In a Becker-Posner blog, Gary Becker objected to amnesty and instead proposed that illegal immigrants should be allowed to buy their legality by paying say a $10,000 fine. This is trumpeted as the Chicago principle of markets as the answer to many problems.
Instead of asking illegal immigrants to buy the right to stay, why not ask their employers to buy the right to keep them in the country? Doing so could free employers from any legal action against them for employing illegals.
Markets are wonderful, but the question is always who is the buyer and who the seller.
Saturday, December 8, 2007
Fuel Efficiency Standards
The House voted for increased fuel efficiency standards, but the Senate has not. It is hard to believe that our domestic auto manufacturers cannot meet the proposed standards. We already have cars that can get 35 mpg, they are called small and light. If Toyota can make a profit selling these cars, why can't US auto makers? As someone observed, "What exists proves what is possible."
During the oil embargo, Clinton led us to a 55 mph speed limit. Such a limit for all relieves us all of the burden of trying to get one up on our fellows by more horsepower and size. Would the quality of our lives really suffer if we were more modest? Many Europeans seem to enjoy it.
During the oil embargo, Clinton led us to a 55 mph speed limit. Such a limit for all relieves us all of the burden of trying to get one up on our fellows by more horsepower and size. Would the quality of our lives really suffer if we were more modest? Many Europeans seem to enjoy it.
Tuesday, December 4, 2007
Tomato Picker Justice
Migrant tomato pickers last week asked Burger King to pay one cent more per pound for their tomatoes in order to improve the lot of the workers. Burger King said it could not be sure the extra money would get to the workers. One suspects that if they wanted to, smart Burger King’s execs could figure out a way. I was surprised in reading comments on this story in the Naples News how many people begrudged paying the pickers more. They often said that the workers were mostly illegals and if they don’t like their pay, they can go home. So much for justice!
The workers rallied at the offices of Goldman Sachs in Miami. Goldman is a major shareholder of BK. The workers noted the irony of their pay compared to the millions about to be distributed as bonuses to Goldman’s managers. Did the clever work of any of these ever put food on our tables?
The workers rallied at the offices of Goldman Sachs in Miami. Goldman is a major shareholder of BK. The workers noted the irony of their pay compared to the millions about to be distributed as bonuses to Goldman’s managers. Did the clever work of any of these ever put food on our tables?
Corporate Board Elections
The Securities and Exchange Commission, decided last week not to change the current rules that govern corporate board elections. Incumbent boards don’t have to print the names of candidates nominated by dissident shareholders on the official proxy ballots sent to shareholders. The cost of a campaign to get visibility for their candidates means that shareholders unhappy about excessive CEO pay for example are at a disadvantage.
The way the economy works is a function of a lot of little rules that get little public debate.
The way the economy works is a function of a lot of little rules that get little public debate.
Bravo Chavez
Populist leaders have always been a scary mixture of good and bad. Chavez’s attempt to gain even more power for himself is scary as is enlarged public ownership of business. However, his championing of the cause of the poor is admirable. The proposed constitution would have shortened the workday from eight hours to six, created a social security fund for millions of informal laborers, and promoted communal councils where residents decide how to spend government funds.
You have to have some respect for a man who can say he may have been too ambitious in asking voters to let him stand indefinitely for re-election and endorse a huge leap to a socialist state. I have not heard that from our own over-reaching president.
One can be heartened to see democracy working in more of Latin America.
You have to have some respect for a man who can say he may have been too ambitious in asking voters to let him stand indefinitely for re-election and endorse a huge leap to a socialist state. I have not heard that from our own over-reaching president.
One can be heartened to see democracy working in more of Latin America.
Monday, November 5, 2007
Financial Crisis: Burst Bubble, Frayed Model
In a web post entitled “The Financial Crisis” Burst Bubble, Frayed Model,” Robert Wade succinctly points out the interdependencies in the world economy.
1. Exporters in countries running trade surpluses such as China and Japan sell the dollars they earn to their banks in return for domestic currency (to pay their workers, etc.).
2. These countries’ central banks buy the dollars from exporters to dampen their currency appreciation and domestic wages which impairs their economy’s competitiveness. This increases the supply of domestic currency which increases domestic demand and creates inflationary pressure.
3. Central banks use their stock of dollars to invest in US assets such as property and Treasury bonds. (China recently made a large purchase of the stock of the US hedge fund, Blackstone Group.) One result is higher bond prices, lower yields, lower interest rates, increased US domestic debt and imports that cause the US deficit to grow even more.
