Chronicle of the Conspiracy
Thursday, February 01, 2007KUDLOW REPLAY Here's the YouTube version, in which I defend gold as an inflation indicator, and defend Milton Freidman's dictum that inflation is everywhere and always a monetary phenomenon.
Gary Shilling (who, by the way, is predicting that the stock market will fall 50% this year) took the other side in the debate, but I'm not entirely sure how to come to terms with the intellectual force of some of the things he said. For example...
"Gold is pushed around by a lot of things... The IMF said they're going to sell, but not for twenty years... what Chinese peasants do with their money... who knows what the real meaning is?"On that last one, I know the Fed does some strange things with printing presses and helicopters, but I'm trying to visualize it humping the money supply... Help me out here...
Posted by Donald L. Luskin at 11:13 PM | link
HMMM... MAYBE KRUGMAN WAS RIGHT when he said back in December: "Most, though not all, of the ... economic numbers that came out this week were ... substantially weaker than expected. Pessimists feel vindicated by the downbeat data." Here's the proof:
NEW YORK (AP) -- The New York Times Co. posted a $648 million loss for the fourth quarter on Wednesday as it absorbed an $814.4 million charge to write down the value of its struggling New England properties, The Boston Globe and the Worcester Telegram & Gazette.Thanks to "public editor" (and artblogger) Irwin Chusid for the link.
Posted by Donald L. Luskin at 8:19 PM | link
JOKE OF THE DAY
Posted by Donald L. Luskin at 9:25 AM | link
BIAS? NOPE. NOT HERE. NO WAY! The lede from an AP "news" story yesterday:
WASHINGTON - The House passed a $463.5 billion spending bill Wednesday that covers about one-sixth of the federal budget as Democrats cleared away the financial mess they inherited from Republicans.Thanks to reader Tim Daniel for the link.
Posted by Donald L. Luskin at 12:14 AM | link
BRAD DELONG'S CONCEPTION OF PROPERTY RIGHTS From a column by Jabba the Economist in the Miami Herald:
Bill Gates, Paul Allen, Steve Ballmer and the other millionaires and billionaires of Microsoft are brilliant, hardworking, entrepreneurial and justly wealthy. But only the first 5 percent of their wealth can be justified as an economic incentive to encourage entrepreneurship and enterprise. The next 95 percent would create much more happiness and opportunity if it were divided evenly among U.S. citizens or others than if they were to consume any portion of it.So the entitlement that hard-working Americans can claim to the fruits of their labors requires being "justified" on the grounds of incentives? How about "justifying" it on the grounds of freedom? What possible argument in favor of stripping away property rights can come from Brad DeLong's opinion, or anyone else's, that some fraction of those fruits would make other people happier than it makes its creators? I am most assuredly not concerned with the happiness it gives Brad DeLong to appoint himself the arbiter of everyone else's happiness, and to imagine the thrill of the power that would come with deciding how everything should be distributed to maximize that happiness. Let DeLong create something of value for once in his life, and let him be in charge of distributing that.
Thanks to reader Mike Mitchell for the link.
Update... a reader who asks for anonymity thinks the headline for this post should have been "Brad DeLong's Conception of Calorie Rights," and he suggests the following rewrite:
Brad DeLong and other overweight economists earn good money from public institutions and are big eaters and obese. But only the first 50 percent of their calories can be justified as a dietary requirement for healthy living. The other 50 percent would create much more happiness and opportunity if it were provided to starving U.S. citizens or others than if they were to consume any portion of it.Update 2 [2/2/2007]... Reader Forbes Tuttle makes a good observation:
In taking up the subject of the Microsoft Millionaires, but especially the billions of Gates, Allen, and Ballmer, whose wealth is a result of the appreciation of Microsoft's market capitalization, DeLong is proposing the policy of a 95% tax on capital (wealth). As class warfare, this may get some juices flowing, but as economic policy, this puts DeLong's party--the Democrats--in league with Karl Marx, who preferred 100% of the capital to be in the hands of the state. As regards the consequences of such a policy, I'd suggest DeLong's 95% tax on wealth is a distinction without a difference, when compared to Marx's 100% state control.
