Sunday, April 30, 2017

The Kings of Fake News: CNN, MSNBC, and the NY Times

It's worth acknowledging that the news media is succeeding in its effort to abandon the normal news media role of providing information to the public.  Anyone who wants to know facts is wasting their time watching CNN or MSNBC or reading the New York Times.   These folks are no longer providing their readers with true information and actual facts.

Instead, these media giants are primarily involved in a daily hatchet job, attacking their political enemies and praising their political friends.  It is all about politics and little else.  Blatantly false and misleading stories, told only from one, usually very extreme, political viewpoint are ubiquitous in these media outlets.

The nonsense news in these media forums extends to economics, politics, even sports.  No subject is immune to the political bias of CNN, MSNBC, and the NY Times.  Reporting about economics is so misleading and false in these media outlets that it would be difficult for someone using only these sources to have any idea about the true situation about the American economy or economies beyond our shores.

The problem with these media outlets is not simply that all stories are told from a single, extreme, point of view with often fabricated "facts."  That is only part of the problem.  The hatred for objective, balanced, news is palpable in the daily reporting.  Note that these media outlets have largely ignored the "freedom of speech" issues that have engulfed university campuses.  The media, like the modern university, abhors any diversity of thought or opinion. and will use every weapon at its disposal to crush free speech and free inquiry.

Admittedly, Fox News has its obvious slant.  But Fox News gives the opposing views air time and seems a paragon of objectivity compared to CNN, MSNBC, and the NY Times.  One can at least watch Fox News and come away knowing the essential facts about the American and world economy and about daily political activity of the country.  That's not possible with CNN, MSNBC, and the NY Times.

Monday, April 24, 2017

So....Where Are Interest Rates Now?

"Fed Raises Rates" says the headlines in the mainstream press.  Nothing could be more nonsensical.  All the rates that matter -- mortgage rates, the yield on the ten year treasury, and others -- are at their lows and have moved dramatically lower since "the Fed raised rates."

So how does the financial press explain itself.  The answer is that they don't bother.  Articles about the Fed are typically strongly worded expressions about the future of the macro economy that bear no resemblance to what later transpires.

Not to say that rates might not rise at some point in time, but that will have nothing to do with anything going on at the Fed.

The Fed should be replaced with a simple monetary rule.  It hardly matters which rule.  Nothing could be worse than the record of Federal Reserve policies since Paul Volcker stepped down as Fed Chairman in 1987.

Macroeconomics has become more "witchcraft" mixed in with political opinions.  See Krugman, Yellen and Stiglitz for a flavor of the current state of macroeconomics.  It is utter nonsense with zero relevance to any economy in the modern world.

Saturday, April 22, 2017

Hubris Destroys the European Union

The European Union was a good idea.  In theory, having a common currency, open borders, and free movement of goods and people brought Europe the advantages that the US has always enjoyed.  But bureaucracy, hubris and incredible stupidity will, in time, bring the Europe Union experiment to an ignominious ending.  Well deserved.

The arrogance of the leaders of the European Union are hastening the end of the European Union.  There was never a need to bail out Greece or Ireland and there is no need to bail out Italy, Spain, etc.  These countries should be permitted to declare bankruptcy (as Detroit did in the US). 

The absurd bailout programs put the savings of hard-working Europeans in jeopardy to bail out countries like Greece, notorious for squandering public and private wealth.  That policy had no chance of working and inevitably posed the question as to what value there was in EU membership.

To make matters worse, Merkel and Sarcozy and the Brussel bureaucrats initiated the refugee policy that has de-stabilized almost every European country and has created domestic economic and political problems for all the of the larger members of the EU.  There was no reason to adopt this absurd policy and the EU will not survive it.  As it shouldn't.

As in the Obama nightmare in the US, the Merkel-Sarcozy nightmare in Europe placed bureaucrats in control and average citizens were left to bear the brunt of arrogant, unfeeling, absurd policies.  The Obama bureaucrats and the EU bureaucrats live in leafy neighborhoods and are funded by average taxpayers who have to contend with atrocious policies that they have been foisted upon their countries.

So, a good idea became a political and economic disaster. A replay of the Obama nightmare that the US is only just beginning to escape from.  Europe will make its escape as well.  Watch what happens in the French elections on Sunday.  The French want their country back.

