Gaius of Blue Crab Boulevard has posted a blog about a New York Sun article concerning food riots. The current global food shortages are a symptom of Alan Greenspan's and Ben Bernanke's excessive liquidity policies. As Howard S. Katz has pointed out in his blog, the banking system in the United States and globally has lent counterfeit Fed money (or excess liquidity) about which the financial community has been ecstatic for the past three decades (calling it stabilization of the credit markets, priming the pump, reducing unemployment, ending recession, stopping depression) to build homes that no one could pay for. At the same time, too little investment was made in commodities. Thus, the sub-prime crisis and the current global shortage of food are direct products of the banking system's lending practices and the Fed's expansion of the money supply since 1981. Ludwig von Mises, the Austrian economist, called this process malinvestment. For the past 25 years the Fed printed money and stimulated home building. Too many homes were built and sold to people who could not pay for them. Too little investment went into expansion of food and commodity production. The sub-prime crisis of today results from the mistakes that the banking community made in response to the hot Fed money that Greenspan and Bernanke have been creating under four presidents, Reagan, Bush, Clinton and Bush II.
The Bush administration's solution to the malinvestment of the past three decades has been...more malinvestment. The Bear Stearns bailout, the current loose monetary policies of the Bernanake Fed and further government transfers to banks to prevent defaults from incompetently made loans keep real estate prices high and continue the massive malinvestment that has occurred in the housing sector.
From an investment standpoint, it is clear that commodities will be hot for the next few years as rising interest rates freeze out new investment in commodities (see Howard S. Katz's blog for more on what he calls the "commodity pendulum"). From a moral standpoint, the American public should be ashamed of itself for allowing this orgy of self indulgence among the various players in the financial community; for allowing transfer of wealth from people who need to eat to wealthy stock investors and hedge fund managers; and for allowing the incompetence and mismanagement that the economics establishment and the Fed have demonstrated.
To quote Gaius:
"The New York Sun reports on a trend that is not at all pretty. In some areas of the country, rice, flour and cooking oil are in such short supply that retailers are limiting the amount people can purchase. This is happening right here in the United States.
The curbs and shortages are being tracked with concern by survivalists who view the phenomenon as a harbinger of more serious trouble to come. "
Tuesday, April 22, 2008
Sunday, April 20, 2008
Media and Democracy
Does public distrust of the media threaten democracy or does the media's failure to report and analyze the news in a balanced way fail the public and democracy? Larwyn just forwarded a post from Jammiewearingfool who comments on a New York Times editorial:
"Get a load of this pap:
"'It might seem a bit self-flagellating for the editorial board of the New York Times to bemoan the collapse of Americans’ trust in the press over the last 30 years. But it seems that the media’s fall from grace is undermining democracy.'
"Oh my. Now because people aren't getting their marching orders from this socialist rag, the bumpkins in flyover country may not vote the way the elitist snobs in Manhattan want them to."
As I mentioned in class the other day, it would be instructive to compare the New York Times's, Fortune's and Business Week's coverage of both Enron and Wal*mart during the years 1997 to 2000. Were the Times and the business press suspicious of the payment of an $80 million bonus to Rebecca Marks for building a $1 billion power plant in Dabhol, India that never opened? Or was Paul Krugman busily collecting $50,000 in fees each year from Enron and so managed to overlook this story? While virtually none of the media questioned the Dabhol plant or any of the other long litany of incompetent investments that Enron had made, and were telling the public that breaches of fiduciary duty meant that Enron was the most creative firm in America, how did the Times and Fortune describe Wal*Mart, which has consistently helped the poor by creating consumer surplus?
Rather than bemoan the public's mistrust, perhaps the New York Times should explain.
"Get a load of this pap:
"'It might seem a bit self-flagellating for the editorial board of the New York Times to bemoan the collapse of Americans’ trust in the press over the last 30 years. But it seems that the media’s fall from grace is undermining democracy.'
"Oh my. Now because people aren't getting their marching orders from this socialist rag, the bumpkins in flyover country may not vote the way the elitist snobs in Manhattan want them to."
As I mentioned in class the other day, it would be instructive to compare the New York Times's, Fortune's and Business Week's coverage of both Enron and Wal*mart during the years 1997 to 2000. Were the Times and the business press suspicious of the payment of an $80 million bonus to Rebecca Marks for building a $1 billion power plant in Dabhol, India that never opened? Or was Paul Krugman busily collecting $50,000 in fees each year from Enron and so managed to overlook this story? While virtually none of the media questioned the Dabhol plant or any of the other long litany of incompetent investments that Enron had made, and were telling the public that breaches of fiduciary duty meant that Enron was the most creative firm in America, how did the Times and Fortune describe Wal*Mart, which has consistently helped the poor by creating consumer surplus?
Rather than bemoan the public's mistrust, perhaps the New York Times should explain.
