In a surprising move today, the Chief Financial Officer of Facebook, Gideon Yu, will be leaving the company. Although the departure appears to be some form of an ouster, Facebook does not currently have anybody to fill the CFO slot, raising the question: Why did he leave? The company has retained Spencer Stuart to lead the search for a replacement.
Reported by the Wall Street Journal, the former Yahoo! and Youtube executive either left or was forced out without providing a public reason.
This has led to speculation that Facebook is "stepping up plans for a public offering," although that may be inadvisable in the current economy. Unless investors like Microsoft, who bought a preferred 1.6% stake at a valuation of $15 billion, are willing to take a haircut, that strategy would seem unlikely anytime soon.
Like many other users/addicts of Facebook, I think the company has a great product, but will have serious trouble emerging as a profitable enterprise. Whoever replaces Yu will have a challenge regardless of any IPO plans.
Tuesday, March 31, 2009
David Brooks Weighs in on GM
"Some companies are in the steel business, some are in the cookie business, but General Motors is in the restructuring business. For 30 years, G.M. has been restructuring itself toward long-term viability. "
Monday, March 30, 2009
The Two Cows Theory
All you need to know about international economics...
SOCIALISM: You have 2 cows. You give one to your neighbour.
COMMUNISM: You have 2 cows. The State takes both and gives you some milk.
FASCISM: You have 2 cows. The State takes both and sells you some milk.
NAZISM: You have 2 cows. The State takes both and shoots you.
BUREAUCRATISM: You have 2 cows. The State takes both, shoots one, milks the other, and then throws the milk away.
TRADITIONAL CAPITALISM: You have two cows. You sell one and buy a bull. Your herd multiplies, and the economy grows.You sell them and retire on the income.
SURREALISM: You have two giraffes. The government requires you to take harmonica lessons.
AN AMERICAN CORPORATION: You have two cows. You sell one, and force the other to produce the milk of four cows. Later, you hire a consultant to analyze why the cow has dropped dead.
ROYAL BANK OF SCOTLAND VENTURE CAPITALISM: You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island Company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more. You sell one cow to buy a new president of the United States, leaving you with nine cows. No balance sheet provided with the release. The public then buys your bull.
A FRENCH CORPORATION: You have two cows. You go on strike, organize a riot, and block the roads, because you want three cows.
A JAPANESE CORPORATION: You have two cows. You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk. You then create a clever cow cartoon image called 'Cowkimon' and market it worldwide.
A GERMAN CORPORATION: You have two cows. You re-engineer them so they live for 100 years, eat once a month, and milk themselves.
AN ITALIAN CORPORATION: You have two cows, but you don't know where they are. You decide to have lunch.
A RUSSIAN CORPORATION: You have two cows. You count them and learn you have five cows. You count them again and learn you have 42 cows. You count them again and learn you have 2 cows. You stop counting cows and open another bottle of vodka.
A SWISS CORPORATION: You have 5000 cows. None of them belong to you. You charge the owners for storing them.
A CHINESE CORPORATION: You have two cows. You have 300 people milking them. You claim that you have full employment, and high bovine productivity. You arrest the newsman who reports the real situation.
AN INDIAN CORPORATION: You have two cows. You worship them.
A BRITISH CORPORATION: You have two cows. Both are mad.
AN IRAQI CORPORATION: Everyone thinks you have lots of cows. You tell them that you have none. No-one believes you, so they bomb the crap out of you and invade your country. You still have no cows, but at least you are now a Democracy.
AN AUSTRALIAN CORPORATION: You have two cows. Business seems pretty good. You close the office and go for a few beers to celebrate.
A NEW ZEALAND CORPORATION: You have two cows. The one on the left looks very attractive
SOCIALISM: You have 2 cows. You give one to your neighbour.
COMMUNISM: You have 2 cows. The State takes both and gives you some milk.
FASCISM: You have 2 cows. The State takes both and sells you some milk.
NAZISM: You have 2 cows. The State takes both and shoots you.
BUREAUCRATISM: You have 2 cows. The State takes both, shoots one, milks the other, and then throws the milk away.
TRADITIONAL CAPITALISM: You have two cows. You sell one and buy a bull. Your herd multiplies, and the economy grows.You sell them and retire on the income.
SURREALISM: You have two giraffes. The government requires you to take harmonica lessons.
AN AMERICAN CORPORATION: You have two cows. You sell one, and force the other to produce the milk of four cows. Later, you hire a consultant to analyze why the cow has dropped dead.
ROYAL BANK OF SCOTLAND VENTURE CAPITALISM: You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island Company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more. You sell one cow to buy a new president of the United States, leaving you with nine cows. No balance sheet provided with the release. The public then buys your bull.
A FRENCH CORPORATION: You have two cows. You go on strike, organize a riot, and block the roads, because you want three cows.
A JAPANESE CORPORATION: You have two cows. You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk. You then create a clever cow cartoon image called 'Cowkimon' and market it worldwide.
A GERMAN CORPORATION: You have two cows. You re-engineer them so they live for 100 years, eat once a month, and milk themselves.
AN ITALIAN CORPORATION: You have two cows, but you don't know where they are. You decide to have lunch.
