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]]> A Rationale http://www.brentwheeler.com/index.php?itemid=223 Sun, 4 Jan 2009 20:20:00 +1300 http://www.brentwheeler.com/index.php?itemid=714 Business & Media Institute
12/29/2008 2:54:09 PM

Editor, The New York Times
229 West 43rd St.
New York, NY 10036

To the Editor:

Like many people, Ben Stein was assured that Bernard Madoff "never lost money" ("They Told Me That Madoff Never Lost Money," Dec. 28). Unlike many people, Ben Stein wisely understood this assurance to be nonsense.

Americans should apply Mr. Stein's wisdom to the greatest Ponzi scheme going: Social Security. Many pols and pundits assure us that this program is a great financial deal for ordinary Americans. But in principle Social Security is identical to Mr. Madoff's fraudulent scheme: rather than generate wealth through productive investments, both schemes transfer wealth from newer 'investors' to older 'investors.' As long as a sufficient number of newer 'investors' keep coming aboard – either by being duped a la Mr. Madoff or by being coerced a la Social Security – such schemes appear brilliant. This appearance, however, is a dangerous apparition.

Sincerely,
Donald J. Boudreaux
Don Boudreaux is the Chairman of the Department of Economics at George Mason University and a Business & Media Institute adviser.]]> Policy http://www.brentwheeler.com/index.php?itemid=714 Sun, 4 Jan 2009 20:19:39 +1300 http://www.brentwheeler.com/index.php?itemid=705 I traced the so called "housing bubble" in N.Z. to screwy tax structures and their resulting incentives. This line of reasoning is now being advanced in respect of the U.S. housing capital.....

Good tax policy (by Russell Roberts)
from Cafe Hayek by Russell Roberts

Commenter j williams writes in response to my post arguing that the reduction in capital gains on housing in 1997 may have been the decisive event that started the rocketing upward of housing prices that created the mortgage mess and subsequent financial collapse:

What conclusions do you draw from this interpretation?

That the government should not have reduced taxes on home capital gains? That the taxes should have been decreased more gradually? That all capital gains taxes should be equal to avoid favoring one investment over the other?

The latter. You don't want to tax-advantage one investment over another or you induce a disproportionate flow of capital into that asset. That's the tragedy of the last ten years that's hidden. Tax policy and what came afterward caused trillions of dollars (not millions, not billions, but trillions) from China and here and elsewhere to go into building new and bigger houses rather than into more productive assets. It was a colossal mistake approved by a Republican Congress and signed by a Democratic president.

The defenders of such policies usually argue that you want more capital to flow into homes because home ownership creates a good society of responsible individuals. Maybe. Maybe not. But such talk is accepted most readily by those who benefit from the policies.

Ever-increasing home ownership is not the American dream. It's the dream of the National Association of Home Builders.]]> Housing http://www.brentwheeler.com/index.php?itemid=705 Sat, 20 Dec 2008 12:28:07 +1300 http://www.brentwheeler.com/index.php?itemid=704
Here we are then, less than 12 months out and change is well underway. Even less surprising, with the threat of their fees no longer being subsidised (remind me why I want to prop up the fund management industry again) up to two thirds of the rent seeking providers may pull out.

Keynes said in the long run we are all dead. Cute. But as Friedman noted, the long run is simply a whole lot of short runs added up. We have just moved through the first of the short runs. Expect more change. Don't expect to retire well off under goivernment sponsored investment schemes. They require a patience and fortuitude no government has or can have.]]> Policy http://www.brentwheeler.com/index.php?itemid=704 Mon, 15 Dec 2008 08:55:05 +1300 http://www.brentwheeler.com/index.php?itemid=702

the supply side

This is a practice, possibly unique to Singapore, whereby patrons of busy public eating areas place a tissue on a chair to "reserve" it while they get their food. The entire page debate I read in the Straits Times over the impropriety or otherwise of the practice suggests it is controversial. The fact that it is widespread suggests acceptability.

How does it compare as an allocation mechanism with obtaining food first then competing for a table? Presumably on efficiency grounds it beats the alternative of having a human "chope" the table since turnover of patrons must be greater.... and yet the debate suggests that there are those who feel some form of inequitable allocation is at work. Still, choped seats remain to be seen.

The web offers various a variety of scattered comment about broadly similar practices - since it is related to holding places in queues and like behaviour, and I have seen references to police warnings about not choping with valuable items such as cell phones.

Meanwhile on the supply side I also noticed strong offerings of tissues being sold by walking vendors.]]> Everyday Economics http://www.brentwheeler.com/index.php?itemid=702 Tue, 9 Dec 2008 00:19:03 +1300 http://www.brentwheeler.com/index.php?itemid=700 HERE.]]> General http://www.brentwheeler.com/index.php?itemid=700 Fri, 5 Dec 2008 23:21:46 +1300 http://www.brentwheeler.com/index.php?itemid=699

The map

1. In both countries there is urgency at a micro as well as a macro level about how to deal with the existing and on coming recession. Newspapers are full of tips on frugality and how to maximise value for money spent. The mood though stresses the overwhelming necessity to look at this as a challenge. The messages from business leaders, politicians, social agencies and politicians is that here is an opportunity to re tool, learn new skills, start new businesses if your old job disappears and strive to come out on top.

I believe there is every chance that Asia will emerge the stronger from any recession and further delimit the differences between the western economies looking to state sponsored solutions and success based on highly self motivated private endeavour.

