At times when money is tight and our resources are stretched to the limit, it pays to spend our money wisely. That is why it makes so much more sense to reduce the costs imposed on private industry instead of increasing spending by government. Industry takes their earnings and reinvests them to create sustainable wealth creation: they hire and train workers, conduct research, build and perfect machinery and robotics, and develop brand equity and a reputation for quality. All of these endeavors represent lasting value creation. What is spent on these things this year will continue to create revenues, wages, and profits for years to come.
100% Beef (or is it tax!)
Government spending is pure consumption. Think of a hamburger store. While it may taste good at the time, it is temporary and fleeting, and will likely do more harm than good in the end. It keeps the beast alive for one period, and then the process has to start all over again next period.
When we approve a massive spending bill, it covers government purchases of goods and services for the next year, maybe less. In one end; out the other, with nothing left to show for it, except a hungry program that needs to be fed again next year, and the next and the next.
Government programs in and of themselves never produce lasting value; only in conjunction with private industry is any wealth or value created. And even then the government purchases have pushed aside, prevented, crowded out, or priced out purchases that would have been made by the private economy.
So, please, keep this in mind whenever you think of any type of government spending or tax increase: it is here today, gone tomorrow. Oh, and skip the fries!
The President of the United States recently pressured the heads of the nations’ largest banks to increase lending to
Pres. Obama
small business and home-owners. Obama claimed that the banks, as recipients of federal bailout funds, had an unusually heavy responsibility to take such measures in order to create more jobs and help nurse the economy back to health. All of this was done very publicly and with much fanfare. Worldwide press coverage was universally favorable.
Seems reasonable, doesn’t it?
But it is not. You are being duped. I can’t tell whether whoever writes this stuff for Obama knows the truth and skilfully skirts it, or just writes flowing prose with no connection to the truth that curries voter buy-in by blaming Wall Street and Corporate America for all that’s wrong in the world.
Tim Clodfelter of the local Winston-Salem Journal wrote a very interesting piece on the future of brick-and-mortar
Tim Clodfelter
video stores and video rental places such as NetFlix and Red Hat.
I happened to be quoted in the article as an economist (the comment about “reducing the average cost every time we watch a purchased video” was supposed to be a joke!), but actually met up with Tim in my role as mom and pseudo-agent! Let me explain.
My 15-year-old daughter was standing in a very long line of young ladies waiting to audition for the Coen Brother’s remake of True Grit. Tim was there to get the story on the open casting. I asked him over hoping he would talk to my daughter. He and I got to talking instead; he found out that I was an economics teacher, and pulled out his notes on the Video Store story. He ended up talking to me and several other parents in line, all of whom had a different approach to viewing movies. The resulting article follows with permission to publish on Learning from Dogs.
“The time to begin writing an article is when you have finished it to your satisfaction. By that time you begin to clearly and logically perceive what it is you really want to say.” ~Mark Twain
It is a bit intimidating to try to write a piece on the importance of good writing. I feel self-conscious about my writing as I write about good writing. After all, a post on good writing should be written especially well. Then again, maybe a poorly written post will do even more to illustrate the importance of good writing. I will have to leave that up to you, the reader.
I have been teaching graduate and undergraduate students for over twenty years now. I have read and graded thousands of papers and essays during that time. I can count on two hands the number that were exceptionally well written. In each case, I sought out the students to compliment their writing, and to encourage them to keep honing their writing skills.
I doubt my words of encouragement had much effect. This, I know from personal experience.
Years ago, in my third year of graduate school, I got a paper back from a professor with the words “You write well” written in the margin. I was crushed. I had worked so hard on that paper: reviewing the existing literature, developing the research design, and trying to make a substantive contribution to my field. I yearned to hear something tangible about the quality of the research, the cleverness of the method, or the importance of the findings. Instead, I got “you write well.” I honestly thought that the professor had said that because he couldn’t think of anything positive to say about the content of the paper.
