Subject: John Dean: PK's new hero From: Sid Bachrach To: All Date Posted: Tues, Mar 30, 2004 at 11:39:46 (EST) Email Address: sidb23@juno.com Message: Today Mr. Krugman presents one John Dean as an expert on American democracy and foreign policy. Mr. Dean is one of the worst liars left over from the Watergate era. Mr. Dean participated in all sorts of dirty tricks, was disbarred and has spent the last 30 years trying to profit from his crimes. In addition, Mr. Dean is a wimp! Yet PK quoting Dean authoritatively. Dean has no credibility and was a two bit lawyer before he married into money. What's next from PK? A quote from Pat Buchanan? BTW, Richard Clark, who is quoted in PK's article, was a minor bureaucrat now profiteering from the lives and blood of 3000 innocent people.

Subject: I am a Lying Troll From: Sid Bachrach To: Sid Bachrach Date Posted: Tues, Mar 30, 2004 at 14:14:59 (EST) Email Address: Not Provided Message: I am Sid Bachrach the Lying Degenerate Troll.

Subject: Vicious Ugly Troll Here From: Trolly Troll To: Sid Bachrach Date Posted: Tues, Mar 30, 2004 at 13:19:05 (EST) Email Address: Not Provided Message:

Subject: Re: Vicious Ugly Troll Here From: Bla... To: Trolly Troll Date Posted: Tues, Mar 30, 2004 at 13:34:18 (EST) Email Address: Bla@bla.bla Message: Bla bla bla bla bla?Bla bla!Bla bla supply-siders bla bla.World?Blaaaa!

Subject: state of the union From: A Alexander Stella To: All Date Posted: Tues, Mar 30, 2004 at 11:09:22 (EST) Email Address: aastella@yahoo.com Message: Well, I do hope you can recall previous courriels of mine. In the event you'd like a couple hints, let me first present this one, like so: 'some sixty years hence, the curators of the Reagan Library will have to devote a wing to a bed-and-breakfast nook ... maybe, a massage parlour, even'. Okay, here's the other one, like so: 'there's no way Joe Scarborough can forever evade questions about the attractive female intern, whose corpse was found in his Florida office'. Anyway, I do hope those two suffice. This time, I'd like you to consider reading the text for a 'state of the union' address that I believe is imperative for this country of ours. To get to it, all you need do is click on the below enclosed U.R.L http://www.bcvoice.com/modules.php?name=News&file=article&sid=205 By the way, the proprietors of the www.BCVoice.com website have provided a couple ways for you to leave your comments. toodles \ A Alexander Stella p.s - also in the event, you'd like some more credentials. Those can be obtained easily enough from the Google search engine. All you need do is use as a search phrase, with quotes and all, the following: 'A. Alexander Stella'. Upon your doing so, the monitor screen shall fill with hyperlinks. state of the union www.bcvoice.com/modules.php?name=News&file=article&sid=205

Subject: New US Economy From: Mik To: All Date Posted: Mon, Mar 29, 2004 at 18:06:39 (EST) Email Address: Not Provided Message: Thanks for your inputs guys. Econochick - again you make me smile with your insight. I see that the posts are being removed as this thread becomes stale. I just want to point something out - I said I don't like the current administration but I tried to point that although it wasn't their express intention - they may actually be doing something good if we think laterally. I'm sure the current administration means well... but... well... hey read Krugman's opinions on Bush and his merry men. Also note that I am sure there are many better places to commit gov spending and push the economy forward. Hey - no argument here. But considering the paradigm that Bush lives in - his angle is 'oil and military strength'. I'm just trying to analyse his angle not argue for or against it. Now I do want to highlight a point about 'rocket science'. I do believe that even in our modern age of a recent Mars landing, we are still in the baby stages or rocket science. This top aero-designer (who's name I think is Bert Rutan) made an amazing statement when he explained how our current technology has slowing dramatically in comparison with the jet-age of the 60's. Just recently we saw the launch of the 'X-prize' - a competition for a private organizations to put people in space for commercial purposes. And! last night I watched a test on a new aircraft that went to mach-7 in a study on getting man into space at a cheaper cost. China has now entered into the exclusive club of man missions to space. It is obvious, that we are on the frontier of a new dawn in civilisation and economics to suit. Ironically enough, the lessons that are going to be learnt out of the Star Wars program (in my opinion) are not going to be 'how to shoot down an incoming missile' but rather to spear head whole new rocket sciences and the economic ripple effect for the leading nations is going to be - whole new economic ventures. I just realised that I shouldn't have read Arthur C Clarke.... am I talking crap?

Subject: Re: New US Economy From: Nat To: Mik Date Posted: Tues, Mar 30, 2004 at 11:01:16 (EST) Email Address: Not Provided Message: Star Wars will not propel our domestic technology forward even a smidgen. As a kid I saw sputnik and echo overhead and stayed home from school to watch all the Mercury launches, so I have a fondness for this sort of stuff. But military projects are too secretive to produce domestic spin offs even if the products have potential. This group in DC wants pie in the sky but is willing to let the Hubble die, a true sin. A truly worthy national project, on the order of the 60's moon race or the 50's highway system or the 30's public works would be to solve our (and therebye the world's) energy problems. How about 10 years to stop our dependence on foreign oil? That would be a new US economy, but not gonna happen...

Subject: Re: New US Economy From: Pete Weis To: Mik Date Posted: Tues, Mar 30, 2004 at 10:27:33 (EST) Email Address: Not Provided Message: Mik. If your general point, here, is a major national effort to develop new technologies similar to our effort to 'land a man on the moon and return him to earth' during the 60's, then I'm in 100% agreement. This is, I believe, a very important issue to America's future. I'm thankful for your reintroduction of this topic. Posters on this board may have different ideas about which direction that effort should go and it would be interesting to hear their ideas. I would like to see this nation recapture that great effort of the 60's, by going 'full speed ahead' into developing and perfecting new energy sources which would replace our dependency on oil. The sooner we reach this goal the better. It's time to end our love affair with the internal combustion engine. We have a meager start - wind and solar power and new battery technology such as vanadium, early highbred auto's, etc. Wind, solar, and proposed tidal power have a weakness in that they produce with uneven volume. The solution revolves around effective means of storage during peak production to provide adequate supply during low production periods. Hydrogen could be that storage medium. Vanadium technology is promising. A Canadian company, VRB Corp out of Vancouver, British Columbia, has developed some interesting large scale vanadium battery systems which deal with fluctuating large scale power demand. Will they become a 'Microsoft' of this type of power storage technology? Maybe. But much of this research, design, development and implementation will cost many billions of dollars. How long would it have taken to reach the desktop computer age if our government hadn't funded the development of the integrated circuit? Would it have been developed elsewhere? New, simpler technologies, could be instituted quickly to greatly increase energy conservation and efficiency - there is so much waste. During the early days of the Bush administration, when energy policy was being formulated, Dick Cheney stated 'the government has no role to play in promoting energy conservation.' Was this statement just short sighted or were there other motivations - you can draw your own conclusion. But the present steep increases in oil are begining to drag on our economy. Anyway I'm running out of time here.

Subject: too weird From: Nat To: Pete Weis Date Posted: Tues, Mar 30, 2004 at 11:03:23 (EST) Email Address: Not Provided Message: Talk about great minds moving on the same path! Pete, you said it much better than I.

Subject: Re: too weird From: Mik To: Nat Date Posted: Tues, Mar 30, 2004 at 15:26:21 (EST) Email Address: Not Provided Message: Thanks for the input. Yes I am aware of Ballard of Vancouver and their hydrogen cell battery. Hey I lived in that Beautiful city for two years. Unfortunately when you hear Ballard speak of what it takes to get cars to convert - it will be generations of active effort - and we haven't even started yet. Ballard may well go under in the next couple of years. BUT !! hey we already have hybrid cars that use both gasoline and electric power - there should be a serious push to have all cars convert to this format (as a start). So yes I agree that the main focus should be on different (and preferrably renewable) energy sources. I can imagine so many good government investments such as Nano-technology, and nuclear energy should be re-visited. From what I know, the 'space race' of the 60s resulted in many spin-offs we don't fully appreciate. As an example, the Intel 8086 processor chip was developed for NASA. This chip was later upgraded to the 80286 and later called the '286' chip and placed in desk top computers - the rest is an amazing history. But alas, perhaps I have been influenced by too many Arthur C Clarke books which make me 'hope' that we will see a return to the rocket age. Nat - you watched the Mercury Missions? wow - uhmmm you must have many year under your belt;-) But consider this: - how old is the Shuttle?

Subject: Anything into Oil From: mike To: All Date Posted: Sun, Mar 28, 2004 at 22:39:53 (EST) Email Address: Not Provided Message: Has anyone read the article'Anything into Oil'. It was written in 'Discover' magazine 4/03. The company has 2 operating plants that convert turkey guts into #2 crude oil. The process is very efficient, and seems to be clean and affordable. The creators claim that they could make 4 billion barrels of oil a year which would make up for all the oil that is imported. The company has posted a notice that says the PIRG states it has given the company(changing world technologies) 95 million dollars of tax credits, but realistically it was only elligible for $190,000 over 4 years. Does anyone know about this? If anyone knows the story please reply. This technology does seem for real, but last fall I saw David Brooks on the 'News Hour'discussing the Republican budget proposal and he dimissed the whole technology in one sentence. I knew something was fishy.

Subject: Krugman's book, The Great Unraveling From: JRVotano To: All Date Posted: Sun, Mar 28, 2004 at 16:01:19 (EST) Email Address: jvotano@chemsilico.com Message: Most revealing book on GW Bush and company I have read in ages. Truly, we, as Americans, have one big problem on our hands with Bush and company. Lies, lies, permanate this current administration and their ''revolutionary goals' of this are to dismantle our institutions, our way of life,our liberties, all in the name of corporate interests. War by decree and shift the burden of all taxation to people who actual are the productive members of society and no taxes for investors who live off the middle class.. What an agenda! and who would believe it. Thanks, Paul K.

Subject: Re: Krugman's book, The Great Unraveling From: Walk To: JRVotano Date Posted: Sun, Mar 28, 2004 at 21:05:01 (EST) Email Address: Not Provided Message: I have to admit that I haven't read Krugman's latest. In fact, I have stopped reading anything by him since he switched from a very interesting commentator on economic policy to a bitter apologist for the left wing. Very boring and predictable. But, I guess that's what maximizes his revenue with the least amount of effort.

Subject: Walk Walk From: Duh To: Walk Date Posted: Mon, Mar 29, 2004 at 16:33:44 (EST) Email Address: Not Provided Message: Such insight.

Subject: Re: Walk Walk From: Walk To: Duh Date Posted: Mon, Mar 29, 2004 at 16:47:27 (EST) Email Address: Not Provided Message: Go fuck yourself.

Subject: Re: Walk Walk From: Run To: Walk Date Posted: Mon, Mar 29, 2004 at 16:55:54 (EST) Email Address: Not Provided Message: Well argued.

Subject: Re: Walk Walk From: Walk To: Run Date Posted: Mon, Mar 29, 2004 at 17:29:07 (EST) Email Address: Not Provided Message: Thanks. An approriate response to an anonymous snipe. You wouldn't by any chance be French would you?

Subject: Do Not Feed From: Troll To: Walk Date Posted: Mon, Mar 29, 2004 at 17:53:38 (EST) Email Address: Not Provided Message: Walk is a Troll

Subject: Re: Krugman's book, The Great Unraveling From: AriLev To: JRVotano Date Posted: Sun, Mar 28, 2004 at 17:34:33 (EST) Email Address: Not Provided Message: PK's book and column are terrific.

Subject: Employment From: Emma To: All Date Posted: Sun, Mar 28, 2004 at 15:02:36 (EST) Email Address: Not Provided Message: http://jobwatch.org/ Unemployment measures understate job slack Despite a steady unemployment rate of 5.6%, jobs increased by only 21,000 in February 2004, underscoring the fact that the typical unemployment measures are failing to convey the labor market's current distress. Evidence of this distress is obvious when taking into account both underemployment rates and the number of those who have dropped out of the job market altogether.

Subject: The perfect storm that's about to hit From: B.B. To: All Date Posted: Sat, Mar 27, 2004 at 22:54:37 (EST) Email Address: Not Provided Message: The perfect storm that's about to hit Rising oil prices and a weak dollar could shatter the global economy Jeremy Rifkin Wednesday March 24, 2004 The Guardian The average nationwide price of a gallon of gasoline in America reached a record high of $1.77 this month. The steady spike in prices has left analysts wondering if this is a harbinger of even more dramatic increases as motorists head into the spring and summer months. Get ready for what might become the economy's version of the perfect storm later this summer. The devastation could quickly spread to the UK and the rest of the world, with dire consequences for the global economy. The first hint of what might be in store came last month when Opec announced its decision to withdraw 1m barrels of crude oil a day from the market. Opec is worried about the weakening value of the dollar: it has lost one-third of its value in just under two years. Since Opec sells oil for dollars, the oil-producing countries are losing precious revenue as the value of the dollar continues to erode. And because oil-producing countries then turn around and purchase much of their goods and services from the EU and must pay in euros, their purchasing power continues to deteriorate. (The euro is currently valued at $1.23.) How will the weaker dollar affect oil prices? Philip K Verleger, the dean of US oil market analysts and a visiting fellow at the Institute for International Economics, suggests that 'oil-exporting countries may decide to adjust their price band to reflect the falling value of the dollar'. If the dollar continues to slide, he warns, we could see oil prices rising from the current $38.18 a barrel to a record high of $40 by midsummer. There are other dark clouds on the horizon. US crude oil inventories are at the lowest point since the mid 70s, and the retail gasoline market is operating with little reserve margin as we move into the summer months, where more travel will increase demand. The dwindling oil reserves are made worse by the White House decision to replenish the strategic petroleum reserve, further reducing the amount of gasoline available. Verleger says gasoline could climb as high as $3.50 a gallon before levelling off at $2 by the autumn. How high prices eventually soar could depend on still other factors, including potential oil disruptions in Venezuela and the Middle East. There is also the prospect that one or two major refineries might fail during peak demand this summer - not that unusual when increased consumer pressure forces refineries to produce at peak capacity without taking the time for proper maintenance. Here is where events potentially begin to feed off each other, creating the conditions for the perfect storm for the economy. If the price of oil increases to $40 a barrel with an accompanying rise in gasoline prices, the already weak economic recovery could stall. How then do we lower the price of a barrel of oil? We'd have to strengthen the value of the dollar so that Opec would not be forced to raise prices to compensate for the deteriorating value of the currency. But the dollar's value is declining because of America's growing debt. The IMF is so concerned about US debt - the result of rising budget deficits and trade imbalance - that it issued a report warning that if steps weren't taken to reverse the trend, it could threaten the financial stability of the world economy. An ever-weaker dollar makes foreign investors less interested in financing the mushrooming US debt. The US could raise interest rates, making it more attractive for foreign investors, but that would mean higher interest rates for US companies and consumers, which could dampen the already weak recovery and send us back into a recession in the US and around the world. So we have all the conditions coming together to create the perfect economic storm: record oil prices triggering a restriction in US economic growth and an increase in the federal budget deficit, accompanied by further erosion in the value of the dollar - with increased budget deficits and the diminished value of the dollar leading in turn to higher interest rates to convince foreign investors to lend the US additional money, followed by a further retraction of the US economy as rising interest rates lead to a drop in domestic investment and consumption. The cascade of events touches off a tsunami that engulfs the rest of the global economy, submerging the world in deep recession. As long as the US and global economy are increasingly dependent on an ever-dwindling supply of oil from the Middle East, the conditions for a perfect economic storm will continue to haunt us. The solution, in the long run, is to wean the world off its dependency on oil. That would require much tougher fuel efficiency standards, greater energy conservation measures, support of hybrid vehicles and a switch to renewable sources of energy. Short of that, expect the storm clouds to gather in intensity. http://www.guardian.co.uk/comment/story/0,3604,1176401,00.html

Subject: Wake Me When It's Over From: jennifer To: B.B. Date Posted: Sun, Mar 28, 2004 at 14:48:14 (EST) Email Address: Not Provided Message: There is no economic analysis here at all. So, who cares for the storm sloshing?

Subject: Re: Wake Me When It's Over From: Pete Weis To: jennifer Date Posted: Mon, Mar 29, 2004 at 00:25:42 (EST) Email Address: Not Provided Message: When, in history, have a majority of economists, academic or otherwise, ever been able to predict or often even detect as it was happening any of the many economic downturns that have occurred over the last two hundred years? Has economic analysis advanced very much at all since its earliest beginings? Once again, we get to find out. Presently a majority of economists are using there analytical training and experience to say they believe the US economy is not headed back into recession, that eventually employment will come along and the consumer will hold up since his debt levels will stay manageable. Apparently, the majority of economists think the current account deficit is not presently a serious problem. The beauty of this time, in which we live, is that we will get the answers to these questions, probably in the coming year or two. Lets face it, if employment doesn't come back in the next year or two, or the Japanese or Chinese decide our economy and/or the dollar are too much risk and stop or slow their financing of our heavy spending habits, or a faltering stock market drives down consumption we'll definitely be headed for another recession, perhaps a deep prolonged one. That's my economic analysis - what's yours? I figure I probably have a better shot at economic 'analysis' than the majority of economists out there, since as far as I can determine, economists, as a group, are batting a big fat 'zero'. Economists seem to get it wrong 100% of the time when we're on the brink of a recession or depression. Now, admittedly, this doesn't say much about my own miserable abilities - it's just that I needn't aim too high to get a better batting average. There have been some notable exceptions amongst economists recently -Robert Shiller at Yale and Stephen Roach at Morgan-Stanley who have shown independent thinking. But independent or original thinking is extremely rare when it comes to economists IMO. Certainly the 'world is not coming to an end' as someone in this thread stated. But that's not what is at issue here. We're talking about which way each of us views the direction of the economy. It's not about being 'positive' or 'negative' it's about how each of us view this economy. People seem to feel threatened by what they perceive as 'negative' views on the economy. But if we all had the same views there would be no point to this web site.

Subject: Re: Wake Me When It's Over From: B.B. To: Pete Weis Date Posted: Mon, Mar 29, 2004 at 16:48:40 (EST) Email Address: Not Provided Message: Wow, I had no idea that post would be so popular. I agree with you, Pete. The last access I had to the internet, I was only able to briefly glance at the replies, and the first thing that popped into my head was what you posted below, and say again here, that a majority of economists have been unable to predict most market downturns. I didn't post this because I thought it would definitely come to pass (nor does the author, I don't think), but because it contained a lot of things we should be thinking about. It seems alot of people spend a great deal of time and energy rationalizing whatever current situation there is as good, rather than spending that energy trying to figure out solutions to problems we have or might have in the future. I would add one more economist to your list of independent thinkers who saw the last recession coming: Doug Henwood.

Subject: Doug Henwood From: Terri To: B.B. Date Posted: Mon, Mar 29, 2004 at 17:36:13 (EST) Email Address: Not Provided Message: Doug Henwood is clever. Please tell us what led him to see the last recession in the offing.

Subject: Re: Doug Henwood From: B.B. To: Terri Date Posted: Tues, Mar 30, 2004 at 12:06:53 (EST) Email Address: Not Provided Message: Well, I am not clever, so I will let him tell you in his own words: http://www.leftbusinessobserver.com/Dow7000.html http://www.leftbusinessobserver.com/Dow36000.html Brad DeLong (whom some people on this site seem to be a fan of, and you may or may not be) says Doug Henwood's book After the New Economy is 'the best single new economy book to read'.

Subject: Thanks From: Terri To: B.B. Date Posted: Tues, Mar 30, 2004 at 13:20:52 (EST) Email Address: Not Provided Message: Nice stuff....

Subject: Peter Weis - You Argue Well From: Jennifer To: Pete Weis Date Posted: Mon, Mar 29, 2004 at 14:15:13 (EST) Email Address: Not Provided Message: Never fear, I always take you comments seriously since they are always carefully developed. Allow me to be comical at times, but know that I will consider the problems you present thoroughly.

Subject: Re: Peter Weis - You Argue Well From: Pete Weis To: Jennifer Date Posted: Mon, Mar 29, 2004 at 21:42:41 (EST) Email Address: Not Provided Message: I need to remember not to take myself too seriously. At times I get a little wound up.

Subject: Predicting From: Jennifer To: Jennifer Date Posted: Mon, Mar 29, 2004 at 17:39:05 (EST) Email Address: Not Provided Message: As Emma noted: Trying to predict and time macro economic changes is important for policy makers, but deadly for investors.

Subject: Re: Predicting From: Pete Weis To: Jennifer Date Posted: Mon, Mar 29, 2004 at 22:01:09 (EST) Email Address: Not Provided Message: My question - if you are in the stock market aren't you, in fact, making a 'bet' (if not a prediction) on where the economy and therefore the markets are headed? Isn't it, at times, beneficial to be prudent like Buffet is now or when Buffet was in the late 90's? What's wrong with an investor looking at a struggling US economy and a falling dollar and placing his or her investments in funds which invest in overseas fixed income securities where they haven't the government debt levels we have (such as Australia and Switzerland), where they pay higher yields and their currency is appreciating against the dollar? Wouldn't this be less risky than the US stock markets?

Subject: Re: The perfect storm that's about to hit From: Pete Weis To: B.B. Date Posted: Sun, Mar 28, 2004 at 11:30:04 (EST) Email Address: Not Provided Message: B.B. This article reveals problems which most of us are unwilling to consider. We tend to either diminish them or ignore them. As the article points out, our economy (in its present state) is very vulnerable to any significant further rise in oil, a rise in interest rates, or significant reduction in Japan's or China's willingness to continue funding our current account deficit. I might add to this: our economy, in its present state, is vulnerable to any prolonged drop in the stock markets and the drop in consumption which inevitably follows. Thus far, the Fed as been able to offset the normal drop in consumption which goes hand in hand with a bear market by introducing unprecedented rate drops. But we've pretty much come to the end of the line with these rate drops. Some of this looks alot like the 70's - the increasing oil prices, falling dollar, and the threat of increasing interest rates. But a big difference is our present sizeable twin deficits. Our twin deficits were just begining in the 70's. Back then we didn't depend on heavy borrowing from foreign central banks to keep our economy afloat - now we do. Again, it's something we often don't want to know about, but we should consider the possibilities and how they might effect us personally.

Subject: Hedging From: Emma To: Pete Weis Date Posted: Sun, Mar 28, 2004 at 17:46:50 (EST) Email Address: Not Provided Message: Easy to hedge against the dollar by buying an index of foreign stocks. But, do you really want to hold the Nikkei Index? Japan has actually been the poorest performing stock market since 1989. That may have changed finally, but the risks are substantial. Also, energy stocks can be bought. The point is investors can protect against changes in economic conditions.

Subject: Not Now From: Emma To: Pete Weis Date Posted: Sun, Mar 28, 2004 at 13:53:35 (EST) Email Address: Not Provided Message: There has been a bull market in bonds since 1981, through all the debt. There is a bull market in stocks and real estate. The dollar, which may rise or fall for years with no harm, is stable. The problem is in the labor market, and that can be addressed with decent fiscal policy as we had during the 1990s.

Subject: Re: Not Now From: Pete Weis To: Emma Date Posted: Mon, Mar 29, 2004 at 01:43:34 (EST) Email Address: Not Provided Message: Ask yourself why there has been bull markets in both bonds and real estate. Then ask yourself if the conditions that promoted these bull markets are still in place. Also, is this a true bull market in stocks or was it merely a bear market rally? We had record inflows into mutual funds in January and February by small investors - hope you're right about this being a bull market. Has any bear market in history ever ended with PE's above 20? Has any bear market in history ever ended with PE's above 10?

Subject: Bull Market From: Emma To: Pete Weis Date Posted: Mon, Mar 29, 2004 at 16:28:56 (EST) Email Address: Not Provided Message: The point of investing is finding companies that are well valued given future earnings prospects. Playing price/earnings numbers games with the entire market is a timer's foolish game that is sure to be a losing strategy. We are in bull market in stocks that extends to almost every country and every investment sector, what other name you want to call it makes no difference. Eventually the market will turn down. So?

Subject: Economagic From: Jennifer To: Pete Weis Date Posted: Mon, Mar 29, 2004 at 14:17:58 (EST) Email Address: Not Provided Message: Statistical questions on economic history can often be answered by referring to 'economagic.' A great tool.

Subject: Re: The perfect storm that's about to hit From: raj To: B.B. Date Posted: Sat, Mar 27, 2004 at 23:54:09 (EST) Email Address: raj@interchange.ubc.ca Message: This does sound kind of sensationalistic. I mean, for all of that to happen during the three months which summer/'driving season' is around seems pretty unlikely.

Subject: When the World comes to an End From: Terri To: raj Date Posted: Sun, Mar 28, 2004 at 13:36:27 (EST) Email Address: Not Provided Message: When I read such predictions, I know there will be no such outcomes. The world is not ending for America. We will drive and air condition through the summer, the Chinese and Japanese will sell to and buy from us, even buy our debt, the dollar will rise or fall but be fine. Of course, we need better energy policy but this scare mongering is absurd.

Subject: Not Now From: Emma To: Terri Date Posted: Sun, Mar 28, 2004 at 13:43:33 (EST) Email Address: Not Provided Message: There is all sorts of essential work to be done through the world. The need is fiscal programs that foster employment in infra-structure from America to India: http://www.nytimes.com/2004/03/25/international/asia/25INDI.html India has a vast primary health care system to serve its billion people, with clinics for every 3,000 to 5,000. But the system is often just a skeleton. New studies have documented the startling, damaging dimensions of chronic absenteeism — and not just in India. Researchers for the World Bank discovered through large national surveys that medical personnel were absent from their public posts 35 to 40 percent of the time in India, Bangladesh, Indonesia and Uganda, and about a quarter of the time in Peru. Researchers from the Massachusetts Institute of Technology and Princeton, in a detailed survey of 100 villages here in Rajasthan, in north India, found a no-show rate of 44 percent. When combined with absences for meetings and other work-related reasons, these vital clinics were closed more than half the time. As the United Nations leads a global effort to prevent millions of deaths from AIDS, tuberculosis, malaria and a range of childhood illnesses, the fissures in public health systems are emerging as a main obstacle....

Subject: It would be better if grownups were in charge. n/m From: David E... To: raj Date Posted: Sun, Mar 28, 2004 at 01:09:45 (EST) Email Address: daveellis_39@hotmail.com Message: n/m

Subject: Iraq's Next Shock Will be Shock Therapy - Stiglitz From: B.B. To: All Date Posted: Fri, Mar 26, 2004 at 22:13:04 (EST) Email Address: Not Provided Message: Iraq's Next Shock Will be Shock Therapy by Joseph E. Stiglitz With one exception - the actual military 'victory,' which looks increasingly Pyrrhic - President Bush's Iraqi adventure has been marked by repeated failures. Scant signs of weapons of mass destruction have been found, and, according to David Kay, America's chief arms inspector, the stockpiles either never existed or were destroyed years ago. So Bush simply ignored the data, gathered by Hans Blix's UN inspectors, and the evidence on which he based his case for war seems to have been largely fabricated. Worse still, it is now clear that Bush never had a plan for when the war ended. Instead of moving towards peace and democracy, the situation in Iraq remains so dangerous that Paul Bremer, the American occupation leader, is using instability as his rationale for avoiding democratic elections this year. Of course, America tried to keep real order in some places, revealing a lot about what it truly valued in Iraq. When Baghdad fell, the oil ministry was quickly protected, while museums and hospitals were allowed to be looted. If there was not outright corruption in the $7 billion in contracts awarded to Halliburton, whose former chairman was Vice President Dick Cheney, there was undoubtedly a strong whiff of crony capitalism. Halliburton and its subsidiaries have been ensnared in charges of war profiteering ever since, and have had to pay back millions of dollars to the US government. Now, everyone agrees, the most important task - beyond creating a democratic state and restoring security - is reconstructing the economy. Blinded by ideology, however, the Bush administration seems determined to continue its record of dismal failures by ignoring past experience. When the Berlin Wall fell, the countries of Eastern Europe and the former Soviet Union began transitions to a market economy, with heated debates over how this should be accomplished. One choice was shock therapy - quick privatization of state-owned assets and abrupt liberalization of trade, prices, and capital flows - while the other was gradual market liberalization to allow for the rule of law to be established at the same time. Today, there is a broad consensus that shock therapy, at least at the level of microeconomic reforms, failed, and that countries (Hungary, Poland, and Slovenia) that took the gradualist approach to privatization and the reconstruction of institutional infrastructure managed their transitions far better than those that tried to leapfrog into a laissez-faire economy. Shock-therapy countries saw incomes plunge and poverty soar. Social indicators, such as life expectancy, mirrored the dismal GDP numbers. More than a decade after the beginning of the transition, many postcommunist countries have not even returned to pre-transition income levels. Worse, the prognosis for establishing a stable democracy and the rule of law in most shock-therapy countries looks bleak. This record suggests that one should think twice before trying shock therapy again. But the Bush administration, backed by a few handpicked Iraqis, is pushing Iraq towards an even more radical form of shock therapy than was pursued in the former Soviet world. Indeed, shock therapy's advocates argue that its failures were due not to excessive speed - too much shock and not enough therapy - but to insufficient shock. So Iraqis better prepare for an even more brutal dose. There are, of course, similarities and differences between the former communist countries and Iraq. In both cases, economies were pervasively weakened before they collapsed. But the Gulf War and sanctions weakened Iraq's economy much more than communism weakened the USSR's. Moreover, while both Russia and Iraq are heavily dependent on natural resources, Russia at least possessed demonstrated abilities in some other areas. Russia had a highly educated labor force, with advanced technological capabilities; Iraq is a developing country. To be sure, Russians went decades without opportunities to exercise entrepreneurship, while Ba'athist rule did not suppress Iraq's merchant class and entrepreneurial spirit in any comparable way. But Iraq's location puts it at a distinct disadvantage compared to Russia and many postcommunist states: none of Iraq's neighbors is doing particularly well economically, while many postcommunist countries sat next door to the European Union during the 1990's boom. Most importantly, ongoing instability in the Middle East will deter foreign investment (other than in the oil sector). These factors, together with the ongoing occupation, make quick privatization particularly problematic. The low prices that the privatized assets are likely to fetch will create the sense of an illegitimate sell-off foisted on the country by the occupiers and their collaborators. Without legitimacy, any purchaser will worry about the security of his property rights, which will contribute to even lower prices. Furthermore, those buying privatized assets may then be reluctant to invest in them; instead, as happened elsewhere, their efforts may be directed more at asset stripping than at wealth creation. If Iraq's prospects are as dismal as my analysis suggests, any international contribution to the US-driven reconstruction effort is likely to be little more than money flushed down the drain. This does not mean that the world should abandon Iraq. But the international community should direct its money to humanitarian causes, such as hospitals and schools, rather than backing American designs. The World Bank and other institutions considering assistance through loans face even greater difficulties. Piling more debt onto Iraq's already huge obligations will only make matters worse. If Iraq's economy falters as a result of a misguided economic reconstruction program based on shock therapy, the country will be further indebted with little to show for it. The dream of Iraq's American invaders was to create a stable, prosperous, and democratic Middle East. But America's economic program for reconstructing Iraq is laying the foundations for poverty and chaos. http://www.project-syndicate.org/commentaries/commentary_text.php4?id=1476&lang=1&m=contributor (I find it hard to believe he takes that last paragraph seriously, but the rest of the article seems top notch)

Subject: The road out of hell From: Economist To: All Date Posted: Fri, Mar 26, 2004 at 21:19:17 (EST) Email Address: nma@hotmail.com Message: 'Ten years after the genocide, Rwanda is at peace, on the mend and outwardly serene.This is an 'astounding?!' achievement, given what the (a) country has suffered.In the 13 weeks after April 6th 1994, between 500,000 and 800,000 were murdered.'... 650,000:3,000 = ? Who cares?

