We could be facing a zombie recovery where, in economic terms, we are not really alive and not really dead. It is an in-between world, where things aren’t so bad you get massive government support but not good enough for the market to support activity.
Spanish economist Luis Garicano, quoted in the Financial Times May 2, 2020
The U.S. will recover from its Coronavirus mis-steps
America generally starts slowly. Our national genius is for the private economy and private pursuits. When crisis comes, it takes the U.S. more time than many countries to move to an emergency footing and coordinate the many moving parts of its society; to get the various state, local and federal authorities to mesh; and to get the private and public sectors working together effectively. The U.S. typically stumbles out of the starting gate, but once it gets going, the ingenuity, adaptability and dedication of the American people enable it to make up the lost ground.
Walter Russell Mead, Wall Street Journal, March 31, 2020
Drip, drip, drip
Easy money has become a morphine drip that too many companies and investors can’t seem to do without, even though we are nearly 10 years into an economic recovery. In fact, low interest rates have papered over myriad political and economic problems not just for 10 years but for several decades. Total financial assets are now more than triple the size of the real economy. The corporate bond market is now worth $13 [trillion] — twice as much as in 2008.
Individuals, lawmakers, we’re all feeling a rapid loss of control and power around these companies [Amazon, Facebook, Google].
Barry Lynn, the director of the Open Markets Institute, a liberal think tank
that opposes concentrated corporate power, quoted in the New York Times, October 27, 2017
Do you feel old?
Feeling old matters, says Dr. Carstensen, 63. If you feel young, regardless of age, you tend to live longer than if you feel old, as in sick and tired. “Subjective age predicts how long you live,” she says.
Clare Ansberry, Wall Street Journal, October 3, 2017
Life after Trump
The [U.S.] desperately needs a healthy center-right party that embraces the full rainbow of American society, promotes market-based solutions for climate change, celebrates risk-taking over redistribution, pushes for smaller government, expands trade that benefits the many but takes care of those hurt by it, invests in infrastructure, offers tax and entitlement reforms — and liberates itself from right-wing thought police like Fox News, Rush Limbaugh and Grover Norquist, who have prevented the G.O.P. from compromising and being a governing party.
China a threat to the United States?
Donald J. Trump has been sounding the alarm on China, calling it an economic bully that has been “eating our lunch.” The crux of Mr. Trump’s attack is that Beijing manipulates its currency to keep it cheap and give Chinese exports an unfair advantage. But that narrative is so last decade. China is now a threat to the United States not because it is strong but because it is fragile.
Ruchir Sharma, New York Times, June 5, 2016
An alternative to the blowhard and the weasel?
In the history of polling, we’ve basically never had a candidate viewed negatively by half of the electorate. This year, we have two. In fact, we now have the two most unpopular candidates ever—Hillary by a little, and Trump by miles (including now 3 out of 4 women—who vote more and influence more votes than men). There are dumpster fires in my town more popular than these two “leaders.” . . . Why shouldn’t America draft an honest leader who will focus on 70% solutions for the next four years? You know . . . an adult?
Sen. Ben Sasse (R-Neb) in a Facebook post May 4, 2016
Cities: Where the action is
Fifty years ago, companies opened new locations to be near lumber, copper, or resources needed for their businesses. “Today, people are the natural resources,” said Meredith Amdur, an analytics expert at advisory firm CEB. Facing a tight labor market and a shortage of skilled workers, many large companies say that a city or region’s population of desirable workers is now the top factor in location decisions.
Lauren Weber, Wall Street Journal, April 13, 2016
By 1915, the United States was the world’s richest nation – and yet, most Americans were dirt poor by today’s standards… How we’ve changed… For all of today’s pessimism, long-term trends in the United States are mostly positive. We tend to forget that and the parallel lessons. First, dramatic change is a constant; the notion that we’re living in a period of exceptional upheaval is a shortsighted fiction. And second, the United States has a solid record of adapting to change, albeit with some setbacks and regrets.
Robert Samuelson, Washington Post, March 1, 2016
What Happens to Society When Robots Replace Workers?
The technologies of the past, by replacing human muscle, increased the value of human effort – and in the process drove rapid economic progress. Those of the future, by substituting for man’s senses and brain, will accelerate that process – but at the risk of creating millions of citizens who are simply unable to contribute economically, and with greater damage to an already declining middle class. … This is why we will soon be looking at hordes of citizens of zero economic value. Figuring out how to deal with the impacts of this development will be the greatest challenge facing free market economies in this century.
William H. Davidow and Michael S. Malone, Harvard Business Review, December 10, 2014
Reflections on Common Core
Our country is going through a trying time, and at least some of our education system disappointments are related to the fallout… There is little that a packaged educational system can do … to overcome an acute lack of motivation. Sometimes a remarkable individual teacher can change students’ attitudes towards learning, and about life, but not as often as we would hope. It is especially difficult when student’s life at home and outside the classroom generally is reinforcing many self-destructive forms of behavior and undermining any sense of purpose.
Economist, educator and columnist James McCusker, Everett Herald, Nov. 27, 2015
Rumination on ‘The Donald’
At a time of international crisis and domestic turmoil, where cool heads are called for, Mr. Trump brings a hot head and a loose lip and a level of coarseness hitherto unseen in a presidential campaign. That so many people appear to be not merely amused but enthralled by his crude views is no cause for celebration.
