Archive for August, 2011
August Dinner Update
Posted by Tom in Symposium Notes on August 17, 2011
Well, it was a fun evening with attendance over sixty last night. Leading off was our candidate forum in which both major party candidates were invited to give a brief update on key issues and then subject themselves to a Q&A from the floor. Unfortunately, despite urging from her Hayek Group supporters, Kate Marshall did not show up, so we did not get the benefit of her opinions or answers. Mark Amodei, true to his commitment, did come and hit the key issues, most of which centered on Washington’s big government overspending for which he called both parties at fault. The Q&A was lively with some good suggestions from the audience, like a simple government hiring freeze from Joe Morabito, which Mark thought was spot on.
Following an excellent dinner we had a Hayek first: our five economists, some products of the most “liberal” institutions of higher learning like Berkeley and Harvard, participated in a panel discussion on the debt limitation deal, the phony spending cuts, our political Fed, and the real decision between big government collectivism and individualism. The audience was attentive through the sometimes academic, sometimes lively exchange and the subsequent Q&A from the floor was engaging.
I prefaced my introduction of the panel by saying how truly indebted we are to these five gentlemen all distinguished Ph.D.s: Jerry O’Driscoll, Tom Cargill, Chuck Baird, Mark Pingle and Brad Schiller. We are blessed to be able to look at current issues through educated eyes. Eyes schooled in the ideas of the great economic thinkers of the past.
One correction I really appreciate was Tom Cargill’s scold of my characterization of the Hayek Group’s promotion of “conservative” economics. Tom distinguished between “positive” economics, that which we find to be the case by empirical observation (“what is”), and “normative” economics, that which we think will work and best fit our desired human outcome (“what ought to be”). In truth we learn from observation. Lesson learned. The Hayek Group’s mission is to promote those economic policies which best promote individual free market development and resist big government collectivism. In other words, like Adam Smith and like Friedrich Hayek, we are for individualism and against collectivism.
The panel format is something we will have again for special occasions. The positive reviews were almost unanimous. It was truly the highlight of the evening for which we are thankful.
I received an interesting request today from Professor Elliott Parker, Chair of UNR’s Department of Economics: Steven Levitt, author of Freakonomics will be the keynote speaker at UNR’s 30th Annual Reno Foundation Banquet at the Peppermill on Thursday, September 22nd, 6 PM. My sons tell me that the book is engaging and that tells me that the author must also be. So I’ve attached the details below for those interested.
TO CHANGE THE WORLD YOU MUST UNDERSTAND IT… TO UNDERSTAND THE WORLD TO GAIN A NEW PERSPECTIVE |
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One of Time Magazine’s ”100 People Who Shape Our World,” Steven D. Levitt shares his findings at this year’s 30th Annual University of Nevada, Reno Foundation Banquet
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| Steven D. Levitt is determined to show us a new way of looking at the modern world. Levitt’s book FREAKONOMICS spent two years on the New York Times best-seller list and initiated a cultural revolution. The illustrated edition of SUPERFREAKONOMICS uses an assortment of visuals to communicate bold new ideas to his devoted readers. The feature-length FREAKONOMICS documentary is noted by Variety as “a revolutionary trip into complex, innovative ideas and altered perspectives.” A self-proclaimed intuitionist and Midwestern father of four, Levitt sets his sights on finding real life stories and, unlike any other economist, devises new ways to measure their effects on our ever-changing world.
Tickets are $200 per person or $2,000 per table. Event sponsorships are also available. Call Julie Gillen at (775) 682-6014 or email jgillen@unr.edu to reserve your place at the 30th Anniversary event. |
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O’Driscoll on Our Political Fed
Posted by Tom in Fed, Monetary Policy on August 12, 2011
The Fed Surprises
The August 9th meeting of the Federal Open Market Committee — the policymaking arm of the Fed — was widely expected to be largely uneventful. It was anything but.
Instead, the Fed issued a press release in the aftermath of the meeting that caught even its closest watchers off-guard, and is indicative of the state of turmoil in the U.S. economy and financial markets.
The Fed left the “federal funds” interest rate at o to .25 percent. That in itself is not a shock. The Fed surprised markets, however, by specifying for how long it will hold interest rates at this low level: through mid-2013. It is unprecedented for the Fed to specify so precisely for how long it will maintain a given policy.
