Wednesday, September 1, 2010

9/1/10 Post


News
Dow Logs Worst August in 9 Years
Stocks limped to their worst August since 2001, battered by a wave of discouraging data that cast doubt on the faltering economic recovery.
Obama to loosen export control policies; could benefit defense companies
In a bid to tighten national security, U.S. President Barack Obama announced a restructuring of export control policies that would prune one-third of the items in the current control list.
Banks post strong quarter, but woes persist
Aggregate earnings grow, as does 'problem' list.
Fed Divided on Move to Buy U.S. Debt
The minutes, released Tuesday, revealed that Fed officials were divided on how effective the purchase of long-term Treasuries would be, and on whether it would complicate an eventual return to normal monetary policy.
Pakistani says floods slow growth, raise inflation
Pakistan's economic growth will plunge 2 percentage points because of the floods and lead to "massive" job losses, the prime minister warned Wednesday in a speech that predicted a grim couple of years for the already fragile country.
California Cities: D Is for Disincorporate
City officials in Half Moon Bay say the municipal budget is such a mess that it may make sense to disincorporate and turn the place over to San Mateo County.
Obama, GOP debate small-business tax
Both sides claim to be championing jobs growth.
Home Prices Rise; Outlook Dims
Potential Buyers Hesitate; 'Bunch of People Who Are Sitting, Waiting in the Wings.'
Taxing the Rich: White House in Favor of Increases
White House economics aide Jason Furman reaffirmed the White House stand in favor of extending Bush era tax cuts to all but the wealthiest Americans.
Guess who wants a carbon tax?
If Republican leaders were serious about using the Gulf oil spill as an opportunity to put the nation on a sane energy course, they'd pull out a little-noticed bill sponsored by Arizona's Jeff Flake and South Carolina's Bob Inglis and plop it atop their 2010 campaign book.
Are Americans de-banking?
The financial crisis that destroyed some of the world's biggest banks and sent others to the brink of failure have changed Americans' idea of lending and borrowing.
Fed minutes show debate on economic outlook
The Federal Reserve is the last line of defense against a weakening economy, but there has been sharp disagreement among members over what action the central bank should take.
China manufacturing could help avoid 'hard landing'
China's manufacturing sector rebounded in August, calming some fears about the pace of that country's growth.
Jobs: 'Stopped firing, not yet hiring'
The jobs picture still looks sour, but there could be light at the end of the tunnel.
Retail data: Americans spent a bit more this August than last, but back-to-school numbers weak
The good news is for consumers: Those who hoped for prices to fall and held off spending may be in luck if stores deepen discounts further to get rid of fall merchandise.

Blogs
The Press Isn’t Talking Us Into a Recession
Whatever the cause of the upward turn in the indicator’s tone, the result is the same: the U.S. press isn’t talking down the economy.
Broken Banks, Durable Delusions
This year 118 banks already failed and were taken over by the FDIC. At this rate, more banks will fail in 2010 than in 2009.
Secondary Sources: Saving Surprise, Leading Indicators, Tax Cuts
A roundup of economic news from around the Web.
Time to Make Hard Choices on the Budget
[Democrats] seem to plan on "paying" for seventeen different programs with the same pot of money. For example, it now appears to be administration policy to claim that health care reform has extended the solvency of Medicare, and has also reduced the budget deficit, which the CBO has said isn't true.
A simple parable of price stickiness and international externalities
Overall, the results may depend on whether wage rigidity is real or nominal in each currency, the degree of capital mobility, the currency of invoicing in which sticky prices are set, and how much market participants look forward and consider stocks in addition to flows... There are many permutations, to the point where they are perhaps no longer very useful.
Whack-a-Mole
As Robert Higgs notes, "Real civilian consumption and private investment both fell after 1941, and they did not recover fully until 1946. The privately owned capital stock actually shrank during the war."
MBA: Purchase Application activity suggests low level of existing home sales in August and September
"Refinance Index increased 2.8 percent from the previous week and is at its highest level since May 1, 2009."
The Best and the Brightest
Academic explorations of health care policy often suffer from several handicaps, handicaps that are exacerbated by ideological conformity.
How to fix unemployment
Monetary or fiscal stimulus just needs to give the economy a good kick in the pants to prop up demand and get firms to start hiring again. This can be expensive, especially if some of that new momentum finds itself overseas, but may be worth the cost if it can get people back to work.
The Obama Doctrine
There was nothing particularly noteworthy about President Barack Obama’s Oval Office address on Iraq last night. Again he evinced the impression that he viewed Iraq as a distraction. As forgettable as the address was however, once placed into the broader context of foreign policy speeches and actions, a clear Obama Doctrine can now be defined.
What Are America’s Interests?
It is not clear what the President meant when he said, “Ending the war was in our interest.”
Missed Opportunities in the Oval Office
Unfortunately, President Obama missed a valuable opportunity tonight to demonstrate that he is fully committed to success in Afghanistan. Instead he stubbornly reiterated his July 2011 withdrawal date.
The Sky (Still) Isn’t Falling
Deficit-spending U.S. politicians are more than happy to borrow money from China and elsewhere. It’s our own politicians and their reckless spending that Americans need to get tough with.
More Evidence against the VAT
Proponents argue that a new tax on consumption would raise the needed revenues to close the deficit gap. However, rather than putting Washington’s fiscal house back in order, a VAT is more likely to grow the size of government and encourage growth in spending.
The Justice Department Strikes Arizona Again
Eric Holder’s Justice Department really seems to believe that its primary responsibility is to help aliens who violate federal law as opposed to tax-paying citizens of the United States.
The "Us" Vs. "Them" Depression
Will acceptance of the financial malaise create a window of opportunity?
Auto Sales Fuel Consumer Spending
Competitive discounts, rebates, and financing rates helped manufacturers sell cars at an annual rate of 11.6 million in July, compared with 11.2 million in June.
The Misinterpretation of Economic Data
Many have been hailing recent housing data, but these small victories are still far from a comeback.
Why Saving Is Right and Economists Are Wrong
Consumer spending is not the way to recovery, and to understand why, we must ask ourselves why we continue to have boom and bust cycles.