Author Joseph Epstein, The Wall Street Journal, December 8, 2015
Uncommon sense about immigration
The flood of new immigrants [nearly 59 million since the passage of the Immigration and Nationality Act of 1965] [has] promoted prosperity in ways that few could have imagined … Between 1990 and 2005, as the digital age took off, 25 percent of the fastest-growing American companies were founded by people born in foreign countries.
Ted Widmer, New York Times, October 7, 2015
Uncommon sense about The Donald
Mr. Trump is a loudmouth vulgarian appealing to quieter vulgarians. These vulgarians comprise a significant percentage of the GOP base. The leader isn’t the problem. The people are. It takes the demos to make the demagogue. …
When people become indifferent to the ideas of their would-be leaders, those leaders become prone to dangerous ideas. Democracies that trade policy substance for personal charisma tend not to last as democracies. They become Bolivarian republics. Donald Trump may be America’s Hugo Chávez, minus the political consistency.
Bret Stephens, Wall Street Journal, September 1, 2015
The truth about Amazon
Amazon blows away one of the biggest lies of management. The stakeholder model pretends you can have it all — customers, shareholders and employees can all do well at the same time. Amazon is a throwback to the old style of capitalism, in which there was a trade-off. … At Amazon, the customer wins — and the employee does not. The company may not have chosen the most morally acceptable trade-off. But it has laid bare this fact of economic life: when some win, others lose..
Lucy Kellaway,Financial Times, August 24, 2015
Want to succeed? Learn to argue
[W]hat do we have that cannot be mechanised or outsourced on the cheap? “Creativity”, supposedly, but this can mean anything. It has joined “disruption” and “network” in the weightless lexicon of the TED age. … The real answer is more specific and less high-minded. The most resilient skill in the modern world is argument. We are all sophists now, or should be.
Janan Ganesh,Financial Times, August 21, 2015
China: Weaker than most know
Last week’s decision to move to a more flexible currency reflects the fact the underlying economy is much weaker than the official figures show. After 30 years, China’s old economic model has broken down and actual growth is much weaker than anything we’ve seen before. The problem for China’s leaders is that their menu of possible policy options is more limited than in the past.
Rodney Jones, founder of Wigram Capital and one of the people credited
with first predicting the 1990s Asian crisis, as quoted in the Financial Times, August 20, 2015
The global economy under one roof
We are making German luxury vehicles in Indiana for export to China, and doing it with workers at the oldest U.A.W. local in the nation. You basically have the entire global economy under one roof.
Howard B. Glaser, head of AM General’s commercial division, in the New York Times Aug. 12, 2015
[The article is about a former Hummer plant in Indiana now turning out Mercedes Benz SUVs for export to China]
Game of Thrones?
[T]here is something profoundly disturbing about the prospect of another Clinton or Bush presidency. Should either win in 2016, then by the time he or she completed their second term, the US would have had a Bush or a Clinton in the White House for 36 of the previous 44 years. There are inbred autocracies with richer blood circulation than this.
Edward Luce, Financial Times, April 6, 2015
May he rest in peace
I now inhabit a life I don’t deserve, but we all walk this earth feeling we are frauds. The trick is to be grateful and hope the caper doesn’t end soon.
New York Times media columnist David Carr (1956-2015) in his book The Night of the Gun, published in 2008
Europe is turning Japanese
The combination of zombie banks, a rapidly aging population and, most importantly, too-tight money have pushed it into a “lowflationary” trap that makes it hard to grow, and is even harder to escape from.
Matt O’Brien in the Washington Post’s Wonkblog, August 14, 2014
Put this on a Post-it note on your brain
If you want to get people to believe something really, really stupid, just stick a number on it.
Author Charles Seife (in Proofiness: The Dark Arts of Mathematical Deception, 2010),
as quoted in the New York Times, July 2, 2014
The trouble with Amazon.com
[T]he biggest concern about Amazon is, paradoxically, a consequence of its long-term vision. It is hard to compete with a company whose shareholders do not expect it to make a profit. Its vast scale and willingness to operate at zero or negative margins represent high barriers to entry for potential competitors. This cannot go on for ever..
The Economist, June 21, 2014
Land of the free?
The US has always struggled between its impulse for freedom and a Calvinistic urge to meddle. …among Americans of all age groups there is growing support for gay marriage, legalised cannabis and even atheism. Freedom is a paradox. There are parts of America where it is difficult to smoke anything except for marijuana. But the march of liberty is not a one-way street. Beneath the battles against racism and for sexual freedom, there is a deeper pull to conformity. What may once have been seen as eccentric is now liable to penalty, or prescription.
Edward Luce, Financial Times, April 28, 2014
Vive la France?
The French are justifiably proud of their social model. Health care and pensions are good, many French retire at 60 or younger, five or six weeks of vacation every summer is the norm, and workers with full-time jobs have a 35-hour week and significant protections against layoffs and firings. …There is nonetheless an underlying understanding that there will be little lasting gain without structural changes to the state-heavy French economy. The warning signs are everywhere: French unemployment and youth unemployment are at record levels; growth is slow compared with Germany, Britain, the United States or Asia; government spending represents nearly 57 percent of gross domestic product, the highest in the euro zone, and is 11 percentage points higher than Germany. The government employs 90 civil servants per 1,000 residents, compared with 50 in Germany.
