The liberal-progressive economic website Project Syndicate is running an op-ed from Simon Johnson, former chief economist of the IMF, providing evidence that libertarianism is in the arguing stage of Gandhi’s formulation that first they ignore you, then they laugh at you, then they argue with you, then you win. Dr. Johnson writes in The Libertarian and the Lobbyists that while Ron Paul has some good ideas, he doesn’t “get” that the real problem is lobbyists. He says that “Paul and others” believe government to be the source of all financial evil (emphasis added). But this is simply not so. Johnson states that lobbying is the real problem, and that libertarians don’t “get” that. But he’s wrong on that point. Libertarians understand that one way or another, very large businesses always get together with centralized powers to forward their interests. It doesn’t matter precisely what percent of that influence comes from lobbying per se; what percent comes from Big Finance sending people such as Robert Rubin, Hank Paulson, Jon Corzine and Gary Gensler to Washington (and Michael Bloomberg to be a three-term mayor of NYC); what percent comes from the certainty that if a government official watches out for Big Finance, then a cushy job within Big Finance will be there when asked; and what percent comes from the general mindset promoted by many in the mass media that what is good for Wall Street is good for America.
This is a guest post from Richard Telofski on the influence of US nonprofit organizations on Canadian environmental policy. I think you will find it informative and interesting.—JH
“It’s Not About Canadianism; It’s About Capitalism”
by Richard Telofski
Recently I wrote on my Web site “Canada Chooses Prosperity Over Radical Influence,” an article which discusses how the Canadian government will now give more attention to capitalistic criteria and less attention to radical and ideological environmentalist criteria as a foundation for the approval of future business projects.
Yes, I know. This is quite a refreshing and sudden change. To see governments say enough is enough with the environmentalist emotional bullying is quite a surprise, especially for those of us in the United States. But how did this flip suddenly come about? What was the catalyst that precipitated this shift?
The Fed didn’t change any policies today, but they have really bought into the “jaw, jaw, jaw” theory of monetary policy by extending the low interest rate (ZIRP) policy out to late 2014 from their former mid-2013 target. That is, they believe if the markets rely on the Fed’s word to keep interest rates low for an “extended period” any doubts about the Fed’s commitment to cheap money will go away and banks and businesses will plan their future without worrying about policy changes. So, in one sense, this is a slight policy change by communicating its long-term commitment to ZIRP.
In their press release they still express doubt about near-term recovery. The only real change in their statement is that they have noted that price inflation has moderated somewhat since the December report:
In Apple’s conference call yesterday, CEO Tim Cook disclosed that the company made a bet at the beginning of the quarter that the new iPhone 4s would be a big success and so it placed extra production orders – betting on the upside- and nonetheless found itself short of inventory as sales exceeded the company’s upside projections. The magnitude of this sales achievement can perhaps best be seen by looking at a report from Reuters today which has some gloomy language, as highlighted:
World No.1 mobile equipment maker Ericsson saw its profit halve in the fourth quarter as the global economic slowdown hit demand, and forecast network operators would remain cautious on spending in the months ahead.
With earnings falling below all forecasts in a Reuters poll, Ericsson shares dropped 15 percent in early Wednesday trading. Smaller rival Alcatel-Lucent also fell 8 percent.
“It is hard to find anything positive,” said Jyske Bank analyst Robert Jakobsen. “The company has indicated there would be a slowdown, but this is much worse than expected.”
Telecoms operators invested heavily through most of 2011 to upgrade networks to cope with surging data traffic from smartphones and tablets and some slowdown had been anticipated, particularly in the United States.
Ericsson said it had seen increased caution from operators in the fourth quarter due to weak macroeconomic conditions which hit its key network unit, where sales fell 9 percent year-on-year.
ODM orders for Kindle Fire tablet PCs are expected to be cut by half to three million units in the first quarter of 2012, down from about six million units shipped in the last quarter of 2011, according to sources in the supply chain.
