Thursday, October 21, 2010

Thursday items.

Housekeeping note: I've added Alan Reynold's 1984 piece, "Managed Money" to the Classic Articles section.

The WSJ reports that following this week’s strong dollar comments, Treasury’s Tim Geithner advocates a global exchange-rate agreement.

At NRO, Larry Kudlow wonders if Sec. Geithner is serious about wanting a stronger dollar.

On The Kudlow Report, David Goldman discusses Geithner’s remaks:

At Seeking Alpha, John M. Mason comments on Robert Mundell’s recent WSJ interview.

On Catholic Culture, Dr. Jeff Mirus summarizes Goldman and Reuven Brenner’s recent article on Keynesian economics.

Keynes’ idea is simple. In fact, it is simple by construction, for it focuses on the very short term within a closed economy. If consumers won’t spend, the government will spend for them; if businesses won’t invest, the government will invest for them; and if investors won’t take risks, the central bank will reduce the yield on low-risk investments to almost nothing. The risk-taking of entrepreneurs, the cleverness of inventors, the skills and motivation of the workforce, the competitiveness of industries—all the granular reality of a dynamic society, chugging along through trial and error—vanish into Keynesian aggregates like gross domestic product, price indices, productivity, and so forth. Behind all the technical language stands the assumption that bureaucracies, with no business experience whatsoever, can somehow make wise decisions about allocating capital—and do so quickly. These gross simplifications take on the aura of academic theurgy when packaged into seemingly complex mathematical models that occult their ridiculous assumptions.
The Telegraph (UK), Terry Smith argues against raising British tax rates.

At Forbes, Rich Karlgaard suggests the key to restoring economic growth is more small companies reaching the billion-dollar mark.

In Investor’s Business Daily, David Beckworth and William Ruger critique Fed policy from a monetarist perspective.

On Kudlow, Don Luskin says the Fed not the Treasury determines the dollar’s value:

Cato’s Dan Mitchell wonders why distrust of government seems to be a partisan issue.


  1. Cato’s Dan Mitchell wonders why distrust of government seems to be a partisan issue.

    The obvious answer is that only about 21% of both Democrats and Republicans distrust the government, according to the graph. The rest is partisan politics. This is a minority of 21% of Americans overall and should put to rest the idea of the government not being trusted. Clearly, Democrats trust Democrat governments and Republicans trust Republican governments in a comfortable majority. Excellent study!

  2. There are a number things the public "knows" as we head into the election that are just false. If people elect leaders based on false information, the things those leaders do in office will not be what the public expects or needs.

    Here are eight of the biggest myths that are out there:

    1) President Obama tripled the deficit.

    Reality: Bush's last budget had a $1.416 trillion deficit. Obama's first reduced that to $1.29 trillion.

    2) President Obama raised taxes, which hurt the economy.

    Reality: Obama cut taxes. 40% of the "stimulus" was wasted on tax cuts which only create debt, which is why it was so much less effective than it could have been.

    3) President Obama bailed out the banks.

    Reality: While many people conflate the "stimulus" with the bank bailouts, the bank bailouts were requested by President Bush and his Treasury Secretary, former Goldman Sachs CEO Henry Paulson. (Paulson also wanted the bailouts to be "non-reviewable by any court or any agency.") The bailouts passed and began before the 2008 election of President Obama.

    4) The stimulus didn't work.

    Reality: The stimulus worked, but was not enough. In fact, according to the Congressional Budget Office, the stimulus raised employment by between 1.4 million and 3.3 million jobs.

    5) Businesses will hire if they get tax cuts.

    Reality: A business hires the right number of employees to meet demand. Having extra cash does not cause a business to hire, but a business that has a demand for what it does will find the money to hire. Businesses want customers, not tax cuts.

    6) Health care reform costs $1 trillion.

    Reality: The health care reform reduces government deficits by $138 billion.

    7) Social Security is a Ponzi scheme, is "going broke," people live longer, fewer workers per retiree, etc.

    Reality: Social Security has run a surplus since it began, has a trust fund in the trillions, is completely sound for at least 25 more years and cannot legally borrow so cannot contribute to the deficit (compare that to the military budget!) Life expectancy is only longer because fewer babies die; people who reach 65 live about the same number of years as they used to.

    8) Government spending takes money out of the economy.

    Reality: Government is We, the People and the money it spends is on We, the People. Many people do not know that it is government that builds the roads, airports, ports, courts, schools and other things that are the soil in which business thrives. Many people think that all government spending is on "welfare" and "foreign aid" when that is only a small part of the government's budget.

    This stuff really matters.

    If the public votes in a new Congress because a majority of voters think this one tripled the deficit, and as a result the new people follow the policies that actually tripled the deficit, the country could go broke.

    If the public votes in a new Congress that rejects the idea of helping to create demand in the economy because they think it didn't work, then the new Congress could do things that cause a depression.

    If the public votes in a new Congress because they think the health care reform will increase the deficit when it is actually projected to reduce the deficit, then the new Congress could repeal health care reform and thereby make the deficit worse. And on it goes.