Steven Erlanger, New York Times, August 25, 2013
Beware and be wary, the sky is falling . . .
Our democracies have broken the contract between the generations by heaping IOUs on our children and grandchildren . . . Our markets are hindered by overcomplex regulations that debilitate the political and economic processes they were created to support…. (W)e lazily expect all of our problems to be solved by the state.
Harvard professor Niall Ferguson, quoted in the Wall Street Journal, August 30, 2013
. . . or maybe not
U.S. manufacturing is becoming so cost competitive that by the end of the decade it will grab away $70 billion to $115 billion in annual exports from other countries—products that will be made in the U.S. and shipped abroad. The losers: chiefly Europe and Japan. Add to this some manufacturing that will be “reshored” from China, and the U.S. could gain up to five million new jobs, including service jobs.
Boston Consulting Group’s Hal Sirkin, quoted in the same Wall Street Journal article by John Bussey, August 30, 2013
Behind the disappearing middle class
[C]omputerization is not reducing the quantity of jobs, but rather degrading the quality of jobs for a significant subset of workers. Demand for highly educated workers who excel in abstract tasks is robust, but the middle of the labor market, where the routine task-intensive jobs lie, is sagging. Workers without college education therefore concentrate in manual task-intensive jobs — like food services, cleaning and security — which are numerous but offer low wages, precarious job security and few prospects for upward mobility.
David H. Autor and David Dorn, New York Times, August 26, 2013
About that Powerball ticket . . .
Powerball players … have a 1 in 175 million chance of winning. You have roughly the same chance of getting hit by lightning on your birthday. … That is why the lottery is called a tax on people who don’t understand math. Lower-income individuals who play but don’t win are hurt the most because they’re wasting a greater share of their income on the games. That’s also why the lottery is often called a regressive tax on the poor.
Tara Siegel Bernard, New York Times, August 10, 2013
The trouble with Washington, D.C.
[E]veryone complains about it, but no one ever seems to leave. . . . [F]ormer House leader Richard Gephardt … twice ran for president as a voice of organised labour. Today he pockets $7 [million] a year to lobby on behalf of corporate clients and advise them on busting unions. …[F]ormer journalist Jeffrey Birnbaum … used to write exposés of the lobbying trade for The Wall Street Journal. Today he works for Haley Barbour, Mississippi’s Republican former governor who is now one of [Washington’s] most influential lobbyists . . . By a magical process of acculturation, Washington transforms true believers into members of the stay-and-get-rich club. Half of former senators, and nearly as large a share of former House members, remain as lobbyists after leaving office.
So you think you are a big deal. Ponder this . . .
The Milky Way is one of nature’s grandest creations: hundreds of billions of glittering stars, wreathed in ribbons of gas and dust, a cloudy, starry pinwheel so vast that a light beam would take 100,000 years to cross it and the Sun with its planetary entourage takes a quarter of a billion years to circle it once. And it is only one of countless galaxies, scattered like sand from here to eternity, rushing outward in the great expansion, whose meaning, if we are honest, is as fathomless to us as it is to a scarab [dung beetle] pushing its carefully wrought investment portfolio [piece of dung] through this garden of Earthy delights.
Dennis Overbye, Science section, New York Times, August 6, 2013
Oil: Pipeline or rail?
Let’s be serious about environmental opposition. Environmentalists are not opposed to pipelines, aka Keystone; they are opposed to fossil fuels. They will oppose both Keystone and oil shipping by rail with perfect consistency. Their goal is to raise the cost of using fossil fuels and to punish politicians who don’t move their way on regulating carbon.
Holman W. Jenkins Jr., Wall Street Journal, July 17, 2013
Without innovation, China cannot sustain high growth, as the artificially low prices of land and capital for politically favored firms become difficult to maintain and the supply of cheap labor dwindles. Unlike in India, a significant slowdown could be regime-threatening for China — today’s young people, with higher expectations than their forebears, will have less tolerance for a shortage of good jobs and affordable housing. China’s leaders may be riding a tiger that will be hard to dismount.
Pranab Bardhan, New York Times, July 15, 2013
About the 20% of American men aged 25-54 NOT in the work force
The situation here is basically a disaster, a crisis far worse than most commentators and policy makers seem to recognize, and with no clear prospects for appreciable improvement over the near-term horizon.
Nicholas Eberstadt of the American Enterprise Institute, quoted by David Brooks, New York Times, July 16, 2013
How long to get a building permit for a fast-food restaurant
It takes 60 days in Texas, 63 in Shanghai, and 125 in Novosibirsk, Russia. In Los Angeles, it’s 285. “I can open up a restaurant faster on Karl Marx Prospect in Siberia than on Carl Karcher Boulevard in California.”
CKE Restaurants (Carl’s Jr., Hardee’s) CEO Andy Puzder as quoted by Allysia Finley, Wall Street Journal, June 15, 2013
An economy of microserfs?
Our search behavior, book reviews and mortgage applications have become fodder for a small elite in charge of “Siren Servers,” systems that know far more than ordinary people do, creating an oppressive information inequality. (As in myth, these Sirens are irresistible but ultimately pernicious.) . . . [T]his system will become even more predatory when technological advances like 3-D printing eliminate hundreds of millions of jobs…. At that point, all the middle class will have to offer are things like search queries, Facebook likes and Twitter witticisms. Laugh if you will, but that stuff is already making some people super-rich.