A RUSSIAN CORPORATION: You have two cows. You count them and learn you have five cows. You count them again and learn you have 42 cows. You count them again and learn you have 2 cows. You stop counting cows and open another bottle of vodka.
A SWISS CORPORATION: You have 5000 cows. None of them belong to you. You charge the owners for storing them.
A CHINESE CORPORATION: You have two cows. You have 300 people milking them. You claim that you have full employment, and high bovine productivity. You arrest the newsman who reports the real situation.
AN INDIAN CORPORATION: You have two cows. You worship them.
A BRITISH CORPORATION: You have two cows. Both are mad.
AN IRAQI CORPORATION: Everyone thinks you have lots of cows. You tell them that you have none. No-one believes you, so they bomb the crap out of you and invade your country. You still have no cows, but at least you are now a Democracy.
AN AUSTRALIAN CORPORATION: You have two cows. Business seems pretty good. You close the office and go for a few beers to celebrate.
A NEW ZEALAND CORPORATION: You have two cows. The one on the left looks very attractive
Miss Universe on Guantanamo Bay
I shit you not. This is from the Miss Universe blog. I swear I did not make this up.
March 27, 2009
Guantanamo Bay
Guantanamo Bay
This week, Guantanamo!!! It was an incredible experience.We arrived in Gitmo on Friday and stared going around the town, everybody knew Crystle and I were coming so the first thing we did was attend a big lunch and then we visited one of the bars they have in the base. We talked about Gitmo and what is was like living there. The next days we had a wonderful time, this truly was a memorable trip! We hung out with the guys from the East Coast and they showed us the boat inside and out, how they work and what they do, we took a ride around the land and it was a loooot of fun!We also met the Military dogs, and they did a very nice demonstration of their skills. All the guys from the Army were amazing with us.We visited the Detainees camps and we saw the jails, where they shower, how the recreate themselves with movies, classes of art, books. It was very interesting.We took a ride with the Marines around the land to see the division of Gitmo and Cuba while they were informed us with a little bit of history.The water in Guantanamo Bay is soooo beautiful! It was unbelievable, we were able to enjoy it for at least an hour. We went to the glass beach, and realized the name of it comes from the little pieces of broken glass from hundred of years ago. It is pretty to see all the colors shining with the sun. That day we met a beautiful lady named Rebeca who does wonders with the glasses from the beach. She creates jewelry with it and of course I bought a necklace from her that will remind me off Guantanamo Bay :)I didn't want to leave, it was such a relaxing place, so calm and beautiful.
And I thought Miss South Carolina took the cake for stupid pageant people...
Saturday, March 28, 2009
Soros Spreads Gloom and Doom in London
In an interview with the Times of London, George Soros describes the ongoing problems in the global financial system, gives the G20 a chance to do more than talk, and discusses the possibility that Britain may have to get a loan from the International Monetary Fund.
Thursday, March 26, 2009
Taking Apart the Stimulus Package
My friend Helena Bottemiller showed this to me last night. The Washington Post ran this great graphic dissecting the stimulus package by type and time.
We're pumping $525 billion into the economy within the first year and a half--64% of the total spending.
The three biggest areas swallowing the spending are Health, Labor & Education; Housing & Transport; and State Stabilization.
I'm still as stunned by this bill as I would have been if I'd been slapped in the face with all 1,100 pages.
We're pumping $525 billion into the economy within the first year and a half--64% of the total spending.
The three biggest areas swallowing the spending are Health, Labor & Education; Housing & Transport; and State Stabilization.
I'm still as stunned by this bill as I would have been if I'd been slapped in the face with all 1,100 pages.
Monday, March 16, 2009
An Argument for Intelligent Conservatism (And Against Rush Limbaugh)
When it comes to politics, I like to think of myself as a moderate. As an economics major, I find conservative economic policy to be both logical and appealing. At the same time, having spent 18 years in Madison, Wisconsin, I recognize the importance of social programs and civil liberties.
Even though I was unable to vote in 2000, I thought John McCain was the best candidate in the final four. Fast-forward eight years, and I would have been equally happy (or unhappy) with him or Barack Obama. But, among other things that cemented my opinion in the end, Obama didn't have Sarah Palin on his ticket.
Perhaps because I have no party affiliation (currently), I would like to see both parties at their best. In an ideal world, these opposing factions would prevent the poor legislation from being passed while agreeing and compromising to bring effective policy to the people. That's how our founders envisioned our government and that is how it functions in its finest hours.
However, right now, the Republican Party is weak. As such, it is in our nation's interest for their party to get their act together.
In a great piece for Newsweek entitled "Why Rush is Wrong for the Right," David Frum, a speechwriter for George W. Bush, makes the case that the Republican Party must face the simple fact that the world has changed in the last 30 years. He argues for an intelligent and rational conservatism rather than the populist garbage emanating from talk radio behemoth, Rush Limbaugh.
Why target Rush? As Mr. Frum puts it:
As for the leader of the Republicans? A man who is aggressive and bombastic, cutting and sarcastic, who dismisses the concerned citizens in network news focus groups as "losers." With his private plane and his cigars, his history of drug dependency and his personal bulk, not to mention his tangled marital history, Rush is a walking stereotype of self-indulgence—exactly the image that Barack Obama most wants to affix to our philosophy and our party.