The committee meeting must have been a brouhaha, because 3 of the 10 voting members dissented. In recent years, dissents have been infrequent and typically just one vote. (Outgoing Kansas City Fed president Thomas Hoenig dissented at every meeting for one year.) The dissenters were the presidents of the Dallas, Minneapolis and Philadelphia Fed banks. Goldman Sachs reported that the last time there were 3 dissents was 1992.
What is the meaning of this?
Promising not to raise rates until mid-2013 means the Fed will not need to make a policy change in a presidential election year. That could be interpreted as an attempt to be non-political; that is, not to be a topic for campaign debate. It could equally be interpreted as an overtly political move to aid President Obama’s re-election. In years past, the Fed had a certain independence from politics and would have been insulated from the suspicion of partisanship. But the current Fed chairman, Ben Bernanke, has politicized the Fed and invited suspicions about its motives.
Promising to hold interest rates down for two years ties the FOMCs hands. A great deal can happen in two years, and the committee may come to regret the decision.
The FOMC decision also signals the Fed has thrown in the towel on the recovery. Its economic forecasts have been consistently too rosy. It has explained weakness in economic growth in the first half of 2011 on special factors like disruptions in industrial production caused by events in Japan. It forecasted a stronger second-half growth as these transient factors passed from the scene. Now it is effectively admitting that something structural is wrong with the economy. It was late to that realization, as many forecasters and now the financial markets have been signaling.
Given its more pessimistic view of the economic future, one might wonder why the FOMC didn’t adopt a still more aggressive stance. Why not announce a new round of purchases of financial assets as it has done twice before. Why not QE3 (quantitative easing, 3rd round)? Though I expect no such admission, I suspect that even Chairman Bernanke has come to the realization that prior monetary stimulus has failed. As it has. Additionally, if there were three dissents on lukewarm easing, he might have lost the vote for an even more aggressive policy.
What about financial markets? For the near term, Treasury obligations are the only financial safe haven. (Gold is a commodity safe-haven.) The stock market has been trying to run on monetary and fiscal fuel. The room for further federal spending has been circumscribed. Now the prospects for additional monetary stimulus have dimmed. Markets are going to trade on economic fundamentals. Those are not strong, and hence the volatility witnessed in the last three days.
There are two clear losers with today’s decision: the dollar and savers. The promise to keep interest rates low for two more years ensures continued weakness of the dollar against strong foreign currencies and gold. I watched the value of the Swiss franc and gold rise as the timing of announcement approached.
Savers lose because of low returns. If the Fed were trying to destroy the middle class on the installment plan, it could hardly have devised a better policy than one of continued low interest rates.
Mr. O’Driscoll is a senior fellow at the Cato Institute and was formerly vice president at the Federal Reserve Bank of Dallas.
S&P Downgrade Is Merely a Symptom
Posted by Tom in Budgets, Deficit, Entitlements, Europe, National Debt, Welfare on August 8, 2011
Despite today’s worldwide market plunge and the pundits attributing it to the loss of the U.S. AAA rating, that loss is only a symptom of the underlying disease: major deficits for as far as the eye can see, resulting accumulated debt as an increasing percentage of GDP, and staggering unfunded (and undisclosed) liabilities. The U.S. is basically headed toward bankruptcy. If downgrades continue bond purchasers will demand more returns which in turn increase the deficits and debt.
On a macro basis we have two major customer economies in the dumps, Europe and the U.S., and one major exporter and lender, China, all suffering. Europe is of greater concern than the U.S., even though neither has cogent plans for a solution; it’s just that the U.S. has a better political structure to affect an eventual solution.
So, forgetting about the market, the real economy is facing a recession. Joe Morabito CEO of an international executive relocation business reports that the typical summer peak time has turned into a downer. Gene Humphrey CEO of a chip technology company reports that industry leaders are forecasting a downturn for the next two quarters because consumers have retreated from the market. This is “real economy” evidence that we are looking at a probable double dip, a second recession.
Politically, the parties blame one another. But the tea party gets the most blame. In fact, the tea party should get the most credit. Someone must yell from the rooftops STOP, CUT BIG GOVERNMENT!
Serious cuts in entitlements must start now. Gen involved. Call your representatives Convince your neighbors. Save your grandchildren.
From the Greatest to the Worst Generation?
Posted by Tom in Entitlements, National Character, National Debt, Welfare on August 6, 2011
Our fathers came home from WWII where they lost friends and limbs; they worked in jobs and completed their educations. They married their sweethearts and raised their families. Attended their churches or synagogues. They did not go on welfare. Healthcare was something they only used when necessary and when they used it, they paid for it. They saved mainly for their family but also for retirement. A family car was a luxury and there was only one. They read the newspapers and maybe a magazine. They were intent on providing a good life for their children, insisting on education. They were charitable, giving to those in need. They participated in the community social organizations, churches, county and city governments. As products of the depression, they were frugal and believed others should also be such. While superlatives are often misplaced, they were indeed a very great generation, a humble, independent, family oriented and charitable generation.
