Monday, August 21, 2017

ECB Policy, At Least, Has a Rationale

Mario Draghi, the head of the European Central Bank, is expected to announced the wind down of its own version of quantitative easing.  Ostensibly, the purpose of QE in Europe was to raise inflationary expectations and to, somehow, spur economic growth.

Inflation has picked up in the Eurozone and economic growth is higher now than earlier.  But both are mighty low.

GDP growth in the last twelve months in the Eurozone is now 2.2 percent.  That's the best the Europe has seen in quite a while, but not enough to do anyone but protected bureacrats much good.  European youth still have to look abroad to find employment.  European pundits are bragging about the reduction in unemployment that has now fallen to slightly under double digits.  That is the record that Europe appears to be proud of.

But, these kinds of growth numbers, acceptable to the wealthy and to the protected elites, leave the remaining unemployed with little or no hope.  Particularly hard hit are youth and minorities.  They will remain in despair for generations with these kinds of growth numbers.

But, the pundits celebrate.  Slow growth doesn't hurt them, so they are happy folks.

Draghi is now pushing for an end to the quantitative easing program based upon the higher inflation and GDP growth numbers.

At least Draghi has a rationale.

No such luck with the Fed.  The US data provides no real reason for reversing QE. Of course, there was never a reason for embarking on QE in the first place -- either in the US or in the Eurozone.

The only policy that will do any good for those at the economic bottom is a return to free markets -- something that will probably never happen in Europe.  Sadly the US is following the Eurozone in reducing the role of free markets, which will spell endless hardship for the less economically fortunate Americans.

Warren Buffett and his TV commentator admirers need have no fear.  Slow economic growth doesn't hurt rich people.  The rich and the protected elite will thrive in slow economic growth, but everyone else will suffer.

Thursday, August 17, 2017

Fed Policy Makes No Sense

So, why is the Fed doing what it is doing?  That question, rarely asked by the financial press, has been asked recently by other Fed board members. 

The Fed is supposed to move rates higher when inflation poses a serious threat.  So, why has the Fed, since December of 2015, been artificially raising overnight lending rates?  Inflation is not a serious threat and has not been during this period.  So, what is behind this policy?  The answer: who knows?

Other rates have generally not risen in sympathy with the Fed's boost of overnight lending rates.  The ten year is about where it was when the December 2015 exercise began.  The markets have been unimpressed and largely unaffected by Fed action.

Now Yellen says its time for another rate increase, though "measured" inflation is trending down.  If inflation is trending down and is below Fed targets, why the hurry to raise rates?  This is a question that Yellen cannot answer.  There is no answer to this question.

Why the sudden interest in reducing the Fed balance sheet?  There was never a reason to balloon the Fed balance sheet in the first place.  Why reduce it now?  What data supports this?  The answer: no data shows any change sufficient to warrant a change in policy.

What this all means is that Fed policy is completely adrift and unrelated to any actual economic data.  The economy is picking up and inflation is declining.  Hardly a call for Fed action.

The only conceivable explanation is politics. There is no economic explanation for Fed policy.  There is nothing in the data or in forecasts that calls for any particular Fed action.  But, politics provides an answer.

It is embarrassing to Janet Yellen and other left wing academics that the economy is picking up just as the new Administration is celebrating its first six months in office.  Maybe by jacking up rates and selling off the Fed balance sheet, the economy can be ground to a halt.  Maybe, that is what is behind Yellen's thought process. 

There is certainly no data and no argument to support further rate increases or the timing for reducing the Fed balance sheet.  This is just politics.

Monday, August 14, 2017

Take Note of Japan

The most recent quarter showed 4 percent economic growth in Japan.  Economists, as a group, had predicted 2.5 percent growth as recently as last week -- about a 60 percent miss.  Not unusual.

What is important here is that no one thinks Japan can grow any more.  Japan, as is well known, has a shrinking and dramatically aging population.  So, economists have dismissed Japan and argued that an aging shrinking population means no growth.  Wrong.

Capitalism can produce economic growth regardless of demographics.  Free markets can do most anything if given a chance.

Japan is now growing faster than Europe, faster than Britain, faster than the US.  The pundits need to go back to the drawing boards.  Much faster growth is possible in Japan, Europe and, yes, in the United States.

Thursday, August 10, 2017

Even WAPO Sees Lies in NYTimes

Today's Washington Post headline: "New York Times guilty of large screw-up on climate-change story."

In earlier blog, I commented on the completely political nature of this NY Times article.  As it turns out the facts are even worse than I thought.  The article is a complete and total fabrication, as noted by this morning's Washington Post.

Here is the main lie in the NY Times article:

“The draft report by scientists from 13 federal agencies, which has not yet been made public, concludes that Americans are feeling the effects of climate change right now," said the NY Times article.