Orders for Kindle Fire or Nook Tablet PCs are likely to drop to 800,000-1,000,000 a month in the first quarter of 2012 after the year-end holiday season, the sources noted.
However, the sources stated that the decline in orders for Kindle Fire tablet PCs is in line with market expectations during the off-peak season and the impact on Kindle Fire’s touch panel suppliers, including TPK Holdings and Wintek, would not be significant.
With touch panel orders from Apple still remaining robust at present…
As in tablets, so in computers, where it appears that the Mac line is growing unit sales while Windows computers are seeing stagnant sales at best.
Without relying on government favors and while employing the simple accounting methods, with no mention of non-GAAP “earnings” and no goosing of EPS by buying back shares, Apple is succeeding the way capitalists are supposed to succeed: by making products that people like. Regardless of differing central bank policies, in the open market of consumer electronics, people (and companies) are increasingly trading their goods and services for Apple’s.
Both Ludwig von Mises and John Maynard Keynes would likely have approved.
I will admit I dislike Newt Gingrich. I will admit that I cannot find anything good about his candidacy. I will admit that I am out to drive him off the podium. Yes, it’s not fair … I know. But I just don’t understand the “family values” folks who support this guy. It must be brain damage that gives them partial amnesia.
Hey, it’s not everyone who gets to be on a someecard.
This great graphic on gold production and usage came from Trustable Gold, a company that provides information on purchasing gold by comparing the different investment opportunities.
Mitt Romney made $21.7 million in 2010 according to his tax returns, and paid $3 million in federal taxes, about a 14% effective tax rate. The bulk of his income ($12.6 million) was from capital gains on investments, plus taxable interest of $3.3 million and ordinary dividends of $4.9 million. His net worth is estimated to be about $190 million to $250 million.
The inevitable call will be for he and his rich friends pay more taxes. I hope that call doesn’t come from the Right, but it might, in that one never knows what Newt Gingrich will say.
“The reality… is that banks … support a thick layer of second tier executives, as well as legions of pen-pushing, meeting-loving, middle-and back-office workers who are paid multiples of their worth and contribution, especially compared with other industries.”
- Financial Times‟ Lex column, January 19th, 2012.
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“Stephen [Hester, CEO of RBS] is being urged by a number of people to accept the bonus and I think he will”… This person [an unnamed senior banker] added that if [Hester] turned down his bonus, it would “demoralise” staff members and would send a signal that they now effectively “worked for an arm of the civil service or a utility, rather than for a bank.”
- Unnamed banker, playing the world’s smallest violin on behalf of Stephen Hester.
* * *
Erik Schatzker (Bloomberg News): “$1.6 billion in compensation [at Goldman Sachs] is still a lot of money.”
Nassim Taleb: “Anything above zero is too much money.”
Erik Schatzker: “Why zero ?”
Nassim Taleb: “Because it is a utility. Anything you bail out, you should not be earning more than a civil servant of corresponding rank. Period.”
Contender for leading meme of our time is the idea, fast becoming conventional wisdom, that capitalism is somehow experiencing a crisis. UK Prime Minister David Cameron (or his speechwriter) suggested last week that it is now the time to use the “crisis of capitalism to improve markets, not undermine them.” If we draw a straight line back in time from the current financial crisis to the dawn of the same crisis, few would dispute that it was, and is, banks carrying the smoking gun. It was banks that made questionable loans to flaky borrowers – sovereign as well as individual – and it is banks that required extraordinary levels of involuntary taxpayer support to keep them “in business”, that is to say, keep their senior executives in the manner to which they have become accustomed. Unfortunately, in saving the banks from themselves, sovereign governments have now largely destroyed their own balance sheets.
The IMF cut its forecast for EU area economic growth for 2012 saying that their collective economies will decline by 0.5%.
The IMF said the most immediate policy challenge is to restore confidence and put an end to the crisis in the euro area by supporting growth, while sustaining fiscal adjustment, containing deleveraging, and providing more liquidity and monetary accommodation.