Steven Levy in a review of Jaron Lanier’s book Who Owns the Future?, Wall Street Journal, May 31, 2013
Made in China? How about dinner
If you dined on tilapia recently, chances are it came from China. And that artificial vanilla you just used to make cookies? It, too, may have made the same long journey to your kitchen in the United States. A growing amount of food commonly consumed by Americans — ranging from canned tuna and mandarin oranges to fresh mushrooms and apple juice — is now being imported from China.
Stephanie Strom, New York Times, May 30, 2013
Dodd-Frank and Affordable Care
Both were supposed to represent the promise of a benign administrative state. Both these new laws are — in an awful but apt word — un-implementable. After decades of nonstop legislating, we’ve arrived at laws so “vast” and so complex that the bureaucracies cannot figure out how to implement them.
Daniel Henninger, Wall Street Journal, May 23, 2013
[T]he Federal Reserve’s policy—to stimulate lending and the economy by buying Treasurys, and to keep stimulating until inflation reaches 2% or unemployment is lower than 6.5%—is creating a shortage of safe collateral, the very thing needed to create credit in the shadow banking system for the private economy. The quantitative easing policy appears self-defeating, perversely keeping economic growth slower and jobs scarcer.
Andy Kessler, Wall Street Journal, May 23, 2013
Cash is trash?
Demand for $100 notes has jumped since 2008 as nervous Europeans stuff them under the mattress, providing vivid proof that the world still loves the dollar and confirming the benefit to the US of the currency’s status as a global reserve. The amount of dollar cash in circulation has risen 42 per cent in the past five years . . .
Robin Harding, Financial Times, April 8, 2013
Did Russia sink Cyprus?
Russian money is frightened of Russia. … since 2008 alone more than $350 billion in capital has fled the country. These billions craved secrecy and security, and financial islands inside the European Union welcomed them. … Only weeks ago, the Cypriot capital, Nicosia, was Russia’s most important offshore accountant. But today this financial paradise lies in economic ruin, its bloated banking sector wrecked by a gigantic exposure to Greek bonds. To save Cyprus from bankruptcy, a decree from the European Union, the International Monetary Fund and the European Central Bank (known as “the troika”) is now confronting depositors in Cypriot banks with the loss of as much as 60 percent of deposits greater than $100,000, alongside tough new capital controls.
Ben Judah, New York Times, April 3, 2013
It’s not all ones and zeroes
North America’s major freight railroads are in the midst of a building boom unlike anything since the industry’s Gilded Age heyday in the 19th century—this year pouring $14 billion into rail yards, refueling stations, additional track. With enhanced speed and efficiency, rail is fast becoming a dominant player in the nation’s commercial transport system and a vital cog in its economic recovery. . . . [R]ail is stealing share from other types of commercial transport—most notably the trucking business, which is waylaid by high fuel prices, overloaded highways, driver shortages and regulations that are pushing up costs.
Betsy Morris, Wall Street Journal, March 27, 2013
Just what we need now
What’s America’s biggest problem right now? It is that business people think that government is so dysfunctional that they are afraid to invest and spur growth. So what are the parties going to do? They are going to prove that government is so dysfunctional that you’d be crazy to invest and spur growth.
David Brooks, New York Times, February 22, 2013
Who’s in charge here?
For two centuries America and Europe exercised effortless global hegemony. Now the east and south are rising. Globalisation and the rise of the rest have upended the old hierarchy. America’s unipolar moment was blown up in Iraq and Afghanistan. . . . [T]he postwar system of international governance has been falling into disrepair. The real source of our present insecurity is that we no longer know who is in charge.
Philip Stephens, reviewing three new books, Financial Times, February 16, 2013
Uncle Sam, entitlement machine
[T]he ranks of government workers … are declining … [Meanwhile] government, particularly at the federal level, is turning increasingly into an entitlement machine, dispensing benefits to those who qualify, while a combination of recession, deficits and an aversion to new taxes is squeezing most remaining government activity.
Gerald Seib, Wall Street Journal, February 7, 2013
Easy money on auto-pilot
It is not clear that Chairman Bernanke is aware that he has now set the Fed’s asset-inflation machine on automatic pilot by promising near-zero interest rates well out into the future. The longer the policy continues, the greater the difficulty in climbing down from the debt mountain it is creating, particularly the rapidly rising national debt.
George Melloan, Wall Street Journal, February 7, 2013
Still on: ‘Contained depression’
[H]igh-income countries remain stuck in a contained depression. … Of the six largest high-income countries, only the US and Germany had higher output in the third quarter of last year than at their pre-crisis peaks … Output in France, Japan, the UK and Italy was below its pre-crisis peak. Output in France and the UK is stagnant, in Japan erratic and in Italy plunging.
Martin Wolf, Financial Times, January 30, 2013
Taxes? Italians love to dodge them
[Italy’s newest IT-based tool for tax compliance] aims to minimize the wiggle room for evasion by examining a taxpayer’s expenditures in dozens of categories, like household costs, car ownership, vacations, gym subscriptions, cellphone usage and clothing. If … spending appears to be more than 20 percent greater than … income, the [Italian version of the IRS] will ask for an explanation.