They paid taxes on their incomes; there were few who did not. They did not expect to receive social security, Roosevelt’s first insurance entitlement. They did not go on the dole, get welfare. There was no such thing as Medicare, Medicaid, or Obamacare.
Contrast my generation, now the so-called millennials and boomers, those born to that WWII generation: We were reared, nurtured, educated, helped and pushed to succeed. Pride and joy of the “greatest generation” we were urged to be greater yet. Our parents wanted better for us. They sacrificed to better our lot. We were the beneficiaries of their family focus and their support and charity. We enjoyed the benefits of their hard work and sacrifice.
Our military challenge, Viet Nam, paled in significance to Germany, Japan and Korea. Some of us honorably served, others ducked service. “Deferees” and “Dodgers” joined protestors to pillar the returning vets who courageously fought in an unpopular war. We lost our parents’ concept of patriotism and service. We were children of the sixties, the protesting, free-loving, pot-smoking, flower children, free of morality and constraint.
We are the pampered. We demand a government that provides everything, minimum wages, unemployment compensation, welfare, Medicaid, Medicare, Social Security, and yes now Obamacare! Fully half the population pays no taxes and likes it that way. Others should pay. What others do not pay we insist the government borrow. That borrowing has increased to 40 cents of every dollar spent. In essence we are borrowing money that we cannot repay. We will leave that debt to our children.
How do we rate vis a vis the next generation, no the next several generations? What will our children and grandchildren say about us? It’s patently obvious that we are borrowing money that we cannot pay back, to fund entitlements, to promote dependency for fully half of the population. We are loading this unsustainable debt on our children and grandchildren! We are in effect stealing from future generations! Will we be called the worst generation? Don Brookins’ video DOORBELL suggests the answer:
You can bet on it!
Class Warfare: Politics of Victimhood
Posted by Tom in Democrats, Economics, Entitlements, Justice, National Character, Socialism, Welfare on August 6, 2011
Barack Hussein Obama is the master of class warfare; his background is community organizing, pitting sub class against sub class and class against class. As such he doesn’t relate to all classes, his politics are dependent on his ability to divide and thus to create more dependency, pushing victimhood, resentment and class warfare.
Kyle Meintzer alerts us to this in Bill Whittle’s video Rich man, poor man?. Bill uses Heritage Foundation data to show that while the rich get richer, the “poor” get richer also. In fact, the definition of poor is suspect. But Obama and the Democrats need to expand the definition of poor just to keep up with those becoming non-poor, and this, just to buy votes. Enough said, here’s the video:
Environmental CO2 Drag on the Economy
Posted by Tom in Environment, EPA, Government Regulation, Uncategorized on August 3, 2011
We know we pay a lawyer tax, a union tax, and a rent-seeker tax, but the environmental tax is probably one of the largest drags on the state, national and world economies. There are various segments of that tax but one of the largest of those is the CO2. You know, breathing, eating and later producing CO2 from one end or the other!
Don Parsons alerts us to the recent NASA data that debunks the environmental alarmists “global warming” models. On point is James Taylor’s article in Forbes, New NASA Data Blow Gaping Hole in Global Warming Alarmism.
“In short, the central premise of alarmist global warming theory is that carbon dioxide emissions should be directly and indirectly trapping a certain amount of heat in the earth’s atmosphere and preventing it from escaping into space. Real-world measurements, however, show far less heat is being trapped in the earth’s atmosphere than the alarmist computer models predict, and far more heat is escaping into space than the alarmist computer models predict.
“When objective NASA satellite data, reported in a peer-reviewed scientific journal, show a “huge discrepancy” between alarmist climate models and real-world facts, climate scientists, the media and our elected officials would be wise to take notice. Whether or not they do so will tell us a great deal about how honest the purveyors of global warming alarmism truly are.”
Now, think of how California is shooting itself in the foot with its own emission standards more stringent than the current national standards. And don’t forget the EPA’s current efforts to regulate CO2!
Marco Rubio On Fire
Posted by Tom in Budgets, Congress, Deficit, Democrats, Entitlements, Fiscal Policy, Welfare on August 1, 2011
Ron Tomsic sent this. We need more Rubios is leadership positions.