Posts Tagged ‘Mark Thoma’

What is the Role of the State?

What is the Role of the State?

Courtesy of Mark Thoma at Economist’s View

When I teach the History of Economic Thought, one thing we focus on is how views on the role of the state have changed over time. It has a natural cycle to it, with eras such as the highly interventionist Mercantilist years followed by Physiocratic and Classical views stressing minimal government intervention. This is followed by a rebound in the other direction, and so it goes with a Keynes followed by a Friedman in the 50s, a rebound back to Keynes in the 60s, to classical ideas following the experience of the 70s, and so on, and so on. We are involved in the same debate, and a smaller version of the grand historical lurches in each direction, yet again today:

What is the role of the state?, by Martin Wolf: It is … a good time to ask … the biggest question in political economy: what is the role of the state? This question has concerned western thinkers at least since Plato (5th-4th century BCE). It has also concerned thinkers in other cultural traditions… The perspective here is that of the contemporary democratic west.

The core purpose of the state is protection. This view would be shared by everybody, except anarchists… Contemporary Somalia shows the horrors that can befall a stateless society. Yet horrors can also befall a society with an over-mighty state. …

Mancur Olson argued that the state was a “stationary bandit”. A stationary bandit is better than a “roving bandit”, because the latter has no interest in developing the economy, while the former does. But it may not be much better, because those who control the state will seek to extract the surplus over subsistence generated by those under their control.

In the contemporary west, there are three protections against undue exploitation by the stationary bandit: exit, voice … and restraint. By “exit”, I mean the possibility of escaping from the control of a given jurisdiction, by emigration, capital flight or some form of market exchange. By “voice”, I mean a degree of control over, the state, most obviously by voting. By “restraint”, I mean independent courts, division of powers, federalism and entrenched rights.

This, then, is a brief background to … the problem, which is defining what a democratic state … is entitled to


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Is the Unemployment Problem Cyclical or Structural?

Is the Unemployment Problem Cyclical or Structural?

Courtesy of Mark Thoma, writing at CBS MoneyWatch

a young man lying on a sofa holding a glass of wine

As I noted in a previous post, economists define three types of unemployment: frictional, structural, and cyclical:

Frictional unemployment is defined as the unemployment that occurs because of people moving or changing occupations. Demographic change can also play a role in this type of unemployment since young or first-time workers tend to have higher-than-normal turnover rates as they settle into a long-term occupation. An important distinguishing feature of this type of unemployment, unlike the two that follow it, is that it is voluntary on the part of the worker.

Structural unemployment is defined as unemployment arising from technical change such as automation, or from changes in the composition of output due to variations in the types of products people demand. For example, a decline in the demand for typewriters would lead to structurally unemployed workers in the typewriter industry.

Cyclical unemployment is defined as workers losing their jobs due to business cycle fluctuations in output, i.e. the normal up and down movements in the economy as it cycles through booms and recessions over time.

In a recession, frictional unemployment tends to drop since people become afraid of quitting the job they have due to the poor chances of finding another one. People that already have another job lined up will still be willing to change jobs, though there will be fewer of them since new jobs are harder to find. However, they aren’t counted as part of the unemployed. Thus, the fall in frictional unemployment is mainly due to a fall in people quitting voluntarily before they have another job lined up.

But the drop in frictional unemployment is relatively small and more than offset by increases in cyclical and structural unemployment. One of the big questions right now is whether the US economy is suffering, for the most part, from structural or cyclical unemployment. If it’s cyclical, then there’s a good chance that government intervention can help. If it’s structural, i.e. a decline in automobile production and manufacturing more generally, a decline in home construction, and a decline in the financial industry all of which free workers that need to be absorbed elsewhere in the economy, there’s less that can be done and some do not think that government can do much at all about this type of problem (though as I…
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Never Let the Threat of a Manufactured Crisis Go to Waste

Never Let the Threat of a Manufactured Crisis Go to Waste

Courtesy of Mark Thoma, Economist’s View 

There’s been a lot of speculation about the motives of the Austerians — those who want to begin balancing budgets now because they believe that’s what markets want. For example, Paul Krugman attributes it, in part, to

moralizing and posturing. Germans tend to think of running deficits as being morally wrong, while balancing budgets is considered virtuous, never mind the … economic logic. “The last few hours were a singular show of strength,” declared Angela Merkel … after a special cabinet meeting agreed on the austerity plan. And showing strength — or what is perceived as strength — is what it’s all about.

