Let's think about people to whom $25 would make - is making - a difference. Rory Sutherland's column in The Spectator this week is about Kiva, a project that lends small sums to individuals and groups around the world, mostly to set up or develop little businesses.
They repay from their increased production, you get to re-lend to more people. Really, it's a way that the poor but proud can help each other, using your finance to grease the wheels.
Having read Sutherland, I've just joined, and I really feel good about it. Why don't you?
Saturday, November 08, 2008
Coming your way
Marc Faber: There are two possibilities. Banks go under and the stakeholders are left with nothing, as is the case with Lehman Brothers, or governments pump money into the financial system so that the incompetent financial clowns in Bahnhofstrasse [Zurich's financial centre] and Wall Street can continue to eat in fancy restaurants.
I am clearly in favour of the first because the consequences of these state interventions are massive budget deficits. To finance these, governments have to acquire money. For that they have to borrow money, which makes state debt and interest payments soar. US economists have come to the conclusion from the trends that there will be a US state bankruptcy.
Swissinfo: Do you share that view?
M.F.: One hundred per cent.
(Source)
I am clearly in favour of the first because the consequences of these state interventions are massive budget deficits. To finance these, governments have to acquire money. For that they have to borrow money, which makes state debt and interest payments soar. US economists have come to the conclusion from the trends that there will be a US state bankruptcy.
Swissinfo: Do you share that view?
M.F.: One hundred per cent.
(Source)
Friday, November 07, 2008
A glimpse from the rich man's coach
Here is a letter to the NYT from the insouciant Don Boudreaux. Unfortunately the comments to this piece on Cafe Hayek are closed - I wonder why? So I'll have to note here that it stirred a memory...
‘Now, you know,’ said Mr. Bounderby, taking some sherry, ‘we have never had any difficulty with you, and you have never been one of the unreasonable ones. You don’t expect to be set up in a coach and six, and to be fed on turtle soup and venison, with a gold spoon, as a good many of ’em do!’
Hard Times, by Charles Dickens
And another, from Shaw's Pygmalion:
I ask you, what am I? I'm one of the undeserving poor: that's what I am. Think of what that means to a man. It means that he's up agen middle class morality all the time. If there's anything going, and I put in for a bit of it, it's always the same story: 'You're undeserving; so you can't have it.' But my needs is as great as the most deserving widow's that ever got money out of six different charities in one week for the death of the same husband. I don't need less than a deserving man: I need more. I don't eat less hearty than him; and I drink a lot more. I want a bit of amusement, cause I'm a thinking man. I want cheerfulness and a song and a band when I feel low. Well, they charge me just the same for everything as they charge the deserving. What is middle class morality? Just an excuse for never giving me anything.
The American Declaration of Independence states "all men are created equal", and of course it was obvious even then that they are not so, whether by birth, upbringing, education or natural talent. Not, in those senses; but the bold defiance of Nature and Society represented by the libertarian revolution of America, and of revolutionary France, is that they have, they should be given, equal dignity, as of right.
And unless a tenured economics professor who boasts of not voting, in a colony that rebelled on the principle of "no taxation without representation", wishes to see the poor squashed while the rich loot the country without fear of retribution, he will need to develop his thesis somewhat.
I do not see how a country can be composed exclusively of the well-off, nor can I imagine how, given all their disadvantages, the poor may rise up as one and join the middle class. There will always be inequality, so our debate should be about setting a minimum standard for the poorest, while motivating them to better themselves if they possibly can. That's certainly a circle that will take some squaring, and a benefit-trap-riddled Britain can scarcely present itself as a model answer.
But I don't see how air conditioning and two cars (what? all poor families?) quite make up for the miseries of ill-health, disability and a shorter lifespan. And it's not entirely down to consciously-made bad choices, in quite the way Mr Boudreaux implies. The ideal-world notion of rational choice has to take into acount real-world limited intelligence, inadequate information, poorer education and in many cases disharmonious emotional constitutions produced by poor parenting, lousy neighbours, failing schools and fear of crime and destitution.
Dives should not look down upon Lazarus.