Elisabetta Povoledo, New York Times, January 28, 2013
Have you paid, or received, your share?
[Since 1960] . . . entitlement transfers—government payments of cash, goods and services to citizens—have been growing twice as fast as overall personal income. . . . [These programs, including Social Security and Medicare] currently dispense entitlement benefits of more than $2.3 trillion annually. Since those entitlements must be paid for—either through taxes or borrowing—the burden of entitlement spending now amounts to over $7,400 per American man, woman and child.
Nicholas Eberstadt, Wall Street Journal, January 25, 2013
Beijing’s bad air
In the age of social media, the Chinese Communist party faces a sticky dilemma: act forcefully to clean up the air and risk hurting the rapid growth that is its main source of legitimacy or else do nothing and risk the wrath of increasingly well-informed and demanding citizens.
Jamil Anderlini, Financial Times, January 18, 2013
Obama’s pyrrhic victory
Neither Democrats nor Republicans recognise that maintaining a basic welfare state, which is right and necessary in our age of globalisation, rapid technological change and demographic pressure, implies higher taxes for the middle class as well as for the rich. A deal that extends unsustainable tax cuts for 98 per cent of Americans is therefore a pyrrhic victory for Mr Obama.
Economist Nouriel Roubini (our era’s Dr. Doom), Financial Times, January 3, 2013
Don’t say you haven’t been warned
Will the US request a bailout? Will the International Monetary Fund grant it? On what terms and conditions? What writedown of US debt will be needed to restore sustainability to its fiscal accounts? What impact will this have on world financial markets? These … are questions worth contemplating. Thinking the unthinkable is one of the lessons of the eurozone saga. Another is the speed with which complacency can convert to crisis.
Robert Jenkins, a member of the Financial Policy Committee of the Bank of England writing in a “private capacity,” Financial Times, November 15, 2012
The catastrophic toll of the ‘Great Leap Forward’
Thirty-six million [Chinese] … starved to death between 1958 and 1962, during the man-made calamity known as the Great Famine. In thousands of cases, desperately hungry people resorted to cannibalism. The toll was more than twice the number of fallen in World War I, and about six times the number of Ukrainians starved by Stalin in 1932-33 or the number of Jews murdered by Hitler during World War II.
Yang Jisheng, author of a banned-in-China book about the famine, New York Times, November 14, 2012
A new opportunity for leadership
[T]he looming confrontation over the deficit presents opportunities on both sides – for Mr Obama the occasion to show bold leadership; for Republicans a chance to demonstrate pragmatism in the national interest. The rules of the game, though, have changed. The Republicans now have most to lose. If he borrows some of Bill Clinton’s political guile, Mr Obama can outflank his opponents with a grand bargain on the deficit.
Philip Stephens, Financial Times, November 9, 2012
Preview of higher prices at Walmart and Costco?
In just five years China’s workforce will start to shrink. By 2030 the median age of Japan’s population will be 51 and in China it will be 43 . . . Asia’s demographic dividend is almost over and its impact is far reaching.
Lex column, Financial Times, October 20, 2012
Undermining Communist China — from leafy New England
Right here in our cozy, conservative boarding school in New England, we are unconsciously and with no malicious intent sowing the seeds of revolution in China. Chinese students … are learning — through their formal education in American classrooms and through osmosis at corner coffee shops — liberal political ideas and critical-thinking skills that may in the long run help to destabilize the Chinese political system.… [As] part of the next generation of adults in China, [they] could prove … a more insidious force to the Chinese Communist Party and the People’s Liberation Army than the U.S. Seventh Fleet.
History teacher Fred Zilian, Wall Street Journal, October 31, 2012
A 2011 survey of 436 employees at retailers in New York City … found that half … were part-time and only one in 10 part-time workers had a set schedule …“We’re seeing more and more that the burden of market fluctuations is being shifted onto the workers”, [said a union-backed spokeswoman; a retail consultant was quoted thus:] “It’s almost like sharecropping”
New York Times report October 28, 2012, on the increasing trend in
retail and leisure sectors to the use of part-time workers with irregular schedules and few if any benefits
China, once a catch basin for the world’s money, is now watching cash stream out. Wealthy Chinese citizens are buying beachfront condos in Cyprus, paying big U.S. tuition bills … and stocking up on luxury goods in Singapore, frequently moving cash secretly through a flourishing network of money-transfer agents.
Wall Street Journal, October 16, 2012
How old will you be in 2024?
Depending on how you count (and on what happens with ObamaCare), Medicare will go broke sometime in the next four to 12 years. Ask yourself how old you’ll be in 2024: If you think you’ll probably be dead by then, you can relax. Otherwise your choice is to reform [Medicare], or watch [it] explode.
Bret Stephens, Wall Street Journal, October 16, 2012
Worried? We all should be
Public debt in advanced economies has climbed to its highest level since World War II. In Japan, the United States, and several European countries, it now exceeds 100 percent of GDP. Low growth, persistent budget deficits, and high future and contingent liabilities stemming from population-aging-related spending pressure and weak financial sectors have markedly heightened concerns about the sustainability of public finances.
