Free Markets, Free People

Dale Franks

Dale Franks’ QandO posts

Podcast for 31 May 09

In this podcast, Bruce, Michael, Billy, and Dale discuss the economy and the Sotomayor nomination.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.

Money? Or Receipts?

Recently, while listening to the Opie and Anthony show, I heard an interview with Loius CK, the comedian.  And he said something that struck me as quite profound.  And quite true.

Back in olden times–i.e., prior to the 1930s–our paper money wasn’t actually money, as such.  Instead, it was a receipt for the real money–gold, or silver–that we had stored in the bank.  And the amount of gold we had determined how many of those receipts we could get.  The gold or silver we held had an intrinsic value, and the paper currency we carried was simply a representation of that intrinsic value.

Then, in the 1930s, we simply got rid of the metal, and kept the receipts.  Ever since then, the paper money we carry around with us has no intrinsic value.  And the value of that receipt is worth whatever the government says it’s worth.  It is a medium of exchange, and nothing more.

You may have $1,000,000 in the bank.  And if the government says that it’s only worth a cup of coffee in exchange, then that’s exactly what it’s worth.  It doesn’t matter if acquiring that million bucks was the work of a lifetime.  The government can, if it wishes or is unwise, reduce the stored value of your life’s work to a trip to Starbucks.

Just something to think about.

Our Inordinate Fear of Inflation

That’s the subject Paul Krugman addresses in his NYT Op/Ed piece today.  In fact, he implies that even talking up the possibility of inflation comes solely from bad political motives, mostly from people who don’t grasp The Fierce Moral Urgency of Change™.

Why shouldn’t we worry about inflation, according to Prof. Krugman?

Now, it’s true that the Fed has taken unprecedented actions lately. More specifically, it has been buying lots of debt both from the government and from the private sector, and paying for these purchases by crediting banks with extra reserves. And in ordinary times, this would be highly inflationary: banks, flush with reserves, would increase loans, which would drive up demand, which would push up prices.

But these aren’t ordinary times. Banks aren’t lending out their extra reserves. They’re just sitting on them — in effect, they’re sending the money right back to the Fed. So the Fed isn’t really printing money after all.

But, let’s grant that the current monetary moves aren’t immediately inflationary.  What happens when the economy recovers and the banks do begin to spnd those extra reserves?  Krugman attempts some sleight of hand, in an effort to make it appear that he addresses that concern.

Still, don’t such actions have to be inflationary sooner or later? No. The Bank of Japan, faced with economic difficulties not too different from those we face today, purchased debt on a huge scale between 1997 and 2003. What happened to consumer prices? They fell.

Yes, they did.  But since Japan hasn’t had a real economic recovery even today, and is entering its third “Lost Decade”, that really isn’t a compelling argument.  Since 1999, Japan’s rate of GDP growth has averaged 1.31%, which is less than half of the average GDP growth rate of 3% a mature economy should experience.  Indeed, over the last decade, Japan has experienced exactly 5 quarters where GDP growth was at 3% or more. In that same period, there have been 9 quarters when GDP contracted.  The highest annual rate of growth was in 2000, when the annual GDP growth was 2.85%.

So, let’s not pretend we know how the inflationary pressures fall out in Japan once a recovery hits…until there actually is a recovery.

ON the other hand, since our policymakers seem hell-bent on following the same path the Japanese did in the 1990s, the return of inflation when the economy recovers might turn out to be worry we can avoid until sometime in the relatively distant future.

Podcast for 24 May 09

In this podcast, Bruce and Dale discuss discuss the president’s announcement of legal indefinite detention, and the economy.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.

How…stimulating!

Apparently the Fed has decided that their doubling of the monetary base in the last 7 months has done so fantastically, that they’re ready to do more of it.

Some Federal Reserve officials are open to raising the amounts of mortgage and Treasury securities purchase programs beyond the $1.75 trillion that they have already committed to buying, according to minutes from the Fed’s April meeting.

Please pay no attention to the inflation lurking behind the curtain.  Our benevolent overlords have everything under control.  So, why more monetary loosening.

Officials, meanwhile, projected an even deeper recession than they expected three months earlier and a more sluggish recovery over the next two years as labor markets remain under pressure.

Huh.  So much for that “turned the corner’ crap from last month.  But that’s OK.  because, you see, if you’re in the middle of a bursted bubble cused by overly loose monetary policy in the first place, then the way to get back on track is an even looser monetary policy.  That’ll fix you right up, you see.

At least, that’s what the Harvard econo-boys tell us.  And they are, of course, the Best and Brightest.

Meanwhile, the DoL reports that weekly claims for unemployment for last week were revised upwards to 643,000, but this week’s numbers were only 628,500.  So, that’s a nice little downward tick.  Except that we’ve got all those upcoming claims from shutting down car dealerships for Chrysler and GM.  Let’s call that 2,000 dealerships with an average of–I’m just spit-balling, here–25 persons per dealership left unemployed.  Let’s call it 50,000 new claims ahead.