‘Now, you know,’ said Mr. Bounderby, taking some sherry, ‘we have never had any difficulty with you, and you have never been one of the unreasonable ones. You don’t expect to be set up in a coach and six, and to be fed on turtle soup and venison, with a gold spoon, as a good many of ’em do!’
Hard Times, by Charles Dickens
And another, from Shaw's Pygmalion:
I ask you, what am I? I'm one of the undeserving poor: that's what I am. Think of what that means to a man. It means that he's up agen middle class morality all the time. If there's anything going, and I put in for a bit of it, it's always the same story: 'You're undeserving; so you can't have it.' But my needs is as great as the most deserving widow's that ever got money out of six different charities in one week for the death of the same husband. I don't need less than a deserving man: I need more. I don't eat less hearty than him; and I drink a lot more. I want a bit of amusement, cause I'm a thinking man. I want cheerfulness and a song and a band when I feel low. Well, they charge me just the same for everything as they charge the deserving. What is middle class morality? Just an excuse for never giving me anything.
The American Declaration of Independence states "all men are created equal", and of course it was obvious even then that they are not so, whether by birth, upbringing, education or natural talent. Not, in those senses; but the bold defiance of Nature and Society represented by the libertarian revolution of America, and of revolutionary France, is that they have, they should be given, equal dignity, as of right.
And unless a tenured economics professor who boasts of not voting, in a colony that rebelled on the principle of "no taxation without representation", wishes to see the poor squashed while the rich loot the country without fear of retribution, he will need to develop his thesis somewhat.
I do not see how a country can be composed exclusively of the well-off, nor can I imagine how, given all their disadvantages, the poor may rise up as one and join the middle class. There will always be inequality, so our debate should be about setting a minimum standard for the poorest, while motivating them to better themselves if they possibly can. That's certainly a circle that will take some squaring, and a benefit-trap-riddled Britain can scarcely present itself as a model answer.
But I don't see how air conditioning and two cars (what? all poor families?) quite make up for the miseries of ill-health, disability and a shorter lifespan. And it's not entirely down to consciously-made bad choices, in quite the way Mr Boudreaux implies. The ideal-world notion of rational choice has to take into acount real-world limited intelligence, inadequate information, poorer education and in many cases disharmonious emotional constitutions produced by poor parenting, lousy neighbours, failing schools and fear of crime and destitution.
Dives should not look down upon Lazarus.
A fuss about banks
British banks are being criticised for not passing the 1.5% rate cut on to their customers, but retaining some or all of the difference. Presumably they are trying to rebuild their reserves, for running down which they have been much more justifiably criticised. Or do we wish them to remain insolvent, which, as Rick Santelli has admitted, they are?
As my wife said, what do we expect the banks to do: take in washing? Look after your pets in holiday time? Run daycare for the elderly in their conveniently-located, brightly-lit premises?
As my wife said, what do we expect the banks to do: take in washing? Look after your pets in holiday time? Run daycare for the elderly in their conveniently-located, brightly-lit premises?
Thursday, November 06, 2008
Inflation-adjusted Dow
( htp: The Mogambo Guru)As I said in my recent letter to the Spectator, "a return to 6,000 points should be unsurprising, and a low of 4,000 not impossible."
Wednesday, November 05, 2008
Just asking
A propos the (I would say) criminal systematic financial looting of past years:
1. Is there any limit in scope or number to the pardon/s of a retiring US President?
2. Can an incoming President challenge or reverse any such pardon?
P.S. If Thomas J. DiLorenzo is right, perhaps the pardons should be made retrospective right back to 1781, just to be on the safe side.
1. Is there any limit in scope or number to the pardon/s of a retiring US President?
2. Can an incoming President challenge or reverse any such pardon?
P.S. If Thomas J. DiLorenzo is right, perhaps the pardons should be made retrospective right back to 1781, just to be on the safe side.
Tuesday, November 04, 2008
Pro-am economics
But there are at least 15,000 professional economists in this country, and you’re saying only two or three of them foresaw the mortgage crisis?
Ten or 12 would be closer than two or three.
What does that say about the field of economics, which claims to be a science?
It’s an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.
James K. Galbraith, 31 October 2008 (htp: Jesse)
And I thought I ought to start reading academic textbooks on economics. It seems that the difference between an amateur and a professional is that the latter gets paid.