Research, Reports & Studies
The Mont Pelerin Society and the Rebirth of Smithian Economics
Spontaneous-order economic theories, as developed by Smith, Menger, and Hayek, imply that mutually beneficial trades in decentralized markets, and the institutional patterns that grow from them, help to satisfy people’s aims. It promotes the wealth of nations.
Keys to Sustainable Recovery
With economic growth lower than expected, policymakers should undertake measures with a higher probability of stimulating the economy.
Should the Government Expand Telework?
Telework faces a variety of barriers, from a reluctant institutional culture to unfavorable tax laws. The government should take simple steps to lower or eliminate these barriers, saving taxpayers’ money and paving the way for a more nimble workforce.
Defining the Obama Doctrine, Its Pitfalls, and How to Avoid Them
Examining President Obama’s doctrinal statements and actions more closely demonstrates why reasserting American leadership on behalf of liberty would be the wiser course.
Reforming Indigent Defense: How Free Market Principles Can Help to Fix a Broken System
The inadequacy of existing methods or serving the indigent is widely acknowledged, and President Obama has recently taken steps to give the problem a higher priority on the national agenda,
Statistics of Income Studies of International Income and Taxes
The Statistics of Income Division of the IRS conducts 15 studies of international income and taxes. These studies provide data on the foreign activity of U.S. persons, as well as the U.S. activity of foreign persons.

Economists’ Comments & Opinions
Obama's wandering economic message
...Obama's tax increase on the rich would be used to reduce the deficit, resulting in a net contraction of economic activity. Tax increases to pay for past spending do not stimulate the economy.
America's entrepreneurial flame is fading
With each step toward socialism in our economic policy, America's defining entrepreneurial flame fades a bit more in our culture.
Entrepreneurs Know What Obama Doesn't
Entrepreneurship is neither created nor nurtured by government, nor reserved to the privileged; it springs from individuals and can be found even in the poorest communities in countries worldwide.
Dear Patients: Vote to Repeal ObamaCare
Don't believe Democrats who promise to fix the bill once they're re-elected.
The fatal flaw of Keynesian stimulus
Last week, the Congressional Budget Office released a report claiming that the $814 billion "stimulus" has added 3.4 million net jobs. This surely comes as a surprise to the 3.5 million Americans who have lost their jobs and remained unemployed since the stimulus was enacted in February 2009.
Beware Those Who Think the Worst Is Past
We have analysed data on numerous severe economic dislocations over the past three-quarters of a century. The result is a bracing warning that the future is likely to bring only hard choices.
Hands off Social Security
The White House deficit commission is reportedly considering deep benefit cuts for Social Security, including a steep rise in the retirement age. We cannot let that happen.

Graph of the Day
Problem Bank List Climbs to 829
See: Currency Trading Soars

Book Excerpts
"Mises's concept of human action embodies an insight about man that is entirely lacking in a world of Robbinsian economizers. This insight recognizes that men are not only calculating agents but are also alert to opportunities. Robbinsian theory only applies after a person is confronted with opportunities; for it does not explain how that person learns about opportunities in the first place. Misesian theory of human action conceives of the individual as having his eyes and ears open to opportunities that are "just around the corner." He is alert, waiting, continually receptive to something that may turn up. And when the prevailing price does not clear the market, market participants realize they should revise their estimates of prices bid or asked in order to avoid repeated disappointment. This alertness is the entrepreneurial element in human action, a concept lacking in analysis carried out in exclusively Robbinsian terms. At the same time that it transforms allocative decision making into a realistic view of human action, entrepreneurship converts the theory of market equilibrium into a theory of market process. " –Israel M. Kirzner, The Foundations of Modern Austrian Economics: Part 3, Essay 1, "Equilibrium versus Market Process" (1976)

Did You Know
Michigan ends summer without state fair for 1st time in 160 years. The Michigan State Fair had been a state tradition for 160 years and held at Eight Mile and Woodward, within Detroit city limits, since 1905. But the fair had been running deficits and needed $360,000 from the state in 2008 to cover losses. Fewer than 220,000 people passed through last year. At its peak in 1966, the fair drew 1 million.