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Friday, January 29, 2010

The recession is over!

The Commerce Department reported that the economy grew at an incredible 5.7%. That is wonderful and welcome news. But it means little as long as the unemployment rate remains in double digits. How long it will take to see that decline is an open question. Don't get too jumpy....that may take a while.

Read Krauthammer and you know what to think.

Samuelson's take on China

Tuesday, January 26, 2010

This is the biggest danger!

I have indicated many times that although the unprecedented increase in the monetary base and excess reserves of the banking system are troubling, they are minor issues compared to compromising the independence of the Federal Reserve. If the Fed does indeed become politicized, then I am in the "inflation is going to happen" camp and we will have that 70s show all over again. Monetary policy run like thanks.

Wednesday, January 20, 2010

Free Advice for Democrats....Winning and Losing: Lessons from Horse Race Gambling

Hey: Look out the window. The sun came up right? You need to understand something. Any gambler knows the thrill of victory. That is what you live for. But if gambling is to be a long-term proposition, then you have to know how to lose too. The thrill of winning does not come without also knowing how to lose. It is part of the equation. If this is a foreign or unknown concept to you then you have not lived life. Phillpe Massa drives for the Ferrari Formula One team. He just lost the world driving championship to Lewis Hamilton by one point in 2008 on the last corner of the last lap of the last race of the year. At the press conference after the race which he won he said "I'm a racer. I know how to win and I know how to lose." Thank you Mr. Massa.

I suggest the Democratic party should follow this advice and get to figuring what the people of Massachusetts are trying to say to them.

US vs. Europe: some answers.

Tuesday, January 19, 2010

One Hour Before Sunrise...Pitch Dark...No pictures...but listen...I had 1500 ducks 150 yards away from me yesterday.

Ten minutes before legal shooting time they all started to fly off. It was an awesome sight.

It's all in how you figure it....

*Clunker Math*

Think of it this way: A clunker that travels 12,000 miles a year at 15 mpg uses 800 gallons of gas a year. A vehicle that travels 12,000 miles a year at 25 mpg uses 480 gallons a year.

So, the average Cash for Clunkers transaction will reduce US gasoline consumption by 320 gallons per year. They claim 700,000 vehicles so that's 224 million gallons saved per year. That equates to a bit over 5 million barrels of oil. 5 million barrels is about 5 hours worth of US consumption. More importantly, 5 million barrels of oil at $70 per barrel costs about $350 million dollars So, the government paid $3 billion of our tax dollars to save $350 million. We spent $8.57 for every dollar saved. I'm pretty sure they will do a great job with health care, though.

Tuesday, January 12, 2010

Henninger gets it right.

Henninger gets it right.

Your government in action.

Part of rebuilding New Orleans caused residents often to be challenged
with the task of tracing home titles back potentially hundreds of
years. With a community rich with history stretching back over two
centuries, houses have been passed along through generations of family,
sometimes making it quite difficult to establish ownership. Here's a
great letter an attorney wrote to the FHA on behalf of Jack his client:

A New Orleans lawyer sought an FHA loan for Jack. He was told the loan
would be granted if he could prove satisfactory title to a parcel of
property being offered as collateral. The title to the property dated
back to 1803, which took the lawyer three months to track down. After
sending the information to the FHA, he received the following reply:

(Actual letter):

"Upon review of your letter adjoining your client's loan application,
we note that the request is supported by an Abstract of Title. While we
compliment the able manner in which you have prepared and presented the
application, we must point out that you have only cleared title to the
proposed collateral property back to 1803. Before final approval can be
accorded, it will be necessary to clear the title back to its origin."

Annoyed, the lawyer responded as follows:

(here's the actual letter):

"Your letter regarding title in Case No. 189156 has been received. I
note that you wish to have title extended further than the 194 years
covered by the present application. I was unaware that any educated
person in this country, particularly those working in the property
area, would not know that Louisiana was purchased, by the U.S. from
France in 1803, the year of origin identified in our application. For
the edification of uninformed FHA bureaucrats, the title to the land
prior to U.S. ownership was obtained from France, which had acquired it
by Right of Conquest from Spain. The land came into the possession of
Spain by Right of Discovery made in the year 1492 by a sea captain
named Christopher Columbus, who had been granted the privilege of
seeking a new route to India by the Spanish monarch, Isabella. The good
queen, Isabella, being a pious woman and almost as careful about titles
as the FHA, took the precaution of securing the blessing of the Pope
before she sold her jewels to finance Columbus' expedition. Now the
Pope, as I'm sure you may know, is the emissary of Jesus Christ, the
Son of God, and God, it is commonly accepted, created this world.
Therefore, I believe it is safe to presume that God also made that part
of the world called Louisiana. God, therefore, would be the owner of
origin and His origins date back, to before the beginning of time, the
world as we know it AND the FHA. I hope you find God's original claim
to be satisfactory. Now, may we have our damn loan?"

