28 September 2008
23 September 2008
3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, Americas dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.Thanks to Marginal Revolution for the post.
22 September 2008
19 September 2008
When bank credit does contract, the impact on the real economy will be more marked than we have seen thus far. The reason is that most bank credit is the sort of money that gets spent in shops and garages, or is used by the corporate sector to invest in real assets. NDFI money is used to invest in financial markets, causing security prices to rise and fall, which only indirectly affects the real economy by changing the value of wealth.
17 September 2008
A large expansion in debt will impose enormous fiscal costs on the US,
ultimately hitting growth through a combination of higher taxes and lower
spending. It will certainly make it harder for the US to maintain its military
dominance, which has been one of the linchpins of the dollar.
The shrinking financial system will also undermine another central
foundation of the strength of the US economy. And it is hard to see how the
central bank will be able to resist a period of allowing elevated levels of
inflation, as this offers a convenient way for the US to deflate the mounting
cost of its private and public debts.
So even if all the magic tricks work and we avert a complete meltdown caused by exotic finance and the folly of making too much money off of money, the repercussions of our rescue efforts (whether successful or unsuccessful) will be felt for years to come.
15 September 2008
"No disrespect to them, but we let them hang around in the game, and look what
happened -- they beat us," ASU safety Troy Nolan said.
Well, just take a look at the stat sheet and try to tell me again that ASU "...let [UNLV] hang around in the game..."
Owned son! 'Nuff said. Good luck against Georgia next week....CHUMPS!
10 September 2008
In essence we already agreed to the bail out some time ago. Have you ever spent $17,000 on a car and asked the dealer what the warranty for the car "really meant"? Well, the Chinese spent $340 billion on agency debt and probably asked the same question at least once or twice. They live in a world of secret agreements with leaders, not transparent democratic arrangements. So when it comes to the U.S government decision, we're not just starting from scratch here. How many phone calls do you think Hank Paulson has received from the Chinese central bank since August 2007?
"Are you *sure* that paper is safe enough for us to keep on buying?"
We'll never know exactly what kind of verbal dance Paulson concocted in response, but just look at the resulting flow of purchases and the relatively slight mark-up over Treasuries over that period of time. The Chinese (among others) thought we were standing behind the securities, at least in any world-state short of federal government quasi-bankruptcy. (In fact Paulson is in a total bind once that phone call comes in. He doesn't have much incentive to just say "tough luck" and precipitate a crisis when otherwise no crisis is on the horizon.)
So should we try this: "Oh, is that what you thought? Guaranteed? Did we use that word? Sorry, try reading our signals better next time. We love you. Great job with those Olympics. And when it comes to those Treasury Bills, we really do still mean it. And don't forget to support us on Iran and North Korea."
I think Mr. Cowen has brought up an important point that I haven't heard many (if any) people talking about, and that is the political implications of this credit crisis. The global economic implications have been pondered. But the political have yet to be speculated upon.
There's no shortage of people arguing against the bailouts, but they seem to fail to understand that we cannot just tell all the foreign institutions that bought Fannie and Freddie debt to eat crap. We still have to maintain relations with them. The common (and even preferred) shareholders are more ambiguous entities that are easy to forget, and we can wipe them out without fear of significant negative repurcussions; but foreign countries that bought hundreds of billions of dollars in debt from these companies can't be disregarded. Take the Chinese for example, as Mr. Cowen has. They've been buying American debt (both private and public) for probably the past decade (I'm not sure how long exactly and haven't looked up the figures). Their investment has fueled American economic growth from the late 90's on. If we crap out on them now by refusing to guarantee the debt they've bought then we won't be seeing much capital coming from them for the next decade or so, severely limiting our government's ability to borrow money and our national economy to grow.
The political implications are mentioned in Mr. Cowen's hypothetical situation. Where do foreign relations end up if we screw them over on this? They probably won't be likely to back us in foreign disputes and could potentially become hostile regarding trade.
I was skeptical at first about the bailouts, even a bit weary. But as more light is shed on the situation, it's becoming more and more clear that this is a necessary action, even though it's putting taxpayers on the hook for potentially hundreds of billions of dollars.
08 September 2008
Arnold Kling thinks you should have to put 20% down to get a mortgage.
07 September 2008
"The Treasury Department on Sunday seized control of the quasi-public mortgage finance giants, Fannie Mae and Freddie Mac, and announced a four-part rescue plan that included an open-ended guarantee to provide as much capital as they need to stave off insolvency."
But will this really help make things better in the short-run? I don't believe so. The downward spiral of housing price declines will continue nonetheless because the supply of homes is simply too great. When the new equilibrium is reached prices will settle and stay low for quite a while.
05 September 2008
Want is the desire to fill need.
Most people don’t understand this. Most people view need as the superior to want. Everyone agrees that want is a desire; but most people think that need is something beyond human control, beyond human manipulation.
‘Tis not so. Need is not above want. It is the other way around. Want is beyond anything in the world, anything in existence.
I’ve come to this conclusion after analyzing the standard interpretation of want and need. What put me on to this subject of thought was the idea of value. I know that my life is pointless, so is everybody elses. There is no purpose, no point, no value in this life. The only value that exists is that which we create.
The general consensus is that for people to feel valued they must be needed. I feel differently. For me to feel valued I must be wanted. For people to need me gives me no value; at least not to myself. Everybody needs other people, but when somebody, or other people, want you, you become a commodity in demand. It’s basic economics. When I am in demand I am of value, both to myself and to others. Anybody can satisfy a need, but only those who strive to please and fulfill the needs of others are wanted. The only way to place any value on oneself is to be desired by others.
It’s simple, really. When others need you they just utilize you because you will do the job. You will suffice. I don’t want to suffice. I want to go beyond expectations, to go beyond need. When you are wanted others desire you; others will go out of their way to use you.
It’s far to common, people being used just because they are available. We see it everyday. Relationships, jobs, friendships. They are all out of need.