But what is the solution?
Look at America's public-policy problems, look at voting trends, and it's inescapably obvious that the Republican Party needs to evolve. We need to put free-market health-care reform, not tax cuts, at the core of our economic message. It's health-care costs that are crushing middle-class incomes. Between 2000 and 2006, the amount that employers paid for labor rose substantially. Employees got none of that money; all of it was absorbed by rising health-care costs. Meanwhile, the income-tax cuts offered by Republicans interest fewer and fewer people: before the recession, two thirds of American workers paid more in payroll taxes than in income taxes.
We need an environmental message. You don't have to accept Al Gore's predictions of imminent gloom to accept that it cannot be healthy to pump gigatons of carbon dioxide into the atmosphere. We are rightly mistrustful of liberal environmentalist disrespect for property rights. But property owners also care about property values, about conservation, and as a party of property owners we should be taking those values more seriously.
Above all, we need to take governing seriously again. Voters have long associated Democrats with corrupt urban machines, Republicans with personal integrity and fiscal responsibility. Even ultraliberal states like Massachusetts would elect Republican governors like Frank Sargent, Leverett Saltonstall, William Weld and Mitt Romney precisely to keep an austere eye on the depredations of Democratic legislators. After Iraq, Katrina and Harriet Miers, Democrats surged to a five-to-three advantage on the competence and ethics questions. And that was before we put Sarah Palin on our national ticket.
Among those in the party, his message is controversial. Yet I agree wholeheartedly. To regain its strength, the Republican Party must return to its conservative intellectual roots. It needs to focus on solving the problems of our day. It needs to listen to the George Wills and Andrew Sullivans out there (even if they don't always get along with each other). And it needs a leader as dynamic and inspiring as Barack Obama.
Will the Republicans get their act together? For all our sakes, I hope so.
Even though I was unable to vote in 2000, I thought John McCain was the best candidate in the final four. Fast-forward eight years, and I would have been equally happy (or unhappy) with him or Barack Obama. But, among other things that cemented my opinion in the end, Obama didn't have Sarah Palin on his ticket.
Perhaps because I have no party affiliation (currently), I would like to see both parties at their best. In an ideal world, these opposing factions would prevent the poor legislation from being passed while agreeing and compromising to bring effective policy to the people. That's how our founders envisioned our government and that is how it functions in its finest hours.
However, right now, the Republican Party is weak. As such, it is in our nation's interest for their party to get their act together.
In a great piece for Newsweek entitled "Why Rush is Wrong for the Right," David Frum, a speechwriter for George W. Bush, makes the case that the Republican Party must face the simple fact that the world has changed in the last 30 years. He argues for an intelligent and rational conservatism rather than the populist garbage emanating from talk radio behemoth, Rush Limbaugh.
Why target Rush? As Mr. Frum puts it:
As for the leader of the Republicans? A man who is aggressive and bombastic, cutting and sarcastic, who dismisses the concerned citizens in network news focus groups as "losers." With his private plane and his cigars, his history of drug dependency and his personal bulk, not to mention his tangled marital history, Rush is a walking stereotype of self-indulgence—exactly the image that Barack Obama most wants to affix to our philosophy and our party.
But what is the solution?
Look at America's public-policy problems, look at voting trends, and it's inescapably obvious that the Republican Party needs to evolve. We need to put free-market health-care reform, not tax cuts, at the core of our economic message. It's health-care costs that are crushing middle-class incomes. Between 2000 and 2006, the amount that employers paid for labor rose substantially. Employees got none of that money; all of it was absorbed by rising health-care costs. Meanwhile, the income-tax cuts offered by Republicans interest fewer and fewer people: before the recession, two thirds of American workers paid more in payroll taxes than in income taxes.
We need an environmental message. You don't have to accept Al Gore's predictions of imminent gloom to accept that it cannot be healthy to pump gigatons of carbon dioxide into the atmosphere. We are rightly mistrustful of liberal environmentalist disrespect for property rights. But property owners also care about property values, about conservation, and as a party of property owners we should be taking those values more seriously.
Above all, we need to take governing seriously again. Voters have long associated Democrats with corrupt urban machines, Republicans with personal integrity and fiscal responsibility. Even ultraliberal states like Massachusetts would elect Republican governors like Frank Sargent, Leverett Saltonstall, William Weld and Mitt Romney precisely to keep an austere eye on the depredations of Democratic legislators. After Iraq, Katrina and Harriet Miers, Democrats surged to a five-to-three advantage on the competence and ethics questions. And that was before we put Sarah Palin on our national ticket.
Among those in the party, his message is controversial. Yet I agree wholeheartedly. To regain its strength, the Republican Party must return to its conservative intellectual roots. It needs to focus on solving the problems of our day. It needs to listen to the George Wills and Andrew Sullivans out there (even if they don't always get along with each other). And it needs a leader as dynamic and inspiring as Barack Obama.
Will the Republicans get their act together? For all our sakes, I hope so.