Subject: Interest Rates From: Emma To: All Date Posted: Fri, Mar 26, 2004 at 14:57:57 (EST) Email Address: Not Provided Message: Defending the dollar may be useful at times against speculators. Robert Rubin certainly did just that by buying dollars after 1993. But, adjusting interest rates to change the value of the dollar is harming the economy for the sake of currency speculators. Fruitless and harmful. There are still decent yields from corporate bonds funds at Vanguard. The Federal Reserve can not act to satisfy older investors, and older investors should carry stocks as well as bonds.

Subject: Fixed Income From: Emma To: Emma Date Posted: Fri, Mar 26, 2004 at 15:46:35 (EST) Email Address: Not Provided Message: Simply because an investor wishes to be quite conservatvie does not mean there are not useful stock and bond portfolios. We have been through an extended bull market in bonds. Bond investors should have ample capital gains running as long as 22 years to go along with yields that have been declining. There is every reason for long term bond investors to be pleased with the past, and prepared to give back some capital gains for higher yield in time.

Subject: Guessing From: Jennifer To: Emma Date Posted: Fri, Mar 26, 2004 at 17:53:23 (EST) Email Address: Not Provided Message: Though analysts have been guessing that interest rates will soon be moving up for the past 2 years, they have been quite wrong and cost overly cautious bond holders dearly. There simply is no telling when rates will begin a long term rise. The 10 year treasury could rise to 5% quickly or stay below 4% for a long while yet.

Subject: Dividends From: Emma To: Emma Date Posted: Fri, Mar 26, 2004 at 17:01:57 (EST) Email Address: Not Provided Message: By the way, stocks dividends are a form of fixed income that can be relied on with a basket of stocks despite the swings in stock prices. The need is to have enough saved to have a portfolio of income generating stock and bond funds. Of course, saving can be a difficult problem unless there is a decent and steady income through a work life.

Subject: Interest Rates From: Jennifer To: All Date Posted: Thurs, Mar 25, 2004 at 17:18:26 (EST) Email Address: Not Provided Message: http://www.j-bradford-delong.net/movable_type/2004_archives/000534.html Gerard Baker: Shackle these sado-monetarists: Sado-monetarism, a deviancy popular among certain central bankers and commentators in the 1980s, is out of the closet and back in respectable living rooms. Even as the US economy is failing to generate sufficient growth to employ its expanding workforce, as the core inflation rate has fallen by a third in the past year, as the stock market slides below where it started the year and as the global economy is held hostage once again to war, Middle East terror and surging oil prices, there is a chorus of calls for the Federal Reserve to raise interest rates to squeeze the world's largest economy harder. The Economist, a sado-monetarist of long standing whose complex psychology has been further tangled in recent years by an unhealthy bubble fixation (stock bubbles, housing bubbles, bond bubbles, dollar bubbles, hubble-bubble, trouble-bubble), is leading the charge. An editorial two weeks ago said: 'A rise in rates could help to avoid another dangerous bubble by warning investors and homebuyers that asset prices cannot rise for ever.' Hurt me! The New York Times, a relatively new convert to self-flagellation, says the same thing. The paper condemned the federal open market committee's decadent decision last week to leave policy unchanged and called for an immediate increase in interest rates. 'Rates are so low that the Fed has plenty of room to move before being accused of adopting a restrictive monetary policy. It needs to get started.' Punish me!

Subject: Re: Interest Rates From: Walk To: Jennifer Date Posted: Fri, Mar 26, 2004 at 09:52:48 (EST) Email Address: Not Provided Message: 'A rise in rates could help to avoid another dangerous bubble by warning investors and homebuyers that asset prices cannot rise for ever.' Why are bubbles dangerous? And why is it the Fed's responsibility to mitigate the 'exuberance'? They certainly did their best in the face of the dot.com feeding frenzy by raising interest rates. Did it make any difference? No. The bubble popped and the Fed had to immediately reverse course.

Subject: Re: Interest Rates From: Pete Weis To: Jennifer Date Posted: Thurs, Mar 25, 2004 at 23:55:50 (EST) Email Address: Not Provided Message: Well, if there is, in fact, no bubbles to worry about (as Gerard seems to think) and the economy is actually coming along as 99% of the prognosticators on Wall Street seem to think, then why not raise rates a little to support the dollar and help out those retirees on fixed income investments? Come on Gerard - you really believe in those inflation numbers? Do you live in America? Who, in the world, pays the bills in your house?Definitely not you.

Subject: Re: Interest Rates From: Walk To: Pete Weis Date Posted: Sat, Mar 27, 2004 at 15:10:31 (EST) Email Address: Not Provided Message: I don't think that monetary policy should be used to help out specific sectors of our economy - especially the current crop of entitled retirees. But, my point is not that there isn't bubbles, but why care? Isn't the effect of a monetary policy to move the Aggregate Demand curve. If we are overheated and in an inflationary mode, decrease AD by the various methods the Fed has at hand. If we are below full employment, then attempt to shift AD out. But a bubble is just that. Maybe a bowing out along the curve somewhere. Let it pop or allow the rest of the AD schedule to catch up.

Subject: Re: Interest Rates From: Pete Weis To: Walk Date Posted: Sat, Mar 27, 2004 at 17:14:19 (EST) Email Address: Not Provided Message: So there are no consequences for asset bubbles, like the stock and real estate markets, popping? Would it effect consumption? What effect would stagflation such as we had in the '70's (with a faltering dollar and rising oil prices) have on a housing market which has gone up by 50-60% in many urban areas on the west coast, northeast and other selected cities in the southeast and southwest? Put that next to an employment picture which is not so rosey and tell me again this won't be a problem. What percentage of homes today have 20% or more equity in them, even at today's high valuations? What does it cost to sell a home? If 20-30% of homes across America go 'upside down' relative to their mortgage/valuation levels, what effect would this have on our financial system? Furthermore, if housing valuations start to falter what will replace this most important segment of our economic stimulus? Somehow, if our housing market begins to go in reverse, I don't see it as a 'bowing out along the curve somewhere'. I think we get to see this whole thing begin to play out in the next 2 to 5 years.

Subject: Re: Interest Rates From: Walk To: Pete Weis Date Posted: Sun, Mar 28, 2004 at 12:40:37 (EST) Email Address: Not Provided Message: I guess I have to disagree with your premises. First of all, I don't beleive there is a real estate bubble. Supply and demand are doing their normal thing here. Second, our economy is doing quite well right now and the employent picture is, in fact, rosey - 5.6 unemployment rate is pretty darn good. Third, although gas prices are rising, they are still very cheap when corrected for inflation. Interest rates very low, inflation very low, expanding economy, low unemployment. Things look pretty good. It would probably take someone like Carter to screw this up.

Subject: Awful Labor Market From: Emma To: Walk Date Posted: Sun, Mar 28, 2004 at 13:46:31 (EST) Email Address: Not Provided Message: This is the worst labor market period since 1945, in terms of job creation and wage and benefit increases.

Subject: Not sure I agree... From: Walk To: Emma Date Posted: Sun, Mar 28, 2004 at 14:12:44 (EST) Email Address: Not Provided Message: Well, 5.6 UR is not bad. Only 0.6% of the labor force is out of work by the text book definition. Perhaps there is job creation but they are being filled overseas becuase of competitive pressures. Wages and benefits are surley not going to rise in the short term. What do you suggest be done? Wage and benefit floors only cause more unemployment. If you were president, what would you do?

Subject: epinet From: Emma To: Walk Date Posted: Sun, Mar 28, 2004 at 14:55:35 (EST) Email Address: Not Provided Message: Take a look at 'epinet.' This is sadly not a question of agreement, but labor department statistics. The unemployment rate is not the relevant statistic in this period. A mark of how weak the labor market is lies in the Federal Reserve holding to a 1% Federal Funds rate, and the 40 year lows for bond yields. When the labor market finally improves interest rates will finally climb. This is easily the poorest labor market recovery from a recession since 1945.

Subject: Re: Interest Rates From: Econochick To: Pete Weis Date Posted: Fri, Mar 26, 2004 at 19:07:11 (EST) Email Address: Not Provided Message: If interest rates were raised, it would certainly burst the real estate bubble. But wouldn't that hurt most Americans - especially in light of unemployment levels? The weaker dollar does make our goods more competitive abroad. Given this, with a stronger dollar at this point we would probably lose even more jobs to offshoring (scary to think!!). Also, the idea of lower interest rates is to stimulate investment in the private sector which will hopefully create more jobs. But there's a lag between investment in a new business or branch and hiring new people because you obviously don't hire people the day you borrow money for your new venture. We've recently had the internet bubble burst and, since there was nothing to replace it, there will be some lag in re-employing those folks and absorbing new labour coming into the market. An increase in interest rate now would stall budding businesses. I understand your point about retirees but I'm not sure that we wouldn't be giving up too much in our economy to boost the incomes of retirees by a small amount. One idea for retirees is to take some of the investment out of bonds and put it into large, mature companies that pay a high dividend. Dividends are taxed at only 15% now and some companies pay very substantial ones.

Subject: Housing From: Emma To: Econochick Date Posted: Sat, Mar 27, 2004 at 16:38:07 (EST) Email Address: Not Provided Message: Simply because real estate prices have increased in desirable areas, does not mean there is a housing bubble. There is no reason to believe there will be much of a decline in housing prices when interest rates rise unless there is a deep recession, and the Federal Reserve will try to prevent a recession by working gradually when the time comes to raise rates.

Subject: Re: Interest Rates From: Pete Weis To: Econochick Date Posted: Sat, Mar 27, 2004 at 11:30:12 (EST) Email Address: Not Provided Message: Actually, I believe raising interest rates would cause some serious problems at this point. But isn't it interesting to hear calls from some pretty savvy people (at the 'Economist', Bill Gross, the chief economist at Morgan-Stanley, and now the New York Fed) to raise rates even when they themselves know this would cause alot of pain. Are they thinking if the Fed doesn't do it now then at some time, perhaps in the near future, the 'market' will do it anyway? You wonder if they believe the 'battle' for our economy is lost on the ground we now occupy and they are thinking it's best to cut our loses and seek higher ground to make a more viable stand? Unfortunately, the weaker dollar hasn't done much to reduce our current account deficit, since so far the Japanese and Chinese have concurrently weakened there currencies. I believe the Europeans will be forced to follow America's and Asia's example. We talk about avoiding the damaging tariff wars of the thirties but today we have currency wars which attempt to accomplish the same goal as broad based tariffs. I think its a risky strategy especially for a nation with such large debts. Can we continue to promote a long, controlled drop in the dollar without any serious accidents (a sudden, steep collapse)? The irony, is that any stoppage in Japan's and China's willingness to play this game could bring on this collapse. Maybe it all comes down to the world's faith in the US consumer and the US dollar. As long as US consumers keep buying and our dollar doesn't appear ready for a freefall then our creditors will continue lending. Any significant slowdown by the US consumer or overly steep drop in the dollar (or even rumors of real trouble with the dollar) then our creditors may 'pull the plug'. Right now, with little to no room to lower interest rates, there is no real 'downside protection' for the bond, stock or real estate markets. Your suggestion for elderly investors to get into the stock market by buying into 'large, mature companies that pay high dividends' is exactly what our parents and grandparents who depend on investments to pay monthly living expenses are being forced to do. But in a broad, prolonged market turndown they could be putting their life savings at risk. This is what we used to tell retirees not to do. If even Buffet sits there with 36 billion in cash, are we going to tell our parents and grandparents to get into the stockmarket at this time? Anyway, these are interesting times. Ten years from now economists and others may me talking about this time as a moment where we came close to disaster but managed to pull through. Or they may be debating about why things went so wrong - should Greenspan have raised rates in 1996-1997, are asset bubbles more dangerous to an economy than inflation, is a Fed Chairman really independent from the pressures of political influence and the power of public opinion? We don't know the answers to these questions yet, but it will be amazing to see these events play out.

Subject: Re: Interest Rates From: Terri To: Econochick Date Posted: Fri, Mar 26, 2004 at 21:03:57 (EST) Email Address: nma@hotmail.com Message: 'The weaker dollar does make our goods more competitive abroad.'Unilateral acting = raising global interdependant demand?.'Given this, with a stronger dollar at this point we would probably lose even more jobs to offshoring (scary to think!!).'Not necessarily.'Also, the idea of lower interest rates is to stimulate investment in the private sector which will hopefully create more jobs.'The raise of productivity and competivity can only be achieved through the purchasing of machines and the firing human resources?'But there's a lag between investment in a new business or branch and hiring new people because you obviously don't hire people the day you borrow money for your new venture.'Yes and No.(No lag, short term effect.Yes, long term effect.) 'We've recently had the internet bubble burst and, since there was nothing to replace it...'Petrol?'An increase in interest rate now would stall budding businesses.'Yes! 'One idea for retirees is to take some of the investment out of bonds and put it into large, mature companies that pay a high dividend. Dividends are taxed at only 15% now and some companies pay very substantial ones.'Sorry, too late.

Subject: Re: Interest Rates From: Jennifer To: Pete Weis Date Posted: Fri, Mar 26, 2004 at 16:57:13 (EST) Email Address: Not Provided Message: Remember that inflation small or large effects each family differently. Gasoline is a problem if you drive large distances, but not if you walk to work or ride a bus or train as in New York City. There are selective price increases, but there is little general inflation in Amercia or Europe and deflation in Japan.

Subject: Re: Interest Rates From: Pete Weis To: Jennifer Date Posted: Sat, Mar 27, 2004 at 11:51:21 (EST) Email Address: Not Provided Message: 'There are selective price increases, but there is little general inflation in America or Europe and deflation in Japan.' Well, the 'selective price increases' seem to be the regular monthly bills we pay - mortgage payments, grocery bills, insurance bills, heating and electric bills, medicines (amount not covered by insurance), college expense for your child, etc. There also have been considerable increases in the dollar costs of raw materials and energy used by US manufacturers. You may argue that low interest rates have reduced mortgage payments, but in fact, home sellers have jacked up the price of their homes to take away any advantage for the buyer. Furthermore, most of those refinancing have not taken advantage of their refinancing to lower their monthly mortgage - they've taken Greenspan's advice and increased their mortgages (often with higher monthly payments - despite lower rates) to help the economy survive just a bit longer.

Subject: A New U.S Economy From: Mik To: All Date Posted: Thurs, Mar 25, 2004 at 16:39:15 (EST) Email Address: Not Provided Message: I'm not a fan of the current administration but a thought hit me, in which they may actually be doing some good (perhaps not intentionally) - and I would welcome some discussion (especially from the ever cool Econochick) I was watching a TV program that spoke of how Keynes first gained credibility by the US administration. It appeared at first that the US administration did not fully believe that Government had a big role to play in stimulating the economy (as Keynes suggested). Leading up to the second World War, the US started spending heavily in developing arms and found itself stimulating the economy well beyond what they imagined. So many industries sprung out of this huge arms spending, that Keynes theory gained serious recognition by the US. The horrible thought struck me when I learned about the vast amounts of money being spent by the current administration in the Military. Then the second thought hit me - what are the current spin-offs of the military spending and will it not have major positive impacts in the US economy? What will the US economy of the future look like? Look at the huge amounts being spent in missile technology and the huge leap forward the US will make in rocket science (as an example). What about the huge leaps in avionics, computer systems, etc, etc. Could this be a repeat of the WWII effort? As we move into the 21st century, could the US economy of the future be based on hightech rockets, super jet liners, ultra-advanced computer technology, etc, etc? Comments?

Subject: Re: A New U.S Economy From: Pete Weis To: Mik Date Posted: Sat, Mar 27, 2004 at 16:14:13 (EST) Email Address: Not Provided Message: Perhaps the biggest economic benefit of WW II (for the US) was the fact that America was the only industrial power in the world to emerge unscathed. All the other industrial powers had their factories bombed to rubble. It took them until the late '60's and '70's to catch up. Based on that, our best chance for a good economic future would be to bomb European, Japanese, Chinese manufacturing plants and Indian Universities into the stoneage. In addition, we might consider napalming competing agricultural regions of the world. Sorry, I couldn't resist. But once the anger subsided and desperation took over we would be in the same position we were in immediately after WW II - minus the great supply of natural resources we had at the time.

Subject: Re: A New U.S Economy From: Econochick To: Pete Weis Date Posted: Sat, Mar 27, 2004 at 18:54:24 (EST) Email Address: Not Provided Message: Pete!!!! Don't be mean!!! Who's going to buy our goods to reduce that current account deficit if we reduce Europe to rubble??!! And then we'll have to have another Marshal Plan....too much work. Sigh. Besides, just wait, if Germany's an indicator Europe will do itself in. We won't be better off.

Subject: Re: A New U.S Economy From: B.B. To: Pete Weis Date Posted: Sat, Mar 27, 2004 at 16:20:46 (EST) Email Address: Not Provided Message: I thought that was the plan. Quite right, by the way.

Subject: Re: A New U.S Economy From: Econochick To: Mik Date Posted: Fri, Mar 26, 2004 at 17:57:58 (EST) Email Address: Not Provided Message: This is a very interesting question indeed. Although I would have to wonder why you thought the current administration means to do 'no good'. Logically, it is beneficial for ANY administration to try to make things better because it wants to be re-elected. For instance, I doubt that Clinton intended to weaken our National Defence by significantly reducing the intelligence department. He was trying to cut government spending post-cold war - a good thing. The dissaray it left the department in (according to Clarke) was certainly an unintended consequence. By the same token, it doesn't benefit the Bush administration to destroy the country it is trying to run. Some decisions may be better than others but I don't think any of our past or present presidents INTEND to destroy the country. But I digress... Keynes developed his demand-side model (or when it became popular - I've now forgotten which) around the time of the depression - which was pretty much world wide. There are (simplictically) two sources of economic stimulus - government and private sector. During the early 30's the private sector was completely dead and no-one had money to invest in private industry. Thus, the government began to embrace a demand-side economic strategy and began to spend spend spend. In fact, the first such spending was to build things like public parks - anything to employ people. The idea is that if the government goes into debt to employ people, those people will have money to spend and invest and that would stimulate the private sector. There has to be a balance between demand and supply-side. The supply-side (private investment) provides private sector jobs and incomes to tax that the government can then redistribute in the form of social welfare and pay down the deficit. Russia tried to go without private industry and it's economy collapsed. And (I'm Russian) it was a MISERABLE existance. Our (American) government was not stupid enough to make that mistake. WWII came at a very advantageous time because it provided a demand and supply-side stimulus. The demand-side came from our government spending on defence and the 'supply-side' came from European governments buying our goods in the lead up and during WWII. And you're absolutely right to point out how much innovation occured during that time. Plastic surgery, antibiotics and a lot of new technology were developed during that war. In my opinion, you are on the mark when you suggest that defense spending boosts GDP. However, I don't think we'll get the same boost to our economy that we got during that war for several reasons - unless we develop a 'killer app' in the process. First, the economy was in much much worse shape in the 1930's than it is now. I know people will say that our unemployment problem is lasting a long time now as it did then, but then our unemployment problem was long AND deep (much higher unemployment than now). Thus, the need for demand-side economics was high. Also, at the time the American manufacturing sector was much larger. I'm tempted to say it was over 50% of GDP but I don't remember off the top of my head. It is a much smaller part of our GDP now. So, you can do the math: huge growth in a huge sector of the economy means huge payoff, huge growth in a tiny sector of the economy, not much growth in GDP. In other words, if I were choosing an economic stimulus, I would not choose defense spending. I would spend on defense only because we needed defense specifically. Now, all bets are off if we develped a killer app type of thing that led to more innovation and to whole new industries. That happened during WWII. That's what you're talking about in the latter part of your post. In other words, a huge leap in a technology that creates a whole new industry - like PC's and internet. New technologies EXPAND the economy. We no longer travel along and within the curve of the 'economic frontier' (if I remember the name correctly) but we actually SHIFT the curve to the right - i.e. expand the economy. This is precisely how the US has grown its economy to the largest in the world BY FAR - twice the size of the second largest. From a previous post, I understand that Nat works in the field of technology and, in particular, software. So, it would be really interesting to hear what he thinks expecially about this last bit. Now, I am fairly certain that Krugman rejects the keynesian model for today's economy. Partially becauce of the much smaller manufacturing sector and partially because there is (compared to the 1930's) a very functional private sector. While he is not a supply-side economist, in his academic work (that's mostly my experience with him), he takes a balanced approach. So, perhaps more demand-side but not eliminating the private sector. I'm afraid that military spending is probably here to stay whether Mr. Kerry or Mr. Bush leads us in the next four years. Unfortunately, we need to beef up our intelligence departments, better the communications within departments and beef up defence of our interests abroad because of the now so-clear terrorist threat. As I sit in my NYC apartment, I often hear the air force planes patrolling our air space. It's unsettling. If that is the case, then let's hope for your scenario of whole new industries coming from that defence spending. We could certainly use a little stimulus in our economy, wouldn't you say? Thanks for bringing it up - it's an interesting point.

Subject: Re: A New U.S Economy From: Terror stoppa To: Econochick Date Posted: Sat, Mar 27, 2004 at 00:03:47 (EST) Email Address: Not Provided Message: Yes, lets put more troops in more countries. I think there are still 2 or 3 without US military bases. Big mistake. Also, we need to install more leaders friendly to US business interests. People in third world countries still want too much for their labor and natural resources. You'd think half a millenium of killing them would have woken them up. Apparently not. If we do all these things we should stop terrorism.

Subject: Re: A New U.S Economy From: Paul G. Brown To: Mik Date Posted: Fri, Mar 26, 2004 at 15:51:41 (EST) Email Address: Not Provided Message: Some data to chew on. Government spending, as a percentage of GDP, reached a peak of just over 40% during WWII. Fiscal stimulus on this scale is mind-boggling. But that was a time of national emergency, and very few would consider it a mistake. (BTW: Look at the jump in G as % of GDP post Roosevelt's election in 1932. That's a jump of 6%, but such was the output gap, and the hysteresis effect of 5 years of depression, that it had a relatively modest effect on GDP growth. But OK, let's allow that fiscal stimulus is a good thing. The question is, why would military spending be a better way of achieving these goals than, say, a national campaign to end US reliance on imported petro-chemicals? The scientific and technical challenges are at least as great, and the effort would have both short and long term benefits: national security implications, make the US a leader in the development and use of non-oil energy, etc, etc. The same argument goes for tax cuts. Reducing tax burden puts more money in the consumer's pockets which increases savings and consumption. But in the details not all tax cuts are created equal. Tax cuts to those with higher relative incomes creates, arguably, more saving than spending. Not a bad thing, when what is needed is additional capital investment, but it represents a missed opportunity (not to mention prolonged misery) in these times. BTW: I retract my earlier enthusiasm over Greenspan's willingness to point out 'turds on plates'. It's true that there is one there, and it's true that no one wants to mention it, but what Greenspan pointed to was not it.

Subject: Re: A New U.S Economy From: B.B. To: Paul G. Brown Date Posted: Fri, Mar 26, 2004 at 16:13:36 (EST) Email Address: Not Provided Message: Excellent point. Why shouldn't government fiscal stimulus programs be for helping people, instead of killing them? People will then reap the direct benefits of the spending program itself, in addition to any spin-offs that result from it. Of course we all know why this is unlikely to happen, but its an excellent point nonetheless.

Subject: Re: A New U.S Economy From: Mik To: B.B. Date Posted: Mon, Mar 29, 2004 at 18:04:47 (EST) Email Address: Not Provided Message: Thanks for your inputs guys. Econochick - again you make me smile with your insight. I just want to point something out - I said I don't like the current administration but I tried to point that although it wasn't their express intention - they may actually be doing something good if we think laterally. I'm sure the current administration means well... but... well... hey read Krugman's opinions on Bush and his merry men. Also note that I am sure there are many better places to commit gov spending and push the economy forward. Hey - no argument here. But considering the paradigm that Bush lives in - his angle is 'oil and military strength'. I'm just trying to analyse his angle not argue for or against it. Now I do want to highlight a point about 'rocket science'. I do believe that even in our modern age of a recent Mars landing, we are still in the baby stages or rocket science. This top aero-designer (who's name I think is Bert Rutan) made an amazing statement when he explained how our current technology has slowing dramatically in comparison with the jet-age of the 60's. Just recently we saw the launch of the 'X-prize' - a competition for a private organizations to put people in space for commercial purposes. And! last night I watched a test on a new aircraft that went to mach-7 in a study on getting man into space at a cheaper cost. China has now entered into the exclusive club of man missions to space. It is obvious, that we are on the frontier of a new dawn in civilisation and economics to suit. Ironically enough, the lessons that are going to be learnt out of the Star Wars program (in my opinion) are not going to be 'how to shoot down an incoming missile' but rather to spear head whole new rocket sciences and the economic ripple effect for the leading nations is going to be - whole new economic ventures. I just realised that I shouldn't have read Arthur C Clarke.... am I talking crap?

Subject: Re: A New U.S Economy From: Mik To: B.B. Date Posted: Mon, Mar 29, 2004 at 18:04:29 (EST) Email Address: Not Provided Message: Thanks for your inputs guys. Econochick - again you make me smile with your insight. I just want to point something out - I said I don't like the current administration but I tried to point that although it wasn't their express intention - they may actually be doing something good if we think laterally. I'm sure the current administration means well... but... well... hey read Krugman's opinions on Bush and his merry men. Also note that I am sure there are many better places to commit gov spending and push the economy forward. Hey - no argument here. But considering the paradigm that Bush lives in - his angle is 'oil and military strength'. I'm just trying to analyse his angle not argue for or against it. Now I do want to highlight a point about 'rocket science'. I do believe that even in our modern age of a recent Mars landing, we are still in the baby stages or rocket science. This top aero-designer (who's name I think is Bert Rutan) made an amazing statement when he explained how our current technology has slowing dramatically in comparison with the jet-age of the 60's. Just recently we saw the launch of the 'X-prize' - a competition for a private organizations to put people in space for commercial purposes. And! last night I watched a test on a new aircraft that went to mach-7 in a study on getting man into space at a cheaper cost. China has now entered into the exclusive club of man missions to space. It is obvious, that we are on the frontier of a new dawn in civilisation and economics to suit. Ironically enough, the lessons that are going to be learnt out of the Star Wars program (in my opinion) are not going to be 'how to shoot down an incoming missile' but rather to spear head whole new rocket sciences and the economic ripple effect for the leading nations is going to be - whole new economic ventures. I just realised that I shouldn't have read Arthur C Clarke.... am I talking crap?

Subject: Re: A New U.S Economy From: B.B. To: Mik Date Posted: Fri, Mar 26, 2004 at 11:16:38 (EST) Email Address: Not Provided Message: It worked for the Soviets. For a while. Tends to piss people off when almost none of the resources of a nation go toward their well-being, though.

Subject: Re: A New U.S Economy From: malcolm To: Mik Date Posted: Fri, Mar 26, 2004 at 02:37:37 (EST) Email Address: Not Provided Message: I think it may have some stimulatin effect but not as much as it did in WW2. Because now only a fraction of workforce work in defence industry. If that was the case to stimulate the economy, I think Russia would the richest country of the Earth. Because Russia spent bigger proportion of its GDP in Military for such a long time. bye

Subject: Re: A New U.S Economy From: Adrian B. To: malcolm Date Posted: Fri, Mar 26, 2004 at 09:35:36 (EST) Email Address: Not Provided Message: On the message board of a site dedicated to a liberal economist, a right-wing troll that thinks dropping the a-bombs on Japan was a good thing, Ronald Reagan was awesome, multinational corporations driving down wages and destroying the environment is a windfall for all, and people are poor cause they aren't innovative enough is 'cool'. Interesting site you have here.

Subject: Re: A New U.S Economy From: Nat To: Adrian B. Date Posted: Fri, Mar 26, 2004 at 10:52:03 (EST) Email Address: Not Provided Message: Hey, I am at the point where I am considering the use of fuel-air munitions to motivate my 14 year old to do his homework. Who says our military expenditures don't have a domestic application?

Subject: Re: A New U.S Economy From: Econochick To: Nat Date Posted: Fri, Mar 26, 2004 at 16:49:03 (EST) Email Address: Not Provided Message: Let me know how that works for ya, Nat!! I need all the advice I can get. Economics is child's play compared to raising kids, eh? LOL.

Subject: Ha Ha From: Emma To: Nat Date Posted: Fri, Mar 26, 2004 at 14:59:01 (EST) Email Address: Not Provided Message: Must do our homework!

Subject: Outsourcing From: Emma To: All Date Posted: Thurs, Mar 25, 2004 at 16:04:42 (EST) Email Address: Not Provided Message: http://www.epinet.org/content.cfm/webfeatures_snapshots February 2004: India's industry association of software and related companies (NASSCOM) published an analysis of recent trends indicating that the professional jobs in India's software export sector rose by 150,000 from 1999 to 2003. Given that 67.7% of its software exports go to the United States, this growth implies that Indian software jobs servicing the U.S. market have increased by roughly 100,000 over the last four years. The NASSCOM report also indicates that its two largest customers abroad are in the banking, financial services, and insurance industry (39% of exports) and in the manufacturing industry (12%). Both industries have traditionally employed many people to produce software in-house. Increased movement of work overseas that had been formerly done in-house at these companies may explain why U.S. jobs fell by 154,000 in software occupations but only 81,000 in software-producing industries between 2000 and 2002. The loss of software jobs lands an especially hard blow to the U.S. labor market because of their high quality. Software-producing industries and software occupations pay exceptionally high salaries. Annual salaries in all private industries averaged $36,520 in 2002, while salaries averaged $99,425 for workers in the software publishing industry, $76,051 in the custom software industry, and $75,568 in the computer systems design industry. Salaries for software occupations averaged $65,200 in 2002. Perhaps most disturbing, faster-than-average job declines occurred in the two highest paid software occupations: computer and information systems managers and computer information scientists.

Subject: Taiwan From: Emma To: Emma Date Posted: Thurs, Mar 25, 2004 at 16:07:02 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/19/business/worldbusiness/19jobs.html After an Exodus of Jobs, a Recovery in Taiwan By KEITH BRADSHER TAIPEI, Taiwan - Many Americans are becoming alarmed as factories and jobs disappear to China. But by Taiwan's standards, American losses so far have been modest. Manufacturing here has shrunk to only a quarter of the economy from half in the late 1980's, as tens of thousands of companies shifted operations across the Taiwan Strait to the mainland. Unemployment more than tripled, from 1.5 percent through the early 1990's to 5.2 percent in 2002. Entire industries, like the manufacture of many plastic products, largely vanished, lured by Chinese wages that are a fifth of those in Taiwan. But while the economy here still has troubles, there are signs that Taiwan has turned the corner. The economy has grown rapidly since a SARS virus outbreak was quelled last June, and unemployment has dropped abruptly, to 4.5 percent, in the last few months. The recovery may provide lessons, economists say, for the United States and the European Union as they struggle to compete with China and other low-wage countries....

Subject: Re: Taiwan From: Jacques To: Emma Date Posted: Thurs, Mar 25, 2004 at 16:29:16 (EST) Email Address: nma@hotmail.com Message: 'The recovery may provide lessons, economists say, for the United States and the European Union as they struggle to compete with China and other low-wage countries....' 'economists say...'.I don't believe in 'economists', I believe in Paul and in his magnificient and Nobel-worth 'New Trade Theory'!