This is completely and utterly false.  The report had been available since January of this year, as was well known at the time this false article was written.  The report had been uploaded by the nonprofit Internet Archive in January and publicized by the NY Times itself in August.

These reporters probably knew that the report had long been public when they wrote the article and that NY Times' editors knew that it was a pack of lies as well.  If they did not know this they are simply incompetent.  But, far more likely is that the reporters and editors knew that they were lying and that the story was false at the time they wrote the article and at the time it was published.

Here is more of what the article said: “Scientists say they fear that the Trump administration could change or suppress the report.”  Really?  How could the Trump Administration suppress or change a report that had been public for eight months?  The Times did not address that, of course.

Here's another doozy lie in the NYTimes article: “Another scientist involved in the process, who spoke to The New York Times on the condition of anonymity, said he and others were concerned that it would be suppressed.”  Really?  So this unnamed, anonymous scientist  believed that a report that had been public for eight months was going to be "suppressed."   How stupid is that?

This article by the NY Times was a complete and total fabrication -- the epitome of fake news.  Nothing in this article was true, accurate or researched....nothing.  The writers and the editors knew that it was completely false.   And, it ran on the front page.

This is pretty typical of the NYTimes, as I have noted, over and over again in this blog.  The NYTimes is a hack, political rag with no regard for the truth.  Even the Washington Post has pointed this out now in today's edition.

In their rush to discredit the Trump Administration, the NY Times simply invents facts or publishes false facts knowingly.  The NY Times has no regard for the truth and the majority of their articles on the front page related to politics or economics are simply outright and deliberate fabrications designed to advance a political agenda.

Wednesday, August 9, 2017

You Can't Make This Stuff Up

The NYTimes has two more ridiculous articles in their business section this morning that have no purpose other than to attack the Trump Administration because the Trump folks have the effrontery to do things the right way, not the NYTimes way.

One article entitled "Secrecy and Suspicion Surround Trump's Deregulation Teams," written by Danielle Ivory and Robert Faturechi.  This absurd article makes the point that people who are working to help deregulate industry are people who once worked in the industry.  Wow!  Isn't that a remarkable fact.  Is this article intended as joke.  Should people who know nothing about the industry be in charge -- as was typically the case in the Obama Administration.

The other, equally ridiculous, article is really a graphic entitled "The Business Links of Those Leading Trump's Rollbacks."  This nonsense was brought to us by Danielle Ivory, Robert Faturechi and Karl Russell.  The point here was the same as the article in the previous paragraph -- knowledgeable folks are leading the effort to deregulate.  That, apparently, is not the right way to go, according to the NY Times.  Again, I suppose the Times prefers folks who know absolutelly nothing about the industry they are supposed to be regulating, a pattern so ably followed by the Obama Administration.

The NYTimes is either a jokebook or a Democratic Party daily handbook.  It is getting increasingly harder to figure out which.

Tuesday, August 8, 2017

Is Climate Science a Branch of Political Science?

Today's NYTimes has another incendiary headline: "Scientists Fear Trump Will Dismiss Climate Change Report."  What scientist is quoted in the article?  A political scientists.

"One government scientist who worked on the report, Katharine Hayhoe, a professor of political science at Texas Tech University, called the conclusions among “the most comprehensive climate science reports” to be published."

No other "scientist" was quoted.

I wonder how a political science professor becomes a "scientist" with expertise on climate change?  Three guesses and the first two don't count.

One more example of NYTimes politicalization of the news.

Who frankly cares what a political scientist thinks about climate change?

Thursday, August 3, 2017

The Good News

Capitalism is still alive and kicking in the United States, though it occupies a shrinking part of the American economy.  It is mostly in the technology sector that capitalism thrives in the US.  The left has put state control in most of the rest of the American economy, which is why you see economic stagnation in large parts of the economy.  But, Uber, Airbnb, Tesla, Amazon all represent the ways in which technology is making Americans lives better.  No doubt the left will try to snuff these out as well in their drive toward socialism.

You would think that the example of Venezuela -- the latest in a long string of socialist experiments -- would cool the ardor of the left for state control of the economy.  But, it hasn't.

Capitalism will always find a way unless brute military compulsion takes over, such as we observed in the old Soviet Union and modern Venezuela.  As long as the government doesn't develop a policy of outright dictatorship and terror on its population, capitalism will find a way.

While the American economy has been severely hamstrung by the left, nevertheless capitalism is overcoming barriers by going where they aren't.  Our schools have been destroyed by the left and our health care system is now headed that way. 

But, there is hope, so long as the government leaves any space of breathing room for innovation and freedom.  We shall see if that happens.  But, for now, innovation continues at a breathtaking pace in the few areas of the economy that the left hasn't strangled.