If it were only that easy. They also say:
Fiscal deficits in many advanced economies fell significantly during 2011, and most plan substantial adjustment this year. Continued adjustment is necessary for medium-term debt sustainability, and should ideally occur at a pace that supports adequate growth in output and employment, according to the latest Fiscal Monitor.
What these statements say, if you read between the lines, is that these governments should keep the financial markets flooded with liquidity, continue government spending but avoid deficits, and don’t let the banks fail.
These two quotes from the IMF actually point to the problem itself: the belief that technocrats can “run” an economy. These statements are almost nonsensical when you think about it: if they could do these things they say that need to be done, why haven’t they already done them, and if they have done them, why haven’t they worked?
If you recall, these policies were used elsewhere with the result that sovereign debt climbed, economic growth stagnated, and prices continued to decline. Japan did and is still doing all these things.
If you are looking for central banks, the mandarins who regulate these economies, and external bailout organizations like the IMF to solve the real problems plaguing Europe, then your faith in them would be misplaced. The very policies that they had previously supported got them into this mess. The problem is debt, mainly the debt of the sovereigns themselves, and their inability to pay it back. If they default, there are pretty good odds that the banks who lent the money will go broke. It is this that the EU leaders are trying to prevent.
They should recall the lesson given by King Cnut. This tide of debt won’t recede without considerable economic pain.
This white paper by Tom Mayer, Chief Economist of Deutsche Bank Group, discusses a serious problem underlying the EMU. It seems that this problem is not easily solvable and threatens to wreck the entire euro system. Basically it comes down to the fact that the PIIGS’ central banks owe Germany’s Bundesbank a lot of euros which is impossible for them to refund, at least not without an very difficult restructuring of their economies. –JH
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In this paper, we discuss the economic adjustment achieved so far since the beginning of the euro crisis and take stock of the funding of the balance of payments imbalances through the euro area central banks.
We find that the domestic demand and cost adjustment needed to restore external balance has begun, but is far from concluded. In the meantime, the funding of continuing balance of payments imbalances by the euro area central banks is leading to a widening of the imbalances within the Target2 inter-bank payment system.
It seems that exports (and by implication imports) of Greece, Ireland, Portugal and Spain are not sufficiently price sensitive to achieve external balance through relative price changes. From this follows that adjustment has to come mainly from changes in domestic demand. Exports of Italy and Germany, on the other hand, seem to be more price sensitive, making external adjustment there easier.
Based on a simple illustrative exercise, we find that GDP will probably have to drop by considerable further amounts in Greece, Portugal and Spain to achieve external balance. Hence, with the achievement of sustainable balance of payments positions still not in sight for most of the problem countries, EMU seems to remain at risk for the foreseeable future.
In previous papers, we have argued that behind the euro area’s public debt and banking crisis lies a balance of payments crisis. A credit-driven expansion of domestic demand in a number of EMU member countries has led to a loss of external competitiveness and unsustainable public and private sector debt in these countries. In the present paper, we take stock of the economic adjustment achieved so far since the beginning of the crisis and take stock of the funding of the balance of payments imbalances through the system of euro area central banks. We conclude that achievement of sustainable balance of payments positions is still not in sight. Hence, EMU seems to remain at risk for the foreseeable future.
Hang-over after the party
The fall of policy interest rates and the convergence of capital market rates to the German level in a global low- interest rate environment seduced a number of EMU member countries to borrow excessively to fund growth based on public and private consumption and housing investment. As strong domestic demand growth lifted GDP growth during the first decade of EMU these countries lost control over their labour costs, experienced a loss of international competitiveness, and incurred large external current account deficits. With the burst of the global credit bubble the funding of both expiring public and private debt as well as continuing savings-investment deficits became very difficult and pushed EMU into crisis. … Continue reading Economic Adjustment In Euroland: Where Do We Stand?
