Monday, September 19, 2011

Monetary Stimulus

Adam Posen, a member of the the Bank of England's monetary policy committee, wants central banks to print more money, a lot more. He suggests that the Bank of England and the British Treasury form a government backed bank to make small-business loans. He does not say specificially how this would be financed.
The Euro Zone is in crisis and needs some new ideas. The Bank of England has a program of purchasing the bonds of weak euro zone economies, but it is expected to stop. The European Central Bank may be forced to adopt the policy I have been advocating, namely to directly make loans to Greece, et. al. The EU countries have abdicated the right to do this, leaving only the European Central Bank.
It is unfortunate that Posen uses the term "print money" since this diverts thinking about the central bank creating money by making loans. If the central bank can create a loan to a bank on its balance sheet in order to buy bonds, it could surely make a direct loan to the Treasury who could use the money to invest in infrastructure and create jobs whose income could increase consumer demand. This is of course the method that should be used to finance Obama's new stimulus instead of more government borrowing and slashing entitlements. (Slashing military budgets is the right idea.)
Source: New York Times, Sept. 17, 2011

Class Warfare

Republicans such as Paul Ryan scream "class warfare" everytime Obama proposes to remove some of the tax breaks enjoyed by the rich. But, class warfare is exactly what we have had for years as the rich get richer and the middleclass shrinks.

Saturday, September 17, 2011

Cash Reserves

American corporations have a record $2 trillion in cash reserves. What does this mean? It means that you can give them all the tax breaks you wnat and they will still not invest and hire more workers. Their problem is not cash, but lack of consumer demand. That means that the critical part of Obama's jobs proposal is to increase incomes of workers via public spending on infrastructure, etc., not tax breaks, including the social security tax paid by employers.

Wednesday, September 14, 2011


There were two ways the U.S. could have reacted to 9/11. One, and the option our government choose, was to wrap ourselves in the flag and spend unlimited amounts on so-called security. The second option was to ask, why did this happen. What have we done to anger others to the extent that they are willing to die to harm us? Few asked this question, so we are today just as exposed and hated as we were 10 years ago.

Climate Change & Stupidity

“Here is the Texas governor (Perry) rejecting the science of climate change while his own state is on fire — ” Thomas Friedman, NYT, Sept.14.
Maybe he is suffering from heat stroke!
CNN reported on Sept. 9 that “Texas had the distinction of experiencing the warmest summer on record of any state in America, with an average of 86.8 degrees. Dallas residents sweltered for 40 consecutive days of grueling 100-plus degree temperatures.

Thursday, September 8, 2011

The Price of Lost Chances

The Price of Lost Chances
A survey by The New York Times puts a stark price tag on the cost of reacting — and overreacting — to the Sept. 11 attacks. An even more difficult question is how much Americans paid in “opportunity costs.”
By DAVID E. SANGER Published: September 8, 2011

"In 2004, when he was arguably still capable of initiating another devastating attack on the United States, Osama bin Laden released a video gloating about his plan of “bleeding America to the point of bankruptcy.”
As usual, Bin Laden’s vow was overblown — but, as it turned out, not entirely crazed. A survey by The New York Times, detailed in the accompanying chart, puts a stark price tag on the cost of reacting — and overreacting — to the defining event of the past decade. America’s bill for fighting a 21st-century “asymmetric war” comes to at least $3.3 trillion. Put another way, for every dollar Al Qaeda spent to pull off the Sept. 11 attacks, the cost to the United States was an astonishing $6.6 million.
Today, Al Qaeda in Pakistan is crippled and Bin Laden is dead. But the $3.3 trillion figure suggests that the unanticipated costs of how we managed a grim decade — money already spent or committed in the future — amount to a little more than one-fifth of America’s current national debt.
Some of those were unavoidable, direct costs of responding to the attack. Some, like the Iraq war, were expenditures of choice. But there is also the more difficult, less quantifiable question of what we paid in “opportunity costs.”
Less than a trillion dollars of the $3.3 trillion was for direct responses — including toppling the Taliban. But what if at least some of the remaining $2 trillion plus had been spent on other, longer-range threats to American national security? Rebuilding a broken education system? Finding more imaginative ways to compete with China? Reducing the national debt? Or delivering on promises, by President George W. Bush and Secretary of State Hillary Rodham Clinton alike, for “Marshall plans” to rebuild societies at risk of letting the next Al Qaeda flourish?"

Tuesday, September 6, 2011

U.S Part of Drug Problem in Mexico

President Filipe Calderon of Mexico argues that the U.S. is partly to blame for the drug wars and killings in Mexico. “Calderón is clear about what he believes are the main causes of the problem. The consumption of drugs in the US and easy access to arms (which he also faults the US for) are two main reasons, along with a lack of educational and work opportunities.” News of the editorial was published by the Christian Science Monitor, June 16, but received little coverage in America where few think it is our problem. Wake up America, if we didn’t buy it, there would not be so much money to attract criminals. We need to seriously discuss making drugs legal and available to addicts in supervised clinics as is done in Holland.

Monday, September 5, 2011

Home Mortgage Relief

A 20 to 30 percent drop in home values is hard for banks and home owners to adjust to. Here is a possible plan equal to the task. Banks could be given the option of reducing the princpal owed to current assessed values. The difference in the value of the mortgage on the bank's books could be adjusted without a charge against the banks' capital as is now not the rule. These values exist only on paper and paper can be adjusted when it is out of line with reality. Example:
Original mortgage amount $100,000
Current market price 80,000 and the amount of the new mortgage
Difference 20,000 written off with no charge to banks' capital.
The interest rate on the new mortgage of 80,000 would be at current rates. The banks would have nothing to lose by getting these non-performing loans off the books. And, the home owners would have a mortgage they could afford, saving them from default. This is the bold plan that Obama is unlikely to propose.

Sunday, September 4, 2011

Coffee Prices at Mercy of Speculators

Hedge funds and other speculators are drving up the price of coffee (as they have done with gasoline) much more than warranted by fundamentals of supply and demand. The government should prohibit futures markets and let the gamblers play at the casino where they can't harm the rest of us.
Futures markets are a means by which coffee processors can lock in the price of future deliveries, but this benefit is not worth its cost. Lots of businesses live with uncertainty--sometimes the acutal price in the future is more than the expected price and sometimes less. A prudent company can survive these fluctuations and thrive on the averages.

Clean Air and Breathers Lose

Our spineless President has caved in on proposed EPA clean air regulations, even though the U.S. has the dirtiest air in the developed world. The old law preventing EPA from considering cost in formulating regulations affecting public health is ill-concieved, but Republican rants about job losses is also over blown. Coal-burning electric power companies would shift to other energy sources, not close their doors.