Posted by Donald L. Luskin at 12:06 AM | link
Wednesday, January 31, 2007KRUGMAN SELLS THE BOTTOM AGAIN From Paul Krugman's December 1 column, published when economic news was at its bleakest, and on the very day that bond yields hit their lows:
Most, though not all, of the ... economic numbers that came out this week were ... substantially weaker than expected. Pessimists feel vindicated by the downbeat data. Nouriel Roubini..., who has been forecasting a housing-led recession for some time, ... predicts zero growth for the current quarter. Economists at Deutsche Bank say the same thing.Nouriel Roubini and Deutsche Bank must have been thrilled at the time to have Krugman quote them. But now their lousy predictions smell like the rotten fish that they are -- and thanks to Krugman, the stink is out in the open, on the record, for everyone and anyone to smell. Today fourth quarter 2006 GDP growth was announced not at zero, as these foolish perma-bears had said, but at a fast 3.5%. So thanks, Krugman, for helping to expose their idiocy along with your own.
Update... Apparently I was unfair to Deutsche Bank. Stupid me -- I made the mistake of believing that Krugman had accurately represented their view. Roubini is an ultra-bear for sure, but reader Shawn Mercer has discovered the truth about Deutsche:
I realize it wasn't really the point of your latest post, but apparently Krugman cannot be trusted even to fairly portray the views of those he claims agree with him. "Economists at Deutsche Bank say the same thing (prediction of zero growth for the 4th quarter)."
Posted by Donald L. Luskin at 4:06 PM | link
CORZINE'S FOLLY The state of New Jersey mulls "privatizing" the state lottery. Our correspondent "Irrational Exuberance" notes that this moves, for a change, the liberal stronghold in the opposite policy direction of Venezuela. But is it really so different? All that's happening here is the government as arbitrarily declared gambling -- a victimless crime -- to be illegal for private operators, granting itself a monopoly. Now it intends to make money by selling that monopoly status to a private operator who should have had an unrestricted opportunity in gambling all along. Thus the state collects an extorted premium from the private sector, and consumers lose the benefits of competition. It's still gambling; it's still privately operated; and it's a legal monopoly. Brilliant.
Posted by Donald L. Luskin at 3:52 PM | link
PERFECT INFORMATION Think unions are the big special-interest group backing the liberal establishment? I'd rank academia number one on that score, since intellectual cover is infinitely more valuable than mere money. So it follows that universities would be exempt from the usual regulatory considerations of privacy rights and monopoly. From Steve Sailer's blog:
Our Endangered Right to Privacy is a favorite topic of newspaper editorials and long op-eds. Yet, I don't recall ever seeing anyone point out that the extraordinarily elaborate process of applying for "financial aid" from colleges tramples all over your privacy. This says a lot about the deference paid to the college cartel by the American upper middle class.Thanks to reader Mark Spahn for the link.
Posted by Donald L. Luskin at 9:25 AM | link
Tuesday, January 30, 2007LOOK WHO'S BLOGGING! Our friend and "public editor" Irwin Chusid has started the Jim Flora blog -- celebrating the life and art of the American artist of the 1940s and 1950s. I guess now that Irwin's blogging on his own he won't have time to catch all the dumb errors I make on this blog, so we're going to have to live with a certain degradation of service here. But it's well worth it. Irwin's blog is a beauty -- and it's your only chance to see some rare Flora artworks that Irwin's been holding out on us! Do check it out!
Posted by Donald L. Luskin at 11:13 PM | link
WHO'S INFLEXIBLE? Here's a Bloomberg story that pretty much sums up the current impasse over Social Security reform. Treasury Secretary Henry Paulson is applauded for seeking a bipartisan consensus in which "everything is on the table," including a tax increase. President Bush is booed for signaling that while he'll discuss that possibility, he is strongly opposed to it. Every Democrat quoted in the story staunchly insists -- with no room for equivocation or debate -- that a tax hike be part of the solution. Here's a whopper from Dem senator Kent Conrad:
``Both sides have to be willing to give up their fixed positions,'' Conrad, 58, said at a Washington press conference last week. ``There needs to be more revenue.''Huh? Give up "fixed positions" other than that there "needs to be more revenue!
At the same time, Bush is portrayed as stubborn and inflexible because he is willing to discuss tax hikes, but comes into the discussion opposed to them. Why is one side in this debate entitled to inflexible requirements for the outcome, and the other not? Simple -- there are two reasons. One, because the liberal media is writing the story, so it seems perfectly sensible for the least flexible people to call the most flexible people inflexible. Two, because no good deed goes unpunished -- Bush took the high road and said he would be flexible, so now any expression of his own opinions is used by his enemies as a sign of hypocrisy. God help anyone working on Social Security reform in Washington who actually gives a damn about policy. This crap is nothing but politics.