Bloomberg.com is out after the close of trading with EU to Have No Deadline for End of Greek Talks. Bloomberg was flogging the story all weekend that a deal was at hand between the Greek government and its private debtholders. Now comes this anodyne brief piece that appears to give a Roseanne Roseannadanna spin on it: ”Never mind”.
Does anything ever matter anymore if it’s not bullish?
Wasn’t this “PSI” initiative make-or-break? Wasn’t the euro maybe about to go the way of the lost island of Atlantis if a deal were not struck by today? Maybe the world economy was going to vaporize?
Now . . . fuggedaboutit?
Lawrence Peter (Yogi) Berra said that it’s never over till it’s over.
He didn’t foresee a world in which it’s seemingly never over.
At least with a bond, someday it is… well… over. That’s a Good Thing.
That’s how doctors handle things. Faced with a problem, you triage it and if it’s serious, you deal with it right away. Win, lose or draw, the crisis gets a resolution.
This Greek situation is no longer a Greek tragedy or even a French farce.
It’s Theater of the Absurd.
Time to move on. We who have followed the twists and turns of the Greek crisis (or is it “crises”?) now look like the men and women who knew too much. Que sera, sera.
Ron Paul and his supporters are much exercised by the danger to America of both crony corporatism and top-down “solutions” that are designed and implemented by officials of the state. They would like to see a country whose direction is determined much less by either, and much more by the free market — defined simply as the sum of voluntary actions and transactions of individuals.
Those working to make Ron Paul president are seeing success based on that very principle — but applied to the campaign, rather than the nation.
Look at any other candidate’s campaign, and you will see a relatively top-down organization, in which the foot soldiers fill various roles that the campaign managers and strategists decide should be filled. In this form of centralized planning, the upper echelons of the campaign employees serve as the politburo. Perhaps ironically, this is standard practice for democratic politics.
As the title of this essay suggests, a loan is an exchange of wealth for income. Like everything else in a free market (imagine happier days of yore), it is a voluntary trade. Contrary to the endemic language of victimization, both parties regard themselves as gaining thereby, or else they would not enter into the transaction.—
In a loan, one party is the borrower and the other is the lender. Mechanically, it is very simple. The lender gives the borrower money and the borrower agrees to pay interest on the outstanding balance and to repay the principle.
The Horse Whisperer may have been a great movie, but its impact was small compared to AAPL whisperers. Matters have now reached such an extreme level – dare I say “insane”? – that Apple 2.0 is out today propounding $11.95 as the whisper number for tomorrow’s earnings in Our Apple whisper numbers.
I’ve always been “against” whisper numbers, and do not like to see that they have now migrated into the MSM’s reporting repertoire. There may now be over-much emphasis on quarterly numbers, expectations “beats” and yoy comparisons, just as in Annie Hall, Woody Allen (Alvy Singer) opined that “there’s too much emphasis on the orgasm . . . to make up for empty areas in life”.
This is a great interview of our own David Stockman by Bill Moyers. The title is “Crony Capitalism,” and the interview is wide-ranging and informative. David spells out the causes of our current malaise and the history behind it. The good thing about shows like this is that Moyers actually let’s Stockman talk at length. Enjoy!
This story falls into the weird but predictable category. Here is the moral question: should people who need housing just take it from others? Apparently some OWS folks think: take it.
‘They took my place!’ Single dad trying to take back home occupied by OWS
They’re occupying his home.
Occupy Wall Street protesters announced with great fanfare last month that they moved a homeless family into a “foreclosed” Brooklyn home — even though they knew the house belonged to a struggling single father desperately trying to renegotiate his mortgage, The Post has learned.
“They’re trying to take a house and say the bank is robbing the people because the mortgage is too high — so contact the owner!” fumed Wise Ahadzi, 28, who owns the home at 702 Vermont St. in East New York.
Occupiers “reclaimed” the row house on Dec. 6 and ceremoniously put out the welcome mat for a homeless family. …
Both House Leader John Boehner and Senate Leader Harry Reid announced today that they are postponing a vote on the anti-piracy bill, SOPA, that is vigorously opposed by Internet leaders. Recall that yesterday Wikipedia shut down as a statement against both SOPA and PIPA.