Barack Obama Wishes You a Happy St. Pat's
In honor of St. Patrick's Day, one of my all-time favorite Youtube videos:
Saturday, March 14, 2009
Barry Ritholtz is "Monkey Boy"
Barry Ritholtz, one of my favorite bloggers, was interviewed by Steve Forbes about intelligent investing. Mr. Ritholtz reminds investors of the limitations of our psychological and cognitive abilities in this single-question excerpt from his blog:
What is the greatest financial lesson you’ve ever learned?
You’re a monkey. It all comes down to that. You are a slightly clever, pants-wearing primate. If you forget that you’re nothing more than a monkey who has been fashioned by eons on the plains, being chased by tigers, you shouldn’t invest. You have to be aware of how your own psychology effects what you do. This is why we as investors sell at the bottom, get panicked. All the other lessons I’ve learned have come out of that. As has the field of behavioral economics.
Wall Street clichés, like “cut your losses and let your winners run” come back to prevent the monkey part of your brain from doing what it does. There’s a banana–I want it. That’s how chimps behave. Us humans react to greed and fear in predictable ways. We are predictably irrational. If you understand that you can take steps to prevent that–we don’t own anything in the office that doesn’t have a stop-loss on it. In 2008, we watched the market go down 40%. We figured out we’re chimps, and don’t let the chimp inside us make those chimp-like decisions.
Every good financial decision I’ve made comes from, “Wait a second, monkey boy, step back, don’t do that.” Once you realize how your own brain chemistry works against you, it gives you a chance to not panic at the bottom.
Forbes has the full story here.
What is the greatest financial lesson you’ve ever learned?
You’re a monkey. It all comes down to that. You are a slightly clever, pants-wearing primate. If you forget that you’re nothing more than a monkey who has been fashioned by eons on the plains, being chased by tigers, you shouldn’t invest. You have to be aware of how your own psychology effects what you do. This is why we as investors sell at the bottom, get panicked. All the other lessons I’ve learned have come out of that. As has the field of behavioral economics.
Wall Street clichés, like “cut your losses and let your winners run” come back to prevent the monkey part of your brain from doing what it does. There’s a banana–I want it. That’s how chimps behave. Us humans react to greed and fear in predictable ways. We are predictably irrational. If you understand that you can take steps to prevent that–we don’t own anything in the office that doesn’t have a stop-loss on it. In 2008, we watched the market go down 40%. We figured out we’re chimps, and don’t let the chimp inside us make those chimp-like decisions.
Every good financial decision I’ve made comes from, “Wait a second, monkey boy, step back, don’t do that.” Once you realize how your own brain chemistry works against you, it gives you a chance to not panic at the bottom.
Forbes has the full story here.
Larry Summers on Obamanomics
President Obama's Chief Economic Guru, Larry Summers, offered his perspective on the Administration's (read as "his") response to the economic crisis at the Brookings Institution.
This follows the presentation earlier this week by the Chair of Obama's Council of Economic Advisers, Christina Romer.
The text of Summers' presentation is available from the Brookings Institution.
Friday, March 13, 2009
The Daily Show Takes on CNBC
This is for those of you who have been out of the country, don't watch the Daily Show (the best damned news program out there), or have avoided CNBC since Cramer "went five bid for a half a million shares of Citigroup and got hit back in 1990. (PS--if you're out of the country, the Hulu clips below won't work. Sorry. Blame the copyright people who want you to be surprised when our re-runs air in your country a year later.)
You may remember my post about Rick Santelli's Chicago Tea Party a couple of weeks ago. Well, it turns out I wasn't the only one who thought that clip was pretty entertaining. Unfortunately for Mr. Santelli, the Daily Show found it to be a hilarious case of populism on cable news.
As you may remember from Jon Stewart's destruction of the bow-tied Tucker Carlson, the Daily Show takes a dislike to what they consider to be real journalists not doing their jobs. In that vein, they aired this clip attacking the quality of CNBC:
This launched the "week-long feud of the century" as commentators, journalists, and bloggers defended the side of their choice. All of this led up to JIM CRAMER......ON THE DAILY SHOW:
My personal favorite quotes:
3) "I want the Jim Cramer on CNBC to protect me from that Jim Cramer."
2) "I understand you want to make finance entertaining, but it’s not a fucking game."
...and of course....
1) 'These guys at these companies were on a Sherman’s march through their companies, financed by our 401ks. And all the incentives of their companies were for short-term profit. And they burned the fucking house down with our money and walked around rich as hell. And you guys knew that was going on!"
What astounds me the most is that Cramer sits back and takes it all calmly. How did that happen?
You may remember my post about Rick Santelli's Chicago Tea Party a couple of weeks ago. Well, it turns out I wasn't the only one who thought that clip was pretty entertaining. Unfortunately for Mr. Santelli, the Daily Show found it to be a hilarious case of populism on cable news.
As you may remember from Jon Stewart's destruction of the bow-tied Tucker Carlson, the Daily Show takes a dislike to what they consider to be real journalists not doing their jobs. In that vein, they aired this clip attacking the quality of CNBC:
This launched the "week-long feud of the century" as commentators, journalists, and bloggers defended the side of their choice. All of this led up to JIM CRAMER......ON THE DAILY SHOW:
My personal favorite quotes:
3) "I want the Jim Cramer on CNBC to protect me from that Jim Cramer."