Bob Barr Is Gunnin' For John McCain
Newsmax just released this report:
Former Republican Rep. Bob Barr is seen as the Libertarian Party’s most likely presidential candidate — and he could wind up torpedoing John McCain’s White House hopes.
“Given the recent fundraising prowess of a kindred spirit — Ron Paul's campaign for the Republican nomination siphoned up $35 million, mostly off the Internet — libertarians are feeling their oats,” political analyst George F. Will writes in Newsweek.
“Come November, Barr conceivably could be to John McCain what Ralph Nader was to Al Gore in 2000 — ruinous.”
“Given the recent fundraising prowess of a kindred spirit — Ron Paul's campaign for the Republican nomination siphoned up $35 million, mostly off the Internet — libertarians are feeling their oats,” political analyst George F. Will writes in Newsweek.
“Come November, Barr conceivably could be to John McCain what Ralph Nader was to Al Gore in 2000 — ruinous.”
I am not a huge fan of Bab Barr on a personal level (he reminds me of a meaner Elmer Fudd) but I respect his candidacy on the Libertarian ticket should he decide to run. I am of two minds about it. On the one hand, if he increases the probability of a Democratic win in November 08, that will have been unfortunate (although understandable given the Republicans' big-government turn under the Bush administration). On the other hand, if he pushes John McCain a little bit further in the libertarian direction without deflecting McCain's win in November, God bless him.
Saturday, April 19, 2008
Inflation News
According to Moneynews.com on April 15:
"Inflation at the wholesale level soared in March at nearly triple the rate that had been expected as the costs of energy and food both climbed rapidly.
"The Labor Department reported Tuesday that wholesale prices rose by 1.1 percent last month, the second largest increase in the past 33 years, exceeded only by a 2.6 percent rise last November. Analysts had been expecting a much more moderate 0.4 percent rise in wholesale prices for the month."
At the same time, Money News reports that there are fewer new millionaires because of the "economic slump". The classic tactic (that goes back to the late nineteenth century) of arguing for inflation, which increases profits and stock market values but hurts people on fixed incomes and the productive poor (i.e., inflation redistributes money from the working poor and pensioners to the wealthy) is to argue that inflation will reduce unemployment. Of course, pro-inflation progressives never mention that besides reducing unemployment inflation gets elderly people to eat cat food and the working poor to give up necessities.
Increasingly, the news media don't bother to lie or color the story as they have in the past. In the 1970s, if you can recall, the media and academia argued that oil prices caused inflation and in the 1960s they argued that unions caused inflation. Today, MoneyNews.com more or less says that millionaires are hurt because there's not enough inflation:
"The continuing global economic turmoil is taking its toll on the wealthy — as fewer new millionaires are being minted....
Is this the end of the American dream? Or just a bit of a nightmare? Probably the latter, economists are telling MoneyNews, as the problems in the stock market are limiting the growth of the portfolios of professionals and executives and entrepreneurs for now. "
Where is Jim Cramer now that we really need him? I want to break into the seven figures myself. We need more old people on cat food and evicted from their homes because they can't afford the property taxes; and we need more families depriving their children of milk so people like me can become millionaires. Absolutely.
"Inflation at the wholesale level soared in March at nearly triple the rate that had been expected as the costs of energy and food both climbed rapidly.
"The Labor Department reported Tuesday that wholesale prices rose by 1.1 percent last month, the second largest increase in the past 33 years, exceeded only by a 2.6 percent rise last November. Analysts had been expecting a much more moderate 0.4 percent rise in wholesale prices for the month."
At the same time, Money News reports that there are fewer new millionaires because of the "economic slump". The classic tactic (that goes back to the late nineteenth century) of arguing for inflation, which increases profits and stock market values but hurts people on fixed incomes and the productive poor (i.e., inflation redistributes money from the working poor and pensioners to the wealthy) is to argue that inflation will reduce unemployment. Of course, pro-inflation progressives never mention that besides reducing unemployment inflation gets elderly people to eat cat food and the working poor to give up necessities.
Increasingly, the news media don't bother to lie or color the story as they have in the past. In the 1970s, if you can recall, the media and academia argued that oil prices caused inflation and in the 1960s they argued that unions caused inflation. Today, MoneyNews.com more or less says that millionaires are hurt because there's not enough inflation:
"The continuing global economic turmoil is taking its toll on the wealthy — as fewer new millionaires are being minted....
Is this the end of the American dream? Or just a bit of a nightmare? Probably the latter, economists are telling MoneyNews, as the problems in the stock market are limiting the growth of the portfolios of professionals and executives and entrepreneurs for now. "
Where is Jim Cramer now that we really need him? I want to break into the seven figures myself. We need more old people on cat food and evicted from their homes because they can't afford the property taxes; and we need more families depriving their children of milk so people like me can become millionaires. Absolutely.
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