Craigslist Inc. founder Craig Newmark, who had been rallying the digerati against the legislation, called the move “a serious grassroots victory for democracy.” He said in a statement that champions of the Internet now need to “turn that success into a tipping point which restores the American vision of honest self-government.”
He added: “Personally, well, a nerd’s gotta do what a nerd’s gotta do.”
Here is what a well-known former Senator, now working for the Motion Picture Association of America, said:
In a statement, Chris Dodd, the chairman of the Motion Picture Association of America and former Senator, said: “As a consequence of failing to act, there will continue to be a safe haven for foreign thieves; American jobs will continue to be lost; and consumers will continue to be exposed to fraudulent and dangerous products peddled by foreign criminals.”
Date: December 12, 2011 Reporting From: Talca, Chile
We’ve spent a wonderful weekend at the farm in Chile watching the harvest of our latest blueberry crop. As I write this, there are 52-workers walking up and down the rows of trees picking fruit … and it’s quite an interesting business.
Blueberry trees mature and hit their full production after around 7-years, at which point a single acre can yield around 2,500 kilograms. We have over 15-acres and are expecting a harvest of around 40,000 kilos—this is by far our smallest crop, but it’s the first one up for harvest.
The global blueberry price is fairly strong at the moment; like any agricultural commodity, it rises and falls based on supply and demand. Chile’s export-quality blueberries are fetching around $4 per kilogram right now, which is a very solid price given what goes in to the cultivation.
But there’s a unique opportunity in the market.
Across the entire world, blueberry harvests take place year-round. At this time of year, Chilean farms are harvesting. At other times of the year, North American farms are harvesting. Etc. … Continue reading The Most Powerful Force On The Planet
I would like to introduce a new contributor to the Daily Capitalist, “Simon Black” who writes the Sovereign Man blog. He focuses on opportunities outside of the U.S. We will be republishing his articles from time to time on matters which I think will be of interest to our readers. ”Simon Black”, the writer, uses this pseudonym to hide his identity. I have verified his existence and expertise from several people who have met him, but he wishes to remain anonymous for his own reasons. He feels it allows him greater freedom to express his ideas.
Simon is constantly on the road and looks for opportunities which would allow us to have the greatest amount of economic freedom and protection of our assets. Simon describes himself as a “permanent traveller” and an international entrepreneur and investor:
“I’m a student of the world, and I believe that travel is the greatest teacher. My knowledge is practical, and hopefully of significant use to you. Off the top of my head I could quote you the price of beachfront property in Croatia, where to bank in Dubai, the best place to store gold in Singapore, which cities in Mexico are the safest, which hospitals in Asia are the most cost effective, and how to find condo foreclosure listings in Panama.
“I believe that in order to achieve true freedom, you have to be able to make money, control your time, and eliminate the mindset that you are subject to a corrupt government that is bent on degrading your personal liberty. …”
Prior to become an entrepreneur and investor, Simon, a West Point graduate, was an Army Intelligence Officer.
I should also point out that Simon sells something, a newsletter and perhaps investment opportunities. I will not be republishing any sales pitches, but you are free to check out his web site. Neither I nor anyone associated with the Daily Capitalist approve or recommend any investment proposed by third parties, including those of the Sovereign Man.
My point in republishing his articles is to open up the range of possibilities that exist outside of the United States. This is not to say I don’t love the good old USA, but rather I believe we are headed in the way of European socialist welfarism, and are limiting our future as a dynamic capitalist country. I don’t have the paranoia of many who see our future as one envisioned by George Orwell, but rather the steady decline as seen in countries like France, Italy, the UK, and Spain, where government is more important than the individual.
I think there are opportunities beyond our borders which should be considered by all investors as part of their portfolios. Already many of us invest in foreign companies, especially those from dynamic emerging economies in Asia. But there is more and Simon Black gives us a look at the choices.