2) "I understand you want to make finance entertaining, but it’s not a fucking game."
...and of course....
1) 'These guys at these companies were on a Sherman’s march through their companies, financed by our 401ks. And all the incentives of their companies were for short-term profit. And they burned the fucking house down with our money and walked around rich as hell. And you guys knew that was going on!"
What astounds me the most is that Cramer sits back and takes it all calmly. How did that happen?
Amartya Sen on "New Capitalism"
Nobel Prize winning economist Amartya Sen examines the current drive to create a "new capitalism" and finds its origins in the classic work of Adam Smith.
It is often overlooked that Smith did not take the pure market mechanism to be a free-standing performer of excellence, nor did he take the profit motive to be all that is needed.
The economic difficulties of today do not, I would argue, call for some “new capitalism”, but they do demand an open-minded understanding of older ideas about the reach and limits of the market economy. What is needed above all is a clear-headed appreciation of how different institutions work, along with an understanding of how a variety of organisations – from the market to the institutions of state – can together contribute to producing a more decent economic world.
For the full text of Dr. Sen's analysis, check out the original New York Review of Books version or the shorter Financial Times version.
It is often overlooked that Smith did not take the pure market mechanism to be a free-standing performer of excellence, nor did he take the profit motive to be all that is needed.
The economic difficulties of today do not, I would argue, call for some “new capitalism”, but they do demand an open-minded understanding of older ideas about the reach and limits of the market economy. What is needed above all is a clear-headed appreciation of how different institutions work, along with an understanding of how a variety of organisations – from the market to the institutions of state – can together contribute to producing a more decent economic world.
For the full text of Dr. Sen's analysis, check out the original New York Review of Books version or the shorter Financial Times version.
SportsCenter's Top Fits
"Helmets, bases, putters, benches, chairs, phones. They're all airborne here. So ... who threw SC's top fits?"
Wednesday, March 11, 2009
The Little Red Hen
Here's a fun joke that's been circulating via e-mail. Thanks to my dad for passing it on to me. Do you remember the little red hen story from when you were a kid? This is it, updated:
"Not I," said the cow.
"Not I," said the duck.
"Not I," said the pig.
"Not I," said the goose.
"Then I will do it by myself," said the little red hen, and so she did. She planted her crop, and the wheat grew very tall and ripened into golden grain.
"Who will help me reap my wheat?" asked the little red hen.
"Not I," said the duck..
"Out of my classification," said the pig.
"I'd lose my seniority," said the cow.
"I'd lose my unemployment compensation," said the goose.
"Then I will do it by myself," said the little red hen, and so she did.
At last it came time to bake the bread. "Who will help me bake the bread?" asked the little red hen.
"That would be overtime for me," said the cow.
"I'd lose my welfare benefits," said the duck.
"I'm a dropout and never learned how," said the pig.
"If I'm to be the only helper, that's discrimination," said the goose.
"Then I will do it by myself," said the little red hen.
She baked five loaves and held them up for all of her neighbors to see. They wanted some and, in fact, demanded a share. But the little red hen said, "No, I shall eat all five loaves."
"Excess profits!" cried the cow. (Nancy Pelosi)
"Capitalist leech!" screamed the duck. (Barbara Boxer)
"I demand equal rights!" yelled the goose. (Jesse Jackson)
The pig just grunted in disdain. (Ted Kennedy)
And they all painted 'Unfair!' picket signs and marched around and around the little red hen, shouting obscenities.
Then the farmer (Obama) came. He said to the little red hen, "You must not be so greedy."
"But I earned the bread," said the little red hen.
"Exactly," said Barack the farmer. "That is what makes our free enterprise system so wonderful. Anyone in the barnyard can earn as much as he wants. But under our modern government regulations, the productive workers must divide the fruits of their labor with those who are lazy and idle."
And they all lived happily ever after, including the little red hen, who smiled and clucked, "I am grateful, for now I truly understand."
But her neighbors became quite disappointed in her. She never again baked bread because she joined the 'party' and got her bread free. And all the Democrats smiled. 'Fairness' had been established.
Individual initiative had died, but nobody noticed; perhaps no one cared...so long as there was free bread that 'the rich' were paying for.
IS THIS A GREAT BARNYARD OR WHAT?
Entertaining and sound as the moral may be, the details are a little twisted. For instance, while Senators Pelosi and Boxer do push for overtime pay and welfare benefits (part of the standard Democratic agenda), they are both salaried and obviously neither receives welfare. And while Ted Kennedy, after getting caught cheating on a Spanish test, was kicked out of Harvard, he re-entered under the the college's policies two years later. He graduated from Harvard in 1956 with a B.A. in history and government and graduated from U-VA's law school in 1959.
You just have to love our "modern" free enterprise system.
"Not I," said the cow.
"Not I," said the duck.
"Not I," said the pig.
"Not I," said the goose.
"Then I will do it by myself," said the little red hen, and so she did. She planted her crop, and the wheat grew very tall and ripened into golden grain.
"Who will help me reap my wheat?" asked the little red hen.
"Not I," said the duck..
