Fed in Global Bailout

Gerald O’Driscoll explains how the Federal Reserve is bailing out European banks.  Click for his  insightful piece in the Wall Street Journal.

Future of Forecasts

by Chidem Kurdas

‘Tis the season for predictions. Pundits offer conjectures on every conceivable subject, though accumulating evidence in recent years has established, as much as anything can be established, that you might as well examine tea leaves to divine the future. Yet one could learn from prophesies; a few are thought provoking and some may even be true.

The Just Distribution of Income and Wealth

by Mario Rizzo

There has been a lot of talk this year, and especially during the holiday season, about the inequities in the distribution of wealth and income. But most of what has been written is quite simple-minded, if the writers mean to convey something more than their own personal preferences for a different distribution.

I have no objection to passive expressions of preference. But I do have objection when people attempt to bolster their case for intervention by the state under the banner of distributive justice, morality, religion or whatever is supposed to evoke some objectivity.

How’s Your Compulsory Holiday Giving Coming Along?

by Mario Rizzo

I wish people would perform the following intellectual experiment. Find out how much in federal taxes you have paid in the past year. Don’t worry about making any distinctions between the various payroll taxes and the income tax. It all goes into the same pot in the final analysis.

Now assume that this amount is in an account and that you are not allowed to spend any of it on yourself or your immediate family. Nevertheless, you are given a choice about how to spend it. What would you spend it on? Now compare that with what the federal government spends on. How do they match up?

Menace to Savings and Small Businesses

by Chidem Kurdas

As the old adage goes, be careful what you ask for, you might just get it. After the 2008 crisis it became fashionable to complain that too much trading is going on. There were calls in this and other countries to restrict financial transactions. And it happened. One example is the rule named after Paul Volcker in the 2010 Dodd-Frank law, banning depository banks’ trading on their own accounts (and also forbidding them from holding significant hedge fund or private equity interests).

Regulators are still in the process of determining how to implement the Volcker rule but the potential impact is already discernible. Likely victims include millions of Americans who save for their retirement and smaller companies that need to borrow money.

The Intellectual Disaster of American Conservatism (Liberalism)

by Mario Rizzo

I watched a rather good debate this morning on the ABC News program This Week. The participants were journalist George Will and Congressman Paul Ryan (on the “right”) and Congressman Barney Frank and former Labor Secretary Robert Reich (“on the ‘left”). You can watch it now or simply read the transcript. The topic for the debate was “There is too much government in my life.”

I thought the “right” handled the economic questions very well. I was especially impressed (because I don’t know him as well) by Paul Ryan’s knowledge and debating skill. But I kept wishing that George Will was in one of his libertarian moods because the “left” exposed some glaring inconsistencies on matters of social and military policy. For whatever reason, Will played the good conservative in the debate (perhaps to avoid causing splits on the “conservative” side of the debate).

I think the “left” (mainly Barney Frank) played an excellent card.

The Real Culprit in Paternalistic Legislation?

by Mario Rizzo

Christopher Hitchens, the great journalist and essayist, has died. Mr. Hitchens was not always right but he often was. I saw at the Cato blog a brief piece, posted by David Boaz, that Hitchens wrote on Mayor Bloomberg’s Nanny State. (HT: Dave Johnson). It was in reaction to smoking restrictions, but could easily apply, more generally, to paternalistic legislation.

Hayek on the Large Corporation (aka “Breaking up Big Banks?”)

by Mario Rizzo

For those who enjoy trying to figure out what important thinkers might have thought about specific issues they never faced (and I am one of them!), the following letter I discovered will prove interesting and perhaps disconcerting to some.

Below is a brief excerpt from a letter that F.A. Hayek wrote to the journalist and political theorist Walter Lippmann in 1937.* The subject was the large modern corporation which Lippmann thought was prone to developing various degrees of monopoly power. This was a view shared by Frank H. Knight at this time, and Hayek may have agreed, at least to some extent.

The issues were: (1) Why was this the case?  and (2) Was it consistent with (classical) liberalism for the government to do something about it?

Emerging Hope in Greece

 by Chidem Kurdas

The Greek economy continues to shrink. With the wider European debt crisis and slump hampering Greek recovery, the recession may persist through 2013.   Amid the grim news, however, there is a small sign that austerity measures are starting to work.

The Free Market versus Crony “Capitalism”

by Mario Rizzo

This will be a short post. Nearby is a Venn diagram showing the intersection between Goldman Sachs and the federal government: people who before or after were attached to both.

This is one reason that the current political-economic system will continue to fail. Those who exercise positions of political influence are not about the let particular so-called private institutions go under (there have been exceptions, of course). The idea is that they will use the ill-defined systemic-risk notions to preserve the status-quo.  This is why I floated, two years ago, the idea that perhaps the government must break up the large financial institutions so that they can fail without dragging us all (particularly me) down with them. My positive program for laissez-faire, so to speak.

A picture is worth a thousand words!

The Big Story of Crony "Capitalism"