4. All of this puts downward pressure on the dollar.
5. “This mechanism has generated impressive economic growth in both deficit and surplus countries. Large trade imbalances generate larger increases in financial transactions and rising financial fragility.
6. In 2004, “Foreign banks, with still fast-rising dollar reserves meeting a smaller supply of US government and quasi-government bonds, therefore switched to … asset-backed securities.” In this context, private banks and other financial organizations developed “sub-prime” mortgages and packaged them. These were given AAA ratings by rating agencies who obtained the business by optimistic ratings.
7. All was well as long as housing prices increased and mortgagees believed that rising prices allowed them to extract equity and thus meet the higher repayment terms that developed.
8. “The bursting of the property bubble in the US in 2006 triggered a sequence in which, slowly, banking and financial operators became aware that the foundation of the debt pyramid was quicksand.” The large international banks and firms like Merrill-Lynch are now acknowledging the problem and writing off billions.
9. Wade suggests that the figure to watch is the ratio of total US Debt to GDP. It has been rising rapidly and in 2006 was 340%. “If US debt/GDP suddenly flattens, the US will experience a recession. If US debt/GDP falls, the world will experience a recession.
Source: http://www.opendemocracy.net/article/the_end_of_neo_liberalism
1. Exporters in countries running trade surpluses such as China and Japan sell the dollars they earn to their banks in return for domestic currency (to pay their workers, etc.).
2. These countries’ central banks buy the dollars from exporters to dampen their currency appreciation and domestic wages which impairs their economy’s competitiveness. This increases the supply of domestic currency which increases domestic demand and creates inflationary pressure.
3. Central banks use their stock of dollars to invest in US assets such as property and Treasury bonds. (China recently made a large purchase of the stock of the US hedge fund, Blackstone Group.) One result is higher bond prices, lower yields, lower interest rates, increased US domestic debt and imports that cause the US deficit to grow even more.
4. All of this puts downward pressure on the dollar.
5. “This mechanism has generated impressive economic growth in both deficit and surplus countries. Large trade imbalances generate larger increases in financial transactions and rising financial fragility.
6. In 2004, “Foreign banks, with still fast-rising dollar reserves meeting a smaller supply of US government and quasi-government bonds, therefore switched to … asset-backed securities.” In this context, private banks and other financial organizations developed “sub-prime” mortgages and packaged them. These were given AAA ratings by rating agencies who obtained the business by optimistic ratings.
7. All was well as long as housing prices increased and mortgagees believed that rising prices allowed them to extract equity and thus meet the higher repayment terms that developed.
8. “The bursting of the property bubble in the US in 2006 triggered a sequence in which, slowly, banking and financial operators became aware that the foundation of the debt pyramid was quicksand.” The large international banks and firms like Merrill-Lynch are now acknowledging the problem and writing off billions.
9. Wade suggests that the figure to watch is the ratio of total US Debt to GDP. It has been rising rapidly and in 2006 was 340%. “If US debt/GDP suddenly flattens, the US will experience a recession. If US debt/GDP falls, the world will experience a recession.
Source: http://www.opendemocracy.net/article/the_end_of_neo_liberalism
Hedge Fund Tax Loophole
The following excerpt from a Krugman NYT column expresses my opinion.
Money influence on Senate:
"The most conspicuous example of this influence right now is the way Senate Democrats are dithering over whether to close the hedge fund tax loophole which allows executives at private equity firms and hedge funds to pay a tax rate of only 15 percent on most of their income.
Only a handful of very wealthy people benefit from this loophole, while closing the loophole would yield billions of dollars each ear in revenue. Retrieving this revenue is a key ingredient in legislation approved by the House Ways and Means Committee to reform the alternative minimum tax, something that must be done to avoid a de facto tax increase for millions of middle-class Americans.
A handful of superwealthy hedge fund managers versus millions of
middle-class Americans,€” it sounds like a no-brainer."
Money influence on Senate:
"The most conspicuous example of this influence right now is the way Senate Democrats are dithering over whether to close the hedge fund tax loophole which allows executives at private equity firms and hedge funds to pay a tax rate of only 15 percent on most of their income.
Only a handful of very wealthy people benefit from this loophole, while closing the loophole would yield billions of dollars each ear in revenue. Retrieving this revenue is a key ingredient in legislation approved by the House Ways and Means Committee to reform the alternative minimum tax, something that must be done to avoid a de facto tax increase for millions of middle-class Americans.
A handful of superwealthy hedge fund managers versus millions of
middle-class Americans,€” it sounds like a no-brainer."
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