"Out of my classification," said the pig.
"I'd lose my seniority," said the cow.
"I'd lose my unemployment compensation," said the goose.
"Then I will do it by myself," said the little red hen, and so she did.
At last it came time to bake the bread. "Who will help me bake the bread?" asked the little red hen.
"That would be overtime for me," said the cow.
"I'd lose my welfare benefits," said the duck.
"I'm a dropout and never learned how," said the pig.
"If I'm to be the only helper, that's discrimination," said the goose.
"Then I will do it by myself," said the little red hen.
She baked five loaves and held them up for all of her neighbors to see. They wanted some and, in fact, demanded a share. But the little red hen said, "No, I shall eat all five loaves."
"Excess profits!" cried the cow. (Nancy Pelosi)
"Capitalist leech!" screamed the duck. (Barbara Boxer)
"I demand equal rights!" yelled the goose. (Jesse Jackson)
The pig just grunted in disdain. (Ted Kennedy)
And they all painted 'Unfair!' picket signs and marched around and around the little red hen, shouting obscenities.
Then the farmer (Obama) came. He said to the little red hen, "You must not be so greedy."
"But I earned the bread," said the little red hen.
"Exactly," said Barack the farmer. "That is what makes our free enterprise system so wonderful. Anyone in the barnyard can earn as much as he wants. But under our modern government regulations, the productive workers must divide the fruits of their labor with those who are lazy and idle."
And they all lived happily ever after, including the little red hen, who smiled and clucked, "I am grateful, for now I truly understand."
But her neighbors became quite disappointed in her. She never again baked bread because she joined the 'party' and got her bread free. And all the Democrats smiled. 'Fairness' had been established.
Individual initiative had died, but nobody noticed; perhaps no one cared...so long as there was free bread that 'the rich' were paying for.
IS THIS A GREAT BARNYARD OR WHAT?
Entertaining and sound as the moral may be, the details are a little twisted. For instance, while Senators Pelosi and Boxer do push for overtime pay and welfare benefits (part of the standard Democratic agenda), they are both salaried and obviously neither receives welfare. And while Ted Kennedy, after getting caught cheating on a Spanish test, was kicked out of Harvard, he re-entered under the the college's policies two years later. He graduated from Harvard in 1956 with a B.A. in history and government and graduated from U-VA's law school in 1959.
You just have to love our "modern" free enterprise system.
Tuesday, March 10, 2009
Christina Romer on The Great Depression
Christina Romer, the chair of President Obama's Council of Economic Advisers, yesterday presented lessons from the Great Depression for economic recovery in 2009 at the Brookings Institution in Washington, D.C.
Her lessons serve as the basis for the Obama Administration's reaction to the credit crisis and their plans to encourage a recovery. They are well-considered, however in some cases, critically flawed.
I will respond directly to some of the sections that caught my attention the most.
This similarity of causes between the Depression and today’s recession means that President Obama begins his presidency and his drive for recovery with many of the same challenges that Franklin Roosevelt faced in 1933.
This is certainly true, and the Administration is clearly acting to prevent another Depression. By attacking the credit crisis with enormous "shock and awe" tactics and spending, the Administration hopes to cut off the crisis before it spirals downward any further. However, as I have mentioned before, spending trillions of dollars alone will not get us out of this mess.
Of course, Roosevelt's New Deal did eventually work, after a decade of misery and a World War.
As for the uses of fiscal policy, she is correct in asserting that fiscal policy did not work to solve the Great Depression:
My argument paralleled E. Cary Brown’s famous conclusion that in the Great Depression, fiscal policy failed to generate recovery “not because it does not work, but because it was not tried.
That the Obama Administration is attempting to use fiscal policy to further economic recovery is noble. However, instead of stimulative tax cuts, they are taking the opposite course and raising taxes, a decision that will most likely be questioned if the recovery takes more time than they anticipate (which is not an unlikely scenario).
On the other side of the equation, the Administration certainly is spending enough. The emergency spending that Roosevelt did was precedent-breaking—balanced budgets had certainly been the norm up to that point. But, it was quite small. The deficit rose by about one and a half percent of GDP in 1934....The American Recovery and Reinvestment Act, passed less than thirty days after the Inauguration, is simply the biggest and boldest countercyclical fiscal action in history. The nearly $800 billion fiscal stimulus is roughly equally divided between tax cuts, direct government investment spending, and aid to the states and people directly hurt by the recession....The fiscal stimulus package was designed to create jobs quickly. But answer me this: how does giving hundreds of millions of dollars to Amtrak and the Smithsonian create jobs? How were they "directly hurt by the recession?"
Of course, now that the tap has been opened, everyone wants more money from the government. Romer warns of another lesson from the Depression: beware of cutting back on stimulus too soon (bold text hers).
I sincerely hope that she doesn't expect the government to pony up trillions of dollars per year in stimulus for the next few years. Because, quite frankly, we don't have the money. Anything we spend, we have to raise in taxes and loans. Let me make this clear: raising taxes does not get you out of a recession. And increasing demand for funds, all else equal, means higher interest rates. A mini-lesson in economics: when the cost of borrowing goes up for the US government, the cost of borrowing goes up for everyone.