Subject: Florida From: Emma To: Emma Date Posted: Thurs, Mar 25, 2004 at 16:09:07 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/22/business/worldbusiness/22ORAN.html In Florida Groves, Cheap Labor Means Machines By EDUARDO PORTER IMMOKALEE, Fla. — Chugging down a row of trees, the pair of canopy shakers in Paul Meador's orange grove here seem like a cross between a bulldozer and a hairbrush, their hungry steel bristles working through the tree crowns as if untangling colossal heads of hair. In under 15 minutes, the machines shake loose 36,000 pounds of oranges from 100 trees, catch the fruit and drop it into a large storage car. 'This would have taken four pickers all day long,' Mr. Meador said. Canopy shakers are still an unusual sight in Florida's orange groves. Most of the crop is harvested by hand, mainly by illegal Mexican immigrants. Nylon sacks slung across their backs, perched atop 16-foot ladders, they pluck oranges at a rate of 70 to 90 cents per 90-pound box, or less than $75 a day. But as globalization creeps into the groves, it is threatening to displace the workers. Facing increased competition from Brazil and a glut of oranges on world markets, alarmed growers here have been turning to labor-saving technology as their best hope for survival. 'The Florida industry has to reduce costs to stay in business,' said Everett Loukonen, agribusiness manager for the Barron Collier Company, which uses shakers to harvest about half of the 40.5 million pounds of oranges reaped annually from its 10,000 acres in southwestern Florida. 'Mechanical harvesting is the only available way to do that today.' Global competition is pressing American farmers on many fronts. American raisins are facing competition from Chile and Turkey. For fresh tomatoes, the challenge comes from Mexico. China, whose Fuji apples have displaced Washington's Golden Delicious from most Asian markets — and whose apple juice has swamped the United States — is cutting into American farmers' markets for garlic, broccoli and a host of other crops....

Subject: Re: Florida From: Jacques D. To: Emma Date Posted: Thurs, Mar 25, 2004 at 17:04:58 (EST) Email Address: nma@htomail.com Message: Ah dear Emma...:'Finally, we come to human capital.This means, above all, the EDUCATION -in the broad sense- of the nation's children.Education is primarily a state and local responsability in the US, and in some ways these local governments actually tried harder;in spite of the emergence of a number of 'distressed' school districts unable to buy textbooks or furniture, overall measures such as classroom size improved.Such financial efforts, however, were surely swamped by the growing problem of child poverty and its associated social consequences.Even at the end of the Reagan expansion, poverty in the US was higher ...'(Peddling Prosperity, p.127-128, written by Genius Paul)

Subject: Nicely Stated From: Emma To: Jacques D. Date Posted: Thurs, Mar 25, 2004 at 17:20:35 (EST) Email Address: Not Provided Message: Important point.

Subject: Right-wing version of Krugman? From: ecoforum To: All Date Posted: Thurs, Mar 25, 2004 at 15:50:40 (EST) Email Address: amcbee@austincollege.edu Message: Who would the right-wing version of Krugman be? If there even is one? Doing some research for future speakers at some economics events... thanks

Subject: Re: Right-wing version of Krugman? From: Dan To: ecoforum Date Posted: Thurs, Mar 25, 2004 at 17:20:07 (EST) Email Address: nma@hotmail.com Message: A good book could be Bhagwati's 'Free Trade Today', translated in fact: 'Supply-side economics vs. demand-side economics.When to use what'

Subject: Re: Right-wing version of Krugman? From: Mik To: ecoforum Date Posted: Thurs, Mar 25, 2004 at 16:04:39 (EST) Email Address: Not Provided Message: I guess the best would be to do a google search on 'Supply Side Economists.'

Subject: Against All Enemies From: Terri To: All Date Posted: Thurs, Mar 25, 2004 at 15:49:53 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/28/books/chapters/0328-1st-clarke.html March 28, 2004 'Against All Enemies' By RICHARD A. CLARKE I expected to go back to a round of meetings examining what the next attacks could be, what our vulnerabilities were, what we could do about them in the short term. Instead, I walked into a series of discussions about Iraq. At first I was incredulous that we were talking about something other than getting al Qaeda. Then I realized with almost a sharp physical pain that Rumsfeld and Wolfowitz were going to try to take advantage of this national tragedy to promote their agenda about Iraq. Since the beginning of the administration, indeed well before, they had been pressing for a war with Iraq. My friends in the Pentagon had been telling me that the word was we would be invading Iraq sometime in 2002. On the morning of the 12th DOD's focus was already beginning to shift from al Qaeda. CIA was explicit now that al Qaeda was guilty of the attacks, but Paul Wolfowitz, Rumsfeld's deputy, was not persuaded. It was too sophisticated and complicated an operation, he said, for a terrorist group to have pulled off by itself, without a state sponsor-Iraq must have been helping them. I had a flashback to Wolfowitz saying the very same thing in April when the administration had finally held its first deputy secretary-level meeting on terrorism. When I had urged action on al Qaeda then, Wolfowitz had harked back to the 1993 attack on the World Trade Center, saying al Qaeda could not have done that alone and must have had help from Iraq. The focus on al Qaeda was wrong, he had said in April, we must go after Iraqi-sponsored terrorism. He had rejected my assertion and CIA's that there had been no Iraqi-sponsored terrorism against the United States since 1993. Now this line of thinking was coming back. By the afternoon on Wednesday, Secretary Rumsfeld was talking about broadening the objectives of our response and 'getting Iraq.' Secretary Powell pushed back, urging a focus on al Qaeda. Relieved to have some support, I thanked Colin Powell and his deputy, Rich Armitage. 'I thought I was missing something here,' I vented. 'Having been attacked by al Qaeda, for us now to go bombing Iraq in response would be like our invading Mexico after the Japanese attacked us at Pearl Harbor.' Powell shook his head. 'It's not over yet.' ...

Subject: Medicare Distortion From: Emma To: All Date Posted: Thurs, Mar 25, 2004 at 14:13:15 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/25/politics/25MEDI.html Medicare Official Testifies on Cost Figures By ROBERT PEAR WASHINGTON — The chief Medicare actuary, Richard S. Foster, told Congress on Wednesday that last June he provided the White House with data indicating that prescription drug legislation would cost 25 percent to 50 percent more than the Bush administration's public estimates. That information did not make its way to Congress for six more months. Mr. Foster said he had shared his cost estimates with Doug Badger, the president's special assistant for health policy, and with James C. Capretta, associate director of the White House Office of Management and Budget. But he said that Thomas A. Scully, who was then administrator of the Medicare program, directed him to withhold the information from Congress, citing orders from the White House in one instance. In testimony before the House Ways and Means Committee, Mr. Foster said he had struggled to preserve the independence and integrity of his office....

Subject: India's Health Care for the Poor From: Emma To: All Date Posted: Thurs, Mar 25, 2004 at 13:53:10 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/25/international/asia/25INDI.html Deserted by Doctors, India's Poor Turn to Quacks By CELIA W. DUGGER BHOMATAWARA, India — The sturdy little public clinic in this poor, sickly village was locked up one recent afternoon, but that is nothing remarkable. Rampant absenteeism among government doctors and nurses is an open secret across India and much of the developing world, and they virtually never get in trouble for not showing up. 'Sometimes the nurse is here, sometime she's not,' said Nagji Lal Pandore, a skinny old man in a saffron turban. 'Sometimes she has medicines, sometimes she doesn't. Why take a chance?' So, like many people here, his family has turned to amateur private 'doctors' who have regular hours and plentiful medications to sell. His daughter-in-law Shanti Bai, 30, went to such a doctor for a fever six months ago. He gave her an injection. The next day, she was dead and her children motherless. Villagers blamed the doctor and he fled, but the heartache remains. Mr. Pandore and his wife have broken the news to their 5-year-old grandson, but they are still telling their 3-year-old granddaughter that her mother is away on a trip. 'She cries and cries and asks, `Where is my mother?' ' he said. India has a vast primary health care system to serve its billion people, with clinics for every 3,000 to 5,000. But the system is often just a skeleton. New studies have documented the startling, damaging dimensions of chronic absenteeism — and not just in India. Researchers for the World Bank discovered through large national surveys that medical personnel were absent from their public posts 35 to 40 percent of the time in India, Bangladesh, Indonesia and Uganda, and about a quarter of the time in Peru. Researchers from the Massachusetts Institute of Technology and Princeton, in a detailed survey of 100 villages here in Rajasthan, in north India, found a no-show rate of 44 percent. When combined with absences for meetings and other work-related reasons, these vital clinics were closed more than half the time. As the United Nations leads a global effort to prevent millions of deaths from AIDS, tuberculosis, malaria and a range of childhood illnesses, the fissures in public health systems are emerging as a main obstacle. There is an increasingly heated debate among experts about whether multibillion-dollar infusions of foreign aid or politically sensitive domestic reforms are more central to repairing public health systems. What is starkly clear in India, home to more poor people than any other country, is that the health system is both starved for resources and desperately in need of reform....

Subject: Development Models From: Jennifer To: Emma Date Posted: Thurs, Mar 25, 2004 at 17:58:59 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/21/opinion/21FRIE.html?8bl Software of Democracy By THOMAS L. FRIEDMAN My favorite building in Bangalore, India's Silicon Valley, is a corporate complex called the 'Golden Enclave.' In some ways, the whole tech sector in Bangalore could be called India's 'Golden Enclave' — disconnected from the country's bad governance, as companies create their own walled enclaves, with their own electricity, bus service, telecommunications and security, and disconnected from the countryside, where many Indians still live in abject poverty. .... http://www.nytimes.com/2004/03/25/opinion/L25FRIE.html Progressive in India To the Editor: If Thomas L. Friedman wants to see firsthand a model of good governance in India, he should head out of Bangalore and visit the Indian state of Kerala. Its history has been one of radical governments and popular movements, a combination that has ensured its population a standard of health care and education that far surpasses the rest of India. But, contrary to Mr. Friedman's precepts, this hasn't been done in conjunction with globalization. Instead, the state has brought this about by a combination of radical land reform and effective provision of basic services like education, medical facilities and public food distribution. The result is a level of social well-being among the people that is hard to find anywhere else in India. AMITABH PAL Managing Editor, The Progressive Madison, Wis., March 21, 2004

Subject: defense outlays From: raj To: All Date Posted: Thurs, Mar 25, 2004 at 11:43:13 (EST) Email Address: raj@interchange.ubc.ca Message: I may be mistaken, but I am fairly sure I had once read a report (perhaps in 'The Economist') which stated that america could support military spending at roughly five or six times its current level (as of 2002). I was wondering what positive and negative effects would occur if america pursued such a strategy. It would mean greater amounts of money put into high-tech research but would this overall be beneficial to the economy?

Subject: Impossible From: Terri To: raj Date Posted: Fri, Mar 26, 2004 at 13:39:11 (EST) Email Address: Not Provided Message: An increase of such magnitude would be impossible unless there were massive tax increases or an end to social benefit spending. Also, it would focus far more spending on defense than could be productive and we should be the weaker for it in economic terms. Impossible.

Subject: Re: defense outlays From: Walk To: raj Date Posted: Fri, Mar 26, 2004 at 11:16:19 (EST) Email Address: Not Provided Message: Government spending is government spending (I made that up). It adds to GDP. But Could the federal government afford it without raising taxes? Without borrowing? Raising taxes would reduce Consumption. Borrowing would reduce Investment. Both of these scenarios would have an offsetting effect. What if the US raised its defense spending by five times in order to manufacture implenemts of destruction because it had every intention of and did use them?

Subject: Re: defense outlays From: Econochick To: Walk Date Posted: Fri, Mar 26, 2004 at 18:52:45 (EST) Email Address: Not Provided Message: Then we would be, as they say, up the creek without a paddle? An unpleasant thought indeed.

Subject: Re: defense outlays From: Econochick To: raj Date Posted: Thurs, Mar 25, 2004 at 14:08:22 (EST) Email Address: Not Provided Message: I guess you could argue that it is overall beneficial if the boosted defense prevents more horrific terrorist attacks that interrupt economic activity. But it's really hard to measure things that DON'T happen. It's a good question - but dang hard to answer.

Subject: Developing countries!!! From: malcolm To: All Date Posted: Thurs, Mar 25, 2004 at 09:47:25 (EST) Email Address: malcolmriver@yahoo.com Message: Hi! I have read many of Krugman's works. They are mostly astonishing. Based on scientific analaysis rather than slogans. But, I did not see any of his work about the problems of Developing World. US may have a huge deficit, but majority of the world live in developing countries and they have a much bigger deficit than US when compared to their GDPs. Also, most od these countries have populated young citizens who are seeking for work. But, the standard cure IMF and World Bankk gives to these countries are 'cuts in public spending in order to decrease inflation and pay the debt' which is a wonderful recipe for unemployment and liitle more than zero economic growth. When yo add up these: budget deficits foreign debts inflation high unemployment the IMF medicine which I have talked about, these countries are all candidates of long-lasting upheavel. And, that is a very crucial probelm for the humanity. What does Mr. Krugman think about that? Does he have any work on this topic?

Subject: Luskin following Paul Krugman From: jim To: All Date Posted: Wed, Mar 24, 2004 at 15:36:59 (EST) Email Address: jzmarg@aol.com Message: While perusing Atrios/Eschaton blog today, I found a piece that referred me to a website for The New American Empire. I thought it was a put on with subsites on Wealth, Values, etc. It had one guest column by of all people, Donald Luskin, who spoke about his attempt to personally, or through his agents, stalk Paul Krugman. This is old news, I know, but the column is relatively recent. Is this a put on? It seems it might be actionable. Guest Column I’m Not Going to Fall for the Banana in the Tailpipe Donald Luskin March 04, 2004 Stalking the elusive Paul Krugman can be daunting, but even the liberal Donald Luskin feels the effort is worthwile Paul Krugman spent last week trying to shake my rolling tail. As he sped around town promoting the lie that the Social Security system is 'in pretty good financial shape,' I was on him like white on rice. Despite his best efforts to give me the slip, I kept my eye on his aerial, my foot on the pedal and my obsession on overdrive as I stalked the hirsute economist across town from Monday to Friday. Here’s a typical day for Krugman: out of the house at 0730 hours after a bagel and coffee with two spoons of sugar, no cream; pop by the video store to drop off movies (Mon: Memento, Toy Story 2; Wed: I Am Sam); visit art gallery for witty reparte with 'Serge'; 2-6 mph over speed limit to office; brown bag lunch at 1230, park bench; back to office; out at 1500 (French working hours?); stop at dry cleaners, pick up white shirt (cocktail sauce stains on left sleeve, mid-forearm) and tie (dark red, green and cream diagonal stripes ... yuk!); drive to bonded warehouse, impersonate customs officer; pull into driveway around 1615 hours; putter about, research column; in bed by 2230. There’s no doubt Krugman possesses a certain amount of street smarts, enough to pull a fast one on even the most professional tail. We all know about the unfortunate 1984 surveillance operation manned by my colleagues in Beverly Hills, Billy Rosewood and John Taggart. Krugman first tried to shake the pair by having room service delivered by a portly Hispanic waiter to their unmarked vehicle while they were staking out the Beverly Wilshire Hotel, where he had played the race card to get a free penthouse suite. Despite excellent crab sandwiches, Rosewood and Taggart put duty first and were ready to roll when they spotted Krugman trying to make a getaway behind the waiter, who was blocking their view. What they couldn't have known was that Krugman had also enlisted the aid of a swishy buffet server, who supplied him with several bananas to block the surveillance car’s tailpipe. With their man on the run, Rosewood and Taggart swung around to give chase ... and their vehicle sputtered and died. It got worse for Rosewood and Taggart. Back on the stakeout the next night, Krugman had the audacity to leap into their car unannounced as a gesture of “friendship.” The devious New York Times columnist then proceeded to suborn the in-over-their-heads duo into visiting a strip club. That certainly wasn’t going by the book, but let’s give Taggart credit for refusing a drink while on duty. The long and the short of it is Rosewood and Taggart were pulled off the stakeout the next day. Replacing them were Foster and McCabe - two highly capable, if slightly arrogant surveillance men. Considering themselves the “first string” in Beverly Hills, Foster and McCabe vowed not to be fall for any bananas in the tailpipe. The new team got off to a good start, parrying a classic Krugman gambit their very first morning on duty. When the same room service waiter darted through traffic to deliver breakfast to their car, they instinctively knew their man was on the move. Sure enough, Krugman was off and away, leading them on a merry chase through Beverly Hills. Confronting him outside the home of a respectable member of the community, the art dealer Victor Maitland, Foster and McCabe deduced that Krugman was on a stakeout of his own. Alas, we’ll never know what he wanted with Maitland - their quarry gave Foster and McCabe the slip at a traffic light, courtesy of the old “stalled car that springs to life as the light turns” routine. (Krugman went on to ruin the buffet at the Harrow Club that same morning.) What we do know is that the elusive liberal economist returned to the Beverly Wilshire at some point later that night and is suspected of stealing various room amenities, including a pair of bathrobes that retailed for $79 each in 1984 (upwards of $120 in today’s dollars). I have enormous respect for Rosewood, Taggart, Foster and McCabe. But this correspondent won’t be falling for any tricks Krugman has up his sleeves. I won’t rest until I’ve tracked down the man who counsels that we ignore 'alarming reports generated by people who work at ideologically driven institutions' who are 'itching for an excuse to dismantle the [social security] system ...' and I've made him pay for what he says. So Paul, if any fat Mexicans come up to my car with room service, just so you know, I’ve got Immigration on speed-dial. As for strip clubs, I say bring ’em on - this hard on’s for you, sweetcheeks. And baby, we can talk “bananas” and “tailpipes” ... once you stop playing hard to get! Donald Luskin is chief investment officer of Trend Macrolytics LLC, an independent economics and investment-research firm. He welcomes your comments at don@trendmacro.com.

Subject: Re: Luskin following Paul Krugman From: David E... To: jim Date Posted: Thurs, Mar 25, 2004 at 20:25:17 (EST) Email Address: daveellis_39@hotmail.com Message: Don't get excited! It sounds like the real Donald Luskin, but it isn't. It is satire, but very similar in tone to Donald's original column. The original one- the one where Donald Luskin said he, Donald, was stalking Paul Krugman. a big clue is the title is from the Beverly Hills Cop movie. 'I’m Not Going to Fall for the Banana in the Tailpipe'

Subject: Re: Luskin following Paul Krugman From: David E... To: David E... Date Posted: Fri, Mar 26, 2004 at 11:45:39 (EST) Email Address: daveellis_39@hotmail.com Message: Econochick, are you a troll? Trolls dont have a sense of humor.

Subject: Re: Luskin following Paul Krugman From: Econochick To: jim Date Posted: Wed, Mar 24, 2004 at 18:59:49 (EST) Email Address: Not Provided Message: Okay, whatever it is, it seems like a huge waste of time. Why would anyone spend that much time to write something that long and that vile?

Subject: Re: Luskin following Paul Krugman From: Piranha To: Econochick Date Posted: Wed, Mar 24, 2004 at 21:14:26 (EST) Email Address: Not Provided Message: This man, Luskin, is beyond mad!

Subject: Outsourcing From: Jennifer To: All Date Posted: Wed, Mar 24, 2004 at 14:10:36 (EST) Email Address: Not Provided Message: http://www.epinet.org/content.cfm/webfeatures_snapshots High-paying software jobs being moved abroad Software jobs, which pay some of the highest wages in America, have fallen sharply since 2000. These jobs have disappeared despite the fact that software sales to U.S. businesses in 2003 were up 4% over 2000. Comprehensive data on the number of U.S. software jobs that have moved overseas is hard to come by, but persuasive indirect evidence points towards the significant movement of software jobs to India (the most prominent of many countries to which U.S. software work is being moved)....

Subject: Re: Outsourcing From: Nat To: Jennifer Date Posted: Wed, Mar 24, 2004 at 14:30:12 (EST) Email Address: Not Provided Message: Want venture capital? Put overseas manufacturing in your business plans Venture capitalists expect entrepreneurs to use cheapest markets By John Shinal SAN FRANCISCO CHRONICLE Monday, March 22, 2004 Silicon Valley's top venture capitalists are pushing hard for tech startups to move jobs overseas to lower costs. 'There isn't a board meeting that goes by that we don't ask, 'Why aren't you being more aggressive (with software development) in India and China?' ' said Jim Breyer, managing general partner of the venture firm Accel Partners, which has backed more than 200 companies. And Accel is not alone. Other venture capitalists are sending the same message, and entrepreneurs have heard it loud and clear. Many are rushing to embrace the trend. Clarus Systems, a San Francisco startup whose software makes it easier to send phone calls over the Internet, expects to save 50 percent by sending development work overseas, according to chief executive R. Keith Giarman. Indeed, cost savings from using foreign labor are so significant that many startup CEOs now include that component in the business plans they pitch to venture capitalists. That's a big change from just three years ago, according to Peter Barris, managing general partner of New Enterprise Associates, a venture firm with offices in Menlo Park, Calif., Baltimore and Northern Virginia. Few of the startups that received funding from the firm's 2000-era fund had a built-in overseas workforce, yet many of those companies eventually sent software development overseas. Now, nearly all the business plans that Barris and his colleagues evaluate for the firm's new venture fund include an workers based in other countries. 'It's not an unusual event anymore,' said Barris. The accelerated use of overseas workers by startup companies means the trend may just be gathering steam in Silicon Valley. That's because the most successful startups will survive and one day compete with large publicly traded companies such as Oracle Corp. and Cisco Systems Inc. If the new rivals can make products more cheaply and thus sell them at lower prices than established companies, the big players will be forced to lower their costs to compete on price, or watch their profit margins erode. Within three years, Breyer predicted, software firms will need to have between 40 percent and 50 percent of their product development done overseas to compete with rivals on cost. Already, the companies in Accel's venture investment portfolio employ 25 percent of their workers overseas. That's up from less than 5 percent five years ago, Breyer said. It's also not unusual.

Subject: Jobs Programs From: Emma To: Nat Date Posted: Wed, Mar 24, 2004 at 17:30:33 (EST) Email Address: Not Provided Message: Then, what we need is fiscal policy that is designed after New Deal models. Programs to directly stimulate job creation. We are not running out of important work to be done, but we need programs such as infra-structure development that add to job creation. That is what fiscal policy should be about and not endless tax cuts for those who do not need tax cuts.

Subject: Infrastructure Dilema From: Mik To: Emma Date Posted: Thurs, Mar 25, 2004 at 14:35:06 (EST) Email Address: Not Provided Message: Emma, Your statement, 'programs such as infra-structure development that add to job creation.' Do they really add to job creation? Infrastructure projects such as dams, bridges, roads, etc comprise of three main job groups. 1. Financial/Economic consultants - to do higher level viability studies 2. Engineering Consultants - to do the design work 3. Construction contractors - to do the physical work The first two job groups can easily be (and are being) exported overseas. The last job group is being done inside the States but has already traditionally become the main employer of new immigrants. So the dilema - infrastructure may well not be a form of government spending to stimulate local job growth. Don't get me wrong - I'm not trying to insult you - I'm looking for solid suggestions that may well stem the tide of all jobs being moved overseas. Consider this - what makes your job so important that it cannot be sent overseas?

Subject: Re: Infrastructure Dilema From: Nat To: Mik Date Posted: Fri, Mar 26, 2004 at 14:56:57 (EST) Email Address: Not Provided Message: This is precisely the point that has me in a lather: I think the current trends in outsourcing will accelerate. If your work is informational: phone-base or internet-based support, bureaucratic paper pushing, the complete software development cycle, analysis of any sort, research, sales, art, engineering, web design and hosting, insurance, and publishing to name a few occupations... your job will ultimately be at risk if you are not cost competitve. The US has always leaked jobs like a sieve, however our jobs creation engine has stalled and I wonder what the next wave of opportunity will be. And when that wave arrives, what will make it so special that it won't be outsourced in a heart beat as well? My concern is that we have just entered an era where most new jobs can be filled anywhere on earth, but that our government hasn't a clue as to the implications of this reality. I suspect we have entered an era where income will stagnate or fall over the long haul for a significant portion of the population. This will affect how we fund our schools, public sector health care, roads, and military. This will also affect our attitudes towards the undocumented family that lives down the street. I agree that most protectionist policies would be counter productive. However, I find it absolutely crazy that state and federal human service organizations would consider offshoring to save costs, but it is beginning. For example, I have heard that several states have their Medicaid help desks overseas. There are very few jobs at a state or federal human service agency (our state welfare systems, employment service agencies, SSA, HCFA et al.) that could not be offshored. The loss of these jobs will only add to the problems these agencies strive to remedy. I think it is reasonable that these jobs stay in the US, and even in state, by statute. Despite my alarmist concerns, on reflection I feel there are some positives/silver linings out there. Much of the offshoring is dependent on good English and the 3rd world does not have an infinite supply of workers with this skill. However, there will be an incentive to develop more... Also, not all the world is technically gifted. Competition will flush out the weaker part of the US job market, but India does not have an infinite supply of these guys either. At some point out in the future all this will stabilize. And this competitiion might ultimately improve our educational system. But in both the short and long run it will cost us some jobs and some wages.

Subject: One more point From: Econochick To: Nat Date Posted: Fri, Mar 26, 2004 at 20:01:51 (EST) Email Address: Not Provided Message: Sorry for those couple of messed up sentences in the first paragraph. That should read 'demand for American labour', not wages. Bad editing. One important point that I forgot to bring up is that the development of a wealthier middle class in India and China will boost demand for American products. And if the Chinese and Indians (for example) are busy answering the phones and working in factories, they will have less time to innovate. The American investor will benefit because they own shares in the companies that produce the products that are now in higher demand. But more importantly, if the Indian middle class will demand more goods in general, Americans will likely fill that demand. Imagine a world in the future where, for example, Indian wages are at parity with American wages. Everybody wins because there is more demand from the newly wealthy Indian middle class and there is no longer pressure to offshore here. Americans will probably still have the upper hand, though, because innovation is very much a part of our culture and with fewer people working in menial labour jobs, we will likely have more entrepeneurs who identify and fill the needs of the growing demand of the world's newly richer middle classes. But, it will be a painful transition in the short term.

Subject: Re: Infrastructure Dilema From: Econochick To: Nat Date Posted: Fri, Mar 26, 2004 at 18:47:44 (EST) Email Address: Not Provided Message: I do enjoy reading your posts, Nat, as you bring up such good points. I wanted to touch on the point you made in the second paragraph where you said that the effect of outsourcing is to, at best, stall our wages here. That exactly what economists say and that is the effect of lower demand for US wages. However, in the long run, the 'job-bleeding' should end at the point at which the labour markets in other countries are bid up to our own wage level - on a relative basis, of course. There is a cost of offshoring and the wages of foreign workers will be discounted by that cost. That means, of course, that eventually the Indian (for example) middle-class will resemble our own. Of course, there are benefits to that as they will have better education, healthcare and lower poverty rates that should, theoretically put a smaller burden on the US. Protectionism could, of course, mean the failure of major American industries because they lack competitive edge and the loss of even more jobs. You also make an excellent point about the limits of offshoring - education, language, a finite amount of bodies, etc. And, of course, I agree with your reiteration of the long and short term effect on wages. My personal belief is that what will 'save' American jobs is continuous innovation. A start-up is unlikely to hire mainly over-seas. And let's face it, Americans are the masters of innovation. That is the thing at which we are best because that is the thing that the free market encourages most. Americans are amazing. I have a lot of faith in the American entrepeneur.

Subject: Interesting From: Terri To: Nat Date Posted: Fri, Mar 26, 2004 at 16:22:03 (EST) Email Address: Not Provided Message: Interesting comments.

Subject: Japan and Taiwan From: Emma To: Mik Date Posted: Thurs, Mar 25, 2004 at 15:52:07 (EST) Email Address: Not Provided Message: Both Japan and Taiwan have used infrastructure development as a successful means of sustaining employment through an outsourcing transition.

Subject: The Problem From: Jennifer To: Jennifer Date Posted: Wed, Mar 24, 2004 at 14:14:55 (EST) Email Address: Not Provided Message: The problem with outsourcing is not with trade or movement of tasks from country to country, but with providing comparable job opportunites for workers suffering trade related loss of occupation.

Subject: Re: Question From: Abbé de Condillac To: Jennifer Date Posted: Thurs, Mar 25, 2004 at 16:07:43 (EST) Email Address: nma@hotmail.com Message: Question:What happens within the domestic market, concerning the price of an 'out-sourced', remember, 'a source??!!! that's been delocalised', created product?

Subject: Question in return?? From: Econochick To: Abbé de Condillac Date Posted: Fri, Mar 26, 2004 at 18:50:52 (EST) Email Address: Not Provided Message: Terri, I'm not sure I understand your question. If you're asking what happens to a product that is produced by a lower-cost labour source, then that product costs Americans less money to buy because it costs less to produce. Simply put. Is that what you were getting at?

Subject: Re: Question in return?? From: Terri To: Econochick Date Posted: Fri, Mar 26, 2004 at 19:13:28 (EST) Email Address: nma@hotmail.com Message: Yes!Thus, demand increasing or decreasing?

Subject: Re: Question in return?? From: Econochick To: Terri Date Posted: Fri, Mar 26, 2004 at 20:06:35 (EST) Email Address: Not Provided Message: Thus, demand increasing - all else constant.

Subject: Re: Question in return?? From: Terri To: Econochick Date Posted: Fri, Mar 26, 2004 at 21:40:16 (EST) Email Address: nma@hotmail.com Message: You can't see without eyes, you can't walk without legs, you can't think without brain, you can't hear without ears... Your legs can't work without muscles, your brain can't work without neurons... Your muscles can't...etc. etc. Thus, demand increasing -everything increasing = nothing constant.

Subject: Waxing Philosophical From: Econochick To: Terri Date Posted: Fri, Mar 26, 2004 at 22:51:54 (EST) Email Address: Not Provided Message: You're very philosophical tonight, Terri. If US income declines enough, demand for even cheaper goods will either remain the same or will decline - depending on the amount of income decline. But, then demand for their substitutes increases. And so on and so on...

Subject: Price Should Fall From: Jennifer To: Abbé de Condillac Date Posted: Thurs, Mar 25, 2004 at 17:49:29 (EST) Email Address: Not Provided Message: Depending on competition in market, the price should fall.

Subject: I want to buy the book! From: onur To: All Date Posted: Wed, Mar 24, 2004 at 08:05:59 (EST) Email Address: malcolmriver@yahoo.com Message: Hi! Although I am not an American, I am a fan of Paul Krugman and especially his writings are quite good. and, I want to buy his latest book. but, I am not a resident of US. Do I have the chance to buy the book or wait until it is translated to my language.

Subject: Making a Living From: Emma To: All Date Posted: Tues, Mar 23, 2004 at 14:29:43 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/23/nyregion/23hunger.html Agencies Say Hunger on Rise Outside Cities Across Region By ADRIENNE LU Come payday, the tough choices begin for Roxie Jackson. Her salary as a physical therapist's assistant has sustained her family of five in the middle-class suburb of Bloomfield, N.J., since her husband lost his job two years ago and income from her second job, with Mary Kay, declined before she eventually left it. So each week, Ms. Jackson weighs which bills she must pay and which must wait. And one factor is ever-present in her budget deliberations: hunger. 'My refrigerator and cupboard have been bare more than once,' said Ms. Jackson, 35, who said that her home telephone has been disconnected since last year because she could not afford to pay for both utilities and groceries. 'It's still a struggle.' According to hunger experts and federal statistics, a growing number of suburban families are struggling to put food on their tables. Nationally, the rate of households facing limited or uncertain availability of food, what the federal government calls food insecurity, has been rising, reaching its highest point in four years. From 1999 to 2002, the latest year for which figures are available, the number of such households rose by about 15 percent, or about 1.5 million, according to the United States Department of Agriculture, bringing the number to just over 12 million. On the surface, hunger may seem more severe and more intractable in the hearts of the largest cities. But experts say that more and more people who live in suburban and outlying areas are also having to make hard choices that sometimes leave them scrambling for their next meal. Nationwide, the number of suburban households facing food shortages rose by roughly a quarter-million from 2001 to 2002....

Subject: Re: Making a Living From: Yann To: Emma Date Posted: Wed, Mar 24, 2004 at 06:31:47 (EST) Email Address: Not Provided Message: Poor Keynes and his (so appealing) 'Economic Possibilities for our Grandchildren' (1930)! Even in the so rich USA, the 'economic problem' is not solved. Will it be solved in 2030, at least in the USA? No? Why? Is there a solution?