Update... Rick Gaber says,
While the ten things are all well and good, let's remember the bigger picture:"If a tax cut increases government revenues, you haven't cut taxes enough." -- Milton Friedman
Posted by Donald L. Luskin at 3:18 PM | link
DON'T SELL SHORT-SELLERS SHORT! My DC lawyer/lobbyist friend has something new for us free-market types to worry about:
Another little bit of evidence that the guiding philosophy of the these past 27 years – Reaganomics -- is slipping away. This one concerns stock trading...
Posted by Donald L. Luskin at 1:03 PM | link
WHAT? ONLY TEN? Our friend Brian Reidl at the Heritage Foundation has ten things you need to know about the 2003 tax cuts:
*Current tax revenues of 18.4% of GDP are now above the historical average;Update [January 31, 2007]... Reader Brian Hart has number 11, and says it should be number 1:
Inflation adjusted tax revenues per capita (less payroll) were 17% higher in 2006 than they were in 2002. When you use % to GDP as the metric, you have ceded that the government should grow its revenues like a private corporation. It also allows the opponents of the tax cuts to claim that anything below the 21% nirvana of 2000 is evidence of “lost revenue” caused by the tax cuts.
Posted by Donald L. Luskin at 12:52 PM | link
THE LOVIE AND TONY BOWL Essayist Joseph Esptein has had it with the lionization of the SuperBowl's head-to-head African American coaches:...every time I hear mention of Lovie Smith and Tony Dungy as African-Americans, I wonder if this emphasis on ethnicity is a good thing. The more it goes on the more I feel that on game day Jesse Jackson will be called in to kick extra points, with Al Sharpton holding. Lovie Smith and Tony Dungy are superior men, smart, dignified, cool under fire, and high above the average of ex-jocks who have gone on to coach National Football League teams. Why make such a journalistic meal out of their being African-American? Nothing nearly similar would be taking place if the two coaches were Italian, Jewish, Irish, Ukrainian or Texan...
Why, then, emphasize the African-Americanness of these two excellent coaches? Doesn't doing so suggest a patronizing sense of amazement at their accomplishments -- as if to say, who'd have thunk not one but two black men could be at the top of their line of work? Doesn't doing so also suggest a note of self-congratulations for Americans -- as if to say, look how far we've come in giving these men a chance? Aren't we grand in our virtue?
Posted by Donald L. Luskin at 8:42 AM | link
Monday, January 29, 2007KRUGMAN LIES ABOUT UNEMPLOYMENT INSURANCE When is this partisan pseudo-economist going to be unemployed himself? From Cafe Hayek:
...this passage in Paul Krugman's column from this past Friday's edition of the New York Times:Thanks to reader Timothy Wise for the link.For the fact is that F.D.R. faced fierce opposition as he created the institutions — Social Security, unemployment insurance, more progressive taxation and beyond — that helped alleviate inequality.Did Franklin Roosevelt "create" unemployment insurance? His administration did champion legislation that created government-provided unemployment insurance. But Mr. Roosevelt emphatically did not create such insurance. Here's a letter that I sent to the Times in response:Paul Krugman mistakenly credits Franklin Roosevelt with having "created" unemployment insurance ("On Being Partisan," Jan. 26).
Posted by Donald L. Luskin at 9:29 AM | link
A LITTLE TIMES LIE The lead editorial in the New York Times yesterday started out with a lie, designed to make it seem that George Bush had lied:
In the State of the Union speech, President Bush said that the budget deficit had been cut in half from 2004 to 2006. Not quite. The deficit declined, but not by half, from $412 billion to $248 billion. If you measure it as a percentage of the economy, Mr. Bush was off by an amount equal to about $15 billion.If memory was insufficient, all the Times had to do was quickly search the White House web site to remind itself what Bush's promise actually was. It was to halve the deficit from the 2004 value projected at the time the promise was made -- and that amount was $521 billion (which means the current estimate of $248 billion is better than halving). It turned out with hindsight that the 2004 deficit came in less than originally estimated -- which ought to be good news, except that the Times uses it to make today's good news seem bad (and a lie).
But setting aside this little Times lie designed to make Bush look bad from the get-go, the real burden of the editorial is to strip Bush of any credit for deficit reduction. Forget the economic growth that was triggered by tax cuts as though a starter's pistol had fired -- or anything else that Bush might have had a hand in. According to the Times,
The drop in the deficit over the past few years was due largely to the cyclical recovery from the earlier recession, and to a boost in revenue when temporary business tax cuts expired after 2004.And why not believe that? It's the liberal formula for prosperity -- sheer luck plus tax hikes. Works every time.
Thanks to reader John Tomasso for the link.
Posted by Donald L. Luskin at 9:01 AM | link