April 23, 2009
Recommended Reading
Here's a chart of excess reserves that banks hold:
Since 1959 the banking system essentially didn't hold excess reserves. That changed in
Posted by Peter Mork at 1:42 PM | Comments | TrackBack
September 19, 2008
Mortgage Meltdown With A Face
Take a look at Ken Lewis' expresion. Think he might have known this would come back to bite him? You could argue the intentions were good, but "zero down" loans that the bank (now government/taxpayer?) is ultimately responsible for when housing heads south is part of what got us into this mess. Via IBD:
In view of the mortgage meltdown that led to the current financial crisis, we couldn't resist rerunning this 2004 photo from the Associated Press that appeared in this spot April 3. It was taken after Bank of America agreed to a $6 billion affordable housing program pushed by the Neighborhood Assistance Corp. of America (NACA). The program was designed to provide mortgages to low-income homebuyers without requiring a down payment or charging closing costs and fees. The expressions on the faces of CEOs Kenneth Lewis of BofA, left, and Chad Gifford of FleetBoston as they listen to NACA's Bruce Marks say it all.
Posted by Peter Mork at 10:06 AM | Comments | TrackBack
November 20, 2007
Flores on Freedom
Here is a great speech by Francisco Flores, the former President of El Salvador, presented by the Atlas Economic Research Foundation:
Posted by Peter Mork at 12:49 PM | Comments | TrackBack
March 24, 2005
Competition Within Europe
The formation of the European Union allowed citizens of the member countries to legally live and work in any country within the EU. This policy of open immigration has had far reaching implication. Governments, in a sense, must now compete to keep citizens and businesses within their borders.
For example, in 2001, after Denmark's Brian Nielsen fought Mike Tyson, he promptly moved to Spain to collect his big payday. Why? It wasn't only to enjoy the Mediterranean lifestyle with his newfound wealth, but because taxes were lower in the Iberian Peninsula than in his native country. It follows that countries have quickly realized that a larger percent of nothing is much less than a smaller percent of something. Tax competition has ensued.
This table from a recent Wall Street Journal editorial speaks for itself with regards to the above. It should come as no surprise Ireland's economy is booming with an unemployment rate below 5%.
But the casualties of a mobile labor force have not been limited to high tax rates. Earlier this week France abandon their compulsory 35-hour work week. Originally, this policy was implemented with the flawed logic that shortening the work week for those already employed, would create jobs for the more than 13% of the population that found itself without work. The actually results were to make an already unfriendly business environment worse, and a system where government officials would routinely search the briefcases of businessmen/women as they left their places of employment to make sure they were not illegally bringing work to their homes to complete.
One question that remains is if Europe continues to move in this direction, how long will it be before the United States itself starts feeling the heat of economic competition from across the Atlantic?
Hat Tip: Hispanic Pundit
Posted by Peter Mork at 10:53 AM | Comments | TrackBack
March 23, 2005
Interest Rates and Economic Growth
There is an interesting op-ed by Jeremy Siegel in today's Wall Street Journal. Entitled "The Next Great Wave of Growth," I specifically enjoyed his closing paragraphs:
Today the developing countries, despite comprising 87% of the world's population, produce less than one-quarter of the world's output measured in dollars. It is likely that by the middle of this century, they will produce over half the world's GDP. Indeed, the growth of these economies will become the dominating factor in the world's capital markets.
Investors should not succumb to the pessimistic forecasts of government agencies and others who bemoan the aging of the U.S. population. Chairman Greenspan is finally showing the markets that our historically low interest rates are unjustified. Those pessimists currently buying bonds to protect themselves against the widely predicted economic downturn will soon be sorry that they bet against growth.
My only comments would be that Greenspan does not control the long-end of the yield curve. Witness that since the Fed started targeting a higher Fed Funds rate in mid-2004, the yield on the 10-Year Treasury Note has not moved up:
In a similar vein, are these interest rates "historically low" and "unjustified"? If inflation remains low (unlike the 70's), then who is to say that interest rates are not just getting back to where they should be? This graph of the yields on Moody's Aaa bonds since 1919 makes a case for that argument:
Posted by Peter Mork at 9:05 AM | Comments | TrackBack
March 4, 2005
Help the Poor... Become a Target of Terrorists
A World Connected has an interesting piece up on Peruvian economist Hernando De Soto. De Soto is famous for his books The Other Path and The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, which brought his economic research on property rights in third world countries to the public. The article summarizes this point well, explaining that the reason the underground Peruvian economy was so large was that the government had made it nearly impossible for most people to register their property and businesses legally:
In the early 1980s, De Soto discovered that 90 percent of all small industrial enterprises, 85 percent of urban transport, 60 percent of Peru's fishing fleet (one of the largest in the world), and 60 percent of its food stores operated outside of the law.
Contrary to the views of the government and Peruvian elites who thought of the poor as lazy, many of Lima's poor were in fact carrying the economy on their backs.
The more people the ILD researchers talked to in the shantytowns and rural byways of Peru, the more they realized that it was not so much that the poor were breaking the law as that the law was breaking them.
Even those who had tried to get into the system by applying for titles to their houses and other real estate or licenses to legalize their busines