But there is another argument based upon the notion of "never let a crisis — or the manufactured threat of one — go to waste." This is an opportunity to "starve the European Beast" in the eyes of many European conservatives, and there are those who are using the "that’s what markets want" argument as cover for an ideological agenda:

The spectre of laissez-faire stalks Britain, by Jeremy Seabrook, CIF: The relish with which David Cameron announced that our whole way of life would be affected for years by impending cuts, and no one in the land would be exempt from the asperities about to be inflicted, suggested to many that he and his fellow cabinet-millionaires will probably weather the coming storm better than the rest of us.

His parade of Margaret Thatcher, who resembled nothing so much as a faded kabuki performer, outside 10 Downing Street, was also highly symbolic. It was a redemptive moment, the "ultimate" triumph of policies she advocated (but did not entirely follow) 30 years ago. It exhibited the qualities of purification ritual, reversion to a more severe form of capitalism; and in the process a transformation of nanny state into stepmother state.

Nick Clegg’s pious assertion that cuts would be fair and compassionate was at odds with Cameron’s gusto, which is familiar enough in Conservative rhetoric: Cameron confronting an overweening state, which will be shrunk so the private sector might flourish once more. When he said the effects of his policies would be felt for decades to come, he meant something more than a mere diminution of the structural deficit. He admitted as much… 

While cutting back big government may appear a


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On kleptocracy and the sense that we have a one-party system

On kleptocracy and the sense that we have a one-party system

Matt TaibbiCourtesy Edward Harrison at Credit Writedowns

As a writer, Matt Taibbi is a lot more vitriolic than I am. He curses, makes some pretty over-the-top personal attacks, and divines a policymaker’s intent where I don’t think he can. But, this goes mostly to style.  Substantively speaking, he has a lot to say and we should take notice. 

I wanted to highlight a piece he wrote yesterday called Fannie, Freddie, and the New Red and Blue. The crux of his argument is this: The partisan rhetoric is on full display in the dust-up over the unlimited liabilities coming from Fannie and Freddie thrust upon taxpayers on Christmas Eve. This rhetoric is not just beside the point, it is specifically designed to obscure the point, namely that both Democrats and Republicans, private industry and the government are culpable in the shambles our economic system has become.

Taibbi says:

Over the Christmas holiday a nasty thing happened: Tim Geithner’s Treasury Department decided to lift the cap on aid to the Government-Sponsored Entities, Fannie Mae and Freddie Mac, apparently in response to Obama administration fears that the two agencies would become insolvent. The cap was raised from $200 billion on each and government backstopping of the mortgage market will apparently now extend into infinity for at least three years, through 2012.

The move has already inspired a mini-firestorm, with several outlets delving deeply into the recent history of the GSEs and uncovering some disturbing new facts…

Sometimes I’m amazed at the speed with which highly provocative information like this GSE business can be converted into distracting propaganda in this country…

What worries me is that we’re… starting to see fault lines develop, where one side blames the government while another side blames Wall Street for the messes of the last two decades…

Everyone was involved in the mortgage scam. At the lender level the deceptions were myriad; liar’s loans, fraudulent income documentation, negative amortization loans, HELOCs, etc. The rush to get as many loans written as possible and then get those hot potatoes moved to the next sucker in the line was furious and extended from coast to coast, sinking one lender after another in Ponzoid debt and indictments….

Everyone had a hand in the bubble,


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Mark Thoma: Libertarians and populists are against Bernanke

Mark Thoma: Libertarians and populists are against Bernanke

Courtesy of Edward Harrison at Credit Writedowns

Mark is right that time is not on Chairman Bernanke’s side. If you saw the Ron Paul video earlier today, you can see what’s happening. I don’t have a strong view, although I believe most of the other bloggers are against.

Reminder: This is what Mark wrote about the Chairman’s being re-appointed in June.

Bernanke, Summers, or Yellen? None of the Above?

I’d reappoint him. If forced to choose between Yellen and Summers, I’d choose Yellen.

Question: are these still the alternatives if Bernanke is not confirmed?

(video embedded above)

See also Bernanke’s nomination approved by Senate banking panel from the BBC

 


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Kimble Charting Solutions

Germany Breakout Bullish For Stocks In The States!