Subject: Re: Making a Living From: Econochick To: Yann Date Posted: Wed, Mar 24, 2004 at 19:14:42 (EST) Email Address: Not Provided Message: Yann, economics is not a problem, so it can't be solved. Economics is the study of decisions people make in an environment of unlimited wants and needs and limited resources. To solve that dilemma, we would reach a state of Utopia. I think that's pretty unattainable. So, grab your favourite profession, come onboard and enjoy the ride with the rest of us :-)

Subject: Re: Making a Living From: Yann To: Econochick Date Posted: Thurs, Mar 25, 2004 at 03:58:05 (EST) Email Address: Not Provided Message: Dear Econochick, I think there's been a little misunderstanding. Of course, economics is not a problem. But the 'economic problem' of Keynes in his 1930 paper might be solved, one day. Ideally, economists pursue a basic goal: managing to free mankind from its material needs. Why? Because the 'economic problem' is not (and cannot) be the permanent problem of mankind. If, one day, mankind is free from its material needs, it will be able to devote itself to what is really important: human relationships, friendship, the arts, and so on. This day, economists will be like dentists! Am I really wrong? Am I so innocent and naive?

Subject: Re: Making a Living From: Econochick To: Yann Date Posted: Thurs, Mar 25, 2004 at 07:33:37 (EST) Email Address: Not Provided Message: We all have at least basic material needs such as clothing and housing, then we have other needs like healthcare, vacations from our jobs, education for our children, rule of law. Economics does not seek to free us from our material needs because it is impossible. Economics studies the trade-offs we make between them. For example: how much does each additional hour of work (so, time away from our families and other important relationship) yield relative to how much time I'm giving up with my family? Economists study these trade-offs and (simplistically) try to determine equilibriums. In fact, Nobel Laureate in Economics, Daniel Kahneman's studies show that, in general, our hunger for material wealth declines after about the average American middle-class level of wealth. Thus, according to Kahneman, the equilibrium is somewhere around a middle-class income. Actually, based on just the little bit of information I have from your two posts, I think you might be interested in his work because Kahneman studies behavioural finance - a fairly new field of study. A lot of his work is measuring things like satisfaction levels and challanges the long-held belief in economics that man is a 'rational' actor. Check it out.

Subject: Re: Making a Living From: Mik To: Econochick Date Posted: Thurs, Mar 25, 2004 at 15:07:38 (EST) Email Address: Not Provided Message: Hhmmm I think that this discussion has an overlap between Economics and Maslow's Hierarchy of needs. As Econochick correctly pointed out - economics is the study of how people best use their limited resources. Human 'needs' such as health, material needs, security, esteem needs, etc on an individual level is studied through Maslow. I guess there is an overlap but the two studies are quite different.

Subject: Yeah, Mik!! From: Econochick To: Mik Date Posted: Thurs, Mar 25, 2004 at 17:04:38 (EST) Email Address: Not Provided Message: You are so right, Mik!! Good old Maslow. From basic shelter and food to self-actualization! I think I studied Maslow in Management and Marketing classes and Econ in...well...Econ classes. But we're talking a looooong time ago. So I don't remember. But I was actually thinking of good old Maslow when I was writing my post! Well, at least we're all involved in that all-important critical thinking process and staving off dementia :-)

Subject: Yes Mik From: Yann To: Econochick Date Posted: Fri, Mar 26, 2004 at 03:19:40 (EST) Email Address: Not Provided Message: Mik, I agree with you.

Subject: Thank you, Paul! From: Bernadette Say To: All Date Posted: Mon, Mar 22, 2004 at 16:48:40 (EST) Email Address: nma@hotmail.com Message: Thank you, Paul!You are definitely Keynes' heir: An optimist!

Subject: Agreed From: Emma To: Bernadette Say Date Posted: Tues, Mar 23, 2004 at 14:28:30 (EST) Email Address: Not Provided Message: Thank you, Paul!

Subject: Re: Thank you, Paul! From: Econochick To: Bernadette Say Date Posted: Mon, Mar 22, 2004 at 17:30:04 (EST) Email Address: Not Provided Message: You think he'll get rich like Keynes? But Paul is definitely apposed to a Keynesian approach in the modern day - the economy is too structuraly different. Optimism would be nice. Not enough of it on this board. Too bad.

Subject: Don't even think about it From: Troll To: Econochick Date Posted: Mon, Mar 22, 2004 at 19:37:37 (EST) Email Address: Not Provided Message: http://www.cabinfever.org/images/fgm-troll.jpg

Subject: NY Housing Market From: Emma To: All Date Posted: Mon, Mar 22, 2004 at 16:41:57 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/21/realestate/21COV.html Supply Varies, Demand Doesn't By DENNIS HEVESI AS though her convoluted deal of nine years ago did not already constitute a broker's symphony — juggling all interested parties so that three apartments on the same floor of a Park Avenue co-op building could be sold and converted into one — Suzanne Sealy has written a coda. In a market of constricted inventory, Ms. Sealy of the William B. May brokerage company recently persuaded the owners of that grand 3,400-square-foot apartment to relinquish their dream home, to sell it to a new buyer and then to buy another, somewhat smaller, apartment a few blocks north on Park Avenue. 'I really had to scurry around to find something for them,' she said. Such are the lengths to which brokers in the upscale environs of Manhattan and Brooklyn Heights go these days as listings have dwindled, bringing prices and buyer frustrations to a boil. In the other boroughs and through much of the suburban ring around New York City, however, a more balanced market equation has prevailed over the last year, with inventory warming or cooling from community to community and prices percolating upward.... As Jason Bram, a regional economist with the Federal Reserve Bank of New York, put it: 'If you had told somebody at the beginning of 2001 that the regional economy would be hit by a national recession, a steep downturn in its key financial sector and the destruction of the World Trade Center, they would have found it unimaginable that the housing market would hold up this well, let alone spiral upward as it seems to be doing now. Yet that's what's happened.' One broad-brush indicator comes from the massive national database of sales compiled by the Office of Federal Housing Enterprise Oversight. According to the federal data, average home prices in New York State rose by 11.6 percent between the fourth quarter of 2002 and the fourth quarter of 2003 (the housing enterprise office does not provide dollar figures). New Jersey saw an even higher increase during the year, 12.1 percent. In Connecticut, the increase was 9.5 percent. All three states surpassed the national increase of 8 percent. 'There has been no easing at all in price patterns,' said James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. 'And sustained low interest rates certainly have had the effect of increasing housing purchasing power, even if incomes are stable.' ...

Subject: Re: NY Housing Market From: spaniel To: Emma Date Posted: Tues, Mar 23, 2004 at 08:55:53 (EST) Email Address: Not Provided Message: In Spain we've been having annual increases around 15% for 4 years in a row now. A small house now costs around 500.000 euro, my annual salary being around 20000. And no appartments to rent out there. :-(

Subject: Spanish Housing From: Emma To: spaniel Date Posted: Tues, Mar 23, 2004 at 16:41:13 (EST) Email Address: Not Provided Message: Though I have argued there is no housing bubble in America, I have been wondering about Spain and in turn wondering about America. The bouyancy in the Spanish economy is coming from the housing sector almost exclusively, and unlike other European countries and unlike the majority of American cities renting is a problem. We must think about what is happening in Spain.

Subject: Wow!! From: Econochick To: spaniel Date Posted: Tues, Mar 23, 2004 at 12:14:41 (EST) Email Address: Not Provided Message: That's pretty intense, Spaniel. That's about double the rate in New York. What part of Spain is that? Is that the case for most cities there?

Subject: I Love NY From: Econochick To: Emma Date Posted: Mon, Mar 22, 2004 at 17:25:23 (EST) Email Address: Not Provided Message: Thanks for the post, Emma, for yet another data point in my apartment buying analysis which usually ends with '...and that is why we will be renting for the foreseeable future'. By the way, for interested parties, occupancy rates in NYC rental buildings are down and so are rents. I think it may be because more people are buying and the higher than average unemployment rate in NYC is reducing the number of people who would rent (presume rent before rent).

Subject: The smear machine cranks up again! From: Bernadette Say To: All Date Posted: Mon, Mar 22, 2004 at 16:35:06 (EST) Email Address: nma@hotmail.com Message: http://www.guardian.co.uk/worldlatest/story/0,1280,-3875905,00.html

Subject: Technology and Labor From: Jennifer To: All Date Posted: Mon, Mar 22, 2004 at 15:10:35 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/22/business/worldbusiness/22ORAN.html In Florida Groves, Cheap Labor Means Machines By EDUARDO PORTER IMMOKALEE, Fla. — Chugging down a row of trees, the pair of canopy shakers in Paul Meador's orange grove here seem like a cross between a bulldozer and a hairbrush, their hungry steel bristles working through the tree crowns as if untangling colossal heads of hair. In under 15 minutes, the machines shake loose 36,000 pounds of oranges from 100 trees, catch the fruit and drop it into a large storage car. 'This would have taken four pickers all day long,' Mr. Meador said. Canopy shakers are still an unusual sight in Florida's orange groves. Most of the crop is harvested by hand, mainly by illegal Mexican immigrants. Nylon sacks slung across their backs, perched atop 16-foot ladders, they pluck oranges at a rate of 70 to 90 cents per 90-pound box, or less than $75 a day. But as globalization creeps into the groves, it is threatening to displace the workers. Facing increased competition from Brazil and a glut of oranges on world markets, alarmed growers here have been turning to labor-saving technology as their best hope for survival. 'The Florida industry has to reduce costs to stay in business,' said Everett Loukonen, agribusiness manager for the Barron Collier Company, which uses shakers to harvest about half of the 40.5 million pounds of oranges reaped annually from its 10,000 acres in southwestern Florida. 'Mechanical harvesting is the only available way to do that today.' ...

Subject: Interesting From: Econochick To: Jennifer Date Posted: Mon, Mar 22, 2004 at 17:37:49 (EST) Email Address: Not Provided Message: Thanks for the post, Jennifer. Very interesting.

Subject: Debunking the Economist -- again From: BB To: All Date Posted: Mon, Mar 22, 2004 at 14:08:32 (EST) Email Address: Not Provided Message: Debunking the Economist -- again Is this the 'new golden age of global capitalism'? The Economist thinks so -- and ignores the facts. - - - - - - - - - - - - By James K. Galbraith March 22, 2004 | Does inequality rise under globalization? You might think this is like asking 'Does McDonald's have golden arches?' And you would not be wrong. But there is a part of the scribbling world -- and some economists of whom they scribble -- for which the obvious is never quite good enough. Especially not when powerful doctrines are at stake. And so we find, in wide circulation, the curious (even weird) claim that worldwide economic inequality has been falling thanks to a 'new golden age of global capitalism.' Last August, the Economist put about this claim. I debunked it before the audience of the British Web site OpenDemocracy.net http://www.opendemocracy.net/home/index.jsp. Clive Crook of the Economist then responded to me, and I rebutted him. All of this is on record, here http://www.opendemocracy.net/debates/article-7-30-1483.jsp here http://www.opendemocracy.net/debates/article-7-30-1485.jsp and here http://www.opendemocracy.net/debates/article-7-30-1495.jsp. But some people don't learn, and here we are again. This month, they've gone and made the claim again http://www.economist.com/opinion/displayStory.cfm?Story_id=2498851. And they've included, as evidence, the same pair of charts they already published last August. The charts come from a lecture given back in January 2003 by Stanley Fischer, a formidable economist and former deputy managing director of the International Monetary Fund. Fischer is a globalization advocate. But he is smart and careful and his lecture is studded with footnotes and qualifications. These the Economist cheerfully ignores. Let's have a little fun: How many ways can a picture lie? --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- The top chart shows economic growth for a large group of countries from 1980 to 2000 plotted against original income level. There is a point for each country. The scatter slopes upward, indicating more growth in the rich countries, and hence increasing inequality between countries, over the past 20 years. Poorer countries have been slipping, in general, during the age of globalization. Nobody disputes this. The bottom chart weights each point by population. It reveals that two of the largest countries, China and India, grew among the fastest. Hence the claim: That if one considers people rather than countries, worldwide inequality has been falling under globalization. The chart qualifies this conclusion by noting that in sub-Saharan Africa the situation is terribly grim, with low and declining incomes in the past 20 years. No one disputes that either. But sub-Saharan Africa, the Economist tells us, is an under-globalized region, so it would not be fair to count it in the grand scorecard of the neo-liberal world. What is wrong with the picture? First, it ignores changes within countries. Yes, China's average income grew. But not every Chinese got the average increase. We know that China became dramatically more unequal in the 1990s. (Fischer concedes this, incidentally; see my evidence here http://utip.gov.utexas.edu/web/workingpaper/risinginequalityinchinaandrussia3.pdf And it is possible to make a much broader statement. Looking over the broad range of developing countries, my University of Texas Inequality Project http://utip.gov.utexas.edu/ finds rising inequality in most of them, including India, and falling inequality in only a few. Second, it is not reasonable to treat sub-Saharan Africa as apart from globalization. These countries have always been suppliers of minerals, rubber, oil, coffee and cocoa to the West, often under horrific conditions. (During the slave era they were, of course, great victims of that earlier wave of globalization.) They are not isolated now: Trade ratios in sub-Saharan Africa are not abnormally low. They are victims now of debt crises and so-called structural adjustment programs. To treat them as special cases is simply a way of evading globalization's greatest failures. Third, the two charts cover only the period 1980-2000. But the right comparison is between this period and what came before. For most developing countries, growth was higher in the 1950s and 1960s, under the regulated international monetary system known as Bretton Woods. It was also much higher in the 1970s, when the oil boom, high commodity prices and cheap credit briefly spelled good times for much of the developing world. Fourth, countries created after 1980 are excluded from those charts, including the successor states to the Soviet Union and Yugoslavia. And what happened to income in these areas as they globalized? Inequality shot up, poverty exploded and life expectancies fell to Third World standards. No one disputes these facts, but the Economist ignores them. In the new version of its article, the Economist does say of China and India that 'Neither country is an exemplar of free market capitalism -- far from it.' Funny, I used almost exactly the same words in my first critique of their earlier article, saying: 'Anyway, neither China nor India is an exemplar of free-market globalisation.' This little bit of crypto-plagiarism tells you all you need to know about the standards the Economist applies, where this issue is concerned. Both China and India steered free of Western banks in the 1970s, and spared themselves the debt crisis. Both continue to maintain capital controls to this day, so that hot money cannot flow freely in and out. Both continue to have large state sectors in heavy industry to this day. And China, for that matter, continues to be run by the Communist Party, which is not the institution most noted in history for devotion to the free market. (More analysis on China can be found here http://utip.gov.utexas.edu/web/workingpaper/utip16.pdf (Confession: In the mid-1990s I served as chief technical advisor to a Chinese State Planning Commission project on macroeconomic reform, a job that centered on advising them as to which Western economists to talk to, and which ones to avoid. I loved the second part of that job.) Of course, whether true or false, the claim that worldwide inequality across people has been falling is just an academic abstraction. Why should anyone care? What matters is whether particular policies lead to good or bad results, and policies tend to differ across countries. Yes, China and India have done well, on the whole. But is this due to their reforms or to the regulations they continue to impose? No doubt, the right answer is: Partly to both. The Economist and its allies simply refuse to face this complex and uncomfortable reality. The Economist makes much of claims that global poverty has been falling in the past 20 years. This claim is probably true. If you measure global poverty as the World Bank does, by a living standard of less than a dollar a day, the numbers probably are falling. But where are all those people -- hundreds of millions of them -- who may have risen out of the very bottom? Once again, they are overwhelmingly in China and India. This point is made explicitly by Surjit Bhalla, one of the pro-globalization economists the Economist cites -- but it doesn't cite him on this point. They are not in Africa, where the world's worst poverty persists. And they are also not in Latin America or the former USSR, where the poor live at a higher standard but where poverty rates are getting worse. So once again, we have to ask: Is this the golden age of global capitalism, really? Or is it something closer to a golden age of reformed socialism in two places (China and India) -- alongside an age of disasters for those who followed the prescriptions favored by the Economist? In truth, countries that followed the IMF-World Bank prescriptions to the letter -- Argentina, say, or Russia in the early 1990s -- have seen catastrophe worse in every way than the Great Depression of the 1930s was for us. Is it any wonder that the electorates in both places firmly reject the neo-liberal model? Finally, it is not true that the remedy to the problems of globalization is 'more globalization.' We often hear, for instance, that cutting trade barriers to farm goods from the Third World is the big solution to many development problems. Don't believe it. Yes, some tropical products (sugar, orange juice) face severe protection. But most do not. And even if all the agricultural barriers came down, few developing countries could get ahead much just by expanding their farms. There are ecological limits. There are limits to the quality of the soil. Most of all, there are severe problems of oversupply. There is too much coffee in the world as it is: New supplies only drive the price down. Sugar would work the same way, and so probably would wheat and beef. Confronting the problems of the stricken Third World will require a balanced approach. What the poorest countries need perhaps most of all is sustainable finance, permitting them to build their infrastructure, their human resources, their public health systems and their industries -- both for domestic consumption and foreign trade. This is an old formula. But it is one with a track record: It worked in Europe after World War II, and then in Japan, Korea and in China, each of which saw decade after decade of sustained growth and industrial transformation. Here's the rub: Pursuing these goals will require placing the world's private financiers under a degree of regulation and control -- such as we used to have in the real golden age of development, from 1945 to 1970. That, of course, is not on the Economist's agenda. But it should be on ours. http://www.salon.com/opinion/feature/2004/03/22/economist/

Subject: Re: Debunking the Economist -- again From: Econochick To: BB Date Posted: Mon, Mar 22, 2004 at 16:23:33 (EST) Email Address: Not Provided Message: But Galbraith has failed to account for the impact of protectionism in Africa. Nor has he scrubbed out the rebuilding after World War II from the 'growth' in the 1950's and 60's. Nor is Russia's growing poverty the fault of globalization - the country imploded and poverty was the result. Hopefully it will rebound but it will take more than one generation. How much agricultural over-supply can be attributed to farm subsidy? How much more could the price drop by taking away controls if you already have over-supply? Even if the price dropped a bit (unlikely), wouldn't that drag impoverished people out of severe poverty and wouldn't that be good? I don't have time to list all of my other concerns that are all along the same lines. I'm all for Galbraith (or anyone) debunking whomever but I'm afraid that Galbraith will have to answer these questions first and give the cost and benefit of an alternative solution for it to be a truly great 'debunking'. I mean, I don't think anyone is silly enough to think that everyone is going to benefit equally at the same time from any change, globalization or otherwise. The question is whether or not it will benefit more people over time than the alternative. Right? Economics - the study of trade-offs?!

Subject: Re: Debunking the Economist -- again From: Mr. Gruff To: Econochick Date Posted: Mon, Mar 22, 2004 at 19:32:15 (EST) Email Address: Not Provided Message: http://www.slightlywarped.com/forumpictures/trolls/trollxing.gif

Subject: Well Argued From: Emma To: BB Date Posted: Mon, Mar 22, 2004 at 15:07:33 (EST) Email Address: Not Provided Message: Fine post!

Subject: Interest Rates From: Jennifer To: All Date Posted: Sun, Mar 21, 2004 at 18:01:14 (EST) Email Address: Not Provided Message: Since we are growing well, with no retail inflation but with plenty of slack in the economy, especially in the labor market, I can find no reason for higher interest rates. Evidently neither can the Federal Reserve. Simply because there are bond investors or gold speculators who want the Fed to raise rates is not enough. Again, to argue that the Japanese or any other foreign central bank is going to suddenly stop buying American bonds and force an interest rate increase makes no sense. Central banks do not try to make profits, they try to keep home economies growing strongly with little inflation. The last thing the Bank of Japan wishes is a decline in American buying. Bond yields are quite low, so we can chose to make other investments, but why worry? The Federal Reserve is doing all it can to spur demand and the labor market. Terrific, though I wish the Administration were doing as much.

Subject: Re: Interest Rates From: Pete Weis To: Jennifer Date Posted: Sun, Mar 21, 2004 at 23:49:58 (EST) Email Address: Not Provided Message: Paul Krugman, Bill Gross and the Japanese Finance Minister don't agree with you. At this point it's not so much about hard goods inflation in the US, but a steep prolonged drop in the US dollar along with very poor yields. It's not about central banks making a profit but it is about central banks not wanting to absorb big losses. As mentioned in the article I sited from the Sydney Morning Herald it's 'about talk in Asian circles of a looming dollar crisis'. Japan's dollar denominated reserve assets now exceed three-quarters of a trillion dollars and the Japanese are becoming concerned about the risk the US dollar represents. Buffet wrote a really good piece on the current account deficit and the very serious threat it represents to the US economy in Fortune magazine recently. He was echoing much of what Krugman and Gross were saying about our creditors (mostly Japan and China) becoming shy about loaning us more money while we deflate the currency in which we pay back our debt. As I've stated in other posts on this site, we've been running a current account deficit for about three decades and as Buffet points out this has been a constant transfer of our net wealth overseas. Since we consume more than we produce, we must borrow just to maintain a constant living standard. Yet we have a considerably higher standard of living today than we had 30 years ago when we produced as much or more than we consumed. Today we own big, expensive 4-wheel drive vehicles, three car garages, bigger houses, more TV's per house, expensive RV's, etc. But most of this better living has come from borrowing and not from substantial growth in wages and jobs. And a big part of the financing for our heavy borrowing habits has come from our trading partners with the current account surpluses. As Krugman, Gross and Buffet, as well as many others who are paying attention, have said this can't go on for ever. Now, the Japanese Finance Minister is begining to say enough is enough. You are right - the Fed has done all it can do. Now it's up to our creditors. They are looking at our economy and they see a worsening US job market and an American consumer who they believe is close to being tapped out anyway. So now they are more focused on the risk their US assets represent and are looking to offload. As to your lack of worry about bond investors - where do you suppose alot of the mortgage money for the real estate market comes from? If the supply of mortgage money drops, we'll need a commensurate drop in demand for mortgage money if interest rates are not to go up, correct? Whether mortgage rates go up or mortgage demand drops, we get to test Emma's theory that there is 'no problem' with a real estate bubble. By the way, gold speculators are not asking the Federal Reserve to raise rates. That would not be good for precious metals investment.

Subject: High or Low Rates From: Jennifer To: Pete Weis Date Posted: Mon, Mar 22, 2004 at 12:39:50 (EST) Email Address: Not Provided Message: Well, I do not find any concern with low interest rates by Paul Krugman. PK wants interest rates as low as can be to generate as much growth as possible. What PK worries about is the 'long term' effect of the deficit on interest rates. Bill Gross wants higher interest rates now. Bill Gross is wrong, and thinking about PIMCO more than the economy. As for the Japanese, they are and will contiue to buy American debt. Who is right? Since the bond market just registered a 3.74% yield on the 10 year treasury, and the lowest mortgage rates since the 1960s, Bill Gross and Stephen Roach of Morgan Stanley are likely wrong. The Federal Reserve is right to keep interest rates low, and the Japanese have never interfered with our bond market and are not about to now. Is there a real estate bubble? Possibly, possibly. But, the housing market is a driver of this economy. What is the Federal Reserve to do, slow housing and risk a recession. If we had a fiscal stimulus that helped employment, we could afford higher interest rates. Gold bugs always try to talk up inflation, that is how they can win at speculation.

Subject: Re: High or Low Rates From: Pete Weis To: Jennifer Date Posted: Mon, Mar 22, 2004 at 15:23:06 (EST) Email Address: Not Provided Message: Guess, to some extent, we're talking about two different issues. You keep saying the Fed should not raise interest rates and I'm talking about the effect of the Japanese ending their purchasing of US dollar denominated assets (which was part of a public statement by the Japanese Finance Minister). I'm not sure that the Japanese Finance Minister is prone to bluffing or make bogus statements. You seem to think he is just blowing smoke - perhaps he is, we'll find out soon. I'm not sure what Paul Krugman's stance on the Fed and interests rates are. I believe the Fed is pretty much out of the picture now when it comes to interest rates. As I said in a previous post, they're now boxed into a corner. In a post below, I refered to two editorials (archived on this site) entitled 'The China Syndrome' and 'This Can't Go On' by Paul Krugman which talked about our 'Asian creditors' 'waking up' to their overextended, risky stake in the US dollar. When I said that Paul Krugman does not agree with you, I was refering to his belief that at some point Japan and China will stop the credit and this will have a powerful upward influence on our interest rates. If you read these two Krugman pieces, I don't know how you can miss what I'm trying to convey with regard to the seriousness of the Japanese public statements.

Subject: Re: High or Low Rates From: Emma To: Pete Weis Date Posted: Mon, Mar 22, 2004 at 16:13:23 (EST) Email Address: Not Provided Message: Paul Krugman 11/04/03 As Bill Gross of Pimco, the giant bond manager, says, 'Sooner, perhaps later, our Asian creditors will wake up and smell the coffee.' (Yes, the federal budget and the value of the dollar now depend on huge purchases of Treasury bills by the governments of Japan and China.) When they do, he predicts 'higher import costs, a cutback in spending on cheap foreign goods, rising inflation, perhaps chaotic financial markets, a lower standard of living.' With Jennifer, I do not argue about the long term danger only that there is little danger in the coming months. There is really no chance that the Japanese or Chinese will balk at holding American debt when development in these countires would be at stake. I would not be buying bonds, but I am not worried about inflation or the bond market 'yet.'

Subject: Re: High or Low Rates From: Nathan Corson To: Emma Date Posted: Mon, Mar 22, 2004 at 19:16:57 (EST) Email Address: Not Provided Message: I believe the critical issue will not be if Asian central banks 'stop' buying US debt, but rather if they (particularly BOJ) buy substantially LESS in the short term. So far in 2004, BOJ has intervened to the tune of $100 billion -- an unprecedented amount of intervention, I believe to keep Yen weak for Japanese exporters going into Japan's fiscal year end March 31. During the last several US treasury auctions, foreign central banks have purchased 40-45% of the issues!! (Asian CB's thought to be large majority) and the US bond market has rallied back toward the all time highs seen last spring. I believe reduced foreign cb buying of US treasuries is an issue if we talk about debt levels, deficits etc. not causing 'dislocations' in the bond market. Will a drop in US bond prices, whatever the cause, from today's lofty levels, snowball into higher and higher yields and exploding bond volatilities like June-August 2003? Will GSE's and other holders of mortgage securities contribute to this snowball, and survive a sustained move up in yields? Speaking of dislocations, as Peter mentions above, the Fed is in a box--one that they have built for themselves. Fed Funds at 1% is extreme, but the Fed's been extremely successful in managing expectations and convincing the market to bid the rest of the curve down to all-time low yields. The futures markets assign a very low probability of a hike before the end of '04. Raising Fed Funds just back to a 'normally' accomodative level in the near future would shock the bond market. (Take a look at the Philly Fed prices paid/prices received chart from their release last week, recent CPI/PPI releases and the CRB numbers): http://www.phil.frb.org/files/bos/bos0304.pdf http://www.bls.gov/news.release/archives/cpi_03172004.pdf http://www.bls.gov/news.release/pdf/ppi.pdf http://www.crbtrader.com/crbindex/ndata.asp Are these numbers indicative of rising prices? Reading Moskow's comments today, the Fed doesn't think so. Even if they WERE getting a bit concerned, how are they going to make a move without causing severe 'dislocations'?

Subject: Re: High or Low Rates From: Pete Weis To: Nathan Corson Date Posted: Mon, Mar 22, 2004 at 21:20:14 (EST) Email Address: Not Provided Message: Nathan. Agree that raising the Fed rate now would cause major problems, despite Stephen Roach and Bill Gross asking for this. I view the US Federal Reserve as a 'deer caught in the headlights'. They may eventually lower rates, as did Japan, to zero if a serious drop in the stock markets begins to erode consumption (reverse wealth effect). I don't believe the Fed will raise rates before the financial markets do it for them. Apparently, Bill Gross and Stephen Roach see very serious problems ahead. I'm sure they believe the Fed raising rates would have some fairly severe consequences. Perhaps for them, a good analogy would be forest-fire fighters purposely setting 'back fires' to limit even greater damage - such as a sudden collapse in the dollar at some future date. I really don't know. Anyway, the coming couple of months should probably reveal how much, if any, reduction in US securities purchases the BOJ has in store. We'll also get to see (if they reduce) how much it effects interest rates and the bond markets. These are truely unusual times.

Subject: India From: Jennifer To: All Date Posted: Sun, Mar 21, 2004 at 13:18:38 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/21/opinion/21FRIE.html Software of Democracy By THOMAS L. FRIEDMAN My favorite building in Bangalore, India's Silicon Valley, is a corporate complex called the 'Golden Enclave.' In some ways, the whole tech sector in Bangalore could be called India's 'Golden Enclave' — disconnected from the country's bad governance, as companies create their own walled enclaves, with their own electricity, bus service, telecommunications and security, and disconnected from the countryside, where many Indians still live in abject poverty. As long as these two liabilities of inept governance and endemic poverty are not addressed, India can't really take off and become a big-time technology competitor of the United States. The information revolution, though, has given India, for the first time, some real resources and tools to address its chronic ailments. Will it seize this opportunity? This is India's 'to be or not to be' question. Says Vivek Paul, president of the cutting-edge Indian software giant Wipro: 'In some sense, all that this globalization of information technology and [outsourcing] has done is to give India pin money to reform itself.' If India 'blows it,' well, the opportunities may still be out there, 'but India won't be a beneficiary in the long run,' he said. 'The beneficiaries will be those who are most flexible and able to organize themselves around the opportunities.' Mr. Paul said he believed India would seize this moment. But it will require some radical changes in politics: While India has the hardware of democracy — free elections — it still lacks a lot of the software — decent, responsive, transparent local government. While China has none of the hardware of democracy, in the form of free elections, its institutions have been better at building infrastructure and services for China's people and foreign investors....

Subject: Outsourcing From: Jennifer To: All Date Posted: Sun, Mar 21, 2004 at 12:38:07 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/21/business/yourmoney/21wipro.html An Outsourcing Giant Fights Back By SARITHA RAI Bangalore, India TO his compatriots, Azim Premji is the Bill Gates of India. By transforming his family-owned vegetable oil business into a global technology powerhouse, Mr. Premji has become the country's richest citizen, with a net worth hovering around $8 billion. Outside India, however, Mr. Premji is not exactly Mr. Popularity these days. A British newspaper recently went so far as to describe him as 'the man who wants to take away your jobs.' That has to do with the nature of Mr. Premji's business: his company, Wipro, is one of the biggest outsourcing concerns in the world. At Wipro's sprawling suburban campus near Bangalore, enthusiastic young engineers in blue-and-cream cubicles write code, build software and maintain computer systems for a host of American companies, including Lehman Brothers, General Motors, Home Depot and Boeing. And they do it for a small fraction of what it would cost these companies to do the work. But in the United States and elsewhere, Wipro and the rest of India's growing technology services industry are increasingly denounced as a major cause of job losses. Senator John Kerry of Massachusetts, the likely Democratic presidential nominee, has called chief executives who shift work overseas 'Benedict Arnolds.' Mr. Premji, 58, contends that Americans are blowing the issue out of proportion. Still, as he sits in his elegant office, gazing through its huge glass windows at the eucalyptus trees in the distance, he allowed that he is feeling the pressure. 'How can you ignore such rooftop shouting against outsourcing unless you are an ostrich with your head stuck in the sand?' he said....

Subject: Re: Outsourcing is good From: SId Bachrach To: Jennifer Date Posted: Sun, Mar 21, 2004 at 18:35:55 (EST) Email Address: sidb23@juno.com Message: John Kerry, who dabbles at populism when he is not marrying heiresses, denounces outsourcing. It is easy for Kerry to denounce outsourcing. After all, Mr. Kerry never has shopped at Walmarts or Home Depot. The fact is that working class Americans want cheap foreeign goods and the lower price of these goods gives families more discretionary spending. Mr. Kerry (and New York Times limousine liberals) don't think working class folks should have the choice of purchasing cheaper goods made by foreigners. The elitists don't see why anyone would ever want to shop at Walmarts.

Subject: Please Do Not Feed From: Troll Alert To: SId Bachrach Date Posted: Mon, Mar 22, 2004 at 13:11:26 (EST) Email Address: Not Provided Message: SB is the ugliest, smelliest, most lying of trolls.