Romer is correct in her assessment of the plan to stablize our banking system.
The Financial Stabilization Plan, which involves evaluating the capital needs of financial institutions, as well as crucial programs to directly increase lending, is central to putting the financial system back to work for American industry and households.
As a panel of CMC professors pointed out, the number one issue the government has to deal with to get out of this crisis is stabilizing and expanding the banks' lending capacities. If we cannot do that, then all other stimulatory measures will not flow through the financial system.
Of course, there's Romer's final lesson from the 1930s:
A key feature of the Great Depression is that it did eventually end.
Personally, I'd prefer to see this recession end sooner rather than later. As Romer makes clear, immediate action is necessary. However, if by ending the recession with imprudent actions now, we force ourselves to pay unforeseen consequences in the future, her response may not be a solution at all.
Her lessons serve as the basis for the Obama Administration's reaction to the credit crisis and their plans to encourage a recovery. They are well-considered, however in some cases, critically flawed.
I will respond directly to some of the sections that caught my attention the most.
This similarity of causes between the Depression and today’s recession means that President Obama begins his presidency and his drive for recovery with many of the same challenges that Franklin Roosevelt faced in 1933.
This is certainly true, and the Administration is clearly acting to prevent another Depression. By attacking the credit crisis with enormous "shock and awe" tactics and spending, the Administration hopes to cut off the crisis before it spirals downward any further. However, as I have mentioned before, spending trillions of dollars alone will not get us out of this mess.
Of course, Roosevelt's New Deal did eventually work, after a decade of misery and a World War.
As for the uses of fiscal policy, she is correct in asserting that fiscal policy did not work to solve the Great Depression:
My argument paralleled E. Cary Brown’s famous conclusion that in the Great Depression, fiscal policy failed to generate recovery “not because it does not work, but because it was not tried.
That the Obama Administration is attempting to use fiscal policy to further economic recovery is noble. However, instead of stimulative tax cuts, they are taking the opposite course and raising taxes, a decision that will most likely be questioned if the recovery takes more time than they anticipate (which is not an unlikely scenario).
On the other side of the equation, the Administration certainly is spending enough. The emergency spending that Roosevelt did was precedent-breaking—balanced budgets had certainly been the norm up to that point. But, it was quite small. The deficit rose by about one and a half percent of GDP in 1934....The American Recovery and Reinvestment Act, passed less than thirty days after the Inauguration, is simply the biggest and boldest countercyclical fiscal action in history. The nearly $800 billion fiscal stimulus is roughly equally divided between tax cuts, direct government investment spending, and aid to the states and people directly hurt by the recession....The fiscal stimulus package was designed to create jobs quickly. But answer me this: how does giving hundreds of millions of dollars to Amtrak and the Smithsonian create jobs? How were they "directly hurt by the recession?"
Of course, now that the tap has been opened, everyone wants more money from the government. Romer warns of another lesson from the Depression: beware of cutting back on stimulus too soon (bold text hers).
I sincerely hope that she doesn't expect the government to pony up trillions of dollars per year in stimulus for the next few years. Because, quite frankly, we don't have the money. Anything we spend, we have to raise in taxes and loans. Let me make this clear: raising taxes does not get you out of a recession. And increasing demand for funds, all else equal, means higher interest rates. A mini-lesson in economics: when the cost of borrowing goes up for the US government, the cost of borrowing goes up for everyone.
Romer is correct in her assessment of the plan to stablize our banking system.
The Financial Stabilization Plan, which involves evaluating the capital needs of financial institutions, as well as crucial programs to directly increase lending, is central to putting the financial system back to work for American industry and households.
As a panel of CMC professors pointed out, the number one issue the government has to deal with to get out of this crisis is stabilizing and expanding the banks' lending capacities. If we cannot do that, then all other stimulatory measures will not flow through the financial system.
Of course, there's Romer's final lesson from the 1930s:
A key feature of the Great Depression is that it did eventually end.
Personally, I'd prefer to see this recession end sooner rather than later. As Romer makes clear, immediate action is necessary. However, if by ending the recession with imprudent actions now, we force ourselves to pay unforeseen consequences in the future, her response may not be a solution at all.
What Happens to Your Passwords When You Die?
Last semester, a member of my graduating class who lived in my dorm died tragically in the LA Metrolink crash. A week and a half ago, one of my classmates lost another good friend who was killed on Interstate 10 while returning from a visit to a graduate program in Texas.
Until today, I'd never thought about what happened to their computers, their e-mail accounts, and their Facebook profiles. As a couple of other blogs are reporting, Legacy Locker, a company offering a will-like service for your online presence, will begin taking customers in a couple of weeks.
Whether you're interested in the service or just think it's interesting, VentureBeat has the full story.
Until today, I'd never thought about what happened to their computers, their e-mail accounts, and their Facebook profiles. As a couple of other blogs are reporting, Legacy Locker, a company offering a will-like service for your online presence, will begin taking customers in a couple of weeks.
Whether you're interested in the service or just think it's interesting, VentureBeat has the full story.