Courtesy of Chris Kimble.

An important message to stocks in the states will come from Germany in the next few weeks!

This chart looks at the DAX index from Germany over the past 10-years. For the majority of the past 6-years, the DAX has remained inside of rising channel (1). The 2018 decline saw the DAX hit support where a 1-year counter-trend rally started.

Over the past year, the DAX has created a new falling channel (2). It is now testing the top of this falling channel and the lows of last February at (3).

For most of last year, the DAX created a bearish divergence with the...



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Insider Scoop

Earnings Scheduled For March 18, 2019

Courtesy of Benzinga.

Companies Reporting Before The Bell
  • Lumber Liquidators Holdings, Inc. (NYSE: LL) is estimated to report quarterly earnings at $0.12 per share on revenue of $272.54 million.
  • Genesis Healthcare, Inc. (NYSE: GEN) is expected to report quarterly loss at $0.24 per share on revenue of $1.19 billion.
  • Overstock.com, Inc. ...


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Zero Hedge

"Spring Is Coming": Why Europe Looks Set To Surprise On The Upside

Courtesy of ZeroHedge. View original post here.

Is the winter of Europe's discontent coming to an end?

After a long period of economic pain which many believe culminated in Europe's descent into recession just as the ECB's QE of public bonds came to an end, in a note titled "Spring is coming" and focusing on events in Europe, Bank of America writes that its EU Composite Macro Indicator (CMI) avoided a decline for the first time in 12 months.

...



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Phil's Favorites

No Free Lunch: Valuation Determines Return

 

Source: Pixabay

No Free Lunch: Valuation Determines Return

By John Mauldin, Thoughts from the Frontline

Last week, I described the enormous challenges retirees face. One reason for that, aside from insufficient savings, is that markets haven’t delivered the returns many experts said we could plan on.

Back in the late 1990s, we were told that the long-term average return (~10%) was a reasonable long-term assumption—even if the market cooled down from the tech boom. Instead, the S&P...



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Biotech

Marijuana is a lot more than just THC - a pharmacologist looks at the untapped healing compounds

Reminder: We are available to chat with Members, comments are found below each post.

 

Marijuana is a lot more than just THC - a pharmacologist looks at the untapped healing compounds

Assorted cannabis bud strains. Roxana Gonzalez/Shutterstock.com

Courtesy of James David Adams, University of Southern California

Medical marijuana is legal in 33 states as of November 2018. Yet the federal government still insists marijuana has no legal u...



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ValueWalk

Crescat Capital On The "Macro Trade of The Century" Short Bet

By Jacob Wolinsky. Originally published at ValueWalk.

Via Crescat Capital

At Crescat we remain positioned to capitalize on a downturn in the economic cycle. Global equity markets peaked in January 2018 while US markets peaked in September 2018. Crescat’s hedge funds were two of the world’s top performing funds in 2018 as a result of our bearish macro views and positioning last year. We are confident that was only the beginning of a downturn in asset prices from record global leverage and central-bank-driven asset bubbles for this cycle. US asset bubbles only just began to burst at the end of last year as on can see in the chart below.

Year to date, global stocks and corporate credit have rallied back while economic indicators have continued to deteriorate. This is setting the market up for another down-leg. We haven&#x...

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Chart School

Wyckoff Price Thrust Measure

Courtesy of Read the Ticker.

Richard Wyckoff said in his last days as an educator,'follow the waves'. And an important measure of those waves is the 'thrust'. The thrust of price into new ground, considering price and volume support or lack of it. The price wave thrust is clear visual presentation of the composite man demand or supply characteristics: strong, mild, weak or confused. 

readtheticker.com favored trend tool named RTTTrendStatus sister indicator RTTTrendThrust shows off Wykcoff measure of price thrust. RTTTrendThrust can be used to assist mechanical trading systems...

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Digital Currencies

Facebook's cryptocurrency: a financial expert breaks it down

 

Facebook's cryptocurrency: a financial expert breaks it down

Grejak/Shutterstock

Courtesy of Alistair Milne, Loughborough University

Facebook is reportedly preparing to launch its own version of Bitcoin, for use in its messaging applications, WhatsApp, Messenger and Instagram. Could this “Facecoin” be the long-awaited breakthrough by a global technology giant into the lucrative market for retail financial services? Or will...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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