International Monetary Fund, World Economic Outlook, October 2012
What Uncle Ben didn’t say
For all the back-slapping by the Fed and the White House about how they’ve saved us from a Great Depression, four years later the Fed is acknowledging that the recovery is rotten, that job creation stinks, and that their policies haven’t helped the middle class. But, hey, it’s great for Wall Street.
Wall Street Journal editorial, September 14, 2012
Built in the USA
[T]he migration of Japanese auto manufacturing to the United States over the last 30 years offers a case study in how the unlikeliest of transformations can unfold. …[T]he United States today remains one of the top auto manufacturers and employers in the world. Japanese and other foreign companies account for more than 40 percent of cars built in the United States, employing about 95,000 people directly and hundreds of thousands more among parts suppliers.
New York Times, August 5, 2012
Why Airbus is headed for Mobile, Ala.
[T]he only way Airbus can compete with the rest of the world is to move away from the Old Country. Just as BMW and Mercedes-Benz before it, Airbus is moving to America’s Deep South in search of what it can’t find in Southern Europe — a highly productive, low-cost workforce that can compete globally, with the help of a competitive currency.
Randall W. Forsyth, Barron’s, July 16, 2012
Crime and Punishment, Chinese-style
When party members are caught breaking the rules — or even when they merely displease a superior — they can be dragged into the maw of an opaque Soviet-style disciplinary machine…that features physical torture and brutal, sleep-deprived interrogations.… Few who have been pulled into the system emerge unscathed, if they emerge at all. Over the last decade, hundreds of officials have committed suicide… or died under mysterious circumstances …
The New York Times, June 15, 2012
I’m a member
Newsprint sentimentalists are part of a shrinking club. Plenty of people care about news, but the fetishists who want it to be imprisoned on paper? We are like Shriners, once a proud, powerful bunch who now meet in little rooms and exchange secret handshakes.
The late David Carr, The New York Times, May 28, 2012
The [California] political system has been ingeniously rigged. It is easy for citizens to vote themselves vast benefits by referendum but nearly impossible for the legislature to pass the taxes to pay for them.
Christopher Caldwell, Financial Times, May 19, 2012
Incredible shrinking Japan
In Japan, birthrates are now so low and life expectancy so great that the nation will soon have a demographic profile that matches that of the American retirement community of Palm Springs. ”Gradually but relentlessly,” the demographer Nick Eberstadt writes …, ”Japan is evolving into a type of society whose contours and workings have been contemplated [only] in science fiction.”
Ross Douthat, The New York Times, April 29, 2012
Bernanke and peers, doing their jobs
The fears of imminent hyperinflation are idiotic. As Ben Bernanke, chairman of the Federal Reserve, explained in an important speech on April 13, central banks have expanded their balance sheets because those of the private financial sector collapsed. That is what a lender of last resort is supposed to do during a severe panic.
Martin Wolf, Financial Times, May 2, 2012
China, a threat to the U.S. — NOT
China has grown at a breakneck pace for so long that its aura of invincibility has grown to outsize proportions in the Western imagination. Now … there are signs that China’s growth is slowing to a rate that is ideal for the interests of the United States: fast enough to remain an important pillar of global economic growth, but not fast enough for China to remain a disruptive threat to American power.
Ruchir Sharma, Morgan Stanley Investment Management, in The New York Times, April 26, 2012
Don’t be evil?
Though Silicon Valley’s newest billionaires may anoint themselves the saints of American capitalism, they’re beginning to resemble something else entirely: robber barons. Behind the hoodies and flip-flops lurk businesspeople as rapacious as the black-suited and top-hatted industrialists of the late 19th century. … Silicon Valley’s new entrepreneurs are harnessing technology to make the world more efficient. But … that process is bringing great economic and labor dislocation, as well as an unequal share of the spoils.
Rob Cox, BreakingViews, March 12, 2012
Bullish? Curb your enthusiasm
The world economy … is five years into a painful deleveraging process that will last another decade. Conditions in the US and UK will be merely tolerable, while countries on the edge of Europe will experience a depression.
Attributed to history’s most successful hedge-fund manger,
Ray Dalio, Bridgewater Associates, profiled in the Financial Times, March 3, 2012
On the phenomenon of ‘dematerialization’
An iPhone … weighs 1/100th and costs 1/10th as much as an Osborne Executive computer did in 1982, but it has 150 times the processing speed and 100,000 times the memory. … Banking has shrunk to a handful of electrons moving on a cellphone, as have maps, encyclopedias, cameras, books, card games, music, records and letters—none of which now need to occupy physical space of their own.
Matt Ridley, Wall Street Journal Feb. 25, 2012
What’s ‘arrivederci’ in Chinese?
[W]hile the [Communist] party touts the ec, April 8, 2013 onomic success of the “Chinese model,” many of its poster children are heading for the exits. They are in search of things money can’t buy in China: Cleaner air, safer food, better education for their children.
Wall Street Journal, Feb. 22, 2012
What’s wrong with this picture?
Almost 15,000 federal retirees…are receiving six-figure pensions from a system that faces a $674.2 billion shortfall. … They include physicians, postal workers and presidential candidate Newt Gingrich … About half of all private-sector workers have no retirement plan other than Social Security.