Subject: Re: Outsourcing is good From: BB To: SId Bachrach Date Posted: Mon, Mar 22, 2004 at 12:11:30 (EST) Email Address: Not Provided Message: Kerry decries outsourcing, but he won't do a damn thing to stop it, and you know it. He'll do exactly what business tells him to do, sadly, just as Clinton did. Working class folks have no choice but to shop at Walmart, which has slightly cheaper merchandise, because their wages have drastically declined in the past 30 years. Goods made in abysmal sweatshop conditions cost a very small fraction of what products made in the US (or anywhere) under good conditions do, and yet they are priced only slightly more cheaply, if at all. The labor costs for an enormous number of products (if not almost all) have been significantly reduced by outsourcing over the last few decades, but there has not been a huge deflation of prices in the US (or the rest of the west) in this time. Rather, the wealth of the top few percent has been growing enormously, while the real wages of most western workers has stagnated or dramatically declined. Let's see: huge savings on the costs of producing items; items stay at same price or become only slightly cheaper; rich become much, much richer. Hmmm, can't figure out what's going on here...

Subject: Re: Outsourcing is good From: Econochick To: SId Bachrach Date Posted: Mon, Mar 22, 2004 at 11:25:32 (EST) Email Address: Not Provided Message: I agree with you, SB. However, George Bush is introducing the same protectionist crap that John Kerry is. I believe the reason is that the vote is coming in the short term and the structural changes in our economy are long term. What people who vote (I'm generalizing here, no offense to anyone) don't realize is that if you don't allow American companies to compete with other companies who do use cheaper labour, not only will those 'protected' jobs disappear but more will go. The companies will simply be out-competed, go out of business and the jobs we tried to protect will be lost anyway - along with the white collar jobs in the same companies that would have been kept had the company been allowed to outsource in the first place. Then, we will be forcing a 'no more than 35 hours per week' law to 'fix' unemployment just like France. It is my opinion that we are better off spending public money in the re-education of the folks who have lost cheap, back-breaking manufacturing jobs to be elligible for growing sectors in our economy - like High Tech manufacturing. We either take the pain in the short term or we take much greater pain for the long run.

Subject: Outsourcing From: Nat To: Econochick Date Posted: Mon, Mar 22, 2004 at 12:52:44 (EST) Email Address: Not Provided Message: Outsourcing is an old problem with several new twists. Twist number 1 is that a vast array of our white collar jobs are subject to outsourcing, not just the traditional blue collar manufacturing jobs. If your job pushes paper, or is involved in high tech or engineering, your job is at risk. I have seen opinions that the 'good' IT jobs will stay here and just the coding jobs will vanish. I am sorry, but pretty much every IT job is at risk: offshore folks are good at the high end stuff, also. And with modern networks even the need for the main machine to be on site is diminishing. And the bureaucratic/paper pushing jobs in government, insurance and corporate offices don't need to be here either. Twist number 2 is the weakened state of unions and the assaults on the government social safety net to cushion the blow of job loss. Twist number 3 is that some of our most educated citizenry will be losing their jobs. It just cracks me up when I hear Greenspan say we need better education. A college degree and 30 years of experience in high tech is not enough: the real issue is cost of labor. What do we tell our kids to study in college? Massage therapy would be safe, I guess, but computer science is a real risk. The 4th twist is our labor market is under pressure from illegal immigration. In Houston it is nearly impossible to find a U.S. citizen on a construction crew. It is the primary reason housing costs there are so cheap. This blessing is also a curse: since these people are outside the normal labor channels (i.e. no FICA, no insurance, no minimum wage, no workman's comp) out-of-work citizens cannot compete for these jobs. This situation will worsen since our neighbors to the south are being battered by job loss also: over 100,000 Guatemalan garment workers lost their jobs last year (sorry, no links to where I saw that figure) to cheaper Chinese labor. The references to cheap goods at Walmart also cracks me up. Last November Walmart released information that their sales peaked on pay day and the best sellers in most categories were the cheapest items. Both of these are symptoms of a buying population under financial stress (their analysis, not mine.) There is no Walmart without people having decent jobs somewhere other than Walmart. Despite all this I am of the opinion that protectionism won't work in either the short or long run. It is scary that we have squandered both our fiscal and monetary ammo and gotten less than squat in jobs creation. The ultimate issue is political stability. Our government treasuries are the most secure investment in the world because we are the most politically stable nation on earth. If we continue to have a growing under and unemployed population with inadequate access to the benefits we all have grown accustomed to having in this country, we may get to insource something from the third world: social unrest.

Subject: Worst Case From: Econochick To: Nat Date Posted: Mon, Mar 22, 2004 at 14:06:58 (EST) Email Address: Not Provided Message: Nat, I think that your analysis is sort of a worst case scenario - unlikely but not unthinkable. Years ago we thought there would be a lot more telecommuting but it's actually pretty rare. For certain jobs it is paramount that people are able to work face to face - Doctors, lawyers, accountants, MIS staff, investment bankers, construction workers, maids, chefs, etc. That's one reason teleconferencing is not so popular. So, based on that, I do think that your post is a worst case scenario. Also, the labour market in India and China will get to full employment and, in theory, the labour cost difference will shrink over time. Also, I'm curious if you know for sure that the construction workers of whom you speak are illegal or you're just guessing because of the lack of English. They could be here legally and not speak English. If you're on a work visa or have a green card, you pay American taxes, you know. I do get the larger point that there is more pressure on our borders but I'm curious about that one statement. But I have a question: what happened to American innovation? What happened to starting your own business instead of relying on someone else to provide the job for you? This is a practical question because working for yourself is the ultimate control - also the ultimate risk. Historically, Americans have been so entrepeneurial and have been admired for that spirit. What happened to us? Do you not think that we will innovate and produce more to offset offshoring? I'm generally an optimistic person, I realize, but there seems to be a lot of pessimism on this board and I don't know why.

Subject: Re: Worst Case From: Jerry To: Econochick Date Posted: Thurs, Mar 25, 2004 at 16:00:54 (EST) Email Address: Not Provided Message: One response...your optimistic outlook presumes a closed system with a limited number of variables. The greatest hazard facing the global economy is long term inflation due to a massive shortage of natural resources. For instance, by the year 2015 oil demand will dramtically exceed supply and that will drive up the cost of all things on a global scale. Like you, I don't see innovation coming to our rescue. We've created an economic Versailles, a closed system that lives for itself and shapes the world around it to fit its own needs. While economics can function objectively, so many ecnomists choose their data in a subjective manner and they can tend to paint a pretty picture. I believe that for the long term the global economy is in great danger with global oil shortages and environmental calamity as two shakey legs on a three legged stool. If you are not considering those two variables in your data set then you will have a far more optimistic outlook on things.

Subject: Re: Worst Case From: Econochick To: Jerry Date Posted: Thurs, Mar 25, 2004 at 17:16:56 (EST) Email Address: Not Provided Message: I see your point, Jerry. However, I think you make a couple of overly pessimistic points. The first is your assumption that we will hit an oil supply crisis in the next 11 years. The most conservative estimates for even hitting Hubert's Peak (let alone an actual shortage) are 20-30 years from now - barring new technology or a discovery of a(n) large reservoir(s). Second, you are assuming that we will not be able to develop a reasonably priced substitute for oil. I think that nuclear energy may be one large componant and maybe fuel cells. Although, I know VERY little about fuel cells. Also, Economic forecasts are by definition not objective because every assumption in a model is a subjective variable. You cannot 'assume' without being subjective. Some economists have much more pessimistic forecasts than others, that's true. But none of us know what will happen and when. So, I guess I'm more optimistic and you're more pessimistic and we'll all just have to wait and hope for the best, right?

Subject: Re: Worst Case From: Nat To: Econochick Date Posted: Wed, Mar 24, 2004 at 14:14:34 (EST) Email Address: Not Provided Message: Econochick, I agree that my previous semi-rant is at least a semi-worst case. The Houston/housing comment is based on a Houston Chronicle article of a few months ago. It was in response to the Bush immigration proposal and the resistance to it at all levels of the real working world. Builders are insulated by a network of middlemen and the INS turning a blind eye to local business activities. They get rock bottom cost, young, motivated undocumenteds who live frugally and ship money back home. Adding these workers to the 'system' will drive up their costs and put their jobs at risk to the lower cost next wave of undocumenteds (who will always be the cheapest labor.) Interesting your comment about physicians: George Will cited offshoring of medical services (i.e. reading xrays) as a way to quell rising costs a few weeks ago on This Week. Stephanopoulos or Schumer retorted that that was a good way to discourage Americans from going into radiology. In general, I think licensed occupations with strong political hooks (lawyers and doctors) are the safest high end jobs. The good blue collar jobs (plumbers, electricians) are under pressure from the other direction: those willing to work without protections and benefits. One of the triggers for my last rant was a conversation with a friend who is a loyal union member (welder and pipefitter, with high tech clean room expertise) here in Austin: his last local union job was in 2000. IMO, unions are toast here in Texas. As for innovation, I am founder and owner of a small software firm that does speculative development in the hospital financial world. Our customers are very large public seector hospitals. I have been a software developer since '76 and started my current work in '89. I took 2 years to write and sell my first spec system on my own nickel. IMO, it has never been harder to be small and innovative than it is today. Basically, that is one of the major reasons I have been hanging around this board and following the Delong etc. blogs. I used to think my working world was a good fall back for my kids. I no longer think that is true.

Subject: Re: Worst Case From: Econochick To: Nat Date Posted: Wed, Mar 24, 2004 at 18:51:39 (EST) Email Address: Not Provided Message: Nat, I see your point about the undocumented workers. I have to say that I really can't disagree with that. And illegal immigration really is a problem - especially in border states. I had actually heard about the offshoring of x-ray reading. However, that seems like pretty narrow thing to offshore. I'm completely out of my depth when it comes to specifics of medicine but I believe radiologists do more than just x-ray reading. Don't they? And it would drive down some of our medical costs, which I think everyone agrees we sorely need. But of course, for anything that requires patient contact (and most of the profession does) you can't offshore. Congratulations on your business!! It is a huge thing when one goes out and does that. You are a fantastic example to all of us. The reason I'm hanging out here a lot is because I'm starting my own business and I'm waiting for equipment arrival and installation. Once that happens I'll be too busy. As for it being harder than ever before, it's hard not to agree. But that's largely a function of a highly developed economy and very little pent-up demand. We will always go through cycles in our economy. Don't you remember the 70's and stag-flation? It was awful. I'm confident that our economy will be just fine as long as we don't turn into Europe and it sounds like your kids have a great example to follow!

Subject: Do Not Feed theTrolls, Please From: B. Goat To: Econochick Date Posted: Mon, Mar 22, 2004 at 19:29:06 (EST) Email Address: Not Provided Message:

Subject: Medicare From: Emma To: All Date Posted: Sat, Mar 20, 2004 at 14:40:45 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/20/politics/20MEDI.html Medicare Actuary Gives Wanted Data to Congress By ROBERT PEAR WASHINGTON — Richard S. Foster, the chief actuary of Medicare, provided Congress with documents on Friday showing that federal payments to private health insurance plans under a new Medicare law could far exceed what Congress assumed when it passed the measure last fall. For months, lawmakers had been seeking the data, but Mr. Foster said in an interview that he had withheld it under instructions from Bush administration officials. He turned over documents outlining the information at a meeting on Friday with Congressional aides of both parties who work on health legislation. The documents estimate that the new law will increase Medicare payments to private health plans by a total of $46 billion over the next 10 years, not the $14 billion assumed by lawmakers when they voted on the legislation. Mr. Foster had cited the discrepancy in an interview earlier this week, but the documents he turned over on Friday, Mr. Foster said, show that the Bush administration was aware of the gap well before Congress approved the new law. Moreover, the documents show that the administration expects a huge increase in the number of Medicare beneficiaries enrolled in various types of managed care. About 12 percent of the 41 million current Medicare beneficiaries are in such private health plans today. By 2009, Mr. Foster says, the proportion will reach 32 percent, equally divided between health maintenance organizations and preferred provider organizations. By contrast, the actuary estimates that enrollment in the traditional government-run Medicare program will decline from 2006 to 2009, along with payments to many health care providers....

Subject: Medicare From: Emma To: Emma Date Posted: Sat, Mar 20, 2004 at 16:54:40 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/18/politics/18MEDI.html Mysterious Fax Adds to Intrigue Over the Medicare Bill's Cost By SHERYL GAY STOLBERG and ROBERT PEAR WASHINGTON — Late one Friday afternoon in January, after the House of Representatives had adjourned for the week, Cybele Bjorklund, a House Democratic health policy aide, heard the buzz of the fax machine at her desk. Coming over the transom, with no hint of the sender, was a document she had been seeking for months: an estimate by Medicare's chief actuary showing the cost of prescription drug benefits for the elderly. Dated June 11, 2003, the document put the cost at $551.5 billion over 10 years. It appeared to confirm what Ms. Bjorklund and her bosses on the House Ways and Means Committee had long suspected: the actuary, Richard S. Foster, had concluded the legislation would be far more expensive than Congress's $400 billion estimate — and had kept quiet while lawmakers voted on the bill and President Bush signed it into law. Ms. Bjorklund had been pressing Mr. Foster for his numbers since June. When he refused, telling her he could be fired, she said, she confronted his boss, Thomas A. Scully, then the Medicare administrator. 'If Rick Foster gives that to you,' Ms. Bjorklund remembered Mr. Scully telling her, 'I'll fire him so fast his head will spin.' Mr. Scully denies making such threats. These conversations among three government employees — an obscure Congressional aide, a little-known actuary and a high-level official — remained secret until now, and Ms. Bjorklund still does not know who sent the fax. But Mr. Foster went public last week, and details of his struggle for independence within the Bush administration are now emerging, raising questions about whether the White House intentionally withheld crucial data from lawmakers....

Subject: Pretending From: Emma To: Emma Date Posted: Sat, Mar 20, 2004 at 18:44:50 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/15/politics/15VIDE.html U.S. Videos, for TV News, Come Under Scrutiny By ROBERT PEAR WASHINGTON — Federal investigators are scrutinizing television segments in which the Bush administration paid people to pose as journalists praising the benefits of the new Medicare law, which would be offered to help elderly Americans with the costs of their prescription medicines. The videos are intended for use in local television news programs. Several include pictures of President Bush receiving a standing ovation from a crowd cheering as he signed the Medicare law on Dec. 8. The materials were produced by the Department of Health and Human Services, which called them video news releases, but the source is not identified. Two videos end with the voice of a woman who says, 'In Washington, I'm Karen Ryan reporting.' But the production company, Home Front Communications, said it had hired her to read a script prepared by the government. Another video, intended for Hispanic audiences, shows a Bush administration official being interviewed in Spanish by a man who identifies himself as a reporter named Alberto Garcia. Another segment shows a pharmacist talking to an elderly customer. The pharmacist says the new law 'helps you better afford your medications,' and the customer says, 'It sounds like a good idea.' Indeed, the pharmacist says, 'A very good idea.' ...

Subject: Pretending From: Emma To: Emma Date Posted: Sat, Mar 20, 2004 at 14:42:04 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/20/opinion/20SAT4.html Reporting Live, Outside Credibility In a foolhardy obsession, the Bush administration continues to insist that a woman it used to portray a television reporter is actually a freelance journalist, not an actor. The woman appears in free videos distributed to local TV stations by the Health and Human Services Department. The videos, which many stations used, are plugs for the controversial new drug program the White House is selling to elderly voters. But the videos pretend to be balanced news accounts, and even end with a facsimile of the tag line delivered by real reporters. 'In Washington, I'm Karen Ryan reporting.' The government insists that Ms. Ryan is the real deal. The Columbia Journalism Review, which put some actual reporters on the case, showed otherwise. Ms. Ryan turns out to be a public relations specialist who in this case was hired to portray a stand-up reporter presenting the Medicare plan as objective news....

Subject: More Pretending From: Kosh To: Emma Date Posted: Mon, Mar 22, 2004 at 12:22:10 (EST) Email Address: jrgallag@earthlink.net Message:

Subject: Re: More Pretending From: Kosh To: Kosh Date Posted: Mon, Mar 22, 2004 at 12:23:40 (EST) Email Address: jrgallag@earthlink.net Message: http://www.newsday.com/news/local/longisland/columnists/ny-livit0312,0,1155991,print.column?coll=ny-li-columnists

Subject: PK: Bad Saudis, good Malysians! From: Sid Bachrach To: All Date Posted: Sat, Mar 20, 2004 at 08:16:20 (EST) Email Address: sidb23@juno.com Message: Mr. Krugman is correct to point out the coddling othe Saudis during the War on Terrorism. Mr. Krugman is correct to point out the Bush administration's insanity in allowing a planeful of Saudis to be spirited out of the US only days after 9/11. But how does Mr. Krugman's correct view of the repressive and terrorist permitting Saudi royal family square with PK's unabashed admiration for Malaysian Muslim fanatic former PM Matahar Mohammed? Answer: It doesn't! Mohammed was at again blaiming Jews for being too powerful and saying again that Israel is the source of all evil in the world. Yet there is not a peep of protest from Mr. Krugman. Last time Matahair Mohammed made antiSemitic statements, Mr. Krugman could only call them 'unfortunate' but blamed Bush for turning an otherwise reasonable man like Matahair Mohammed into a foaming antisemite. If the Saudis deserve approbation, and they do, surely Mr. Krugman won't allow his personal friendship with Matahair Mohamed to render PK silent about Mohammed latest garbage.

Subject: Do Not Feed the Trolls From: Please To: Sid Bachrach Date Posted: Sun, Mar 21, 2004 at 12:34:33 (EST) Email Address: Not Provided Message:

Subject: Trolling From: Troll To: Sid Bachrach Date Posted: Sat, Mar 20, 2004 at 14:29:55 (EST) Email Address: Not Provided Message: SB is a lying radical right troll, as all trolls are. Lying in Ponds is the home of trolls, if trolls can be thought to have homes.

Subject: Re: Trolling From: Sid Bachrach To: Troll Date Posted: Sat, Mar 20, 2004 at 20:03:07 (EST) Email Address: sidb23@juno.com Message: The fact is that Mr. Krugman pooh poohed Matahair Mohammed's anitSemitic ravings. Read Mr. Mohammad's remarks side by side with David Duke's ravings. There is no discernible difference. So why on earth did Mr. Krugman blame George Bush for Mr. Mohammad's disgraceful remarks. The logic of Mr. Krugman's argument was nonsensical. PK essentially claimed that people like Mohatair Mohammed are essentially reasonable but get inflamed by bad people like George Bush and then turn to antiSemitism. Then Mr. Krugman condemns the Bush administration for coddling the Saudis (by itself a good point by Mr. Krugman). So at the same time, Mr. Krugman has George Bush coddling the most fanaatical Muslim regime and simultaneously causing Muslims to become antiSemites. How on earth can Mr. Bush do both at the same time? It just does not make sense.

Subject: I can not Help Lying From: SB - Lying Troll To: Sid Bachrach Date Posted: Sun, Mar 21, 2004 at 12:30:47 (EST) Email Address: Not Provided Message: I am a lunatic troll, and I can not help lying.

Subject: Countering Trolls From: Terri To: SB - Lying Troll Date Posted: Sun, Mar 21, 2004 at 15:18:32 (EST) Email Address: Not Provided Message: The whole purpose of critics like this troll is to try to intimidate. They lie and assume if they toss around lies they will be effective at intimidation. They must be countered. I am feeding the trolls once to explain why they are so hateful, never again.

Subject: Re: Trolling From: Suleiman To: Sid Bachrach Date Posted: Sat, Mar 20, 2004 at 20:11:02 (EST) Email Address: nma@hotmail.com Message: What's the difference between a politician and a statesman?A politician is short sighted, a statesman(Paul Krugman!) is long sighted

Subject: Re: PK: Bad Saudis, good Malysians! From: Econochick To: Sid Bachrach Date Posted: Sat, Mar 20, 2004 at 12:59:15 (EST) Email Address: Not Provided Message: I have a lot of Respect for Paul Krugman the Economist but less as a political pundit. Thought you guys might like this article. Nov 13th 2003 From The Economist print edition Paul Krugman and the controversial art of popularising economics “GIVE me a one-handed economist,” demanded a frustrated American president. “All my economists say, ‘on the one hand...on the other'”. From a mono-manual perspective, at least, Harry Truman would have loved Paul Krugman, an economist who rarely hesitates to take a bold position—even when the subject is himself. In recounting the transformation of his twice-weekly New York Times column from a genial discussion of the “New Economy” into a widely read broadside against the Bush administration, the Princeton professor recently described himself as “a lonely voice of truth in a sea of corruption.” What is beyond dispute is that Mr Krugman is the finest economist to become a media superstar—at least since Milton Friedman or, earlier, John Maynard Keynes turned to journalism. Mr Krugman's work on currency crises and international trade is widely admired by other economists. He holds the John Bates Clark medal in economics, which is slightly harder to get than a Nobel prize. As for popularity, his new book, “The Great Unravelling”—his eighth aimed at a broad, non-academic readership—has spent eight weeks on the New York Times bestseller list. The Economist, which itself has been known on occasion to clamber off the economic fence, can hardly criticise anybody for writing hard-hitting (yet engaging and accessible!) economic analyses. But, increasingly, people are asking whether Mr Krugman's success as a journalist is now coming at the expense of, rather than as the result of, his economics. For while he has had some journalistic coups during his time as a columnist—most notably in recognising, long before most other commentators, that market manipulation played a role in the California energy crisis—perhaps the most striking thing about his writing these days is not its economic rigour but its political partisanship. Paul Krugman's columns and other writings are available at the Unofficial Paul Krugman Archive, while a collection of rebuttals to his critics (such as the National Review's Krugman Truth Squad) and other pieces are available on Mr Krugman's own web page. Click to buy “The Great Unraveling” from Amazon.com (Amazon.co.uk) Lyinginponds.com, a website that tracks partisanship among American political columnists, rates Mr Krugman second in the overall partisan slant of his columns, behind only Ann Coulter, a fiercely (and often incoherently) conservative polemicist. As the site documents exhaustively, the vast majority of Mr Krugman's columns feature attacks on Republicans; almost none criticise Democrats. Unsurprisingly, this has made him a sort of ivory-tower folk-hero of the American left—a thinking person's Michael Moore. But he may have even more readers among his ideological adversaries, particularly on the internet, where deconstructing his latest column is a kind of twice-weekly parlour game—albeit one so contentious it has spawned talk-show chatter and even legal threats. He refers to these critics as his “stalkers”. Many of them spend an inordinate amount of time quibbling about minor semantic points, or trivial differences in statistics. But they cannot all be easily dismissed. The more reasonable ones allow that he is a gifted writer and economist, but also argue that these days his relentless partisanship is getting in the way of his argument. Is the American political and economic picture, they ask, really as one-sided as he paints it? And if not, should an economist of Mr Krugman's prominence be telling the public that it is? A glance through his past columns reveals a growing tendency to attribute all the world's ills to George Bush. Regarding California's energy crisis, for example, he berated the Bush administration and the Federal Energy Regulatory Commission for not imposing price caps sooner—but found no room to mention Bill Clinton, who presided over a similarly inactive FERC for the first part of the crisis, nor to attack California's then Democratic governor Gray Davis for his disastrous refusal to allow consumer prices to rise. After Mahathir Mohamad, the prime minister of Malaysia, recently gave an anti-Semitic speech, Mr Krugman argued that the Bush administration's ham-fisted foreign policy had forced Dr Mahathir to make the remarks in order to shore up domestic political support—most unlikely, given that he was about to step down. Even his economics is sometimes stretched. A recent piece accused conservatives of embracing the “lump of labour fallacy”, the mistaken claim that there is a fixed quantity of work which governments must strive to allocate equitably. In fact, the paper he cited did not commit the lump of labour fallacy. He used game theory to argue that, by criticising North Korea but not attacking it, and then going after Iraq instead, Mr Bush is “probably” encouraging North Korea to become a more dangerous nuclear power. This probably did not convince most game theorists. Overall, the effect is to give lay readers the illusion that Mr Krugman's perfectly respectable personal political beliefs can somehow be derived empirically from economic theory. No such thing as a free lunch Now that he is a journalist, it is perhaps not surprising that Mr Krugman seems to have embraced the concept of the free lunch—even though as an economist he should know better. Every opportunity (including lunch, and even including Mr Krugman's favoured policies) has a cost. Decision-making, not least in politics, tends to be hard because it involves trading off those costs and benefits, with the resulting net gains often marginal and uncertain. Surely one of an economist's main tasks is to remind one-handed politicians, and their constituents, that economic choices generally come in shades of grey, not black and white—even when they are made by one's political rivals. Many of Mr Krugman's fellow economists, jealous of his celebrity, comfort themselves with the thought that his angry rants have hurt his reputation enough to ensure he will not now win a Nobel prize. They may be kidding themselves. The Nobel committee has not been averse in the past to giving the prize to economists who have achieved popular notoriety, as its awards to Mr Friedman and, more recently, Joseph Stiglitz show. Mr Krugman is probably still in the running

Subject: Re: PK: Bad Saudis, good Malysians! From: Gnao To: Econochick Date Posted: Sat, Mar 20, 2004 at 19:16:26 (EST) Email Address: nma@hotmail.com Message: 'The object of government in peace and in war is not the glory of rulers or of races, but the happiness of the common man.' Lord William Beveridge or Sir Paul Krugman?

Subject: Ah! If only we can go back to tending our gardens. From: Ayn Rant To: Econochick Date Posted: Sat, Mar 20, 2004 at 18:42:51 (EST) Email Address: Not Provided Message: As I have noted here before; there is nothing I would like better than for PK to go back to the ivory tower and produce research on (among other things) economic geography, which he has helped to change from a descriptive science to an analytic one. (From geography--my field of study--it is only fair to mention Brian J.K. Berry, who has delved into economic analysis. He's only the second geographer inducted into the National Academy of Sciences.) George Orwell wrote that 'We have now sunk to a depth at which restatement of the obvious is the first duty of intelligent men.' I think PK sees his duty clear.

Subject: I Love a Good Quote n/m From: David E... To: Ayn Rant Date Posted: Sat, Mar 20, 2004 at 20:49:17 (EST) Email Address: daveellis_39@hotmail.com Message: n/m

Subject: Right Wing Tripe From: Terri To: Econochick Date Posted: Sat, Mar 20, 2004 at 17:56:26 (EST) Email Address: Not Provided Message: Duh....

Subject: Trolling From: Troll To: Econochick Date Posted: Sat, Mar 20, 2004 at 14:23:53 (EST) Email Address: Not Provided Message: Lying in Ponds is complete right wing rubbish. The Economist is simply more subtle bujt on such matters is all hypocrisy. SD is a beyond mention.

Subject: God Forbid... From: Econochick To: Troll Date Posted: Sun, Mar 21, 2004 at 13:03:03 (EST) Email Address: Not Provided Message: ...anyone question your god. Quick, put the blinders back on or you may see the world as it really is, warts and all.

Subject: Re: God Forbid... From: David E... To: Econochick Date Posted: Sun, Mar 21, 2004 at 14:33:33 (EST) Email Address: daveellis_39@hotmail.com Message: To avoid the troll label, maybe you might want to analyze the 'Mahathir Mohamad' columns. I just re-read them, and I failed to find what the Economist was talking about. Maybe you could point the problems out to me.

Subject: Re: God Forbid... From: Econochick To: David E... Date Posted: Mon, Mar 22, 2004 at 11:16:34 (EST) Email Address: Not Provided Message: I've no interest your labels. I'm careful who I argue with. My post was on SB's behalf.

Subject: Troll, Troll, Troll From: David E... To: Econochick Date Posted: Mon, Mar 22, 2004 at 12:34:38 (EST) Email Address: daveellis_39@hotmail.com Message: Yes, you said you had doubts about Paul talents as a pundit. Because you supported Sid, those doubts supposedly include the Mohammed Matathir columns. Sid has posted here many times in the past. It has been impossible to have an intelligent discourse with him. You picked his side - and you refuse to defend your position. I dont think you are careful who you argue with, I think you got caught saying something you can't defend. Looks like you are a definite troll.

Subject: *sigh* From: Econochick To: David E... Date Posted: Mon, Mar 22, 2004 at 22:36:20 (EST) Email Address: Not Provided Message: Okay, David. Enough. You've become uncharacteristically childish. My entire opinion of the venerable Mr. Krugman is summarized in the article I posted. Krugman is not divine and, in any case, he is not MY God. This is my OPINION of Krugman and, as such, I am under no obligation to defend it. It is not a good use of my time to have a huge fight about Krugman on this or any other board with you or anyone else. If that discredits my position in your eyes, that is absolutely fine with me. We are (at least I am) in a free country. Furthermore, I posted on behalf of Sid because he brought up a point and someone attacked him with that troll thing (whatever that means). It didn't seem nice. If you do not agree or you can't have what you consider to be an 'intelligent discussion' with him, simply don't answer his post. Good night.

Subject: Trolly Annoyed From: Troll Alert To: Econochick Date Posted: Sun, Mar 21, 2004 at 14:19:43 (EST) Email Address: Not Provided Message:

Subject: A Lesson From Taiwan From: Jennifer To: All Date Posted: Fri, Mar 19, 2004 at 13:53:10 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/19/business/worldbusiness/19jobs.html After an Exodus of Jobs, a Recovery in Taiwan By KEITH BRADSHER TAIPEI, Taiwan - Many Americans are becoming alarmed as factories and jobs disappear to China. But by Taiwan's standards, American losses so far have been modest. Manufacturing here has shrunk to only a quarter of the economy from half in the late 1980's, as tens of thousands of companies shifted operations across the Taiwan Strait to the mainland. Unemployment more than tripled, from 1.5 percent through the early 1990's to 5.2 percent in 2002. Entire industries, like the manufacture of many plastic products, largely vanished, lured by Chinese wages that are a fifth of those in Taiwan. But while the economy here still has troubles, there are signs that Taiwan has turned the corner. The economy has grown rapidly since a SARS virus outbreak was quelled last June, and unemployment has dropped abruptly, to 4.5 percent, in the last few months. The recovery may provide lessons, economists say, for the United States and the European Union as they struggle to compete with China and other low-wage countries. Many jobs have come from surging exports, especially of high-technology products. There have also been more jobs in marketing, logistics and other tasks related to managing operations on the Chinese mainland, using expertise not yet available there. Heavy government spending to build roads, dams, rail and subway lines and other infrastructure projects in Taiwan has played a lesser but important role in increasing employment....

Subject: American Business Abroad From: Jennifer To: Jennifer Date Posted: Fri, Mar 19, 2004 at 15:22:49 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/19/business/worldbusiness/19manufacture.html Increasingly, American-Made Doesn't Mean in the U.S.A. By LOUIS UCHITELLE Anthony F. Raimondo, a Nebraska business executive, was all set to become President Bush's manufacturing czar until he was caught in a political firestorm last week after John Kerry's campaign suggested that Mr. Raimondo was a 'Benedict Arnold C.E.O.' for moving jobs from the United States to China. But it's not that simple. What Mr. Raimondo's company did, experts of all stripes say, has become standard business practice in response to domestic and international pressures. Hundreds of American companies, among them Mr. Raimondo's Behlen Manufacturing of Columbus, Neb., own facilities abroad that produce goods and services for overseas customers rather than for shipment back home. Indeed, these overseas sales, which have risen to more than $2.2 trillion annually in recent years, dwarf the nation's exports of roughly $1 trillion. Should American companies turn so quickly to production abroad, rather than export from the United States - particularly in China, where sales are growing at two or three times the rate in any other country? Mr. Raimondo says yes and he is far from alone. He and the chief executives of most manufacturing companies contend that such moves are essential to keep American industry competitive in the global marketplace. Behlen's story is telling....