Jack's loan was approved

Monday, January 11, 2010

Shut up Harry.

For what it is worth, one of the most important and useful tools I use in guiding my actions comes from the movie Cool Hand Luke. Struther Martin, who plays the Captain, goes over Luke's (Paul Newman) crime of cutting the heads off parking meters. He asks Luke "what did you think that was going to get you?" Luke answers "I guess you could say I wasn't thinking Captain." So let me ask the majority leader in saying what he said about the president, what did you think that was going to get you?

Saturday, January 9, 2010

Dogs make life worth living.

My Dog "Mikka" after two days of intense wild pheasant hunting.

Friday, January 8, 2010

You are living history...

I still don't believe we are headed for a major economic train wreck like the 1930s. A big downturn is very possible, but I am not willing to say the "D" word. Instead let me suggest we are going to be like 1933 and 1965. We are looking at major, major changes in the percentage of our GDP that the government consumes. I view what will happen in the next few short years as a race to the French model of macroeconomic structure. The starter's pistol goes off when Democrats have super majorities in both houses of Congress. That is where I see us headed. If that appeals to you, start licking your chops, dinner is almost ready. If that is not something you want, you may want to freshen up a bit, because man you have a wall of pain coming your way. Let me remind any and all that it took 50 years and Ronald Reagan to break the grip the Great Depression had on our economic policy and macroeconomic functioning.

Welcome home LBJ. The following is from the lead editorial in the Wall Street Journal today. Surprise surprise, the editors of the WSJ are more articulate than me. But it is exactly what I have been thinking lately.

From the WSJ:

If the current polls hold, Barack Obama will win the White House on November 4 and Democrats will consolidate their Congressional majorities, probably with a filibuster-proof Senate or very close to it. Without the ability to filibuster, the Senate would become like the House, able to pass whatever the majority wants.

Though we doubt most Americans realize it, this would be one of the most profound political and ideological shifts in U.S. history. Liberals would dominate the entire government in a way they haven't since 1965, or 1933. In other words, the election would mark the restoration of the activist government that fell out of public favor in the 1970s. If the U.S. really is entering a period of unchecked left-wing ascendancy, Americans at least ought to understand what they will be getting, especially with the media cheering it all on.
The nearby table shows the major bills that passed the House this year or last before being stopped by the Senate minority. Keep in mind that the most important power of the filibuster is to shape legislation, not merely to block it. The threat of 41 committed Senators can cause the House to modify its desires even before legislation comes to a vote. Without that restraining power, all of the following have very good chances of becoming law in 2009 or 2010.

- Medicare for all. When HillaryCare cratered in 1994, the Democrats concluded they had overreached, so they carved up the old agenda into smaller incremental steps, such as Schip for children. A strongly Democratic Congress is now likely to lay the final flagstones on the path to government-run health insurance from cradle to grave.
Mr. Obama wants to build a public insurance program, modeled after Medicare and open to everyone of any income. According to the Lewin Group, the gold standard of health policy analysis, the Obama plan would shift between 32 million and 52 million from private coverage to the huge new entitlement. Like Medicare or the Canadian system, this would never be repealed.
The commitments would start slow, so as not to cause immediate alarm. But as U.S. health-care spending flowed into the default government options, taxes would have to rise or services would be rationed, or both. Single payer is the inevitable next step, as Mr. Obama has already said is his ultimate ideal.
- The business climate. "We have some harsh decisions to make," Speaker Nancy Pelosi warned recently, speaking about retribution for the financial panic. Look for a replay of the Pecora hearings of the 1930s, with Henry Waxman, John Conyers and Ed Markey sponsoring ritual hangings to further their agenda to control more of the private economy. The financial industry will get an overhaul in any case, but telecom, biotech and drug makers, among many others, can expect to be investigated and face new, more onerous rules. See the "Issues and Legislation" tab on Mr. Waxman's Web site for a not-so-brief target list.
The danger is that Democrats could cause the economic downturn to last longer than it otherwise will by enacting regulatory overkill like Sarbanes-Oxley. Something more punitive is likely as well, for instance a windfall profits tax on oil, and maybe other industries.
- Union supremacy. One program certain to be given right of way is "card check." Unions have been in decline for decades, now claiming only 7.4% of the private-sector work force, so Big Labor wants to trash the secret-ballot elections that have been in place since the 1930s. The "Employee Free Choice Act" would convert workplaces into union shops merely by gathering signatures from a majority of employees, which means organizers could strongarm those who opposed such a petition.
The bill also imposes a compulsory arbitration regime that results in an automatic two-year union "contract" after 130 days of failed negotiation. The point is to force businesses to recognize a union whether the workers support it or not. This would be the biggest pro-union shift in the balance of labor-management power since the Wagner Act of 1935.
- Taxes. Taxes will rise substantially, the only question being how high. Mr. Obama would raise the top income, dividend and capital-gains rates for "the rich," substantially increasing the cost of new investment in the U.S. More radically, he wants to lift or eliminate the cap on income subject to payroll taxes that fund Medicare and Social Security. This would convert what was meant to be a pension insurance program into an overt income redistribution program. It would also impose a probably unrepealable increase in marginal tax rates, and a permanent shift upward in the federal tax share of GDP.
- The green revolution. A tax-and-regulation scheme in the name of climate change is a top left-wing priority. Cap and trade would hand Congress trillions of dollars in new spending from the auction of carbon credits, which it would use to pick winners and losers in the energy business and across the economy. Huge chunks of GDP and millions of jobs would be at the mercy of Congress and a vast new global-warming bureaucracy. Without the GOP votes to help stage a filibuster, Senators from carbon-intensive states would have less ability to temper coastal liberals who answer to the green elites.
- Free speech and voting rights. A liberal supermajority would move quickly to impose procedural advantages that could cement Democratic rule for years to come. One early effort would be national, election-day voter registration. This is a long-time goal of Acorn and others on the "community organizer" left and would make it far easier to stack the voter rolls. The District of Columbia would also get votes in Congress -- Democratic, naturally.
Felons may also get the right to vote nationwide, while the Fairness Doctrine is likely to be reimposed either by Congress or the Obama FCC. A major goal of the supermajority left would be to shut down talk radio and other voices of political opposition.
- Special-interest potpourri. Look for the watering down of No Child Left Behind testing standards, as a favor to the National Education Association. The tort bar's ship would also come in, including limits on arbitration to settle disputes and watering down the 1995 law limiting strike suits. New causes of legal action would be sprinkled throughout most legislation. The anti-antiterror lobby would be rewarded with the end of Guantanamo and military commissions, which probably means trying terrorists in civilian courts. Google and would get "net neutrality" rules, subjecting the Internet to intrusive regulation for the first time.