Ten or 12 would be closer than two or three.
What does that say about the field of economics, which claims to be a science?
It’s an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.
James K. Galbraith, 31 October 2008 (htp: Jesse)
And I thought I ought to start reading academic textbooks on economics. It seems that the difference between an amateur and a professional is that the latter gets paid.
Sunday, November 02, 2008
Dow 4,900 - sometime?
I'm still working on looking at the Dow in real (CPI-adjusted) terms. Meanwhile, note that in two previous cycles, the Dow dropped to a third of its former peak: from 15 to 5, from 30 to 10 (see red dots).If history repeats itself, then in real terms the Dow would again lose two-thirds of its value, from 66 to 22, which considering last autumn's peak would imply an ultimate low (if it happened all at once, tomorrow) of about 4,900 points.
But in the previous cases, the process took years to complete, and I would expect it to be a long affair this time, too. The Dow may not hit this 4,900 low in nominal terms.
Continuing this theme, may I draw your attention to the letter I emailed to The Spectator today?
Public service, public broadcasting, public nuisance
12 months' earnings in pounds sterling (official for the PM, reported for the others):
Yet another letter to the Spectator
Sir:
Your leader (“Riders On The Storm”, 1 November) suggests that current investor sentiment is “excessively negative”. That depends upon one’s historical perspective, in both directions.
A reversion to the mean (over the last generation) for UK house prices would be some 3.5 times household income, which on 2007 figures would imply average valuations around £120,000. Turning to shares, the progress of the Dow over the past 80 years (adjusted for consumer prices) indicates that a return to 6,000 points should be unsurprising, and a low of 4,000 not impossible.
But in addition to the business cycle and recurrent bubbles, there are deep linear changes at work. While maintaining the Western consumer in his fantasy of idle wealth, the East has been building up its human and physical industrial resources. We are focussing on the present recession, but not what the world will look like afterwards. When Asia has sufficiently developed its domestic demand, it will lose its enthusiasm for US Treasury debt, and the credit markets will tear at our economies with higher interest rates. Already, the search is well under way for an alternative to the US dollar as a world trading currency; and foreign investors, sovereign wealth funds and oil-rich governments are building up holdings in our bellwether businesses (e.g. Barclays Bank), thus converting imbalance into equity and exporting our future dividends.
Besides, the Dow and FTSE companies derive an increasing proportion of their income from abroad, so stock indices no longer reflect national prosperity. Real wages have stalled, and seem set to decline against a background of rising inflation and global competition; this, plus an interest rate correction, might strengthen the downward trend for house prices.
In short, successive governments have failed to repair our economic structure, and bear market rallies notwithstanding, I think we must eventually recalibrate our measures of normality.
Your leader (“Riders On The Storm”, 1 November) suggests that current investor sentiment is “excessively negative”. That depends upon one’s historical perspective, in both directions.
A reversion to the mean (over the last generation) for UK house prices would be some 3.5 times household income, which on 2007 figures would imply average valuations around £120,000. Turning to shares, the progress of the Dow over the past 80 years (adjusted for consumer prices) indicates that a return to 6,000 points should be unsurprising, and a low of 4,000 not impossible.
But in addition to the business cycle and recurrent bubbles, there are deep linear changes at work. While maintaining the Western consumer in his fantasy of idle wealth, the East has been building up its human and physical industrial resources. We are focussing on the present recession, but not what the world will look like afterwards. When Asia has sufficiently developed its domestic demand, it will lose its enthusiasm for US Treasury debt, and the credit markets will tear at our economies with higher interest rates. Already, the search is well under way for an alternative to the US dollar as a world trading currency; and foreign investors, sovereign wealth funds and oil-rich governments are building up holdings in our bellwether businesses (e.g. Barclays Bank), thus converting imbalance into equity and exporting our future dividends.
Besides, the Dow and FTSE companies derive an increasing proportion of their income from abroad, so stock indices no longer reflect national prosperity. Real wages have stalled, and seem set to decline against a background of rising inflation and global competition; this, plus an interest rate correction, might strengthen the downward trend for house prices.
In short, successive governments have failed to repair our economic structure, and bear market rallies notwithstanding, I think we must eventually recalibrate our measures of normality.
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