Tuesday, August 31, 2010
An early warning about the dangers of keeping interest rates low
Shiller bases the possibility on a parallel between what has happened in the U.S. housing market and what happened in Japan. After a sharp increase from the late 1990s through the peak in 2006, home prices in the U.S. have declined for three years until the recent sharp government intervention. In Japan urban land prices (home prices) peaked around 1991, and then fell for 15 consecutive years in major cities of Japan. 'That's the way these markets typically, historically have worked, and it reflects changing public attitude,' said Shiller. 'These are not professional markets that trade on exchanges and turn on a dime. The only reason they turned on a dime this time is because of a massive government intervention.'"
“So long as our leaders tell us that we must trust them to regulate and redistribute our way back to prosperity, we will not break out of this economic quagmire,” Mr. Loeb wrote.
“Perhaps our leaders will awaken to the fact that free market capitalism is the best system to allocate resources and create innovation, growth and jobs,” he continued. “Perhaps too, a cloven-hoofed, bristly haired mammal will become airborne and the rosette-like marking of a certain breed of ferocious feline will become altered. In other words, we are not holding our breath.”
For several reasons. The vitriol has a xenophobic edge: witness the venomous references to “British Petroleum”, a name BP dropped in 1998 (just as well that it dispensed with the name Anglo-Iranian Oil Company even longer ago). Vilifying BP also gets in the way of identifying other culprits, one of which is the government. BP operates in one of the most regulated industries on earth with some of the most perverse rules, subsidies and incentives. Shoddy oversight clearly contributed to the spill, and an energy policy which reduced the demand for oil would do more to avert future environmental horrors than fierce retribution.
Mr Obama is not the socialist the right claims he is. He went out of his way, meeting BP executives on June 16th, to insist that he has no interest in undermining the company’s financial stability. But his reaction is cementing business leaders’ impression that he is indifferent to their concerns. If he sees any impropriety in politicians ordering executives about, upstaging the courts and threatening confiscation, he has not said so. The collapse in BP’s share price suggests that he has convinced the markets that he is an American version of Vladimir Putin, willing to harry firms into doing his bidding."
Monday, August 30, 2010
Sunday, August 29, 2010
"Rich countries must act to prevent prices from falling. That will cause problems for emerging economies"
Thursday, August 26, 2010
The financial crisis has led to only a few civil and criminal cases against executives, and even those focused on peripheral issues: Goldman Sachs’s peddling of a credit derivative obligation and the communications of two former Bear Stearns hedge fund managers.
But the Securities and Exchange Commission’s securities fraud action against Angelo R. Mozilo, former chief executive of Countrywide Financial, promises to feature the aggressive mortgage practices of what was then the nation’s largest mortgage lender."
Wednesday, August 25, 2010
Monday, August 23, 2010
Sunday, August 22, 2010
Chief Scientist Werner Dahm says could provide disproportionate advantage for the Air Force
The new U.S. Air Force Technology Horizons study contains a list of 30 “potential capability areas”. The top 10 are:
- Inherently intrusion-resilient cyber-systems.
- Automated cyber-vulnerability assessments.
- Decision-quality prediction of behavior.
- Augmentation of human performance.
- Constructive environments for discovery and training.
- Adaptive, flexibly autonomous systems.
- Frequency-agile spectrum utilization.
- Dominant-spectrum warfare operations.
- Precision navigation/timing in GPS-denied environments.
- Next-generation, high-bandwidth communications.
Aviation Week & Space Technology (July 19, 2010 issue)
Saturday, August 21, 2010
Tuesday, August 17, 2010
• An explicit federal guarantee of a large portion of the mortgage-backed securities created to finance American's home mortgages;
• A tax on these securities to fund low-income housing initiatives; and
• A requirement that issuers of securities meet affordable housing mandates.
Monday, August 16, 2010
Policy makers have long worried that Americans aren't saving enough for old age. And lately, current and prospective retirees have been hit on many fronts at once: They have less money, they earn less on what they have, their houses aren't rising in value and the prospect of working longer to make up the shortfall has dimmed significantly in a lousy job market."
Thursday, August 12, 2010
Big as Reagan's mandate was, in two elections, the man was never bigger than his country. There was never narcissism or a bloated sense of personal destiny in him. He gloried in the country, and drew sustenance from its heroic deeds and its capacity for recovery. No political class rode with him to power anxious to lay its hands on the nation's treasure, eager to supplant the forces of the market with its own economic preferences."
Tuesday, August 10, 2010
But attaining genuine remedies for our housing finance system could actually be harder than rocket science. That’s because it would require an honest dialogue about the role the federal government should play in housing. It also requires a candid conversation about whether promoting homeownership through tax policy and other federal efforts remains a good idea, given the economic disaster we’ve just lived through."
Monday, August 09, 2010
There are at least four channels through which Mr. Bush's tax reform (proposed and passed) raised the long-run productive capacity of the economy—that is, increased the size of the pie. First, since lower taxes mean higher returns to investors, those investors allocate more funds to corporate capital. Corporations can raise capital for investment more cheaply. As a result, the nation's capital stock and output increase.
Second, reducing or eliminating the differential tax treatment between corporate and noncorporate investments means that investment flows are not channeled artificially by tax considerations and the overall productivity of the economy increases.
Third, lowering or eliminating taxes on capital mitigates distortions in our financial structure. Prior to 2003, equity financing was disadvantaged relative to debt financing, with taxes levied twice, at the corporate level and again at the investor level. Because interest payments to debt holders are deductible at the corporate level, debt financing was taxed only once, at the investor level. This system contributed to over-reliance on debt financing. The 2003 tax cuts reduced this bias substantially. Nonfinancial companies went into the recent crisis with lower leverage as a result, a very good thing.
Fourth, low taxes on dividends encourage firms with few growth opportunities to distribute the funds to shareholders. Those shareholders could then reinvest funds in other, more innovative and productive ventures—another very good thing for economic efficiency and growth.
Putting together the effects of greater capital accumulation and improved capital allocation, I estimated at the Council of Economic Advisers that, despite slightly higher interest rates caused by an increase in government debt, the president's 2003 proposal would raise real GDP permanently by about $75 billion annually.
Yet, the next ten years could be much different, and Pimco doesn't want to be stuck in last decade's asset class."