Subject: Re: American Business Abroad From: Jennifer To: Jennifer Date Posted: Fri, Mar 19, 2004 at 17:53:40 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/18/business/18scene.html?pagewanted=1 Questioning Free Trade Mathematics By JEFF MADRICK FREE trade theory has a growing number of detractors, and one of their traditional concerns has understandably moved to center stage in this presidential election year. How much has the exporting of jobs to foreign nations contributed to the lack of jobs and the absence of wage growth in the current expansion at home? The standard tenets of free trade theory strongly support the case for outsourcing. Generally, as business finds cheaper ways to make products, it reduces prices to consumers. And some businesses may not survive unless they can reduce labor costs. In general, most economists believe that the 'consumer surplus' that results from lower prices far outweighs the cost of lost jobs or lower wages. In other words, there are many more winners than losers. But recent research suggests that the magnitude of this advantage has been exaggerated. Also, the plight of the losers has clearly been sorely neglected in the economic literature. And if sending jobs abroad turns from its current relative trickle to a fast-flowing stream, as it well might, the costs of job dislocation will be still higher. It is more than a little interesting how frequently past research understated the costs of jobs lost to free trade. A literature search published in a 2003 monograph by the economists Michael W. Klein, Scott Schuh and Robert K. Triest, called 'Job Creation, Job Destruction and International Competition' (Upjohn Institute), provides a useful summary of this work....

Subject: Japan firing a warning shot? From: Pete Weis To: All Date Posted: Thurs, Mar 18, 2004 at 22:06:16 (EST) Email Address: Not Provided Message: Reuters reported the following on March 15: 'The Bank of Japan is mulling ending its massive yen-selling interventions in the currency market by the end of March, the Nihon Keizai Shimbun reported from Tokyo in its early Tuesday edition.' Reuters also reported Japanese Finance Minister Sadakazu Tanigaki saying he felt it was necessary to 'diversify' Japan's foreign reserve assets which are presently made up mostly of US dollar denominated assets. Looks like they are losing their appetite for US debt especially with the very poor return on investment they're getting. Their public statements seem to be directed at Greenspan (to raise rates) and the US government (to get its spending under control). They are setting a deadline by specificly mentioning the end of March as an end or severe curtailment in their purchases of US dollar denominated assets. They may not be demanding a Fed rate increase before the end of March but may be demanding some assurances that the Fed will raise rates soon. What they seem to be saying is either the Fed raises our interest rates or Japan will do it for us. You might say this is ironic since Japan has the lowest interest rates in the world. But Japan runs a current account surplus and doesn't need to borrow to offset an outflow of its wealth. It's kind of startling to realize that a country like Japan can obliquely threaten to pull the plug on our low interest rates but they definitely have the power to do so. Afterall, they owe so much of our debt. It appears they have decided to take a different tact in this currency war we've started and have been running for several years now. They are saying 'no mas'.

Subject: No Problem From: Emma To: Pete Weis Date Posted: Fri, Mar 19, 2004 at 13:27:40 (EST) Email Address: Not Provided Message: There is no problem here. If the Japanese central bank buys less American currency, the Yen will appreciate against the dollar. So? Why should we be the least concerned? A more expensive Yen will give a competitive edge to American exporters and be a hurdle for Japanese exporters. The is simply no problem, no warning, no concern.

Subject: Re: No Problem From: Jhemp To: Emma Date Posted: Fri, Mar 19, 2004 at 16:46:24 (EST) Email Address: Not Provided Message: Dear Emma, what about the 'Euro'?

Subject: Speculation From: Emma To: Jhemp Date Posted: Fri, Mar 19, 2004 at 17:17:44 (EST) Email Address: Not Provided Message: A thought. When the Bank of Japan appears to change course from constant support of the dollar to now and then support, we may take this as a lesson for currency traders. Robert Rubin always wanted currency traders to know a bet could go either way. The Bank of Japan could be teaching traders a lesson: you can lose if you assume we have to support the dollar. Remember, central banks can not let currency traders think they can trade with no risk. As for the Euro, the dollar has been steady since November. Europe is growing more slowly than America, and the steadying of the Euro-dollar rate may just continue.

Subject: Re: Speculation From: Jennifer To: Emma Date Posted: Fri, Mar 19, 2004 at 17:31:15 (EST) Email Address: Not Provided Message: This seems right. A central bank never wants speculation to be rickless. BOJ is only concerned with keeping Japan's economy healthy, but it has to create risk for speculators.

Subject: Re: No Problem From: Pete Weis To: Emma Date Posted: Fri, Mar 19, 2004 at 15:20:32 (EST) Email Address: Not Provided Message: What do you suppose will happen with US interest rates? If you believe there is no housing bubble or stock market bubble than there is no problem if our rates were to jump a percent or two? Unless you believe the US is about to buy its own securities - that will be interesting.

Subject: No Bubbles From: Emma To: Pete Weis Date Posted: Fri, Mar 19, 2004 at 15:33:23 (EST) Email Address: Not Provided Message: The trailing price/earning ratio of the S&P was 20.8 on February 27. There is no stock market bubble. Stocks are not cheap, but why should they be. I have no worries about bubbles. Asset prices rise and fall, and might do either in the short run. In the long run, I am not worried about asset prices. There are no doubt selected real estate prices that are quite high, but that will happen from time to time. Nothing will happen to American interest rates because of action by the Bank of Japan. The Bank of Japan is not about to destroy an export market.

Subject: Interest Rates From: Emma To: Emma Date Posted: Fri, Mar 19, 2004 at 16:01:02 (EST) Email Address: Not Provided Message: There is no chance at all that American interest rates will rise significantly because of action by the Bank of Japan. Notice that American bond investors and the Federal Reserve are paying no attention to such a possibility. When the labor market finally begins to improve, then rates will climb.

Subject: Re: Interest Rates From: Pete Weis To: Emma Date Posted: Fri, Mar 19, 2004 at 22:50:58 (EST) Email Address: Not Provided Message: I'm very sure the Federal Reserve is paying alot of attention to it. But the Federal Reserve is boxed into a corner. They have been reduced to merely reacting to events around them rather than being in a position to take any effective action. There is a prevalent misconception that the Fed is the primary factor, at all times, when it comes to interest rates. In fact, many elements contribute to rising or falling interest rates. One of the most powerful influences on US interest rates are the twin deficits and the foreign central bank purchases of US securities necessary to fund these deficits. Many economies around the world can survive without any foreign central bank purchases of their securities. These are, generally, countries which have current account surpluses. The US is not one of these countries. In fact, since we consume so much more than we presently produce (now at about a net loss of 500 billion a year and rising rapidly) our economy is literally being propped up, mostly, by the Japanese and Chinese central banks. We owe as much, if not more, for our present low interest rates to foreign central banks returning their surplus dollars than we do our Federal Reserve. Japan has been by far the largest purchaser of US securities. Paul Krugman has refered to this problem a number of times. In his New York Times editorial 'The China Syndrome' which talks about why we have no bargaining chips when it comes to our trade deficit with China. He states 'Furthermore, purchases of Treasurey bills by China's central bank are one of the ways the US finances its trade deficit. Nobody is quite sure what would happen if the Chinese suddenly switched to, say, Euros - a two-point jump in mortgage rates?' Now, Japan is a much bigger purchaser of US treasuries than is China. I believing I was being quite conservative when I said a one to two percent rise in mortgage rates if Japan follows through with its warnings. Another Paul Krugman editorial 'This Can't Go On' says ' there will eventually be a day of reckoning. As Bill Gross of Pimco, the giant bond manager, says, 'sooner, perhaps later, our Asian creditors will wake up and smell the coffee.'' Paul Krugman goes on to say, 'Yes, the federal budget and the value of the dollar now depend on huge purchases of treasury bills by the governments of Japan and China.' Krugman further quotes Bill Gross as saying when our Asian creditors 'wake up' it will bring 'rising inflation, perhaps chaotic financial markets, and a lower standard of living.' A Sidney Morning Herald article, dated March 13, 2004, entitled 'Asia's mass debt weapon points to US', says: 'A warning signal is flashing, however, in a trend by Asian countries to diversify new additions to their foreign reserves away from US dollar investments into other currencies and assets. This is a sign of concern about the growing twin deficits in the US.' The article goes on to say 'A default by the US government is still unthinkable, but not so a unilateral change in the rules of international finance.. Among the possibilities being discussed are a closing of the exit door to prevent a sudden sell-off of US treasuries by Asian governments , which would require sudden leaps in US domestic interest rates.' The article also mentions growing fear in Asian circles that there is a 'looming dollar crisis'. Does this sound like the Federal Reserve would not be paying attention to foreign purchases of US securities, especially the largest purchaser - Japan. If I'm a bond trader, I better be paying attention! There is alot written out there about this subject. Your assertion that this is 'no problem' disagrees with not only Gross and Krugman, but just about every major financial and economic publication on the planet. This is a very serious issue.

Subject: Demand for American Debt From: Emma To: Emma Date Posted: Fri, Mar 19, 2004 at 13:51:25 (EST) Email Address: Not Provided Message: Worries about whether the Japanese will stop buying American debt have been around for 20 years. As long as the Japanese want to export to us, they will buy American debt. When they do not wish to export they can stop, but they will not stop. The Yen will grow stronger and weaker, but all will be well.

Subject: Re: Japan firing a warning shot? From: Danny Boy To: Pete Weis Date Posted: Fri, Mar 19, 2004 at 00:55:01 (EST) Email Address: Not Provided Message: NO. I think the US bonds are attractive to foreign investers.What bonds are attractive than Americans?

Subject: Bonds From: Jennifer To: Danny Boy Date Posted: Sat, Mar 20, 2004 at 14:38:06 (EST) Email Address: Not Provided Message: Bonds seem completely un-attractive to ordinary investors at these yields.

Subject: Bonds - No Reason From: Emma To: Jennifer Date Posted: Sat, Mar 20, 2004 at 14:45:26 (EST) Email Address: Not Provided Message: Agreed. There is no reason for bonds at such interest rates.

Subject: Re: Bonds - No Reason From: Pete Weis To: Emma Date Posted: Sun, Mar 21, 2004 at 11:10:23 (EST) Email Address: Not Provided Message: Well, if Japan stops buying and private investment slows its buying at these low yields, what replaces this loss to the pool of money available for borrowing? Does this not force interest rates higher?

Subject: Bonds - No Problem From: Jennifer To: Pete Weis Date Posted: Sun, Mar 21, 2004 at 12:41:31 (EST) Email Address: Not Provided Message: Japan will continue to be American debt as will any and every other central bank. Central banks are not out for profit, but to facilitate economic growth and stability. There is no possible problem. Interest rates will rise when the economy speeds and the labor market improves, not when Japan sneezes.

Subject: Re: Bonds - No Problem From: David E... To: Jennifer Date Posted: Sun, Mar 21, 2004 at 14:37:43 (EST) Email Address: daveellis_39@hotmail.com Message: Bill Gross, the well-recognized bond guru, is very concerned. I wonder why you are not concerned and he is. http://www.pimco.com/LeftNav/Late Breaking Commentary/IO/2004/IO_03_04.htm

Subject: Fine Question From: Jennifer To: David E... Date Posted: Sun, Mar 21, 2004 at 15:25:49 (EST) Email Address: Not Provided Message: I am not concerned because they 10 year treasury is telling me not to be concerned. The yield is about 3.8%. There is no general inflation, the economy is growing reasonably, and we are all hoping for a labor market improvement before the Federal Reserve begins a tightening sequence. The Federal Reserve is telling us there is no problem with low interest rates, and I agree. So, I read Bill Gross but do not agree. Bond yields were this low for years in the 1950s and 1960s. Then, find better personal investments but do not worry. The long term worry is the deficit, but that is long term and not now.

Subject: Institutions Buy From: Jennifer To: Jennifer Date Posted: Sun, Mar 21, 2004 at 12:47:45 (EST) Email Address: Not Provided Message: Also, private institutions such as pension funds will continue to buy bonds. Just because you or I do not wish to buy, makes no perceptible difference. Remember, I surely do expect rates to rise in time because of domestic factors from labor market improvement to deficit growth.

Subject: Debt From: Emma To: All Date Posted: Wed, Mar 17, 2004 at 14:22:10 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/16/business/16FED.html Alan Greenspan suggests that household and foreign debt are not too troublesome. Low long term interest rates may be bearing this idea out.... Adjusted for inflation, the average family's debt, including a mortgage, has climbed from $54,000 in 1990 to $79,000 last year. Mortgage foreclosures, credit card delinquencies and personal bankruptcies are all at near record levels. Mr. Greenspan's view is that household balance sheets are 'in good shape,' and perhaps stronger than ever, because the value of people's homes and stock portfolios have risen faster than their debts. The Fed chairman is equally sanguine about the nation's overall borrowing from foreigners, which has soared to more than $500 billion a year and has contributed to a sharp drop in the value of the dollar. And he has also made it clear he will not try to torpedo the president's tax-cutting agenda, which could add another $2 trillion to federal borrowing over the next decade. 'History suggests that the odds are favorable that current imbalances will be defused with little disruption,' he declared in a speech two weeks ago....

Subject: Re: Debt in Dell-land From: nat To: Emma Date Posted: Thurs, Mar 18, 2004 at 14:55:29 (EST) Email Address: Not Provided Message: Foreclosure gloom lingers Postings for April auctions up sharply By Shonda Novak AMERICAN-STATESMAN STAFF Thursday, March 18, 2004 The foreclosure cloud that has hung over Central Texas for more than a year isn't going away. In Travis County, foreclosure postings for the April 6 auction are at a 13-year high. In Williamson County, the 284 postings are believed to be a record, according to companies that track such activity. The reasons for the spike include a weak job market, excessive credit card debt and the purchase of more house than the buyer could afford, in many cases because of the lure of record low mortgage interest rates. People who track the market say foreclosures will remain high until the area sees appreciable job growth. 'There is no other solution to the foreclosure problem,' said George Roddy Sr., president of Foreclosure Listing Service Inc., an Addison company that tracks foreclosures in several Texas cities. 'And the job growth has to be people being re-employed, and re-employed at liveable wages.' Based on preliminary figures, Roddy's firm tallied 408 April postings for Travis County, 46 percent higher than a year ago. The Williamson County figure is 73 percent higher than the 164 postings in April 2003. Both figures could change slightly when the count is finalized today. But the picture won't change: The region has a growing number of people who have run out of financial rope and can't make their mortgage payments. Even in good times, there are about 150 foreclosures a month in Travis County, said Peter Sajovich, president of eCounty Foreclosures Inc., which tracks foreclosures for real estate investors. But the numbers began to rise as the Central Texas economy cratered. The 2002 total for Travis and Williamson counties was 49.3 percent higher than the previous year's, and foreclosures in 2003 were 64.4 percent higher than those in 2002. Foreclosures tend to lag an economic recovery, so monthly ups and downs are to be expected this year, even as the economy continues its tentative rebound. Even if the region started generating jobs, 'we would still see high foreclosures for six months because . . . people have gotten themselves into a problem and they're not going to get out of it,' Roddy said. He and other analysts described several reasons why homeowners would find themselves on the foreclosure list: * Low- or no-down-payment programs lured many people, especially first-time buyers, to buy homes that they no longer could afford after they lost their jobs. With no equity, 'they don't have anything to lose,' Roddy said. 'So psychologically they're saying, 'I don't have that much in it, so I'll let it foreclose.' ' * Record low mortgage interest rates led others to buy more house than they could afford. When a layoff hit, they also lacked the resources to pay the mortgage. 'Once you start to get behind on your note, it's very hard to make it up,' Roddy said. * Still others bought homes at high prices during the boom, believing that the market would continue to rise. For the past two years, however, prices have been flat. When a job loss or other troubles forced those buyers to sell, 'they couldn't get enough to pay off the loan because the market didn't go up anymore,' said Gregg Stanley, president of San Antonio-based Real Estate Foreclosures Inc. Despite the gloomy statistics, analysts say there's no reason for the foreclosure picture to get much worse. The worst of the layoffs appear to be over, though the region is still not generating jobs. 'Unless some big problem happens with lending institutions, we're probably getting close to the bottom,' Stanley said. 'I don't think things will get much worse, but I'm not going to bet money on it.' Even at high levels, Roddy doesn't think the foreclosure postings in Travis County will affect home prices. 'They're spread out all over the county,' he said. 'There's no reason for them to impact values unless you have a lot of foreclosures in close proximity, and that's not happening. If you had 10 in your neighborhood, that would be a serious problem.' snovak@statesman.com; 445-3856

Subject: Re: Debt From: Mik To: Emma Date Posted: Wed, Mar 17, 2004 at 18:17:43 (EST) Email Address: Not Provided Message: pardon me for being cynical. But! 'Alan Greenspan suggests that household and foreign debt are not too troublesome'.... 'Mortgage foreclosures, credit card delinquencies and personal bankruptcies are all at near record levels.' Am I the only one joining the dots here? Just because interest rates are down, doesn't mean we can manage debt better or that we are taking on less debt. I personally believe lower interest rates are to a large degree cancelled out by increase house values and increased mortgage rates.... but I don't have figure to prove it.

Subject: Rising Debt From: Emma To: Mik Date Posted: Thurs, Mar 18, 2004 at 15:21:13 (EST) Email Address: Not Provided Message: Alan Greenspan is making the case that increasing asset values and low interest rates are making it easier for householders to afford rising debt levels. The argument is interesting, for it goes against the warnings on debt that we are used to. So, could it be rising debt and easier payments?

Subject: Re: Rising Debt From: Mik To: Emma Date Posted: Fri, Mar 19, 2004 at 15:44:53 (EST) Email Address: Not Provided Message: Emma, Interesting concept - 'increasing asset values and low interest rates are making it easier for householders to afford rising debt levels.' Maybe I'm wrong here but let me analyse this - house values increase, thus the 'asset' value has increased. An increase in asset value means that using yur asset as surety you now have an increase in surety. I'm sorry - call me old fashion - I don't buy this (pardon the pun).

Subject: Re: Rising Debt From: Emma To: Mik Date Posted: Fri, Mar 19, 2004 at 17:52:17 (EST) Email Address: Not Provided Message: We need to argue more about this, as I am arguing with myself. Alan Greenspan is arguing that households are learning to act just like a small business. Use rising asset values to extend debt, but for business there is supposed to be a revenue or further asset appreciation return for debt. Are households to expect the same? I do not know!

Subject: Alan Greenspan From: Emma To: All Date Posted: Tues, Mar 16, 2004 at 15:19:58 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/16/business/16FED.html Greenspan Shifts View on Deficits By EDMUND L. ANDREWS WASHINGTON — Consumer debt is hitting record levels. The federal budget deficit is yawning ever larger. The trade gap? Don't even ask. Many mainstream economists are worried about these trends, but Alan Greenspan, arguably the most powerful and influential economist in the land, is not as concerned. In speeches and testimony, Mr. Greenspan, chairman of the Federal Reserve Board, is piecing together a theory about debt that departs from traditional views and even from fears he has himself expressed in the past. In the 1990's, Mr. Greenspan implored President Bill Clinton to lower the budget deficit and tacitly condoned tax increases in doing so. Today, with the deficit heading toward a record of $500 billion, he warns more emphatically about the risks of raising taxes than about shortfalls over the next few years. On Monday, the nonpartisan Congressional Budget Office published new calculations showing that the budget deficit now stems almost entirely from tax cuts and spending increases rather than from lingering effects of the economic slowdown. Mr. Greenspan's thesis, which is not accepted by all traditional economists, is that increases in personal wealth and the growing sophistication of financial markets have allowed Americans — individually and as a nation — to borrow much more today than might have seemed manageable 20 years ago....

Subject: Re: Alan Greenspan From: Jennifer To: Emma Date Posted: Tues, Mar 16, 2004 at 16:34:50 (EST) Email Address: Not Provided Message: Essentially Greenspan is arguing that institutions and households can handle more debt since interest rates are low so payments are less of a problem and institutions are better at handling risk. Interesting.

Subject: Re: Alan Greenspan From: Econochick To: Jennifer Date Posted: Tues, Mar 16, 2004 at 17:21:27 (EST) Email Address: Not Provided Message: If I'm not mistaken, though, he also warns in other statements that household debt is getting alarmingly high. I believe that is a distinction between being able to 'handle' household debt and household debt being good for people. Household debt means lower household investment, thus missing out on the return on investment. So, while we may not go bankrupt at the rate we would expect with this kind of debt (on a Macro level), we're not getting richer either.

Subject: Debt From: Jennifer To: Econochick Date Posted: Tues, Mar 16, 2004 at 17:32:02 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/16/business/16FED.html Mr. Greenspan's view is that household balance sheets are 'in good shape,' and perhaps stronger than ever, because the value of people's homes and stock portfolios have risen faster than their debts. This really is an interesting argument. Economists fret about household debt, but they have been fretting for decades. Do I agree with Greenspan? No, but but but....

Subject: Hmmmm... From: Econochick To: Jennifer Date Posted: Tues, Mar 16, 2004 at 17:34:36 (EST) Email Address: Not Provided Message: I'm with you in that 'but but but....' camp.

Subject: Re: Hmmmm... From: Pete Weis To: Econochick Date Posted: Tues, Mar 16, 2004 at 21:33:34 (EST) Email Address: Not Provided Message: We may get an answer to those 'buts' sooner rather than later since economic stimulus (made up mostly of mortgage originations) appears to be running between $1 trillion to $1.5 trillion less in 2004 than it was in 2003 when interest rates bottomed. If the stock markets begin dropping or go flat in 2004, then we could get the 'wealth effect' going in reverse. Consumers may begin to look at their high levels of debt with a little more unease. It doesn't look like employment is going to save the day anytime soon. So far its been load up those credit cards, pay them off with home equity and load them up all over again. There's nothing like cheap, easy money when you can pay the bills for the last cheap, easy money with new cheap, easy money. But just as automakers must offer better and better discounts to keep the customers coming, our financial system must offer both steadily cheaper and easier money to keep the consumers consuming. Greenspan apparently thinks this can go on indefinitely, or atleast until employment rides to the rescue. We're still waiting on employment.

Subject: Gentlemen, start your savings From: Econochick To: Pete Weis Date Posted: Tues, Mar 16, 2004 at 21:51:18 (EST) Email Address: Not Provided Message: Well, Pete, you know that I'm a big supporter of self-discipline and savings. I say, cut back on spending, pay off the credit cards and increase investment. You don't need a change in government policy to do that.

Subject: Re: Gentlemen, start your savings From: Pete Weis To: Econochick Date Posted: Tues, Mar 16, 2004 at 22:38:50 (EST) Email Address: Not Provided Message: Wow. That was a fast reply! Guess we're a couple of message board junkies on this site. I agree with you completely on the self-discipline. Doesn't appear to be much of it out there. Apparently, primitive aspects of human behavior ('keeping up with the Flintstones' and 'live for today') seem to 'carry the day'. Guess this whole scenario of holding things together up to this point (until employment kicks in)wouldn't have worked if most of us had self-discipline. So, here's to the overwhelming lack of self discipline - may it carry on forever so our economy will do the same. Afterall, in a fiat money system this can go on forever. If bailouts are needed along the way, our government can simply print money as needed. If we're a little short on social security, health care for the masses, FDIC, GSE's, foreign investment in the US, and foreign wars, we can just cover it with paper. As Greenspan has stated - our markets have become 'sophisticated' and that now trumps the primitive human behavior which has so long ruled our markets and economy. Anyway, we need to have a sense of humor about this brave new world of economics.

Subject: Pete - Ayi Caramba From: Mik To: Pete Weis Date Posted: Wed, Mar 17, 2004 at 18:09:13 (EST) Email Address: Not Provided Message: Peter, your statement, 'our markets have become 'sophisticated' and that now trumps the primitive human behavior which has so long ruled our markets and economy.'.... uhmm you know some how I can draw an analogy to Enron on that. In one way it kinda spooks me. In another way - what the hell can I do about it?.. life must go on and a sense of humour is a good thing.

Subject: Amen, Pete! From: Econochick To: Pete Weis Date Posted: Wed, Mar 17, 2004 at 14:10:18 (EST) Email Address: Not Provided Message: Yeah, I gotta say I find myself here often! And I agree with you - you have to have a sense of humour, full stop. About everything - otherwise it's all just too intimidating.

Subject: Why no jobs recovery From: Jim To: All Date Posted: Mon, Mar 15, 2004 at 20:00:48 (EST) Email Address: jzmarg@aol.com Message: Behind the jobs debacle Bush's jobs forecast failed because there's been no jobs recovery at all. - - - - - - - - - - - - By James K. Galbraith March 15, 2004 | Let's look again at the chart deftly deployed by Paul Krugman in the New York Times on March 9 to blast the Bush economic team for missing its employment forecasts. (Source: The New York Times) No doubt, it's a screw-up. But just how did they manage it? Was Economic Team Bush getting its job targets, as many suspect, from Karl Rove? Did the professionals turn prostitute, as Krugman charges in no uncertain words? So far as we can tell from the numbers, it's the Scotch Verdict: Not Proven. We can make this clear immediately. We need only extend the historical tail of the Krugman chart back in time, say to 1991 -- as in the chart below. Our new chart shows that the Bush forecast did not imply unusually rapid job growth for an economic expansion. To the contrary. The growth track in the first set of Bush forecasts, published in 2002, is a bit lower than the actual rate of job growth under Clinton. And it is considerably lower (though probably for good reason) than the average growth rate of payroll jobs in non-recession years since 1952. And so, the failure of the jobs forecast did not occur because economic recovery forecasts were abnormal. They were not. So far as we can tell, it did not occur because someone cooked the books, under instruction or otherwise. No. The true reason is worse than that. Bush's jobs forecast failed because a jobs recovery never began at all. Look at monthly payrolls compared to a year before. The period through January 2004 is by far the longest episode of steadily falling payroll employment since World War II: 32 months, with the end still uncertain. The next worst was 26 months, roughly from the end of World War II to the 1947 start of the Cold War. Apart from these two periods, the average period of job losses on this basis (over 11 episodes) is just one year. And as Lee Price of the Economic Policy Institute points out, since 1939 full recovery of all jobs lost in recession has never taken more than 35 months. Something's happening here. Four years after the tech implosion, two and a half years after 9/11, one year after the start of the Iraq war -- we are still not creating new jobs in serious or sufficient number. And let's therefore ask, why not? Is it because, as many have said, Bush's tax cuts are primarily for the rich, who do not spend their tax-cut gains? This argument has practical virtue. It makes a case for repeal of the worst Bush tax cuts, which is useful: The worst Bush cuts should be repealed. But the facts don't support this particular argument as to why. Bush did cut taxes on the rich -- relentlessly, recklessly, wrongly. But most of those tax cuts have yet to be phased in. They are part of the revenue losses still to come in the decades ahead. They aren't the big thing behind deficits we're seeing now. Therefore, reconfiguring the tax cuts already in place to benefit only the middle class and poor would have helped some -- but not that much. Moreover, in 2001 and 2003, taxes were cut for the middle class. Those cuts were the sweetener for the enormous future giveaways to the rich. They happened first through cash rebates and then through an expanded child credit. Taken entirely alone, these cuts weren't bad policy. Without them -- and without the short-term deficits they caused -- the recession and job losses would have been much worse. And in 2003 the middle-class tax cuts did deliver a burst of spending, leading to an 8 percent economic growth rate in the third quarter. But it didn't lead to new jobs. And then too: In 2001 and 2003 Bush took us to war. That entailed large increases in public spending, boosting demand and economic growth. The macro effects of the Iraq war were roughly sufficient to double the growth rate in the second quarter of 2003, getting (as many thought) recovery underway. But that didn't lead to new jobs either. Some people appear to believe that the root cause lies in the person of the president himself: Clinton good, Bush bad. Replace Bush, economy better. But this is economics for children. Truth: The conditions for this disaster were set by the tech debacle, by the enormous and unsustainable accumulation of household debt, by the decline in our trade competitiveness and trade balance (under the 'high dollar policy'), and by the unsustainability of regressive and opportunistic state and local tax structures. Not since the 1920s had growth been so dependent on speculative investment and mortgage finance. Not in history has our trade position been so weak. Most economists missed the significance of this. Back in 1991, most of them just assumed that we were facing an ordinary recession and that an ordinary recovery would follow. Those who felt that way repeatedly made forecasts no less wrong than those adopted by Bush's Council of Economic Advisers. And that is why the official forecasts -- apart from their natural obscurity -- attracted little attention at the time. But a few did not go along. It was possible to figure things out. The British economist Wynne Godley has been writing strategic analyses for years on the Web site of the Levy Institute. What's the difference? In general terms, it is that Godley is not engaged in the facile maneuver of the forecasting trade, which is mechanically to predict an 'average recovery' starting some time in the near future. Rather, he presents the implications of a very specific theory of financial relations and behavior. And this approach, because it could pick up the unique financial signature of the late 1990s, got the essentials of our problem right. (Godley was not alone, either -- though very few cared to listen. I lectured on Godley's thesis in the summer of 2001 -- though in China, where no one could hear.) The failure of Bush and his economists does not lie in faking a prediction. It lies in failing to understand what the underlying problems are. It lies in failing to propose policies suitable to their cure. It lies in the wanton pursuit of a strategy of tax cuts for the long term aimed at the political, not economic, objective of exempting plutocrats and their fortunes from federal tax. In lies in the rush into military adventures -- from missile defense to Iraq -- that achieve little, waste vast resources and make a proper jobs-and-security policy even more difficult down the road. Most of all, it lies in failing to care, one way or another, what might happen. That we-don't-care attitude showed up pretty clearly when Bush nominated his 'manufacturing czar' -- a steel-building man who promptly and sensibly withdrew. The nominee, a Nebraskan named Tony Raimondo, got a bad rap, momentarily, for being an outsourcer. It turns out he isn't: His new factory in China is for the Chinese market, which is, of course, booming. And one can only admire the man's frankness about the effect of Bush's Iraq adventure on his domestic business: 'They sure as hell don't want to buy a building if there's a war.' It turns out that the job of 'manufacturing czar' isn't new: An existing post in the Commerce Department just got relabeled. It showed up again on March 11 when Commerce Secretary Don Evans said the administration had '57 ... objectives in its plan to reinvigorate U.S. manufacturing.' Fifty-seven objectives? Now there's a number for you! Is there a list? Or does Evans have ketchup, or Theresa Heinz Kerry, on his mind for some reason? And will the Democrats under the leadership of John Kerry do better? Let's hope so. But let's recognize that the challenge will be enormous. To begin with, there is a good chance that things will get worse, not better, after the election. But even if a normal jobs recovery, at the normal growth rate, somehow got underway, would that be good enough? I don't think so. We would be starting then from a deep hole and 'normal' growth would leave millions unemployed and underemployed for many years. We should aim for something better: A strong recovery brought on by good policy. Whether we can get it will depend on what President Kerry eventually does. Right now, the test should not be whether enlightened policy emerges in the heat of the campaign. It probably won't. But Franklin D. Roosevelt campaigned against deficits in 1932 and embraced them in 1933 -- and thank God for that flip-flop. If John Kerry wants to campaign on halving the deficit in four years, I won't complain. But when the policy is tried, and nothing happens, I ask only that he be ready to change, and quickly, to something much more substantial. Kerry's right move now is to make a broad and forceful commitment to the return of good jobs at decent wages -- to the return of full employment. It lies in stating a willingness to do, in good time, whatever may prove necessary to achieve that goal. It lies in helping to prepare the public for big policy changes when it becomes necessary to have them. The most important thing is to keep an open mind. salon.com - - - - - - - - - - - - About the writer James K. Galbraith is Salon's economics correspondent. He teaches at the Lyndon B. Johnson School of Public Affairs, the University of Texas at Austin. Sound Off Send us a Letter to the Editor Salon.com >> News

Subject: Jim, thanks for your post From: David E... To: Jim Date Posted: Fri, Mar 19, 2004 at 16:58:54 (EST) Email Address: Not Provided Message: What a good way to understand and forecast economic growth. I read some of Wynne Godley's essays. http://www.levy.org/1/research/bios/godley.html I read his analyses written in 1999, 2000, and 2001. Very few economists can remain right over 3 years. His analysis in 2001 told him that George Bush's tax cuts were a 1/3rd of the strength needed. So he predicted this jobless recovery three years ago.