Bloomberg, Jan. 19, 2012
The economic truth that no one wants to hear
Most voters in these places [Europe, the United States, Japan] have yet to come to grips with the notion that they have promised themselves benefits that, at current tax rates, they cannot afford. Their economies have been growing too slowly, for too long, to pay for the coming bulge of retirees.… On the most basic level, affluent countries are facing sharply increasing claims on their resources even as those resources are growing less quickly than they once were.
David Leonhardt, The New York Times, November 6, 2011
Will our kids live better than we?
For the moment, the very rapidity of …changes is hurting us and bringing us difficult problems to solve. We are being afflicted with a new disease….unemployment due to our discovery of means of economizing the use of labor outrunning the pace at which we can find new uses for labor. But this is only a temporary period of maladjustment….The standard of life in progressive countries 100 years hence will be between four and eight times as high as it is today.
John Maynard Keynes in 1930, quoted by David Wessel in The Wall Street Journal on line, November 2, 2011
The problem with the Euro
The conceit is that fiscal union will, over time, make Europe more like Germany than Greece. But in practice the opposite is more likely, as the political pressure will always be for higher taxes, a little more inflation, a little more stimulus and increased transfers from rich countries to poor . . .
Wall Street Journal editorial, October 8, 2011
China v America
The defining geopolitical drama of the next century will be the battle for power and influence between China and America. That emerging struggle is already posing awkward choices for Asian countries. …China is now the largest trading partner for Japan, India, Australia, South Korea. … But these countries still have their most important military relationship with the US. How long can their economic and strategic interests point in different directions?
Gideon Rachman, Financial Times, October 4, 2011
U.S. dollars are THEIR problem
Rather than confronting a debt crisis, as in 1997-98, emerging-market economies now face an “asset crisis,” but they will suffer the same result: great capital losses on their foreign-exchange reserves [mainly U.S. dollars]. Indeed, the magnitude of the losses will be on par with that of Asian financial crisis, if not higher.
Yu Yongding, president of the China Society of World Economics, September 2011, Project Syndicate
Crisis of capitalism?
[O]ur economic model and policy settings can’t produce sustainable growth, adequate income formation or employment creation. We have lost the housing, financial services and credit creation growth drivers and been left with excessive levels of personal and government debt to unwind, a dysfunctional financial system, and weak labour markets. The capacity to produce and sell goods and services has now outstripped that of consumers to borrow and spend. And without credit and jobs, other fault lines have been exposed, including the long stagnation of real wages, and extremes of inequality
George Magnus, senior economic adviser to UBS, Financial Times, September 12, 2011
Germany’s advice to spendthrifts: Stop spending!
[W]estern democracies and other countries faced with high levels of debt and deficits need to cut expenditures, increase revenues and remove the structural hindrances in their economies, however politically painful.… Only this course of action can lead to sustainable growth as opposed to short-term volatile bursts or long-term economic decline.
Wolfgang Schäuble, Germany’s finance minister, in the Financial Times, September 6, 2011
Brains and leadership
Richard Nixon had the best raw intellect of any president since Woodrow Wilson and look where it got him. The former editor of the Harvard Law Review who sits in the White House shows signs of being in over his head.
On the decline of the west
Most of the “west” – liberal democracies with capitalist economies but a degree of state welfare, including high-income Asian countries – are in a rough patch. But they are far from being overrun, outcompeted or rendered obsolete by the emerging world.…The annual output attributable to each US citizen – gross national income per capita – is $47,140. For the average Chinese, it is $4,260; for Indians, $1,340; for Russians, $9,910; and for Brazilians, $9,390.
Martin Sandbu, Financial Times, August 24, 2011
Soak the rich? Good luck with that.
In an era of trillion-dollar deficits, soaking the mega rich [the 400 highest-income taxpayers] would get the country between an eightieth [35% top rate] and a fortieth [at a 50% top rate] of the way to a balanced budget. Taxing the half-million and million dollar a year men would help a bit. The rest would be loaded on to the backs of the same upper-middle class whose fury grows by the day.
Christopher Caldwell, Financial Times, August 20, 2011
Waiting for a Churchill or Roosevelt? Good luck with that.
[T]oday’s western leaders face difficulties that cannot all be attributed to their own inadequacy. Their fundamental task is to reconcile electorates to accepting less of everything… It seems mistaken to suppose that mere Churchillian rhetoric or Rooseveltian guile could achieve this.
Max Hastings, contributing editor, in the Financial Times, August 16, 2011
Worried about too much public debt? Stop blowing bubbles.
The lesson from Japan is that we know a lot less about debt dynamics than we think we do. There is no magic level of debt to GDP that will automatically trigger a fiscal crisis. After the collapse of a bubble of historical size, deleveraging by the private sector is likely to be substantial in scale and duration. One way or another it has to be accommodated. The only safe way to avoid a build-up in public debt is not to have the bubble in the first place.
Peter Tasker of Arcus Research, Financial Times, August 12, 2011
Observations of James Grant of Grant’s Interest Rate Observer
On Fed Chair Ben Bernanke: By flooding the system with dollar bills… he has accomplished little of what he meant to accomplish and he has unintentionally done a great many things he didn’t want to do.
On Wall Street’s current heads-I-win, tails-you-lose business model: When you take away the downside, you take away the virtue. You take away the moral foundation of markets. You always have envy but now the envy is a little better grounded in objective facts. Taxpayers get the downside. Modern-day Wall Street gets the upside.