Podcast for 17 May 09

In this podcast, Bruce and Dale discuss the Nancy Peolosi’s beclownment, and the state of the economy

The direct link to the podcast can be found at BlogTalkRadio, since I inadvertently failed to record a local copy of the podcast.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.

An Open Letter to California

We have a special election here in California on Tuesday the 19th.  We all have to go to our polling places, and decide whether Propositions 1A-1F–which were put on the ballot by the legislature–will be accepted.  Of those propositions, 1F, which denies pay increases for elected officials if the state’s budget is all higgeldy-piggeldy–is the only one worth passing.

The rest of them amount to nothing more than allowing the legislature to loot the revenues from things like the lottery or child health programs, that the current law prevents them from touching.  But the legislature wants to loot those programs, so that it can use the money in the general fund, instead.  And, the general fund certainly needs something.  At this rate, there is an excellent chance that California will be out of money by July.   That means no money for teachers.  No money for the DMV.  Or the CHP, or CDF.  The state will be, well, broke.

So, who do we blame for this, California?

Some people, Like Tom McClintock, the former Republican state senator and now Congressman, blame Arnold Schwarzenegger.  Indeed, McClintock says that Schwarzenegger lied to the people of California when he ran against Gray Davis in the now-famous recall election.  “He promised to stop the crazy deficit spending, cut up the credit cards, live within our means. And he did exactly the opposite. Schwarzenegger increased spending faster than we saw under Gray Davis.”  McClintock, of course, was one of the people who ran against Schwarzenegger during that election.

(By the way, a side note to Rep. McClintock:  Barring an act of divine providence, the sun will set in a blazing red sky to the east of Casablanca before you ever become governor.  You may be a great guy, for all I know, and truly committed to reducing the size and scope of government.  You may be popular in little the red-state enclave that makes up your Congressional district.  But the electorate at large is not going to send someone with your crazy, helter-skelter eyes to the governor’s mansion.)

But should we blame Arnold for this mess?  After all, he promised to reform the budget process, and ensure that California would never, ever be in the position that Gray Davis left us in, with a massive budget shortfall.  And yet, he did.  In fact, the animating issue of that recall election was Davis’ proposed increase to the car registration fee, which would  make the annual regiatration fee average something like $600.  Now, Schwarzenegger is supporting pretty much the same thing.  So, it’s certain that the Governator has been a failure.

But, you know what?  I don’t blame him, California.  I blame you.  Not every individual one of you, of course.  By “you”, I mean the electorate as a whole.  We aren’t in this position because Arnold changed his mind about reforming the budget process.  He did, in fact, put sweeping changes to the process before you for approval  in a series of ballot propositions in a special election.

And you told him to go f*ck himself.

Not only did you kill his reform plans by sizeable majorities, you then proceed to approve nearly every state bond issue that reared its ugly head.  More money for schools?  No problem.  More money for the CDF? Let’s borrow it. More money for a shelter for developmentally challenged kittens?  Might as well slap that on the card, too.

You listened when the Service Employees Union, the California Teachers Association, and the AFSCME union for government workers told you that if we attempted to reform the budget, disaster would ensue.  We’d have to slash thousands of jobs for teachers, firemen and cops.  Those of us who weren’t lucky enough to be murdered in our beds or die shrieking in horrific pain as our bodies were engulfed by flame would be able to look forward only to a life shameful unemployment due to our abject ignorance, cowering under the heel of our new Chinese overlords. You believed them they told you, “education spending  is being cut, and our children are suffering,” despite the fact that, while the school age population has been declining, education spending since 2003 has risen from $45 billion to $54 billion.   That’s a 20% increase, at a time when school enrollment was falling.

So, when the special interests or politicians asked to spend or borrow more money via ballot propositions, you told them to go right ahead.  “Spend away, Sunshine!  Let the good times roll!” And that’s exactly what we did.  It seems never to have occured to you that the only way the government can spend money is to take it from the economy–that is to say, you.

So, now, the state’s got nothing left to spend.  But, by your votes to increase spending, and to reject any reform of the budget process, that’s apparently what you wanted to happen.And since the state has no other way to get money, Sacramento is reaching onto your pocket yet again. So, when you get that $600 bill for vehicle registration renewal, see the prices of goods get higher as the sales tax goes up, and watch your state income tax bill rise, you need to just smile, suck it up, and be a man.  After all, that’s exactly what you asked for.

Now you’re getting it.

Predicted vs. Actual

Here’s an interesting little chart I found at Innocent Bystanders.  The light blue line is the Obama administration’s prediction of how terrible unemployment would be if we didn’t pass the stimulus plan.  The dark blue line is the prediction of how much better things would be we did pass it.  The dark red triangles show the actual unemployment statistics.

The Amazing Effectiveness of Stimulus

The Amazing Effectiveness of Stimulus

So, how’s that recovery plan working out for us?  Not so good, apparently.

I merely provide the chart for informational purposes.  I know it’s useless to make any criticisms of the actual performance of the plan, just as it was useless to predict that this is pretty much what would happen.

Besides, saying, “I told you so”, is so churlish and mean.

Podcast for 10 May 09

In this podcast, Michael, and Dale discuss the county’s failing energy and economic policies.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.