Years later, something happened that made me realize how wrong I was. I had taken a teaching job at Southern Methodist University in Dallas, Texas, even though I had yet to defend my doctoral thesis; it’s called “ABD,” or “all but
Merton Miller
dissertation.” I had traveled to Chicago to meet with Merton Miller, my thesis chairman, about polishing up my dissertation and scheduling the defense. As I waited outside his office door, I couldn’t help but notice how distracted Professor Miller seemed. He had always stood at a tall wooden lectern to write, but this day he paced to and from that lectern, rubbing his head, adjusting his shirt sleeves, writing, erasing, then erasing some more.
He was at the lectern when I entered his office for our meeting. I congratulated him again for winning the first Nobel Prize in financial economics and asked him about the upcoming trip to Stockholm. He was taking his wife and daughters on the trip, who were very excited. He, on the other hand, was not ready for the trip. He was worried, he said, because he was not going to have sufficient time to revise his acceptance speech. He had only edited it seven times thus far, and his magic number was eight. Not six, not seven, but eight rewrites were what he needed to be satisfied with his writing.
Professor Miller was known as one of the most gifted writers in all of economics. His writing was disarmingly simple and clear. It flowed like a piece of music. It seemed effortless. Everyone, myself included, assumed that he was just a naturally talented writer, lucky to have been blessed with that skill. Everyone was wrong. I learned that day that Professor Miller worked hard at writing well. He was well into his 60’s, had written hundreds of articles and had won the Nobel Prize, but he was still working at writing well.
Then I remembered the comment that a teacher had written in the margin of my paper years earlier. The teacher was Merton Miller. And now I knew how much it really meant, coming from him. So now when I see the rare student who writes really well, I make it a point to tell them. Not that it means as much coming from me as it did coming from Professor Miller. But it still means something, because good writing is very important, and it’s worth working for.
The US Federal Reserve, or Central Bank, is the banking system’s bank. It is the lender of last resort.
It is through the Central Bank that banks settle their accounts with each other. The central bank serves as a clearinghouse for checks written by depositors, and it holds the commercial banks’ reserves.
Bank reserves (vault cash, and deposits by banks at the Central Bank or the Fed) are monies held out of circulation by banks to satisfy the Fed’s reserve requirements and the currency demand by the public. Excess reserves are those held above the legal reserve requirements to handle uncertain demand. Bank deposits not held in (required plus excess) reserves are used to make loans and earn interest.
When banks make loans, they do not actually lend out the equivalent in cash but instead create on their balance sheet a loan asset and an equal liability called a demand deposit. Such lending by banks is limited only by reserve requirements (set by the Fed) and the cash they need to satisfy cash withdrawal demand by their customers.
As these loans are then re-deposited by the borrower, the multiplier process continues as fractional reserves are held back and the balance is “lent” out again.
Okay. If you tried this ploy on your parents, you wouldn’t get away with it. If your kids tried it on you, you wouldn’t fall for it either. So why are the American people letting the Government get away with this ploy? I don’t know. And I don’t get it. Maybe there is just so much going on that it gets lost in the mix. Maybe it’s because of the deceptive and disingenuous way it’s being presented by Pelosi, Reid, and Obama.
Here’s the ruse: “Give us more of your money today, and we will reduce tomorrow’s health care costs. We will increase efficiency. And we will do all of this without increasing the budget deficit!”
Yeah, right.
What exactly is stopping them from reducing health care costs and improving the efficiency of health care delivery now? Why do they need more money today to accomplish these things tomorrow? What magical powers does the next dollar of tax collections have that the current ones don’t?
Exactly. None. So when Congress asks to increase taxes and the deficit in order to fix health care tomorrow, let’s respond to them as we would our clever but errant children: Ask to see some proof today first.
You know how that will turn out. And so does Congress. That’s why they just keep promising the moon. What I don’t get is why we continue to let them get away with it.
[Not just the US Government plays on the roundabout – I’m sure they learnt from the Brits! Ed.]
The US poor pay czar is lamenting his task: how to limit the pay of executives at companies receiving a bailout without undercutting the ability of the firm to secure talented management. “It’s a delicate balance! Very difficult indeed.” Well, Mr. Czar, difficult for you, maybe, but a piece of cake for the labor market. That’s exactly what the labor market does, day in and day out, quite naturally.