Subject: Investing From: Jennifer To: All Date Posted: Mon, Mar 15, 2004 at 15:09:05 (EST) Email Address: Not Provided Message: 'The fact is, if 'beating the market' were that easy, it wouldn't be this hard....know what I mean?' Well, yes and no. Buy a broad index fund and you are the market minus a small fee. Since the great majority of investors have higher costs in fees and taxes than indexers, you will beat the broad market majority to bits over time. Buy the American total stock market index and add Europe and you have a hedge against the dollar as well. A Vanguard bond bond and you have as much diversity as you could wish. Heck, buy the REIT index from Vanguard and you have more diversity [though REITs appear quite expensive right now]. Also, the idea of paying loads and high fees for funds is absurd.

Subject: Re: Investing From: Don Camillo To: Jennifer Date Posted: Tues, Mar 16, 2004 at 17:16:01 (EST) Email Address: nma@hotmail.com Message: 'Buy the American total stock market index and add Europe and you have a hedge against the dollar as well.' Compare the evolution of both stock-markets (Dow & Euro Stockxx) after the worldwide fall of the 'New-Economy' in april 2000 till now to the evolution of the dollar.Comparative or competitive(trade balance, PK) advantage?Don't think so.Now N>>M (in The Quarterly Journal of Economics,Nov.1989, Issue 4 'Persistent Trade Effects Of Large Exchange Rate Shocks, by R.Bladwin and P. Krugman) why then FDIs(US 1995-1999)>>FDIs(US 2003).Your guesses?

Subject: Don Camillo = Rubbish From: Nonsense To: Don Camillo Date Posted: Wed, Mar 17, 2004 at 12:49:55 (EST) Email Address: Not Provided Message: Don Camillo posts rubbish.

Subject: Re: Investing From: Econochick To: Don Camillo Date Posted: Tues, Mar 16, 2004 at 17:23:53 (EST) Email Address: Not Provided Message: Not sure what you're getting at. Would you mind reposting?

Subject: Re: Investing From: Jennifer To: Econochick Date Posted: Tues, Mar 16, 2004 at 17:40:40 (EST) Email Address: Not Provided Message: The point may be that in the bear market both the S&P and Europe Indexes declined about 50% over the same periods. The markets sold off together and have risen together. Europe fell a bit more and for a few months longer actually. My sense is to buy the better of the values at different times, though the markets may move together for quite a while. Bonds were the haven during the bear market, and a few sectors like REITs and to a lesser extent large drug and oil companies.

Subject: Re: Investing From: Don Camillo To: Jennifer Date Posted: Tues, Mar 16, 2004 at 18:13:46 (EST) Email Address: nma@hotmail.com Message: Dow-Index * Exchange-rate (E=Eus/Eeuro) = Euro Stockxxx-Index * Exchange rate (E=Eeuro/Eus)?Or not?

Subject: Re: Investing From: Don Camillo To: Jennifer Date Posted: Tues, Mar 16, 2004 at 18:13:34 (EST) Email Address: nma@hotmail.com Message: Dow-Index * Exchange-rate (E=Eus/Eeuro) = Euro Stockxxx-Index * Exchange rate (E=Eeuro/Eus)?Or not?

Subject: Re: Investing From: Don Camillo To: Don Camillo Date Posted: Tues, Mar 16, 2004 at 18:22:32 (EST) Email Address: nma@hotmail.com Message: delta stocks as a function of time and exchange-rate from t0=april 2000 to t1=now

Subject: Don Camillo = Rubbish From: Nonsense To: Don Camillo Date Posted: Wed, Mar 17, 2004 at 13:35:27 (EST) Email Address: Not Provided Message:

Subject: Re: Don Camillo = Rubbish From: Don Camillo To: Nonsense Date Posted: Wed, Mar 17, 2004 at 17:16:54 (EST) Email Address: nma@hotmail.com Message: Bof, do your homework!

Subject: Re: Investing From: Econochick To: Jennifer Date Posted: Tues, Mar 16, 2004 at 17:49:48 (EST) Email Address: Not Provided Message: Thanks, Jennifer. So if that's what that post means then this is proves the point we've been making on these investment-related threads - diversify among asset classes and you'll be fine. Correct? If you want further diversification, traditionally emerging markets have been less correlated with (but more volatile) than developed markets - which are more highly correlated with each other. but the point is diversify.

Subject: Bonds From: Emma To: Jennifer Date Posted: Tues, Mar 16, 2004 at 13:54:20 (EST) Email Address: Not Provided Message: Again, I agree, but my choices in bond funds have long been convertible securities and high yield tax free and more recently high yield corporate. High yield tax free is secure and stable enough to be used as a money market account. There is really no reason for an actual money market account.

Subject: Jen hits Bull's Eye!! From: Econochick To: Jennifer Date Posted: Mon, Mar 15, 2004 at 16:52:41 (EST) Email Address: Not Provided Message: Oh my God!!! You're trying to build the CAPM!!! It's true - if you buy an index of all the assets you are as perfectly diversified as you can get. Also, I forgot to mention (but you implied in your post) that index funds typically have no loads and a MUCH smaller management fee than 'actively managed' funds. The European index is a great idea for a dollar hedge. I think Pete also said that in a post a few days ago. There are a few tricks too, like investing in muni bonds if you're in a high tax bracket. The higher the tax bracket the closer you get to a stock-like return but for bond risk. You can reduce your risk even further if you buy an index of muni bonds. Since all returns have to be measured relative to risk, that's a pretty good deal! Yhat's a form of 'outperforming' without having to guess about where the market is going next. I could not agree with you more about those fund fees. It is my impression - although I could be completely wrong about this - that investors don't pay enough attention to management fees and end up paying too much. And funds do a great job of distracting you with glossy photos of capable looking fund managers and the razzle dazzle of their (pre-fee) performance so that you don't. I cannot think of one good reason for paying up for that either! Jennifer, you are the third person (besides Emma and myself) to mention Vanguard specifically. I have a large portion of our portfolio invested with them because they are large, professional, and have some of the lowest fees around. So, I recommend them. But other than myself I have no testimonials. Are we correct in assuming from your post that you would recommend Vanguard from personal experience? Finally, I read your kind comment below and I thank you. I know for sure that there are those who disagree. However, I think (and I'm sure others will agree) that there is such a large number of people who make great arguments on this board that it is the only one I find worth checking on a regular basis.

Subject: Re: Jen hits Bull's Eye!! From: Emma To: Econochick Date Posted: Mon, Mar 15, 2004 at 17:25:22 (EST) Email Address: Not Provided Message: Interesting! Given high quality and low costs, I am less concerned about buying a bond index than a stock index. I would rather buy and hold a specific category and duration of bond fund. When I can buy high quality corporates or municipals at low cost all, I need to do is decide the duration. By that I mean a long term fund, which would have a duration of about 9 or 10 years. Or, an intermediate fund with a duration of about 4.5 to 5 years. Then, let a manager shop for a bit of extra yield which an index fund will not do. A smidge more cost and less diversity but enough extra yield to be attractive. Since I do not time markets, I like to buy long term and hold. the extra yield always more than makes up in time for price swings as long as the duration is fairly constant.

Subject: Re: Jen hits Bull's Eye!! From: Econochick To: Emma Date Posted: Mon, Mar 15, 2004 at 19:23:29 (EST) Email Address: Not Provided Message: If I understand you correctly, you are determining the risk exposure you want by choosing the duration (longer duration = more risk, shorter duration = less risk). Then, by investing in a bond fund, you're letting the fund manager pick the most attractively priced bonds in that duration and that's where you pick up the extra yield. It's more efficient to pay him to do it (through fees) than to spend the time wading through the lists of bonds yourself. Plus you get the managers expertise and economies of scale (lower transaction costs). As long as the management fee doesn't eat too much of the gain you're winning. Sounds great. But are you saying there's never a need for a stock piece? I didn't understand that part of your post.

Subject: Investing - Econochick From: Jennifer To: Jennifer Date Posted: Mon, Mar 15, 2004 at 15:41:10 (EST) Email Address: Not Provided Message: Econochick argues wonderfully!

Subject: Madrid, March 11, 2004 From: Yann To: All Date Posted: Mon, Mar 15, 2004 at 03:57:23 (EST) Email Address: Not Provided Message: Is 'March 11' in Madrid our 'September 11'? Are there some economic reasons for terrorism? What can we do? Is removing all poverty the solution? Yann (French citizen)

Subject: Re: Madrid, March 11, 2004 From: Econochick To: Yann Date Posted: Mon, Mar 15, 2004 at 11:12:01 (EST) Email Address: Not Provided Message: Philosophical ruminating on what internal dialogue some people have with themselves that gives them the permission to destroy others is almost too scary to consider. I remember reading a book more than a decade ago called 'The True Believer' that may answer that question. I don't think it is possible to eliminate all poverty. Partially because 'poverty' is relative and there is more than one sort of poverty. The worst part about what happened in Spain, I think, is the implications for the future. Because the Spaniards folded like a house of cards, voting out the ruling party in retaliation for making them 'targets of Islamic terror', the terrorists will be encouraged to try this in future. In other words, the Spaniards sent the message that 'if you threaten us, we will bend to your will'. That's a very bad message to send.

Subject: Re: Madrid, March 11, 2004 From: Jerry To: Econochick Date Posted: Mon, Mar 15, 2004 at 11:53:40 (EST) Email Address: Not Provided Message: Well, actually, no. The Spanish people voted out the Center-Right party as a response to that party's support of the United States in Iraq. I would offer that the Iraq war has been a distraction from the legitimate war on terror, well on the radar of Bush's policy team when he was still running for office back here in Texas. Ninety percent of the Spanish people were against supporting the U.S. in Iraq and the Center-Right party was on its way out the door well before the March 11 attacks. At some point, even in this so-called war on terror, democracy has to count for something. You cannot fight a war on something as nebulous as 'terror.' Wars must be fought afainst specific enemies. In this case I enemy is Al Qaeda, not 'terror.' We need to seriously re-think how we are approaching the whole concept. A repudiation of an imperialistic war in Iraq, a power it has now been proven that was fully contained, is in no way a repudiation of the war against Al Qaeda or a victory for terrorists. It is a wake up call that people are disgusted with the direction so-called Western 'democracy' has taken.

Subject: Re: Madrid, March 11, 2004 From: Econochick To: Jerry Date Posted: Mon, Mar 15, 2004 at 17:14:59 (EST) Email Address: Not Provided Message: Well, you may be right about the reason that the PP was voted out. The fact that the party had popular support just before the train bombings (despite the war) would run counter to your argument, though. However, my statement was really more specific than that. I think that if people interviewed has said 'I don't support the war in Iraq and this party does, therefore I want to vote them out' that would be fine. Or if they just liked the socialist platform better. My concern was people interviewed by the media were saying things along the line of 'we are voting them out because we blame their policies for bringing Islamic terrorism to our shores'. That sends the message to terrorists that terrifying and killing works. Do it enough and an entire country will bend to your will. I'm pretty certain that these guys have other things they want Spain to do, other than getting out of Iraq, that the Spanish probably don't want to do. So how much will they concede to terrorists in return for not being bombed? This kind of commentary by the public encourages terrorists to stage these sorts of attacks in future. I'm a little worried about between now and November here in the States, for example. Whether what people said differed from the real reason they voted out the PP, I guess we don't really know. The unfortunate thing is what they said to the media.

Subject: Re: Madrid, March 11, 2004 From: Paul G. Brown To: Jerry Date Posted: Mon, Mar 15, 2004 at 12:54:15 (EST) Email Address: Not Provided Message: I think both Jerry & Econochick have good points here. Inspite of its involvement in the US led coallition in Iraq, Aznar's party had widespread popular support, and up until the bombing polls indicated that they would be returned to power. But on polling day, it was beaten like a cheap drum. Now, let's put on our neo-con, real-politik goggles. How badly has the Bush administration screwed up the battle against theocratic fascism? (Yes Mr Falwell, Robertson, that was a glance in your direction.) Very badly. The only way to win is to win the struggle for hearts & minds. The Popular Party's defeat tells us that the Spanish people do not trust their leadership, or (indirectly) the Bushies'. The Spanish election is not, I think, a defeat in the broader struggle. If we in the west repudiate the cynicism, deceit and opportunism that has characterized our efforts in this war so far it might well stand as an example of the inherent strength of democracy. From an economic perspective, attacks like Madrid 3/11 corrode expectations and make it hard to judge risk in a rational way (for psychological reasons). Endemic terrorism stunts social and economic development. But the best evidence is that occasional terrorism is not as important as other factors.

Subject: Re: Madrid, March 11, 2004 From: Jerry To: Yann Date Posted: Mon, Mar 15, 2004 at 10:30:19 (EST) Email Address: Not Provided Message: Removing all poverty is not the answer, although it is a nice goal. Most of the people behind this kind of stuff are not poor themselves and, for a time, even had ties to the United States. This kind of terrorism is, really, a response to American imperialism. Every time we have flexed our imperialistic muscle we've been met with this type response. Every empire eventually faces it. Look at Rome. As a French person, you must know that it was your ancestors and the ancestors of you neighbors that brought that empire down. External response to empirial misdeeds coupled with internal mismanagement spelled doom for the greatest empire in history. Does that sound familiar? It is not unfamiliar to those in the know. Anthropologist James C. Scott referred to this as 'A Saturnalia of Power.' His book on hegemony, DOMINATION AND THE ARTS OF RESISTENCE should be mandatory reading for all U.S. politicians right now.

Subject: Re: Madrid, March 11, 2004 From: Econochick To: Jerry Date Posted: Mon, Mar 15, 2004 at 17:01:14 (EST) Email Address: Not Provided Message: Well, I believe Empire is a factor but to blame it solely on Empire is an oversimplification. After all, terrorism exists without Empire too. Poverty (in all its forms) is a factor, clashing ideologies is a factor, education is a factor, religion is a factor. Just plain craziness is a factor too, I guess. I'm sure lots of folks can add lots more factors to that list.

Subject: Re: Madrid, March 11, 2004 From: Piranha To: Jerry Date Posted: Mon, Mar 15, 2004 at 11:50:32 (EST) Email Address: Not Provided Message: Robert Barro wrote a good piece about the relationship between poverty and terrorism in Business Week. Here is a link to the article:(you may need subscription) http://www.businessweek.com/magazine/content/02_23/b3786027.htm I personally think that removing poverty will help reduce terrorism to some extent. A lot of the terrorists, rely on public sympathy for their work. The public are far more likley to be sympathetic to violent means if they are poor and have many greivances. Reduce the poverty, and you reduce one such greivance.

Subject: Re: Madrid, March 11, 2004 From: Starsky To: Piranha Date Posted: Mon, Mar 15, 2004 at 16:28:22 (EST) Email Address: nma@hotmail.com Message: So far, though so terribly near...

Subject: too close to home From: Econochick To: Starsky Date Posted: Mon, Mar 15, 2004 at 16:53:59 (EST) Email Address: Not Provided Message: You said it, brother. I live in NYC and I still can't sleep at night...

Subject: Greenspan to retire? From: Pete Weis To: All Date Posted: Sun, Mar 14, 2004 at 12:56:28 (EST) Email Address: Not Provided Message: Do any posters on this board believe Greenspan might retire before the upcoming elections? He's getting up there in years. Would the Republican leadership want this? Or do you think they need him to remain until after the elections? He made comments about social security which George W. had to disavow. Ben Bernanke was appointed by the Bush administration to the Philadelphia Fed position and he has been very outspoken while other Fed governors keep a low profile. Bernanke is a big Friedman fan and is outspoken about taking a very agressive approach to increasing liquidity if necessary. Is Bernanke being 'groomed' (not sure this is the best word) for Greenspan's job? If winning the upcoming elections looks unlikely or atleast questionable for the Republicans, would Republican supporters of 'influence' pressure Greenspan to retire now to prevent the possibility of the Democrats appointing the new Fed Chairman? I don't think Greenspan wants to remain Fed Chairman much longer - he looks increasingly tired to me.

Subject: Let me dream for a short while From: Mik To: Pete Weis Date Posted: Wed, Mar 17, 2004 at 18:12:51 (EST) Email Address: Not Provided Message: Imagine the Democrats win.... imagine.... imagine Greenspan decides to retire after the Democrats win.... imagine... imagine Paul Krugman is asked to take Greenspan's position.... ahhh I can dream can't I?

Subject: Not so hot in person? From: SSFSX17 To: All Date Posted: Sun, Mar 14, 2004 at 03:59:15 (EST) Email Address: ssfsx17@yahoo.com Message: I noticed that, although Krugman is a masterful writer and his books are incredibly enlightening, he seems to stumble a lot or miss the point in live interviews. It seems that he is on the 'losing' side in any live debate against any of his opponents simply because he gets under a lot of stress. It feels like if they were debating through letters and e-mails instead of in-person, Paul Krugman should be absolutely destroying his opposition. I don't understand why Paul Krugman should falter like that, since he doesn't seem like a bad-looking fellow or a shy person. Any ideas?

Subject: Paul is Excellent From: Terri To: SSFSX17 Date Posted: Tues, Mar 16, 2004 at 17:03:28 (EST) Email Address: Not Provided Message: You may be not so hot in person, Paul is excellent!

Subject: Re: Not so hot in person? From: Paul G. Brown To: SSFSX17 Date Posted: Mon, Mar 15, 2004 at 14:22:03 (EST) Email Address: Not Provided Message: Television, like movies, is a 'hot' media. It is superb at conveying emotional truths because its signal saturates the two dominant senses, sight and sound, rubbing up directly against our most strongly recalled experiences. Print media is relatively 'cool'. Readers can stop, go back, and integrate what they have just read over a broader range of memories. Some ideas are easier to convey through certain media than others. Print is ideal for Krugman's analytic reasoning, but he comes across poorly on TV because he's not got the training or experience in that media. I mean, imagine Krugman as Tom Hanks in 'Sleepless in Seattle'. Now, imagine Russell Crowe testifying before the House Finance committee.

Subject: Re: Not so hot in person? From: Jerry To: SSFSX17 Date Posted: Mon, Mar 15, 2004 at 10:35:25 (EST) Email Address: Not Provided Message: Yeah, I know. He often goes into interviews and debates completely unprepared, as well. He's best when his discusses economics, but now that he's become a 'personality' he's often asked to talk about things on which he does not have fully developed opinions. I'm sure he has an agent that just says 'show - TONIGHT' and he has to go running. Some Prof types respond very well in this environment, Krugman seems a little over his head in it.

Subject: Re: Not so hot in person? From: Econochick To: Jerry Date Posted: Mon, Mar 15, 2004 at 17:45:22 (EST) Email Address: Not Provided Message: I couldn't agree with you more. I don't think he should go out at all if he's not prepared - that's just unprofessional. Like you, I think does best on the topic of Economics and he should stick to it.

Subject: Always Prepared From: Terri To: Econochick Date Posted: Tues, Mar 16, 2004 at 17:04:51 (EST) Email Address: Not Provided Message: Paul is always prepared and always interesting on any topic I have heard discussed.

Subject: Re: Not so hot in person? From: Al Corrente To: Jerry Date Posted: Mon, Mar 15, 2004 at 16:23:04 (EST) Email Address: nma@hotmail.com Message: 'Now, imagine Russell Crowe...', or Terminator...?

Subject: Re: Not so hot in person? From: Al Corrente To: SSFSX17 Date Posted: Sun, Mar 14, 2004 at 15:14:45 (EST) Email Address: nma@hotmail.com Message: The China Syndrome: 'SYNOPSIS: Bad incentives, media consolidation, and implicit favors are turning the media into a toady to the government'

Subject: Japan intervention From: Nathan Corson To: All Date Posted: Sat, Mar 13, 2004 at 01:23:17 (EST) Email Address: Not Provided Message: Can anyone pitch in on the following: Is the massive amount of fx intervention by the Bank of Japan in the last year or so, and especially in the last two months, 'sterilized' or 'unsterilized' intervention? Also, I have heard it kicked around that the sterilization issue 'doesn't matter' because the BOJ has a zero interest rate policy right now. Is this true? and if so, why? Finally, is it possible that the current BOJ intervention efforts, unprecedented in size, may be a move toward 'credible irresponsibility', as suggested by Krugman in his Japan Trap article? Thanks.

Subject: Keeping the Yen From Rising From: Emma To: Nathan Corson Date Posted: Mon, Mar 15, 2004 at 15:12:20 (EST) Email Address: Not Provided Message: the Bank of Japan simply wishes to keep the Yez from increasing in value too sharply against the dollar. The idea is to protect Japanese traders.

Subject: Re: Keeping the Yen From Rising From: Pete Weis To: Emma Date Posted: Tues, Mar 16, 2004 at 14:33:50 (EST) Email Address: Not Provided Message: 'The idea is to protect Japanese traders'. Interesting viewpoint. Most would say it was to protect Japanese jobs.

Subject: Re: Keeping the Yen From Rising From: Emma To: Pete Weis Date Posted: Tues, Mar 16, 2004 at 15:23:51 (EST) Email Address: Not Provided Message: Fiscal policy in Japan has been the key in insuring Japanese jobs. A reasonably priced Yen is the key to earnings for Japanese companies that are heavily trade dependent.

Subject: Re: Keeping the Yen From Rising From: OPEC To: Emma Date Posted: Mon, Mar 15, 2004 at 17:16:59 (EST) Email Address: nma@hotmail Message: Why?

Subject: Re: Keeping the Yen From Rising From: Wiiliam To: Emma Date Posted: Mon, Mar 15, 2004 at 16:54:20 (EST) Email Address: nma@hotmail.com Message: {[(BOC)]} as X% function of (BOJ), both are loving GreenSpan.That's why still 'M' (M=P*L(Y;i)) is 'under control!?'.(personal opinion)

Subject: Rising Oil Prices Hurting Job Growth From: David Doty To: All Date Posted: Fri, Mar 12, 2004 at 18:14:52 (EST) Email Address: david@dotynmr.com Message: It's often been pointed out that rising oil prices portend a drop in job creation, primarily because of their indirect effects on natural gas (NG) prices and the chemical industry. It's time for astute economists to begin factoring 'Oil Peak' into their economic analyses. A fresh look at practical energy solutions, based on sound science, couldn't be a more timely subject, as debate on the pending Energy Bill begins, and gasoline prices are now at record highs. You may want to start with the abridged version of my 'Fuels for Tomorrow's Vehicles', http://www.dotynmr.com/PDF/Doty_Practical_Energy_Brief.pdf . I discuss 'hydrogen hype' and next-generation biofuels in more detail in my paper, 'Fuels for Tomorrow's Vehicles', http://www.dotynmr.com/PDF/Doty_FutureFuels.pdf . You'll be surprised at how much bad energy science is being pushed by the Bush administration, but also by how much progress has been made toward some viable options that could avert a looming energy crisis if we change directions very soon. - David Doty, PhD, Physicist

Subject: Phooey From: Ad Alert To: David Doty Date Posted: Mon, Mar 15, 2004 at 15:15:42 (EST) Email Address: Not Provided Message: Reason not to pay attention!

Subject: Re: Rising Oil Prices Hurting Job Growth From: Econchick To: David Doty Date Posted: Sat, Mar 13, 2004 at 20:52:20 (EST) Email Address: Not Provided Message: Primarily because of the effect of higher energy and raw materials cost on INFLATION. As inflation goes up, employment declines and vice versa. The Philips Curve. Do you know Prof. Goodstein at Cal Tech? He just came out with a book and a paper on the same subject.

Subject: Re: Rising Oil Prices Hurting Job Growth From: Econchick To: David Doty Date Posted: Sat, Mar 13, 2004 at 20:51:38 (EST) Email Address: Not Provided Message: Primarily because of the effect of higher energy and raw materials cost on INFLATION. As inflation goes up, employment declines and vice versa. The Philips Curve. Do you know Prof. Goodstein at Cal Tech? He just came out with a book and a paper on the subject.

Subject: Re: Rising Oil Prices Hurting Job Growth From: Milton To: Econchick Date Posted: Mon, Mar 15, 2004 at 17:20:52 (EST) Email Address: nma@hotmail.com Message: I don't believe in the 'Phillips Curve'!He was an engineer, not an economist!

Subject: A.W. Phillips' Curve From: Econochick To: Milton Date Posted: Mon, Mar 15, 2004 at 17:39:28 (EST) Email Address: Not Provided Message: Milton, you don't have to believe in the Phillips curve if you don't want to but A. W. Pillips was an Economist. He studied Economics at the London School of Economics and became a professor there in 1958. He developed the 'phillips curve' and built a machine called the Moniac as a physical representation of his mathematical model of the economy. The machine represented his both of his interests - Macroeconomics and Hydro-dynamics. So, he may have been an engineer of sorts too.

Subject: Re: A.W. Phillips' Curve From: Cold-Play To: Econochick Date Posted: Mon, Mar 15, 2004 at 17:59:17 (EST) Email Address: nma@hotmail.com Message: What about Paul Krugman then?

Subject: Re: A.W. Phillips' Curve From: Econochick To: Cold-Play Date Posted: Mon, Mar 15, 2004 at 17:56:09 (EST) Email Address: Not Provided Message: Um...not sure what you're asking.

Subject: Econochick From: Mik To: All Date Posted: Fri, Mar 12, 2004 at 17:00:25 (EST) Email Address: Not Provided Message: Just a quick note to say thanks for your posts. Really informative and to the point.

Subject: Re: Econochick From: econochick To: Mik Date Posted: Sat, Mar 13, 2004 at 11:26:05 (EST) Email Address: Not Provided Message: Than YOU, Mik. Also Emma and Pete for a great exchange. I just now realized that Emma added to the investment discussion in the 'always pays to save' thread. She mentioned Vanguard funds as a favourite of hers because of low fees and I have to second her high opinion of Vanguard. I don't know if Vaguard has advisory but they have a very wide selection of asset classes and a lot of 'do it yourself' information. Vanguard also charges some of the lowest - if not THE lowest - fees on the Street. I am in no way affiliated with Vangaurd (just so you know) but I part of my personal portfolio is in their Municipal Bond fund for the reasons I stated above.

Subject: Bond Funds From: Emma To: econochick Date Posted: Mon, Mar 15, 2004 at 15:26:02 (EST) Email Address: Not Provided Message: Thanks EC High Yield Tax Free at Vanguard has long been a particular favorite, though yields are awfully low these days. The portfolio is high investment grade even though it is termed 'high yield.' The yield is gained even with the quality because of the low fees. Another favorite has been convertible securities, though there is more price risk to the fund than other bond funds. Astonishing how little price competition there has been among fund families all these years. Same for insurance families.

Subject: High fees From: Econochick To: Emma Date Posted: Mon, Mar 15, 2004 at 17:24:34 (EST) Email Address: Not Provided Message: Ditto, Emma! Thanks for the info! That's good stuff. I'll have to look into that fund. I can't understand the still high fees of funds either. My best guess is that most fund investors are individuals and they don't bother figuring the fees into returns. Thus, they are sort of 'unconsiously' price insensitive. Does anyone on the board know or have a guess?

Subject: Re: Econochick From: E To: Mik Date Posted: Sat, Mar 13, 2004 at 01:24:30 (EST) Email Address: Not Provided Message: http://www.hotboards.com/plus/plus.mirage?who=pkarchive&id=16717.035236142126

Subject: terrorist teachers From: byron To: All Date Posted: Thurs, Mar 11, 2004 at 23:09:41 (EST) Email Address: bluefin76020@yahoo.com Message: Here we have Bushe's education secretary calling the teachers union and teachers terrorists and he is still on the job. Why is this not being reported by the news media. Is it because they are controlled by the Bush Admin?

Subject: Saving and Investing From: Jennifer To: All Date Posted: Thurs, Mar 11, 2004 at 16:22:27 (EST) Email Address: Not Provided Message: I would welcome more discussion of saving and investing. The discussion below were most useful.

Subject: Re: Saving and Investing From: Pete Weis To: Jennifer Date Posted: Fri, Mar 12, 2004 at 00:49:10 (EST) Email Address: Not Provided Message: Jennifer, this will be a continuation of the thread below. Might as well continue it here. One of the ideas expressed in the previous thread was that the reason Warren Buffet succeeds (or at least part of why he succeeds) is that he has a large position in the companies in which he invests and therefore influences the management of those companies. And this is an advantage that the average investor does not have. I believe Buffet would be the first to tell you that he invests in companies because they already have quality management and need no help from him. Furthermore, Buffet would tell you that PE ratios do matter and he invests in companies which have good earnings relative to the price and market cap of the stock, along with many other factors. This whole idea that price-to-earnings ratios no longer matter or matter less than in the past only seems to crop up when PE's begin to get really high, as they are now. If you read his March 3rd 2003 letter to Berkshire-Hathaway shareholders ( a search in google will find it) you'll find that he states 'presently we can find few if any stocks at a value worth buying'. Remember this is before this last very big rally in the stock market. In his most recent March 2004 letter he mentions how strange it is to be holding so much cash (about 36 billion right now) 'but its better than doing something stupid' he says. I can guarantee you he would not advise anyone to buy into a US stock index at this time. Bill Gross (often refered to as 'The Bond King') at PIMCO has talked extensively in recent writings about probable problems in the bond markets in the future and as one poster on this board pointed out has sold his personal holdings in bonds. I'll mention again, as I did in a previous post, that Buffet, believing interest rates where likely headed upward, sold Berkshire-Hathaway bond holdings (about 9 billion worth) in the Spring of 2003. Shortly after (in June) the Fed dropped a quarter point, the bond market tanked and 30 year fixed mortgage rates jumped about 1%. As you are probably aware, bond traders (most bond funds are trading funds) buy bonds when they believe interest rates are headed lower and sell bonds when they believe interest rates are headed higher. In recent weeks bonds have rebounded since poor employment data has cast doubt on our 'recovery' which makes it less likely the fed will raise rates. However, there is little room to lower rates and a growing federal budget deficit, current account deficit, as well as rising oil/energy prices are likely to pressure interest rates upward in the future. I agree that investing in the S&P index or other well balanced stock funds along with bonds is usually a very good strategy. But I believe this is one of those rare times when it's not a good idea. Why jump into a market which has, on average, such high valuations and in which, someone like Buffet can find nothing of value which he would buy? If employment is not doing well, personal debt is at record levels, interest rates have little room to go down, US companies are being squeezed between the rising costs of raw materials & energy and a lack of pricing power, why would you want to get into this stock market now? There will be a time to get back into the S&P but it's not now. One other thing. You may be in a balanced portfolio where you 'out perform' the S&P if it goes down a bunch. But ask yourself if the S&P were to drop 40% over the coming years and you 'out performed' the S&P by dropping only 30% in the same period, would you be happy with that?

Subject: Re: Saving and Investing From: Econochick To: Pete Weis Date Posted: Fri, Mar 12, 2004 at 14:52:05 (EST) Email Address: Not Provided Message: P/E: this is a fine metric. However, it is useless for small-cap, high-growth companies (like tech startups) because their earnings near-term are negative. Negative cash flows (and earnings) are a hallmark of all start-ups, by the way. What does a negative P/E mean? Well, nothing. Also, you have to know what they mean by 'earnings'. Companies often dump all manner of rubbish into their Income Statement to augement earnings. Thus, when we worked with earnings statements we always 'scrubbed' the data. I assure you Buffet scrubs numbers. Most small investors do not a.) know how and 2.) have the time. I wouldn't trust the Street's scrubbed numbers either, though. The scrubbing is often as only as good as the investment banking deal from the company in question. I could go on about the benefits and pitfalls P/E ratios. I could also go on about other metrics like Price-to-book, Cash flow-to-EBITDA, ROE, ROI, Discounted Cash flow analyses, etc., etc. In fact, we could go through several whole textbooks. See my point? The fact is, if 'beating the market' were that easy, it wouldn't be this hard....know what I mean? I've said it before and I'll say it again. If you enjoy being a momentum player (as Pete seems to) - picking the ups and downs and predicting in which the market lurches next - or stock picking, by all means go for it. As long as you're diversified among non-correlated assets, you won't lose your life savings. Just watch out for those transaction costs. As for my implication that Buffet's success is based in part on how much sway he has over management, I would only say not to forget that I also implied that he could just be a statistical inevitablility. In other words, in the group of managers who consistently outperform as a statistical inevitablity. I'm not trying to beat up on poor ole' Buffet or Gross (both really smart people), just trying to point out that not all is as simple as it would seem. I still don't think that where the S&P is now is of any relevance to people with long time horizons. This is basic Finance 101 stuff. I elaborate on this in my previous posts under the subject heading 'It ALWAYS pays to save'. You have to ask yourself if you even want to try to 'outperform' the market. To outperform you have to take on higher risk than the market on average, which means you can also hugely UNDERPERFORM the market. Do you want to gamble with your retirement like that? If you're 20 years away from retirement then you may want to. Just remember that if you lose a lot of money you may be working a few more years than you expected. But that might be okay with you. And what if you're wrong? What if there is a paradigm shift and inflation stays low and the stock market goes way up? How do you know for sure that isn't going to happen? I sure don't know what's going to happen next. If I did, I would be richer than anyone else in the world. If you love the risk and want to invest this way, go for it. Just realize that that's what you're doing. Okay, I think I've made my point. I'm finding myself more time constrained than I was a week ago and don't have time for long posts. If anyone has found my posts helpful or interesting and would like some more information about anything specific, I will be happy to answer it. I do find it a shame that folks don't have a lot of access good portfolio management - where they aren't being pushed into some product or another that some firm is selling. If I can be of help to anyone, that's great.

