Friday, March 20, 2009

A Greater Wrong

While I am as disgusted as all those pontificating politicians about the AIG bonus issue, there is a greater issue than this additional instance of unfairness, and that is the sanctity of contracts.

While contracts can be set aside for a few narrow reasons, this is not one of them. Even worse, over-turning these contracts will have a very chilling effect on dealing with the many other financial problems we face, because the private sector won’t trust the contracts they negotiate.

The TALF plan is dependent upon contracts with funds to clean up the toxic assets. Would you want to do business with the Federal government, to help clean it up, when you don’t know if the contract will be honored or not?

Revenge may be sweet, but it has a bitter aftertaste!

Monday, March 16, 2009

Our future leaders are impressive

Last week, I spoke before 750 people for Virginia Beach’s annual “State of the City” address. It was a piece of cake!

I also spoke before the 24 brightest high school seniors in Virginia Beach, who are competing for a large scholarship. That was intimidating! These kids are so bright. They asked questions about the difference between Keynesian economics and Austrian economics. They asked how to protect themselves from people like Bernie Maddoff. Amazingly, they seemed resigned, but not angry, about inheriting all the debt we are piling on them. They were a much tougher audience.

Sometimes, it is nice to be reminded that our country’s future is in good hands, indeed!

Sunday, March 8, 2009

Jobs Report reflects long year ahead

A year ago, I predicted unemployment would reach nine percent. On Friday morning, the Labor Department released the monthly “Jobs Report,” showing unemployment had already reached 8.1 percent, the worst in 26 years.

If you add in the under-employed, those people who are forced to work part-time or who have given up, 14.8 percent of the workforce is struggling. As if that wasn’t bad enough, don’t forget that unemployment is a “lagging indicator,” which means it will not improve until after the economy improves, which is not expected before the fourth quarter of this year.

That means unemployment is likely to rise all year, making a 10 percent level of unemployment almost a certainty. The rate of under-employment could even approach an unthinkable 20 percent. It will be a very long year indeed for millions of people.

Sunday, March 1, 2009

Economics is not a religion

Sitting at a traffic light yesterday, listening to Rush Limbaugh’s speech to the Conservative Political Action Committee, I saw pick-up trucks go by, helpful for small cargoes. I saw 18-wheelers go by, helpful for large cargoes. I saw cement trucks, refrigerated trucks, and even a fire engine -- all helpful tools for specialized missions.

Some people, especially politicians, see economics as a religion, rather than a tool box. If you are trying to get the economy out of a deep ditch, Keynesian economics has a proven track record. If you are trying to stimulate a sluggish, under-performing economy, supply-side economics has a proven track record. If you are dealing with a specialized mission, such as inflation/deflation, monetarism has a proven track record.

There is a difference between a flathead screwdriver and a Phillips screwdriver, and each tool accomplishes a specific mission.