Economics

President Obama is reportedly outraged to learn that financial executives were actually paid the bonuses owed them in 2008:

President Obama fired a warning shot at Wall Street on Thursday, branding bankers “shameful” for giving themselves $18.4 billion in bonuses as the economy was spinning out of control and the government was spending billions to bail out many of the nation’s most prominent financial firms.

Creating jobs by breaking windows is not only bad economics, it’s criminal (except when government does it):

The owner of a glass company accused of a $132,000 scheme to smash Scottsdale school bus windows and profit from the repairs has been indicted.

(click picture to visit a Detroit photographer’s gallery of 100 Abandoned Houses)

Via: Maggie’s Farm

In this week’s column, Walter Williams poses a question:

The Federal Register, which lists new regulations, annually averaged 72,844 pages between 1977 and 1980. During the Reagan years, the average fell to 54,335. During the Bush I years, they rose to 59,527, to 71,590 during the Clinton years and rose to a record of 75,526 during the Bush II years.

Economic heavyweight John Maynard Keynes is often quoted for his observation, “In the long run, we’re all dead.” Keynes’s ‘long run’ arrived long ago, but his disproven theories march on. For our current rash of bailouts or spend-and-tax “stimulus programs”, blame Keynes.

Harvard economist Greg Mankiw directs a shotgun blast at Keynesian thinking:

Today the US Department of Labor released December’s unemployment statistics. Everyone was expecting bad news. Well, there was news. But “bad” is a judgement, not a fact, and the headlines reflect those Chicken Little expectations.

Carnage continues with 524,000 jobs lost in Dec.
Unemployment rate rises to 7.2%, the highest in 16 years

Investment vs. Expense:

An investment is a use of money or wealth with an expectation of income or profit. The investor expects to get his initial outlay back, with something extra, a profit. An expense is a use of money with the expectation of gaining some benefit or beneficial outcome. The wealth expended is lost, in trade for something else.

Lower gasoline prices are saving American consumers a billion dollars every day:

Last week's $1.59 - the average for a gallon of regular on Dec. 29, according to the Energy Information Administration - works out to $1.33 in 2001 dollars, or 9 percent less than it was the day Mr. Bush took office. The tumble in prices, from a high of more than $4.05 in early July, has meant incredible savings.

Would covering our roofs with solar panels save us money? MaxedOutMama runs the numbers:

The result, according to the figures of the organization selling the equipment, would be to reduce the annual utility bill to $0.00. In other words, I'd spend $16,500 to save $780 annually, so it would take about the life of the equipment to break even.

But actually, I'd be costing myself money. The next "Alternative" block figures the return of taking that $16,500, investing it, and using the proceeds to pay the utility bill. At 5% return, I'd be doing better on my utility bill than with the solar power. At 3% return (3.22% is the last reported yield on 20-year Treasury bills), I'd be paying less than $25 a month for power. Plus, at the end of the 20 years, I'd still have my $16,500.

Even a child could spot the silliness in current economic thinking:

“Mrs. Adams talks about fairness a lot in school,” Junior said. “She says it’s not fair for some people to be very rich and others to be very poor, that the government should do something about it.”

“That’s right, son,” Dad said. “The rich should pay more in taxes to reduce the gap between rich and poor, something they call income inequality.”

Prominent in today’s headlines is Obama’s proposal for tax cuts. Some commenters are optimistic that Barry is not really as much of a Marxist goon as his history and campaign rhetoric suggested. I disagree.

The lede to a weekend story on Marketwatch.com (an investing news site):

While most investors panicked or were forced to sell, Berkshire Hathaway Chairman Warren Buffett put more than $20 billion to work last year, positioning his insurance-focused conglomerate to profit if the economy and markets recover in coming years.
[emphasis added]

If?

Auto sales are down significantly in the short term, so much that the least-viable manufacturers are taking a lifeline from the US Congress. Congress has made no secret that they intend to wiggle their end of the rope to force greater production of fuel-efficient vehicles. But that class of vehicle has suffered the biggest drop in demand:

I maintain humans do not have an energy problem. The energy used by all of humanity is only about 1/10000 of the solar energy hitting the planet. There is no shortage of power. What we have is a technology problem: How do we capture more and/or increase efficiency?

What things cost under earlier conditions is history; what the supply and demand are today is economics.

Quoted from: Thomas Sowell in Basic Economics: A Common Sense Guide to the Economy

Arianna Huffington adopts my rhetoric (yes, I know she’s never heard me, but I’ve been calling for socialists and central planners to be relegated to midnight radio for years):

Many people talked about a housing "bubble" before it "popped", but none (to my knowledge) warned about the credit and economic contraction that would follow. Nevertheless, no one is shy about being wise enough to offer radical policy prescriptions now that the downturn is here.

A couple of days back I tossed out a suggestion to help Minneapolis meet its budget shortfall. Turns out our City Overlords are working in the oppostie direction:

In the ordinary world, an investor buys bonds to earn interest. The world today is not ordinary. The Treasury Department has just sold $32B worth of 4-week bonds (T-Bills) that yield 0%. Zero. Percent.

There may be good reasons to switch from existing energy sources to renewable. But President-elect Barack Obama's energy plans have significant costs. His energy promises rely on questionable science and even more questionable economics. Creating "green jobs" would kill other jobs.
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