Joe's Investo-Blog

Harsh lessons we may need to learn again
By Joseph E. Stiglitz (China Daily)

http://www.chinadaily.com.cn/opinion/2009-12/31/content_9249981.htm

Joseph Stiglitz recounts five “harsh lessons” from 2009:

1. Markets are not self-correcting.
2. Recent Markets failed because too-big-to-fail financial institutions had perverse incentives.
3. Keynesian policies do work.
4. There is more to monetary policy than just fighting inflation.
5. Not all innovation leads to a more efficient and productive economy – let alone a better society.

The best that can be said for 2009 is that it could have been worse, that we pulled back from the precipice on which we seemed to be perched in late 2008, and that 2010 will almost surely be better for most countries around the world. The world has also learned some valuable lessons, though at great cost both to current and future prosperity – costs that were unnecessarily high given that we should already have learned them.

The first lesson is that markets are not self-correcting. Indeed, without adequate regulation, they are prone to excess. In 2009, we again saw why Adam Smith’s invisible hand often appeared invisible: it is not there. The bankers’ pursuit of self-interest (greed) did not lead to the well-being of society; it did not even serve their shareholders and bondholders well. It certainly did not serve homeowners who are losing their homes, workers who have lost their jobs, retirees who have seen their retirement funds vanish, or taxpayers who paid hundreds of billions of dollars to bail out the banks.

Under the threat of a collapse of the entire system, the safety net – intended to help unfortunate individuals meet the exigencies of life – was generously extended to commercial banks, then to investment banks, insurance firms, auto companies, even car-loan companies. Never has so much money been transferred from so many to so few.
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Banks, Economics, Financial Crises, Inflation/Deflation, Markets, Politics Banks, collapse, deflation, Economics, economy, fiscal policy, history, inflation, monetary policy, Politics, taxes, The Fed, US treasury

Is Santa Claus a member of the WTO? Patrick Thomas, the U.K. Embassy’s policy adviser for trade and agriculture, and Tom Barry, first secretary, economics at the U.K. Embassy in Washington, look at the trade implications of St. Nick’s actions. Thomas and Barry blog at http://blogs.fco.gov.uk/roller/economic.

Dear Santa:

It is with regret that I am serving you with a Section 415 Cease and Desist order in the matter of delivery of gifts and/or presents on the occasion of the Night Before Christmas on behalf of Mr. and Mrs. Dean (hereafter “My Parents”).

My Parents note the following violations of international trade rules which constitute a prima facie case of unfair competition in the delivery of but not limited to balls, teddy bears and games:

Anti-Dumping. The low price of zero dollars you charge is clearly below marginal cost. This seems to be a flagrant attempt to attain market share. No doubt you have your eyes fixed on Easter and Halloween, to say nothing of birthdays.

Labor standards. You have never accepted international standards for your workforce. Your elves toil for impossibly long hours and appear to subsist entirely on leftover cookies. My Parents have serious concerns about the long-term health effects of the “magic dust” which you pump into your workshops to enhance productivity.

Environmental standards. Your production methods are extremely carbon-intensive. My Parents are not convinced that your base in the North Pole is sustainable given the long-term decline in Arctic sea ice.

Intellectual Property. Santa-brand Tickle-Me-Elmo dolls are an unauthorized reproduction of the real thing.

Transportation costs. We regret your genetic modification of reindeer in respect of flight, and, in at least one case, red noses.

In light of these concerns, it is My Parents’ view that I would be better off without any such “free” presents and that my arguments against such were “naive.”

Merry Christmas.

Yours

Johnny (aged four and three quarters)

Economics Humor, trade

In today’s Senate hearings to confirm the re-appointment of Federal Reserve Chairman Ben Bernanke, Senator Bunning succinctly lays out the greivous mistakes of the Fed in the years leading up to, during, and in the aftermath of the recent financial meltdown. It is hard to refute his argument that the privately owned Fed did nothing for the taxpayers and everything for it’s stockholders, the member banks of the Federal Reserve System.

Statement of Senator Bunning

Four years ago when you came before the Senate for confirmation to be Chairman of the Federal Reserve, I was the only Senator to vote against you. In fact, I was the only Senator to even raise serious concerns about you. I opposed you because I knew you would continue the legacy of Alan Greenspan, and I was right. But I did not know how right I would be and could not begin to imagine how wrong you would be in the following four years.
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Banks, Economics, Financial Crises, Markets, Politics Banks, collapse, debt, deflation, economy, history, monetary policy, Politics, The Fed, US treasury