Subject: Re: Saving and Investing From: Pete Weis To: Econochick Date Posted: Sat, Mar 13, 2004 at 13:45:08 (EST) Email Address: Not Provided Message: Well, this has been a good discussion. When Jennifer reintroduced this subject at the top of the board, I thought this could end up being quite a long thread with posters adding their various thoughts about investing and saving. It's obviously a very important issue, not only for each of us who post here, but for the health of our economy down the road. If retirements dwindle either because markets don't do well over the next decade or simply because we have become a nation of spenders, with little saving and investing - leaving many with poor retirements - then social security will have to be the 'life ring' for too many of us. I've taken a somewhat defensive approach to investing in the last couple of years. I invest in funds which buy fixed income securities, mostly in Europe, Australia, and Canada, which pay higher yields than here in the US. I also have been getting the added benefit of the rising Euro and Australian and Canadian dollars vs. the US dollar. Also, a smaller portion of my investments have been in companies that produce commodities and to some extent in these commodities themselves. Clearly, I'm a believer that the US markets, in the short term, are a poor place to invest and the US dollar has some real problems for the long term. When Buffet starts getting back into the markets, I probably will buy some Berkshire-Hathaway. I believe he is biding his time for stocks to get back down to reasonable levels. Recently, he has expressed some disatisfaction with some of the stocks he presently owns, but talks about his responsibilities (since he sits on their boards) which precludes him from dumping them wholesale. Anyway, I agree with econochic that there is a lot of bad advice out their. A final thought - we should think about the currency implications of our investments as well as the actual dollar returns. If you make 15% on you stock fund and the US dollar has fallen a given amount against a basket of currencies and commodities then you need to subract that from your dollar denominated stock fund. Remember that the next time you fill up your gas tank.

Subject: Re: Saving and Investing From: Econochick To: Pete Weis Date Posted: Sat, Mar 13, 2004 at 20:45:07 (EST) Email Address: Not Provided Message: 'A final thought - we should think about the currency implications of our investments as well as the actual dollar returns. If you make 15% on you stock fund and the US dollar has fallen a given amount against a basket of currencies and commodities then you need to subract that from your dollar denominated stock fund. Remember that the next time you fill up your gas tank. ' Good point. Depending on how the CPI is calculated the weak dollar would theoretically be captured in the form of inflation in your scenario. I think you made a case in earlier posts for increasing inflation - maybe this was your reaoning for that? If the CPI does not include a lot of foreign produced goods, then inflation could be substantially under-estimated. I've had a browse on www.bls.gov to discover what's in the CPI number and I'm no better for it. They seem to calculate inflation for everything (Olives!?!) but the released number appears to be only select raw material? I'm no less confused than before. But to your point, Pete, year over year inflation for energy was 4.4%! By the way, you seem pretty diversified. I hope you've shopped around for the lowest management fees for the funds you invested in. They can be so outrageous!

Subject: China's Development From: Emma To: All Date Posted: Thurs, Mar 11, 2004 at 13:21:15 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/05/international/asia/05CHIN.html China's Leader Urges Shift in Development to Rural Areas By JOSEPH KAHN BEIJING — Prime Minister Wen Jiabao, delivering China's equivalent of the State of the Union address, vowed Friday to cool China's surging economy and focus more resources on the hundreds of millions of people left behind in the boom of the last decade. Mr. Wen, who was appointed prime minister a year ago and is presiding over an annual session of China's Communist Party-controlled Parliament for the first time, implicitly criticized his predecessors for stimulating high growth through heavy state investment. He said this had led to rampant waste and did too little to raise the incomes of peasants, who make up most of China's 1.3 billion population. 'Rural incomes have grown too slowly, and development in different regions of the country is not balanced,' Mr. Wen said in his 90-minute address. China has a 'serious problem of haphazard investment,' he said, adding that peasants have suffered 'widespread illegal appropriation of farmland.' Plans to increase urban and rural welfare payments, overhaul grain production, reduce rural taxes, improve education and cut down on 'serious accidents that inflict heavy loss of life' took up most of Mr. Wen's address, fulfilling expectations that he would outline a new approach to what he has called 'balanced development.'

Subject: China's Development - Continued From: Emma To: Emma Date Posted: Thurs, Mar 11, 2004 at 15:01:44 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/10/international/asia/10RIVE.html Dam Building Threatens China's 'Grand Canyon' By JIM YARDLEY DIMALUO, China — The highest villages in the mountains above the Nu River seem to hang in the air. Farmers grow cabbage and corn nearly a quarter-mile up, as if cultivating ski slopes. Necessity has pushed them into the sky; land is precious along the river. They may have to move higher still, perhaps into the clouds. The Nu, which flows through a region that is home to old-growth forests, some 7,000 species of plants and 80 rare or endangered animal species, is the latest waterway coveted by a Chinese government that is planning to build a new generation of dams to help power its relentless, booming economy. Unlike the Three Gorges Dam, the world's largest hydroelectric project and the subject of a bitter international debate, the Nu River plan has barely stirred a ripple outside China. But in China the project, which calls for 13 dams in all, has unexpectedly touched a nascent chord of environmental awareness and provoked rare public rifts within the government. The reason is that the Nu is one of the last pristine rivers in one of the world's most polluted countries, running through a canyon region unlike any other, which a United Nations agency has designated a World Heritage Site. Last year, China's State Environmental Protection Agency and the Chinese Academy of Sciences publicly criticized the Nu project. 'If this river system is destroyed, it would be a terrible blow,' said Li Bosheng, a prominent Chinese botanist. 'This area has been called the Grand Canyon of the Orient. It forms one of the world's most special canyon environments.' ...

Subject: Re: China's Development - Continued From: Mik To: Emma Date Posted: Thurs, Mar 11, 2004 at 15:13:25 (EST) Email Address: Not Provided Message: Interesting to see a critic on China's dam construction. Yet no one seems to criticize the pollution from the coal powered power stations that has caused wide spread lung disease. The dams will replace these coal power stations and offer far cleaner energy sources. I'm even more amazed that in this world we live in where energy requirements and burning of fossil fuel is so controverial, one would think that dams are far more welcome. I guess you can't please everyone?

Subject: Emma From: Mik To: Mik Date Posted: Fri, Mar 12, 2004 at 17:18:47 (EST) Email Address: Not Provided Message: How ironic - I have just read the interview with Paul Krugman - where he was asked the simple question - 'Why aren't we seeing more jobs in the face of strong economic growth.' Paul had no answer. Am I allowed to put my theory forward again?

Subject: Does economic growth = to job creation? From: Mik To: All Date Posted: Tues, Mar 09, 2004 at 12:02:49 (EST) Email Address: Not Provided Message: Simple question really. In the past it seemed simple that good economic growth was the main target of monetary and fiscal policies. With the economic growth, we would get job creation and all the rest would fall in place. I once remember some sort of stat that said something like 1% GDP was equal to 0.8% employment growth (the exact figures stand to be corrected). The point is that there we are seeing a serious 'disconnection' between economic growth and employment growth. Now I know that according to Keynes, employment stimulus also requires government spending. But even the current government is spending a great deal. Heck they are spending more than they are making. Now I raise this question again - are we not seeing a new phenomena that is actually very dangerous, not only in the US but all over the world as the majority of developing countries are gaining good GDP growth but very weak employment growth. These are the same countries that have been convinced to give up their dictatorships and socialist systems in exchange for 'our western' system that is a panacea for economic problems. As an example: The IMF and the US gov, convinced Uganda to restructure their economy liberating it and allowing for Western Capitalism (promising a flood of foreign investment). Uganda has met all the requirements set by the IMF and US advisors, after more than 10 years (within the stipulated requirements) Uganda has seen excellent GDP growth but dismal employment growth (and none of the promised foreign investment). There are now calls by the opposition for the government to give up this 'experiment' as it is not working.

Subject: Re: Does economic growth = to job creation? From: Enzo To: Mik Date Posted: Tues, Mar 09, 2004 at 15:46:37 (EST) Email Address: www.ferrari.it Message: '...that good economic growth was the main target of monetary and fiscal policies.' Want a Ferrari? But, do me a favour...

Subject: Critical Question From: Emma To: Mik Date Posted: Tues, Mar 09, 2004 at 13:34:36 (EST) Email Address: Not Provided Message: The Uganda example is excellent. Growth per se will not assure a high employment level. Rather, economic stimulus programs must be designed to add to employment as was the case during the New Deal. More added in time....

Subject: Hey Emma From: Mik To: Emma Date Posted: Thurs, Mar 11, 2004 at 15:15:00 (EST) Email Address: Not Provided Message: I thought you were going to give some comment on the Uganda discussion?

Subject: Uganda From: Emma To: Mik Date Posted: Thurs, Mar 11, 2004 at 17:35:31 (EST) Email Address: Not Provided Message: 'The IMF and the US gov, convinced Uganda to restructure their economy liberating it and allowing for Western Capitalism (promising a flood of foreign investment). Uganda has met all the requirements set by the IMF and US advisors, after more than 10 years (within the stipulated requirements) Uganda has seen excellent GDP growth but dismal employment growth (and none of the promised foreign investment).' Though I have spent considerable time reading and thinking about the question, I have no argument. The problem is most important, but how do I approach it? Why the continued employment problem, especially in light of the sweep of AIDS which harshly limits the prime working age population? Why the lack of foreign investment? Is it capital infrastructure that is lacking or education? So, I do not have a response only more questions. We can return to this!

Subject: Re: Uganda From: Al corrente To: Emma Date Posted: Fri, Mar 12, 2004 at 17:40:06 (EST) Email Address: Not Provided Message: Emma, u're really gold, man!

Subject: Re: Uganda From: Mik To: Emma Date Posted: Fri, Mar 12, 2004 at 12:02:09 (EST) Email Address: Not Provided Message: Emma, I would hope we'd return to this. You seem to have raised some good points in other threads. Aids is not an issue in this case. Uganda is the first African country to have stemmed the tide of Aids - besides, there are many unemployed able workers. Capital infrastructure has seen much rehabilitation after all Uganda had a staggering 10% GDP growth in 2002 and a negligable employment growth. The country Lesotho is another prime example also 10% GDP growth for a couple years running but negligable employment growth. The main problem is that FDI is a complicated beast. The mere fact that we have good monetary, fiscal and even infrastructure layout - does not guarantee FDI. And when FDI does arrive - it appears to be more 'capital' lead and not 'labour' lead. In other words, companies are taking advantage of tax holidays, cheap local costs, etc to set up their primarily automated factories. The hope now would be that most of these countries can grow from developing their own economies. All said and done - we are, in my opinion, witnessing a whole new phenomena. Jobless growth. I don't fully understand it. I believe it is just a new case of the 'trickle down' effect. And it is not exclusive to any country. Comments?

Subject: China's Transport From: Emma To: All Date Posted: Mon, Mar 08, 2004 at 18:15:52 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/05/business/worldbusiness/05ship.html A Logjam for Transportation in China By KEITH BRADSHER HONG KONG - Strained by rapid economic growth, China's transportation system has bogged down, especially in the last six weeks, causing delays in deliveries of raw materials and raising a serious risk of higher inflation. Railroads are so overburdened that power plants in southern China are having trouble getting coal from the north. That and shortages of generating capacity have contributed to brownouts that have forced factories to operate on limited schedules or in the middle of the night.... anne

Subject: China's Transport - Continued From: Emma To: Emma Date Posted: Tues, Mar 09, 2004 at 15:50:38 (EST) Email Address: Not Provided Message: http://www.nytimes.com/2004/03/05/business/worldbusiness/05ship.html Heavy-duty trucks have also become an impediment, as Beijing, alarmed at road damage caused by overloaded trucks, has suddenly clamped down on enforcing cargo weight limits. This forces each truck to make more trips to carry the same amount of cargo. The logjam appears to be most acute in China's ports, where shortages of trucks and railcars are preventing the distribution of shipments arriving from overseas. Mountains of imported iron ore and steel now clog the docks in many of China's biggest ports, forcing ships to wait at anchor as long as a month to make deliveries, at a cost of up to $100,000 a day per vessel just in ship charter fees. Notably, even as China seems to be choking on imported commodities like iron ore, steel, coal, aluminum and soybeans, its exports of everything from shoes to furniture to the United States and other foreign markets have been remarkably little affected. That is because such goods move mostly in steel containers on different kinds of trucks, and they pass through special ports that have received considerable investment in recent years.

Subject: Re: China's Transport - Continued From: Mik To: Emma Date Posted: Tues, Mar 09, 2004 at 16:52:19 (EST) Email Address: Not Provided Message: Emma, you are now entering my field - is this not a sign of an overheating economy? China already uses international standards in road design, especially in Beijing. So to 'implement cargo weight limits' and force trucks to make more trips is a very one sided argument. It holds about as much weight as saying that 'because US trucks cannot overload, they have to make more trips and thus slow down the US economy.' I'm sure you can see how weak this argument is. All that has happened in Beijing, is that the traffic load control enforcement has been weak in the past - they are now clamping down. It is probably a co-incidence that it falls at a time when there are blockages at the ports and someone has used some creative thinking to join some dots that should not be joined. As for the blockages, yes, China is growing fast. And like many places they are having to deal with under capacity issues. Their imports have recently boomed, which probably explains your post. But they are already, for many years, implementing large projects to expand capacity in all their infrastructure. Consider this - I recently worked on a study on the construction of a new road in rural Western China. A simple 78km road which comprises of 228 Bridges and 19 tunnels. 20 of these bridges are in the 'super large suspension' category. The US and Canada has never seen road projects of this scale. AND! this is one of their smaller projects. In essence these are the hey-days of China.

Subject: China's Boom From: Emma To: Mik Date Posted: Thurs, Mar 11, 2004 at 13:18:58 (EST) Email Address: Not Provided Message: Agreed completely. My firm sense is that careful economic policy can keep China growing at about 8% indefinitely. China strikes me as having the growth potential of America in 1870. The biggest problem will be managing the labor transition from rural to urban occupations.

Subject: Re: China's Transport From: Mik To: Emma Date Posted: Tues, Mar 09, 2004 at 11:38:07 (EST) Email Address: Not Provided Message: Interesting Emma, They are building roads at an amazing scale. So the current transport strain should only be a temporary issue.

Subject: New trade Theory? From: The Interpolator To: All Date Posted: Mon, Mar 08, 2004 at 14:02:42 (EST) Email Address: nma@hotmail.com Message: 'Supply-Side Economics' = f(ONE country;t0 < 1991-1992); 'Demand-Side Economics' = f(MANY countries;t0 > 1992); 'Supply-Side Economics' = f(ONE country;t0 < 1991) 'Demand-Side Economics' = f(MANY countries;t0 > 1992); = P.K.'s Noble worth 'NEW TRADE THEORY'

Subject: Re: New trade Theory? From: The Interpolator To: The Interpolator Date Posted: Mon, Mar 08, 2004 at 14:07:56 (EST) Email Address: nma@hotmail.com Message: SORRY:'Supply-Side Economics' = f(ONE country;t0 < 1991) added to 'Demand-Side Economics' = f(MANY countries;t0 > 1992); = P.K.'s Noble worth 'NEW TRADE THEORY'

Subject: The Hong Kong currency board From: Matthew Bristow To: All Date Posted: Sun, Mar 07, 2004 at 22:56:35 (EST) Email Address: matthew.bristow@britishcouncil.org.hk Message: Do any of you know anything about the Hong Kong currency board? Since Argentina went a couple of years ago, I think it is the only big one left. When their currency was overvalued they had five years of deflation and rising unemployment. Then, on September 23rd last year, the $HK went to a premium against its pegged rate, and since then it has been undervalued, like the Yuan, and we have had falling unemployment, an asset price boom and deflation has almost ended. What I would like to know is this: if the HK dollar stays below its equilibrium rate will Hong Kong continue to recover regardless of what happens to US interest rates? Or will we get thrown into recession again when nice Mr Greenspan starts putting up interest rates? Is a high interest rate deflationary in itself, or only through its effect on the money supply? I haven’t studied economics for over a decade, so forgive me if I have overlooked something obvious or fallen into some well-known Heffalump trap.

Subject: Hong Kong Currency From: Emma To: Matthew Bristow Date Posted: Mon, Mar 08, 2004 at 13:39:21 (EST) Email Address: Not Provided Message: My records show no meaningful change in the value of Hong Kong's currency against the American dollar in the last year. Hong Kong's currency has lost value against other currencies because it is tied to the dollar which has lost value.

Subject: Re: Hong Kong Currency From: M Bristow To: Emma Date Posted: Mon, Mar 08, 2004 at 20:45:01 (EST) Email Address: Not Provided Message: Yes, it has been pegged at 7.8 to the US dollar since 1983. Until September, the forward rate for $HK was anticipating a possibility of a devaluation. Now if Hong Kong unpegged the HK$ would apparently go up, hence it is undervalued, like the Yuan. And you are right, this has been caused by the fall in the US dollar. When the equilibrium rate is lower than its pegged rate, Hong Kong has deflation; when it is higher it has a boom. Having a currency board is like having a gold standard. They have no control over their money supply. Because the exchange rate cannot move, the price level has to make the adjustments. This is why they have had the world’s worst deflation over the last few years. And this is why they have such wild swings in asset prices. From 1997 to last autumn property prices were down 70%. Since then there has been a huge increase, as much as 40% in some areas. According to the South China Morning Post, flat prices rose 5% last week, which struck me as rather a lot. But the thing I don’t understand –one of the things I don’t understand- is this: if the $HK is below its equilibrium rate, will Hong Kong continue to have growth in the money supply even if there is a large increase in interest rates? Is a high interest rate deflationary in itself? Or only through its effect on the money supply?

Subject: Hong Kong Currency Board From: Emma To: Emma Date Posted: Mon, Mar 08, 2004 at 16:15:22 (EST) Email Address: Not Provided Message: Checked again. Hong Kong's currency is simply moving with the American dollar. So, if the American dollar declines in value against the Euro so does Hong Kong's currency. There has been no change. Hong Kong is tied to the dollar so this is the only 'equilibrium' level, though there really is no equilibrium level because of the tie. Should the dollar change in value in any way up or down against other currencies, Hong Kong's currency will change to the same extent against all other currencies.

Subject: Re: Hong Kong Currency Board From: Pikono-Klast To: Emma Date Posted: Mon, Mar 08, 2004 at 17:02:17 (EST) Email Address: nma@hotmail.com Message: Dear Emma, too far away,too many variables ergo too difficult to discern!

Subject: Yes, but.... From: Emma To: Pikono-Klast Date Posted: Mon, Mar 08, 2004 at 18:14:31 (EST) Email Address: Not Provided Message: The reason for Hong Kong's new growth would seem to be the growth of China proper, and the weaker American dollar which in turn has weakened Hong Kong's currency. Why should we be surprised?

Subject: Energy From: F. David Doty, PhD To: All Date Posted: Sat, Mar 06, 2004 at 20:47:24 (EST) Email Address: david@dotynmr.com Message: It's time for astute economists to begin factoring 'Oil Peak' into their economic analyses. A fresh look at practical energy solutions, based on sound science, couldn't be a more timely subject, as debate on the pending Energy Bill is expected to begin within a week to 10 days, and gasoline prices are now (or within the week) at record highs. You may want to start with the abridged version of my 'Fuels for Tomorrow's Vehicles', which is available here http://www.dotynmr.com/PDF/Doty_Practical_Energy_Brief.pdf . I discuss 'hydrogen hype' and next-generation biofuels in more detail in my paper, 'Fuels for Tomorrow's Vehicles', available here http://www.dotynmr.com/PDF/Doty_FutureFuels.pdf . You'll be surprised at how much bad energy science is being pushed by the Bush administration, but also by how much progress has been made toward some viable options that could avert a looming energy crisis if we change directions very soon. - David Doty, PhD, Physicist, Science Moderator, Dean Issues Forum, http://deanissuesforum.com/ Dean Issues Forum deanissuesforum.com/

Subject: Re: Energy From: Paul G. Brown To: F. David Doty, PhD Date Posted: Sun, Mar 07, 2004 at 14:06:29 (EST) Email Address: Not Provided Message: > You'll be surprised at how much bad energy science is being pushed > by the Bush administration, Oh no I would not. Shocked, perhaps. But not surprised.

Subject: Re: Energy From: Jennifer To: Paul G. Brown Date Posted: Mon, Mar 08, 2004 at 18:18:16 (EST) Email Address: Not Provided Message: Energy efficiency or conservation? With these folks there is neither.

Subject: Greenspan, Galt's Gulch, and more... From: Jerky LeBoeuf To: All Date Posted: Sat, Mar 06, 2004 at 20:25:19 (EST) Email Address: feedback@dailydirt.com Message: GREENSPAN, GALT'S GULCH, AND THE GREATEST GENERATION Remember all the talk a few years back about America's so-called Greatest Generation? Those stalwart survivors who met the challenges of the Great Depression, defeated fascism in Europe, kept communism in check until it imploded, and established the historically unprecedented 'middle class' from which Americans derive all their most cherished traditions, beliefs and values? I remembers my own sneaking suspicions upon first encountering this idea of the Greatest Generation. It was back in 1998, when those words entered the lexicon via NBC anchorman Tom Brokaw's doorstop-sized best-seller. Since that time, the title of his pandering paean has come to serve as a brand name of sorts. It also serves a handy rhetorical whip with which to flagellate butter-soft Boomers, not to mention the pierced and tattooed sloth-weasels of Generations X, Y and Z. How could the sturdy, worthy stock of mid-century America have spawned a generation of hippie/yuppies who then, in turn, produced a generation of nihilistic sensualists? How did those industrious paragons of self-reliance come to produce the soft, entitled likes of us? Whence this perplexing xenogenesis? These are the questions Brokaw's book - and its copycats - seems to ask of the reader. Actually, 'copycat' might be an unfair characterization. Considering the publishing industry's torturous turnaround, the speed at which these books followed each other would indicate cultural synchronicity at least, if not collusion. And while it might appear paranoid and naïve to believe that Dan Rather, Peter Jennings and others conspire to shape consensus reality, fact is these five-star generals of the Fifth Estate often do consult with each other, to significant effect. Case in point, the recent Homeland Security 'summit meeting,' where celebrity anchors and newsmedia brass attended an off-the-record dinner with Big Tom Ridge. The purpose of this meeting was to coordinate media efforts in anticipation of the next major terrorist attack on American soil. And isn't it comforting to know that when a suitcase nuke finally goes off in the Lower 48, Aaron Brown will be there to point us all towards the camps. But I digress. It was last week, while watching Alan Greenspan address Congress, that I undestood something fishy was afoot. According to the unelected Federal Reserve chairman-for-life, the opportunity had finally arrived for this generation - the Lamest Generation - to be noble, to sacrifice for the common good, to prove worthy of that which came before. Here, in part, is what Big Money Yoda (a.k.a. The Pope of Greenback Village) said: 'In view of this upward ratchet in government programs and the enormous uncertainty about the upper bounds of future demands for medical care, I believe that a thorough review of our spending commitments - and at least some adjustment in these commitments - is necessary for prudent policy. This dramatic demographic change is certain to place enormous demands on our nation's resources - demands we almost surely will be unable to meet unless action is taken.' Greenspan here implies that Social Security and Medicare are on the verge of bankrupting the nation. Thus, those entitlements must be reduced, if not eliminated. But a brief perusal of recent history reveals that Social Security's collapse isn't exactly imminent. The program takes in far more than what it pays out, and is projected to do so for decades. And yet, when anyone dares suggest dealing with the exploding Bush deficit by reversing his irresponsible tax cuts, they get this kind of gobbledygook in reply: 'The exact magnitude of such risks is very difficult to estimate, but they are of enough concern, in my judgment, to warrant aiming to close the fiscal gap primarily, if not wholly, from the outlay side. For a variety of reasons, that action is better taken as soon as possible.' Translated from the Greenspanese, that means: 'Reversing Bush's consciously irresponsible tax cuts wouldn't be feasible, because if that happened, America's wealthiest citizens - the capital investors whose purity of vision and forceful leadership keep Western civilization afloat - would likely become angry, and refuse to use their wealth to generate more wealth. According to the principles of supply-side, trickle-down, Voodoo economics, the wealthy would go on a devastating wealth strike.' The above scenario might seem vaguely familiar to some of you. It echoes the plotline of Ayn Rand's novel, Atlas Shrugged. Rand was an eccentric, egocentric Russian émigré who became the leader of a pseudo-philosophical cult of personality called 'Objectivism.' Her beliefs were a weird mélange of atheism, libertarianism, and what she called enlightened selfishness. In Atlas Shrugged, the 'creative people' of the world decide to withhold their genius from the unworthy masses and retreat from society. They relocate to a faraway hidden valley where they create their own private utopia. Without them, the civilization they left behind spirals into anarchy and collapses. Despite its obvious comic potential - think Bill Gates and Warren Buffet bunking together and having to empty a mountain cabin chamber-pot every morning - Atlas Shrugged was not meant as satire. Rand took her fiction, her philosophy, and herself very seriously, even when few others did. One of the first people to take Ayn Rand seriously other than Rand, herself, was Alan Greenspan. He thought her philosophy so appealing that he became a member of her cult's inner circle, known as 'the Collective.' Legend has it that Greenspan first read Atlas Shrugged literally while Rand was writing it. He would read the freshly finished pages as she peeled them from her typewriter. In 1957, Greenspan defended Atlas Shrugged's merits in a letter to the New York Times, after that paper had published a negative review. The letter strikes a disturbing chord: 'To the Editor: Atlas Shrugged is a celebration of life and happiness. Justice is unrelenting. Creative individuals and undeviating purpose and rationality achieve joy and fulfillment. Parasites who persistently avoid either purpose or reason perish as they should. Mr. Hicks suspiciously wonders 'about a person who sustains such a mood through the writing of 1,168 pages and some fourteen years of work.' This reader wonders about a person who finds unrelenting justice personally disturbing. Alan Greenspan, NY' Half a century ago, Greenspan used the language of genocide to express his 'joy' at the idea of 'creative individuals' with 'undeviating purpose' one day meting out 'unrelenting justice' to social 'parasites,' causing them to 'perish.' Today, two decades after he reformed Social Security in a way that increased its burden on the working class and left the program ripe for Republican plunder, he's using romanticized, revisionist myths about the 'rugged individualism' of the Greatest Generation as a pretext for dismantling one of that generation's greatest legacies. 'The money can't be spared. You don't deserve it anyway. Come on… noblesse oblige!' If the Greatest Generation was, indeed, the greatest generation, it's only because they had to be. Rugged individualism didn't pull America out of the Great Depression. It took a New Deal - proactive government responding to legitimate needs - to do that. European fascism wasn't defeated by rugged individualism, but by cooperation between Allies, including a great many communists. The trillions spent playing 'bankruptcy chicken' with the USSR during the course of the Cold War didn't come from rugged individuals. It came from taxes. The government. The state. A collective. And where were Greenspan's rugged individuals during all this? They were doing everything in their power to avoid paying the taxes that paid for it all. They were closing down factories at home, and opening unregulated sweatshops abroad. They were hiding their assets offshore. They were treating government contracts like a license to steal from the American people. Then they decided to use their ill-gotten loot to buy more influence, so they could score more contracts, so they could make more money, so they could eventually afford to get a puppet Preznit installed in the White House. This gave them the oportunity to dismantle and/or de-fang all those pesky government regulatory agencies, then raid the treasury. Now they've going after Social Security. I guess after that comes the part when the parasites - who, as we all know, persistently avoid either purpose or reason - will perish as they should.

Subject: Re: Greenspan, Galt's Gulch, and more... From: David H. To: Jerky LeBoeuf Date Posted: Sat, Mar 06, 2004 at 23:58:52 (EST) Email Address: Not Provided Message: Wonderful article. I would appreciate it if anyone had a link. Here's another: Greenspan's Con Job It is not exactly that he lies, but Alan Greenspan certainly ranks among the most duplicitous figures to serve in modern American government. Using his exalted status as economic wizard, the Federal Reserve chairman regularly corrupts the political dialogue by sowing outrageously false impressions among gullible members of Congress and adoring financial reporters. These distortions are not harmless; they become solemn writ for lawmakers and opinionmongers. Greenspan is especially destructive when he opines on public matters outside his supposed expertise as a central banker. His thinking is still anchored by Ayn Rand's brittle social philosophy: Let the strong prevail, let the weak pay for their weakness. The Fed chairman's recent remarks on Social Security and the federal budget deficits offer a particularly chilling example. In a House budget hearing, he elided the two subjects in a way that produced predictable scare headlines and chin-wagging editorials. The deficits must be dealt with promptly, he warned, because the baby boomers are about to retire. Then Social Security will be in trouble. And so government must cut benefits now, before it's too late. 'I am just basically saying that we are overcommitted at this stage,' he explained. 'You don't have the resources to do it all.' That sounds like manly wisdom. Greenspan was widely praised for courage. He should more properly be pilloried for gross mendacity. He is proposing a con job on ordinary working Americans--a bait-and-switch game on a grand scale--in which the payroll taxes they paid into Social Security over many years will now be diverted to other purposes, including the generous tax reductions G.W. Bush has enacted for the very wealthy and the corporations. It doesn't sound so noble when you put it that way. Greenspan knows these facts but also knows his big lie will probably endure as conventional wisdom. Typically, the media shorthanded his comments to create a larger fallacy--that Social Security is part of the deficit problem, therefore future retirees deserve to take the hit. Here is the truth: Social Security is not in deficit, not now and not for at least the next forty years. The trust fund will have a surplus next year of $1.8 trillion. In 2011 when, Greenspan warns, the baby boomers will start retiring in large numbers, the surplus will be $3.2 trillion. These stored savings, plus future payroll-tax revenue, are sufficient to pay all retirees the current level of benefits through 2042, according to the fund's very conservative actuaries. The problem is, the government borrowed this money and has spent it on other projects. But the trust fund, despite what right-wingers like to claim, is not an accounting gimmick. The government is legally obligated to pay back the money (as surely as it is obliged to repay Treasury bonds). The borrowed trillions, in fiduciary terms, belong to the 'beneficial owners'--every worker who has paid higher payroll taxes for the past twenty years. Greenspan is familiar with the accounting because he was chairman of the bipartisan commission that supposedly 'fixed' the Social Security problem back in 1983 by imposing a huge increase in FICA payroll taxes--extra revenue that produced the still-growing surpluses. This historic tax shift (I think of it as the 'crime of '83') was most convenient to the Reagan Administration because Reaganomics had just created huge budget deficits by cutting income taxes for the monied interests and pumping up the military budget. The burgeoning surpluses from the Social Security payroll tax would help offset the economic impact of the deficits. Hardly anyone noticed at the time, since Democrats cooperated in the 'solution.' Now Bush Jr. has done the same thing. And Greenspan is proposing another