Compensation should not be the purview of an appointed administrator serving at the pleasure of the executive branch of the U.S. Government.
US still struggling to find a proper health care solution
We’ve all heard this definition of insanity: doing the same thing over and over again but expecting a different result.
Here, in a nutshell, is the insanity of the current U.S. health care debate:
Medicare, the government’s single-payer wealth redistribution health care program, is quickly going bankrupt. No one disputes this fact.
When President Obama refers to “cutting costs of healthcare,” he is referring to cutting the Medicare budget. Period. No increased efficiencies, no improved services, no reduced market-clearing prices. No, cutting costs refers to reducing the fraction of the U.S. government’s tax collections devoted to Medicare.
The new Health Care Plan is fundamentally a new Medicare program. Let’s call is Medicare 2.0.
Medicare 2.0 is being funded in large part by cutting the current Medicare budget item. We are supposed to ignore the fact that the funds cut from the current Medicare program will be spent on Medicare 2.0.
The Medicare 2.0 plan shifts as much as 25% of its (under)estimated costs (e.g. payments to physicians) to other accounts. The costs are still there; these obligations would still need to be paid by the government under the proposed legislation, but Congress is hoping the public won’t “count” the shifted costs if they slap another name on them, further fostering the illusion of “lowering costs of health care.”
Medicare 2.0 will also go bankrupt but, as a larger, more far-reaching entitlement program, the impact on the U.S. budget will be larger and more far-reaching.
A primer from Prof. Jarrell on this important subject
Macroeconomics is the study of aggregate supply and demand, and looks both internally to the workings of the economy and externally to how a domestic economy interacts with others worldwide.
Macro builds on the principles of microeconomics, which is the study of prices and quantities of individual goods and the markets where these goods are produced and sold.
In macro, “price” refers to some index of the prices of domestic goods and services, and “quantity” refers to some measure of the value of domestic production or “output.” One common measure of output is gross domestic product (“a measure of the productive activity of a country computed on the basis of the ownership of the factors of production”). A country’s standard of living is usually directly correlated with its real output, or the value of total output corrected for inflation.
John M Keynes
Unlike microeconomics, macroeconomics started with the idea that prices and markets do not continuously resolve all of the coordination requirements of a modern economy. Such “failures of coordination” (Keynes) seem likely when one views the economy as the collective sum of thousands of microeconomic markets.
For example, although most economies around the world have experienced generally positive trends in their gross domestic product, short run positive and negative deviations (recessions and, in more dramatic examples of the failure of coordination, depressions) around the trend line, or “business cycles,” are common.
Inflation is the rate of change of the average level of prices, where the price level is usually measured as a price index. Inflation rates are typically quoted in annualized percentages. In normal times, the inflation rate is procyclical: it rises in periods of high growth and declines in periods of slow growth. Unemployment, by contrast, is usually countercyclical. The U. S. inflation rate was as likely to be negative as it was positive before World War II; since then, price levels have risen fairly consistently.
I must say that I am very confused about bringing an admitted terrorist into our country and its court system, where everyone is presumed innocent until proven guilty, has an attorney assigned to them if they cannot afford one, and they enjoy the full rights and benefits of any other individual accused of a crime in the United States.
Evidence will be brought to bear on the case and, based on the preponderance of the evidence as presented skilfully by attorneys on both sides, and as adjudicated freely and with respect for the law, the judge and/or jury will find KSH innocent or guilty.
If, as Eric Holder, Obama’s choice for the U.S. Attorney General, has indicated ‘KSH’ should be found guilty of horrible crimes and should be brought to justice, I am wondering what is Holder’s real purpose of trying this mastermind here. He must know that there is a chance that the well-meaning set of 12 honest, everyday jurors in this case, through legalese or side-deals or bias, might find to acquit. Right? Then what?
Holder says he’s guilty, yet brings him here (while trying others in a military tribunal) to “try” him in a courtroom which Holder expects to find him guilty. I see the twisted mess we are left with if this happens. But where’s the upside?
Learning from Dogs 