2. The large number of young people in service occupations coupled with low unemployment rates. Investigating I found that hourly rates for bell boys, waiters, people providing all sorts of services are in the order of $4:00 - $6:00 an hour – well below anything people are allowed to employ anyone in N.Z. for. At the same time there is close to zero tax at these levels so the effective rates are above our benefit rates and the cost of numerous items is a long way below their N.Z. equivalent.

These people appear to have pride in the jobs they have, wear uniforms and so on with pride, work efficiently and are great to talk to. They undertake tasks we (for what reason I have no idea) routinely consider menial but aspire to and tell stories of friends and colleagues who have moved on and up starting where they are. What is it that we have made “illegal” through our minimum wage?

3. A taxi sign in Singapore reads “Low crime is not No crime – be alert”. A sign in a bus I read says “Our drivers have the right to work safely – report abuse.” A large sign outside Changi prison reads “Every year 11,000 people are released. They have done their time. They are re starting. Don’t let prejudice stop them.”

This says plenty to me about the attitude towards individual responsibility and law and order. The codicil is that children wander freely, day and night, in public spaces such as outdoor restaurants and parks – parents within sight true but without fear and women seem to walk in the streets alone freely in the streets as well.

4. In Singapore, the country our “liberals” have liked to scoff at about human rights but even more loudly about such weighty matters as chewing gum there are no laws commanding that everyone wear a dork hat when riding a bike.
]]> Policy http://www.brentwheeler.com/index.php?itemid=699 Sun, 30 Nov 2008 20:30:48 +1300 http://www.brentwheeler.com/index.php?itemid=698

Leaving on a jet plane

It was an utter and absolute lack of any semblance of such judgment.......which the failed Detroit automaker CEs displayed on a global scale in flying to Washington DC by private jet for the specific purpose of separating American taxpayers from $25 billion this week. Never mind the subsidy arguments, the continuation of a decades old process of propping up a failing industry and all the deabte surrounding that.

Again even a mild exercise of the brain tells us this is a cul de sac and to kid workers, suppliers and others it is not is a cruel hoax. There is more at stake than motown ego here.

Rightly or wrongly, whether rationally or emotively and whether reasonably or unreasonably, the world over people are questionning the very system which is at the heart of what has brought us thus far, has improved standards of living and delivered unparalelled well being. How could it all have gone so wrong? Is capitalism a failure? Should we not reject at the most fundamental level the market process which seems to have brought us to this juncture?

Most of all, "who is responsible for this?" Common answers which are as much believed as they are wrong include "leaders of business", the "greed" of business people and "terrible" processes such as "making a profit". This is, of course nonsense - but that matters little in a world where people believe this to be the case.

Then to cap it off four clowns, earning more than the majority of people can imagine by losing more than the average person can conceive of, fly by private jet to ask for a gift larger than many can believe exists.

It is difficult to think of a better way to absolutely confirm the worst fears of those who would blame business, seek to overturn market process and look to governments for the very comfort it can never give them.

It is business which is going to have to dig us out of the current and threatened worse quasi recession we find ourselves in. Sooner or later the understandable but deluded and expensive pass the parcel re distribution games governments are playing with taxpayers money will have to be replaced by genuine production - and businesses will have to do the producing.

These people just made the job tougher - not only for themeselves and the numerous shareholders, workers and suppliers who depend on them, but for the entire business sector whose job is to pick up the pieces across the entire economy - not just in a long dead market for Detroit's out of touch output.

Thanks guys - your hopelessly poor judgment in the simplest of PR exercises coupled with a refusal to "put the mistake right", just cost the world a heap - certainly plenty more than the $25 billion that was already headed the way of all flesh.

Enjoy the trip home.
]]> Policy http://www.brentwheeler.com/index.php?itemid=698 Sat, 22 Nov 2008 20:53:15 +1300 http://www.brentwheeler.com/index.php?itemid=697
Happily expectations of this sort of bunfight involving these types are so low amongst the seriously concerned as to mean that the posturing does little other than confirm their analytical weakness and joint interest in politics - domestic politics at that - before anything much else.

Here are the action points:

-Continue "vigorous efforts and take whatever further actions are necessary to stabilize the financial system.

-"Recognise the importance of monetary policy support, as deemed appropriate to domestic conditions.

-"Use fiscal measures to stimulate domestic demand to rapid effect, as appropriate...

-Help "emerging and developing economies gain access to finance in current difficult financial conditions... .We stress the International Monetary Fund's important role in crisis response...

-"Encourage the World Bank and other multilateral development banks to use their full capacity" in support of developing nations.

-"Ensure that the IMF, World Bank and other MDBs have sufficient resources to continue playing their role in overcoming the crisis."

Luckily it is close to impossible to work out what this tripe means let alone what to do about it (except that it is an international mandate to do your own thing. I can't see how any country would feel moved to change any policy on this basis)... so we have to use our own brains. This is never a bad thing.

Oh and see you in Europe in April for another productive meeting....]]> Policy http://www.brentwheeler.com/index.php?itemid=697 Mon, 17 Nov 2008 00:20:52 +1300 http://www.brentwheeler.com/index.php?itemid=694 elsewhere. I noticed two things of signifcance:

- how much more gracious, elegant and civilised the Americans are in defeat and victory than we crude types who would scorn them.
- to the extent that the win vindicates a "failed policies of the past" myth... be very, very scared.

Helen beat many in adopting this inaccurate and poisonous slogan - and she has built much long term welfare destruction off the back of it... albeit with good intention.

Is it now thw worlds turn????]]> Policy http://www.brentwheeler.com/index.php?itemid=694 Wed, 5 Nov 2008 22:56:34 +1300