Weekend interview with Holman W. Jenkins Jr., Wall Street Journal, July 16, 2011
About Medicare use (duh!)
Almost all discussions about Medicare reform ignore one key factor: Medicare utilization is roughly 50% higher than private health-insurance utilization, even after adjusting for age and medical conditions.… Several factors help cause this substantial disparity. First and foremost is the lack of effective cost sharing. When people are insulated from the cost of a desirable product or service, they use more.
Merrill Matthews and Mark Litow, Wall Street Journal, July 11, 2011
[N]o country is better positioned to take advantage of the opportunities or manage the dangers [of the 21st Century] than the United States.…Ninety years after the formation of the Communist Party of China, 50 years after the death of the philosopher of modern militant Islam Sayyid Qutb, liberal capitalist democracy remains the wave of the future.…[T]he 21st will be the fastest, most exhilarating and most dangerous ride the world has ever seen. Everybody is going to feel the stress, but the United States of America is better placed to surf this transformation than any other country.
Bard College professor Walter Russell Mead, Wall Street Journal, July 2, 2011
The deficit of your dreams
The one we imagine is a deficit caused by waste, fraud, abuse, foreign aid, oil industry subsidies and vague out-of-control spending. The one we have is caused by the world’s highest health costs (by far), the world’s largest military (by far), a Social Security program built when most people died by 70 — and to pay for it all, the lowest tax rates in decades.
Economix columnist David Leonhardt, New York Times, June 22, 2011
Have we set the bar too high?
He wrote florid love letters to his wife’s social secretary, and later romanced his own assistant under the White House roof. The First Lady took several lovers of her own, including another woman; to facilitate this arrangement, she and the president slept in separate wings. By the standards of modern politics, Franklin and Eleanor Roosevelt’s unorthodox marriage would render FDR unfit to serve. But in the 1930s, the press did not pry into politicians’ private lives; FDR was judged by what he did in the Oval Office, not upstairs in the bedroom. What a quaint notion.
William Falk, editor of the newsweekly The Week, issue cover dated June 3, 2011
Perspective on our (in)significance
Astronomers said [May 18, 2011] that space was littered with hundreds of billions of planets that had been ejected from the planetary systems that gave them birth and either were going their own lonely ways or were only distantly bound to stars at least 10 times as far away as the Sun is from the Earth. There are two Jupiter-mass planets floating around for each of the 200 billion stars in the Milky Way galaxy…
Dennis Overbye, New York Times, May 19, 2011
Another bubble popping?
Oil down, copper down, precious metals down, the dollar up – the popping sound you hear coming from the commodities market has echoes of the bust of three years ago. It is too early to say that the recent bust in commodities heralds a disaster, but the parallels are striking. . . Even if this worst-case scenario plays out, there will be no Lehman repeat, as governments have learnt the lesson. Unhappily, sovereigns have replaced banks as the world’s weakest link.
James Mackintosh, Financial Times, May 13, 2011
Work longer, live longer, be healthier, be happier
Americans are hard-wired to consider retirement age to be 65. Social Security, under a formula established in the 1930s when the average age at death was about 15 years earlier than it is The tragedy of the modern entitlement state is that it has become too big to afford but also too entrenched to easily reform. (See Greece, riots in the streets.) Republicans can’t give up the cause, but [the loss of a New York congressional seat May 24] is a warning that they p style=”padding-left: 30px;”need to pursue it as part of a larger agenda that restores the American middle-class’s economic hope.today, reinforced that idea. And now that retirees can begin collecting Social Security and/or pensions before they turn 65, a growing number of people leave the workplace even earlier. As a geriatrician, I’ve come to believe that working longer is generally a good thing. Most people just plain do better, both intellectually and physically, when they continue to work. . . [M]ature patients who quit working — whether they have been laid off or retired voluntarily — are likely to gain weight, become hypertensive and even develop depression.
Katherine Schlaerth MD, associate professor emeritus at the USC School of Medicine, Los Angeles Times, April 27, 2011
All hail the cost-cutters!
The robber barons of the late 19th century generally made their fortunes by drastically cheapening new technologies, grabbing market share by undercutting rivals — and ending up with terrible reputations. Cornelius Vanderbilt cut the price of rail freight 90%, Andrew Carnegie slashed steel prices 75% and John D. Rockefeller cut oil prices 80% between 1870 and 1900. Malcom McLean, Sam Walton and Michael Dell did roughly the same for container shipping, discount retailing and home computing a century later, and were also unloved for it.Yet it’s the cheapening that raises the world’s living standards.
Matt Ridley, Wall Street Journal, May 7, 2011
Straight talk on Medicare
Rationing is not inherently evil. If there’s a finite amount of money to spend on health care, we’ll need a system of values and rules to divvy up that money humanely and effectively. Whatever system we ultimately choose, someone will have to say no to expensive treatments of dubious value; we may have to reconsider spending a quarter of the entire Medicare budget keeping people tethered to machines in the last months of life. We could, of course, continue to operate as if there’s an infinite amount of money available. But how’s that working out? For Americans to stop spending trillions we don’t have, we’ll have to accept limits on personal choice. We’ll even have to accept our own mortality.
Editor William Falk in the newsweekly The Week, cover dated April 22, 2011