Friday, April 14, 2017

Once Again: Fed Raises Rates and Rates Fall

It used to be:  when pundits announced that the "Fed raises rates," that interest rates actually went up.  No longer.

Mortgage rates and ten year treasury yields have collapsed since the recent "Fed raises rates" announcement.

The Fed has arbitrarily used its unlimited purse strings to raise the one-day repo and funds rate, but no other rates followed.  Interest rates are lower today -- much lower -- on things that matter -- mortgages, ten year treasuries, high yield debt, commercial loans, whatever -- than they were before December, 2015 when the Fed began "raising rates."

Once again, economists use of terms like "raising rates" doesn't really mean raising rates for any interest rate that might be relevant to the economy.  Economists have a narrative. If the facts don't fit the narrative, economists invent new (false) facts.

Interest rates are down, not up.  The Fed has done nothing of consequence through their recent "interest rate increases."

Economics Non-Think: Raising Prices Increases Demand

The economics profession is increasingly a cacophony of bizarre, frequently illogical, slogans.

One of the more absurd of these slogans is the concept of "rent-sharing" by an ongoing business.  The idea, broadly, is that company profits are actually rents in the sense that they are unearned and unresponsive generally to market forces.  This absurd notion was the outgrowth of "research" that purported to show that workers of similar talent receive widely different compensation depending upon the profitability of the businesses they work for.

The idea that similarly skilled workers make disparate compensation is, at best if true, a static, temporary, phenomenon.  But, more likely, this "research" outcome is simply another example of far-left academics in search of a nonsense "fact" that supports an ideology.  In this case, the ideology, by further stretches, extends to the minimum wage discussion.

Minimum wage laws say, among other things, that if a company wishes to pay an employee in skill training, as opposed to cash, it is breaking the law (and so is the employee, who wishes to gain skill training).  As everyone, not drinking the "progressive" kool-aide knows, low income folks do not have access to colleges and universities where all the "progressives" hang out.  Rich and upper middle class Americans (which constitute the demographic of the American "progressive") luxuriate in leafy colleges and universities and cruise their way into the employment world.

But, the poor don't have the luxuries that are provided to high income "progressive" college students and their mentors.  The poor often don't even have high school diplomas.  If they are going to learn a skill, it will have to be through on-the-job training -- an opportunity that "progressives" have fought to prohibit by law.

Using the bizarre notion of "rent-sharing," the modern "progressive" academic economist argues that divvying up profits between labor and capital is largely unrelated to market forces.  Thus, within wide limits, firms should pay much higher wages (in cash only, not skill training) to their lowest skilled employees.  It must be nice to sit in a plush office, making six figure salaries, with six months off every year and opine about what rights poor people should or should not have.

Why not let poor people decide for themselves?  Why, instead of cash payments, can't poor people have the same rights as these wealthy, "progressive" economists?  Why can't they work for peanuts while gaining job skills that will transform their economic status.  Why are "progressives" opposed to that?

"Progressive" economists increasingly substitute logic and sound research for a search for conclusions that fit their "progressive" narrative.  The "progressive" insistence on outlawing the right of contract to poor people through their insistence on minimum wage laws only serves to perpetuate inequality and limit opportunities for the poorest among us.  Meanwhile, the "progressives" sit back in luxury and feel good about themselves as they trample the hopes and dreams of the poor with absurd slogans and bizarre "research."

Saturday, April 1, 2017

Political Monetary Policy

So what's changed?

From the Fall of 2008 until November 8, 2016, the Federal Reserve was content to build up a $ 4.5 trilllion balance sheet and leave short term rates below one percent.

What is different now?

According to today's Wall Street Journal, the Federal Reserve is now, for the first time since 2008, contemplating reducing the Federal Reserve balance sheet.  Not only that, the Fed has raised the repo and funds rate this year already and promises to repeat the exercise twice more this year.  Why?

What makes 2017 the appropriate year?  What facts are different that leads the Fed to want to raise rates and reduce borrowing capacity in the economy (reducing the Fed balance sheet will, of necessity, reduce the level of excess reserves in the commercial banking system)?

Guess who Janet Yellen voted for?  That's right -- Hillary Clinton.

Does anyone really believe in Fed independence?  What a joke.

The (political) Fed should be abolished and monetary policy should be replaced by a fixed rule. 

The Fed is just one more political animal threatening the economic and political health of the country.  Get rid of it.