Economics

America’s public finances: The Unsteady States of America

"Detroit’s population has fallen by 60% since 1950. The murder rate is 11 times the national average. The previous mayor is in prison. Shrubs, weeds and raccoons have reclaimed empty neighbourhoods. The debts racked up when Detroit was big and rich are unpayable now that it is smaller and poor. Though some of its woes are unique, a crucial one is not. Many other state and city governments across America have made impossible-to-keep promises to do with pensions and health care. Detroit shows what can happen when leaders put off reforming the public sector for too long." Continue reading →

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Federal Reserve expected to stay the course on near-zero interest rate

"Markets appeared to ignore his assertion that the Fed’s key federal funds rate, at 0.0-0.25 percent since December 2008, would not rise before 2015. Interest rates jumped more than a full percentage point in two months, pushing mortgage rates suddenly higher, raising concerns they could snuff out the housing market recovery, one of the few bright spots in the sluggish economy. In later comments, particularly two days of twice-yearly testimony to Congress in mid-July, Bernanke sought to assure markets that the near-zero interest rate would stay put for a while, given the 'weak' economy. 'If we were to tighten policy, the economy would tank,' he told lawmakers." Continue reading →

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Working Class Whites Are Giving Up Hope.

"Working class whites are giving up economic hope, according to a recent poll. They did not vote for Obama. The article did talk about single-mother households. They are in poverty, of course. What did the social planners expect? If the government subsidizes a particular behavior, we get more of it. That was the conservative argument a generation ago. It was dismissed as heartless by liberals. This is what 80 years of welfare state politics have produced. But of course, no one in the mainstream mentions this. Pessimism now reigns." Continue reading →

Continue ReadingWorking Class Whites Are Giving Up Hope.

Declare Detroit a Free City

"Do not expect overnight success, but who knows? A free market always surprises us with new innovations. At first one can expect lots of mom and pop startups, sidewalk vendors, unlicensed and untaxed services such as simple property repair, home schools, private taxis, etc. But if Nike and other American businesses are enticed by lower costs and fewer regulatory burdens to outsource their manufacturing operations overseas, why would they not take a good look at a Free Detroit? Expect to be amazed. Allow Detroit to become a safe, cooperative city that represents the best that America can be. Economic freedom will ensure the rebirth of Detroit." Continue reading →

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Guess Where There Is a Restaurant Boom?

"New residents flock to Midland in search of jobs in the area’s booming economy. In the past year, almost 20 new restaurants have opened or are planned to open in Midland and Odessa, with several national restaurant chains even venturing to call West Texas home. [..] About a year ago, talk began circulating in this West Texas town about a huge oil-producing formation called the Cline Shale, east of the traditional drilling areas around Midland. Then the oilmen and their rigs arrived. Now homes and hotels are sprouting, 'help wanted' signs have multiplied, and a major drilling company has cleared land to build an office and equipment yard." Continue reading →

Continue ReadingGuess Where There Is a Restaurant Boom?

Why Buffett Bailed on India

"Buffett isn’t alone in voting with his feet. Wal-Mart Stores Inc., ArcelorMittal (MT) SA and Posco are pulling back on investments in India that they had announced with great fanfare. What’s scaring foreigners away? A rampant political dysfunction that has stopped India’s progress cold. Headwinds from New Delhi are contributing to the slowest growth rates in a decade, a record current-account deficit and a 7.9 percent plunge in the rupee this year. Fiscal neglect has bond traders demanding higher yields for government debt than India wants to pay. Foreign-direct investment slid about 21 percent last fiscal year, and this one doesn’t look promising." Continue reading →

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Ageing population pushes welfare bill to crisis point

"In a report released tonight, the Organisation for Economic Cooperation and Development said that the proportion of GDP spent on jobseekers’ allowance, pensions and other 'public social spending' stood at 23.8 per cent — the same as it was in 2010. The Paris-based think tank warned that unless action was taken to cut the cost to the state of Britain’s rapidly rising elderly population, the health and pensions systems could collapse. Ddespite broadly positive signs, economic activity is still well below the level enjoyed before the financial crisis and Britain faces years of austerity and uncertainty." Continue reading →

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Which State Is Headed in the Wrong Direction at the Fastest Rate?

"I was very interested in the data showing that most European nations actually increased the size of government in recent years – notwithstanding all the hyperbole about 'savage' and 'draconian' austerity. That’s why the 'exceptions to the rule' in Europe – such as Estonia and Germany – are so noteworthy. While their neighbors are doing the wrong thing, these countries are being at least semi-responsible and trying to rein in the burden of government spending. The same thing is true for state governments, which is why this new map from the Tax Foundation is worth sharing. It shows how fast spending has increased in each state over the past 10 years." Continue reading →

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Bankruptcy Litigation Does Not Generate New Wealth

"The only viable long-term strategy for claimants is to focus on doing whatever it takes to help the city/county start generating new wealth. But this is far more difficult than hoping to win some court ruling, and it also requires sacrificing the dearly held belief that fantasy entitlements should be made real by somebody, somewhere. Which brings us to the ultimate make-us-whole fantasy, the Federal bailout of every bankrupt city, county and state in the nation. Every constituency is of course first in line in terms of being deserving of 'what's owed to me.' Unfortunately for those counting on the Grand Federal Bailout, the queue at the Federal bailout window is already long." Continue reading →

Continue ReadingBankruptcy Litigation Does Not Generate New Wealth