It's always possible that events -- such as a recession -- would temper some of these ambitions. Republicans also feared the worst in 1993 when Democrats ran the entire government, but it didn't turn out that way. On the other hand, Bob Dole then had 43 GOP Senators to support a filibuster, and the entire Democratic Party has since moved sharply to the left. Mr. Obama's agenda is far more liberal than Bill Clinton's was in 1992, and the Southern Democrats who killed Al Gore's BTU tax and modified liberal ambitions are long gone.
In both 1933 and 1965, liberal majorities imposed vast expansions of government that have never been repealed, and the current financial panic may give today's left another pretext to return to those heydays of welfare-state liberalism. Americans voting for "change" should know they may get far more than they ever imagined.

Tuesday, January 5, 2010

The New New Deal.

We have hardly spent the money from the first stimulus bill and Krugman already wants another one. What the hell, why just one more? We'll speak more of this over time, but here's why:

Monday, January 4, 2010

Greatest Movie Line Ever!

Please take this for the humor in which it is intended.

Sunday, January 3, 2010

Lessons from the Great Depression 101: 2009 Redux

Thanks to Greg Mankiw's Blog...Click on this picture to the left. You will know what it means instantly.
Here... listen to this funked up smokey jazz number to cheer you up

Saturday, January 2, 2010

The Great Depression: Part II

An undergrad from another University recently called me and asked if he could speak to me about the Great Depression. He was writing his thesis on the Depression and one component of his research was to include conversations with individual scholars in his field of inquiry. I think it is great that the kid had the guts to grab the phone and ring me up, so I gladly helped him out. It reminds me of how people asked me after my first book "How in the world did you get to meet Milton Friedman?" I said "it's easy, I picked up the phone and dialed his number." Thanks Dad.
Anyway, he asked me to provide a list of advantages that have resulted from the Depression. So I will share them with you. Consider this the Randy Parker Top 10 List of good things from the Depression:
#10 It showed bad economic policies give us bad economic outcomes (National Industrial Recovery Act anyone?).
#9 We abandoned Say's Law and the real bills doctrine for good.
#8 We provided a social safety net for those less fortunate (even though it currently is out of hand and unaffordable...stay tuned for the next 50 years and watch what happens to entitlements).
#7 We were divorced from the silly notion of having to balance the federal budget annually.
#6 We put the gold standard in the history books for good (Donald Luskin where are you?).
#5 After leaving gold we had independent economic policies and traded external balance for internal balance as we should.
#4 The FDIC obviated banks' chronic problems with the liabilities side of their balance sheets (don't worry, now they have all manners of trouble with the assets side).
#3 The Depression showed that general deflation is a macroeconomic death sentence (attention Ben Bernanke!).
#2 The Depression gave us an aggressive Federal Reserve that is not going to let the financial markets implode.
#1 The Great Depression ended Prohibition! I'll drink to that!