there will be less investment if there is less money left to invest with after taxes - well, liberals just don't understand this kind of behavior or math.
Tuesday, December 21, 2010
U.S. Regulators Mull New Push to Shape Bank Pay - WSJ.com
BLAMING THE HORSE INSTEAD OF THE JOCKEY: U.S. Regulators Mull New Push to Shape Bank Pay - WSJ.com
I'm not that familiar with European rules other than that there was an apparent happy marriage between the Basel II requirements (which effectively let banks transfer the assessment of risk to the credit rating agencies) and the American Congress' push to have Fannie and Freddie give loans with looser credit conditions to expand the rate of homeownership.
Republicans tried to rein in Fannie and Freddie, but the Democrats in Congress (like Barnie Frank) refused to curtail this lending.
The rating agencies didn't have any competition and thus were able to act in a lemming fashion with no logical consideration of the fact that housing prices were going up much faster than salaries - while, at the same time, there were few constraints on the supply of new housing. (Obviously the study of supply and demand had been missing in their socially-minded economics courses.)
So, we had an apparent process-oriented reaction in Europe supplied by inane policies coming out of government in Washington (plus of course the Fed's support for low interest rates).
Now that there is Basel III and the new financial regulatory act in the US, I'm missing something in each case addressing the above-noted causative factors for the bubble and crash?
Somehow all this blame on bankers seems misdirected - sort of like blaming a horse for running in a race (the banks being the horse and the government and regulators the jockey).
I'm not that familiar with European rules other than that there was an apparent happy marriage between the Basel II requirements (which effectively let banks transfer the assessment of risk to the credit rating agencies) and the American Congress' push to have Fannie and Freddie give loans with looser credit conditions to expand the rate of homeownership.
Republicans tried to rein in Fannie and Freddie, but the Democrats in Congress (like Barnie Frank) refused to curtail this lending.
The rating agencies didn't have any competition and thus were able to act in a lemming fashion with no logical consideration of the fact that housing prices were going up much faster than salaries - while, at the same time, there were few constraints on the supply of new housing. (Obviously the study of supply and demand had been missing in their socially-minded economics courses.)
So, we had an apparent process-oriented reaction in Europe supplied by inane policies coming out of government in Washington (plus of course the Fed's support for low interest rates).
Now that there is Basel III and the new financial regulatory act in the US, I'm missing something in each case addressing the above-noted causative factors for the bubble and crash?
Somehow all this blame on bankers seems misdirected - sort of like blaming a horse for running in a race (the banks being the horse and the government and regulators the jockey).
Thursday, December 16, 2010
HEARD ON THE STREET: Washington Taxes Own Credibility - WSJ.com
Caution from a lack of leadership and mixed messages: HEARD ON THE STREET: Washington Taxes Own Credibility - WSJ.com
Let's see?
The president and Keynesians are worried that everyone gets to consume by redistributing wealth.
Supply siders believe people need to get to keep a certain amount of what they produce in order to support production and growth.
There is clearly a disconnect between America's ability to pay for all the entitlements and benefits that the liberals want while providing a fair return (18-19% of GDP max to government) to producers.
As the administration and the Republicans appear to be unwilling to confront this great policy divide, the lack of leadership becomes more acute.
So one question might be whether the cautionary response to the lack of leadership will be greater than the modest stimulus (actually just to consumption, not really long-term returns to capital and investment)?
Oh yes, and this is tied part and parcel to the Administration going against the oil companies in the Gulf for an oil spill, at the same time its wants to tout having spent 4 hours the same day listening to business leaders. Can we say another mixed message day?
Let's see?
The president and Keynesians are worried that everyone gets to consume by redistributing wealth.
Supply siders believe people need to get to keep a certain amount of what they produce in order to support production and growth.
There is clearly a disconnect between America's ability to pay for all the entitlements and benefits that the liberals want while providing a fair return (18-19% of GDP max to government) to producers.
As the administration and the Republicans appear to be unwilling to confront this great policy divide, the lack of leadership becomes more acute.
So one question might be whether the cautionary response to the lack of leadership will be greater than the modest stimulus (actually just to consumption, not really long-term returns to capital and investment)?
Oh yes, and this is tied part and parcel to the Administration going against the oil companies in the Gulf for an oil spill, at the same time its wants to tout having spent 4 hours the same day listening to business leaders. Can we say another mixed message day?
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