Archive for Finances
Another Flawed Keynesian Approach
Posted by: | CommentsWith the help of five Republicans in the US Senate, it appears the hurdle has been cleared for some form of a jobs bill to pass approval in Congress. Perhaps I am mistaken, but Congress already passed and the president signed a $750 billion spending bill to get people back to work. What is different about raiding an empty treasury of billions more this time to create jobs?
Architects of the legislation point to the tax credits available to businesses that increase their headcount. One idea is to give employers a tax-credit up to $5000 for each additional person hired. At first glance this may seem like a logical incentive. But as my economic students learn, two sides exist to transaction.
The tax credit will only reduce the marginal cost of a new employee for the first year. After the initial year the cost of the new hire will balloon by at least the amount of the tax credit. As any student passing a Principles of Economic realizes, cost is just one factor in the employment equation. The other side of the coin takes into account the revenue benefit that an employee brings to the table. Firms will retain or hire individuals as long as their additional benefit exceeds their additional cost. Without a significant pick up in demand, many firms will pass on expanding their payrolls.
Small business owners point to another flaw of the proposal in that tax-credits are realized at the end of the year. The cost of a new hire drains cash flow in the meantime. As one owner stated, cash flow is at the heart of staying in business. My creditors may not wait for the federal government to reimburse me.
It looks like another lesson in failed Keynesian economics.
Never-Ending Government Lies About Markets
Posted by: | CommentsThe purpose of government is for those who run it to plunder those who do not. Throughout history, governments have used violence, intimidation, coercion, and mass murder to enforce this system. But governments’ first line of “defense” is always a blizzard of lies about its own alleged benevolence, altruism, heroism, and greatness, along with equally big lies about the “evils” of the civil society, especially the free market.
Wall St. Threatens to Take Ball and Go Home
Posted by: | CommentsJapanese and US Parallels
Posted by: | CommentsHere is what happened to the Japanese economy in the late 80’s-early 90’s that you see referenced around the news in many non mainstream outlets. Why we haven’t heard more about it is a subject for another post. Needless to say, in the Japanese crash, the government spent hundreds of billions supporting banks and businesses, buying U.S. Treasuries in an attempt to keep the yen cheap and so their manufacturing sector at work. As the economic morass dragged on, the government cut interest rates to zero, then eventually accelerated spending in a five-year experiment in “quantitative easing,” which involved funding all manner of public works projects and other targeted infusions of government spending into the economy.
Using the equity market as a proxy for the broader economy, the Nikkei fell from around 38,000 at the height of the bubble in the late 1980s, down to around 7,000. During the five-year period of quantitative easing, 2001 to 2006, the Nikkei rebounded by about 100%, moving back to the 14,000 neighborhood. Importantly, however, the minute the Japanese government stopped the spending, the stock market came tumbling back down to around 7,500, near where it hovers today. Note that at no point did it get anywhere near the bubble high of over 38,000.
Back here in the US, if history repeats itself the DOW will fall to somewhere around 3000 and recover to somewhere around current levels and then back down… how low no one knows.
Now We Know What Happened and How!
Posted by: | CommentsOur View
Posted by: | CommentsDear Towncrier,
It is our view that we have a problem here! We commend you for the prompt attention you have given the case regarding very serious case of the Crimmins.
For some unknown reason, Ms. Crimmins feels it is her duty to spend millions upon millions of taxpayer dollars because some how she is an expert.
Sure, shell tell you about her extensive background in statistical analysis! Sure, shell tell you how to spend your money for you, acting as some kind of expert!
It is our view that Ms. Crimmins has publicly and privately demonstrated her inability to control her own finances while claiming to be able to dutifully spend our taxpayer money. We feel the only appropriate action now is to ask Ms. Crimmins to resign her post as taxpayer spend and build liaison because of her inability to control her own.
It is our view that what happened yesterday to Mr. Blago in Illinois is what should happen here. Trust is now gone in the eyes of us little taxpayers whom some actually think that somehow the school bored members were given a gift from God to handle finances.
It is our view that they cant! Thank You Towncrier for pointing that out for us!
Good riddens Ms. Crimmins and your twinkies too!
Bringing Wall Street Much Closer to Home
Posted by: | CommentsMaking the headlines today at CNNMoney.com was this story.
Wisconsin school districts slammed by Wall Street meltdown
What makes one chuckle is the complaint from board members stating how, “They told us something different than what was put on paper.”
You’d think that if you were going to invest $200 million of taxpayer’s money you’d at least have a lawyer check the fine print. It would seem those running our educational system aren’t very educated themselves. And we wonder why we’re in the state we’re in.
Hare-Brained
Posted by: | CommentsLarry Summers, the man designated by President-Elect Obama to be head of the National Economic Council and, as such, according to The Times, his lead economic adviser inside the White House. (David Leonhardt, The Return of Larry Summers, November 26, 2008, p. B1.)
Although generally viewed as a prominent professional economist, his actual knowledge of the subject is minimal. This conclusion follows from the fact that the essential subject matter of economics is capitalism. And Summers’ ideas on redistribution reveal that he fails to understand the nature of the most essential feature of capitalism, namely, private ownership of the means of production and the indispensable role it plays in the standard of living of the average person.
His views may qualify him to be an economic advisor to Hugo Chavez of Venezuela or Robert Mugabe of Zimbabwe, but certainly not to be an economic advisor to the President of the United States.
Read Larry Summers: Heavyweight Centrist or Lightweight Leftist?
Bubbling Cauldron
Posted by: | CommentsDouble, double toil and trouble; Fire burn and cauldron bubble -William Shakespeare-
Easy money credit policies of the Federal Reserve are the boiling broth in which financial frauds stew. The percolating liquid in the cauldron forms aromatic bubbles that cause individuals to seek fortunes where none exist.
As the bubble enlarges, money chases money at an increasing pace. The time it takes to profit from a real estate or stock transaction is measured in weeks. The allure of fantastic returns on the quick is an environment ripe for the con man.
The multi-billion dollar ponzi scheme hatched by Bernard Madoff a decade ago came to an end this week. Flush with a stream of money from those chasing the bubble, Madoff was able to play a cash merry-go-round with clients by taking new money and redistributing it as returns on investments.
Because of the financial uncertainty caused by the popping of the bubble, many who invested with hedge funds or other money managers have taken flight with their money. In Madoffs case, the withdrawals far outweighed the current trickle of new money. The merry-go-round came to an abrupt halt.
Bernard Madoff will certainly spend the remainder of his life in jail. Unfortunately, the accomplices in this thievery will continue to live comfortably spending hours writing books and giving speeches.
No excuse exists for Mr. Madoffs actions. But without the bubble created by Alan Greenspan and Ben Bernanke, the scheme may never have been launched or lasted so long.
A personal note: Several times during my career I had the chance to meet and work with the Madoffs. Back in the 1990s, they were at the forfront of electronic trading and competive executions that eventually led to the platforms we have today. On Friday. the investment community was in a state of shock over the revelations.
But this episode points to another fraud. How could a scheme like this last so long. How could accountants and regulators employed to shed light on the crooked have been left in the dark. Government laws and regulations dulled the need for personal due dilligence. Once again, government protection left behind a street full of victims.