Monday, March 9, 2009
Two WSJ Op-Eds You Must Read
Today's Wall Street Journal contained two key op-ed pieces for understanding the current economic situation. The first, from Bank of America CEO Ken Lewis, clarifies just what is and is not occuring in the banking industry. The second, by Professor Laura D'Andrea Tyson, a former chairman of the Clinton's Council of Economic Advisers and current member of President Obama's Economic Recovery Advisory Board, defends the stimulus plan and budget proposal.
In response to Ken Lewis' piece, he is perfectly positioned to see the reality emerging in the banking industry. His analysis makes sense and I believe his facts to be accurate. Then again, upon graduation, he's going to be my boss, so I may be slightly biased. Nonetheless, he is correct that banks are in fact lending, that very few banks are actually insolvent, that TARP is working, that those who caused this mess are now unemployed and/or bankrupt, that the US taxpayers are receiving high real interest rates on TARP funds, and that, as Ben Bernanke has said, nationalization of banks is unnecessary to stabilize the banking system.
Regarding Tyson's article, the arguments against the stimulus and the viewpoints of other prominent economists are pretty persuasive. The budget, as she describes, is "faithful to the progressive vision he articulated during his campaign." I do like the idea of investing in health care, education, energy, and the environment, but wonder where we're going to get the money for all this given that we already have the LARGEST BUDGET DEFICIT AS A PERCENTAGE OF GDP SINCE WORLD WAR II. Perhaps I'm not making myself clear, but this hardly seems the time to be adding even more projects and government bureaucracy to the mix. President Obama promised to sharpen his pencil and cut the weak programs from the budget. Like many others, I was hoping he'd follow through on that plan. Perhaps I was praying for a moment like the scene in Dave in which a reluctant citizen goes through the federal budget with his accountant friend and trims off enough money from wasteful projects to salvage a program that actually makes a difference in people's lives. Alas, the pencil sharpener appears to be broken.
Instead, we get "a shift of wealth through higher taxes on the rich to pay for healthcare...and social programs." The last time I checked, that was a hallmark of socialism. Nonetheless, I wasn't a fan of the Bush tax cuts originally and do not mind seeing them expire. Besides, by the time I make that much money, the Republicans will probably be in power again.
After visiting Walker Foods, a California-based food company with international distribution, last Friday, I realized the vital role of small businesses in the economy. The proposition that "97% of small businesses will see their rates unchanged or enjoy additional tax benefits under the Obama plan" doesn't sound bad at all.
As for the claims that the size of government will not explode, I do not expect it to triple in size or anything. However, the government will have to create an infrastructure to run its ambitious proposals and that will add to the already annoying layers of bureaucracy.
Perhaps Dave's accountant best sums up the American budget: "Who does these books? If I ran my office this way, I'd be out of business."
In response to Ken Lewis' piece, he is perfectly positioned to see the reality emerging in the banking industry. His analysis makes sense and I believe his facts to be accurate. Then again, upon graduation, he's going to be my boss, so I may be slightly biased. Nonetheless, he is correct that banks are in fact lending, that very few banks are actually insolvent, that TARP is working, that those who caused this mess are now unemployed and/or bankrupt, that the US taxpayers are receiving high real interest rates on TARP funds, and that, as Ben Bernanke has said, nationalization of banks is unnecessary to stabilize the banking system.
Regarding Tyson's article, the arguments against the stimulus and the viewpoints of other prominent economists are pretty persuasive. The budget, as she describes, is "faithful to the progressive vision he articulated during his campaign." I do like the idea of investing in health care, education, energy, and the environment, but wonder where we're going to get the money for all this given that we already have the LARGEST BUDGET DEFICIT AS A PERCENTAGE OF GDP SINCE WORLD WAR II. Perhaps I'm not making myself clear, but this hardly seems the time to be adding even more projects and government bureaucracy to the mix. President Obama promised to sharpen his pencil and cut the weak programs from the budget. Like many others, I was hoping he'd follow through on that plan. Perhaps I was praying for a moment like the scene in Dave in which a reluctant citizen goes through the federal budget with his accountant friend and trims off enough money from wasteful projects to salvage a program that actually makes a difference in people's lives. Alas, the pencil sharpener appears to be broken.
Instead, we get "a shift of wealth through higher taxes on the rich to pay for healthcare...and social programs." The last time I checked, that was a hallmark of socialism. Nonetheless, I wasn't a fan of the Bush tax cuts originally and do not mind seeing them expire. Besides, by the time I make that much money, the Republicans will probably be in power again.
After visiting Walker Foods, a California-based food company with international distribution, last Friday, I realized the vital role of small businesses in the economy. The proposition that "97% of small businesses will see their rates unchanged or enjoy additional tax benefits under the Obama plan" doesn't sound bad at all.
As for the claims that the size of government will not explode, I do not expect it to triple in size or anything. However, the government will have to create an infrastructure to run its ambitious proposals and that will add to the already annoying layers of bureaucracy.
Perhaps Dave's accountant best sums up the American budget: "Who does these books? If I ran my office this way, I'd be out of business."
Warren Buffett on CNBC
Warren Buffett appeared for several hours on CNBC today to discuss the current state of the economy. Here are all 7 clips of the video, in order from CNBC.com. For a full transcript, check out CNBC's Warren Buffett Watch.
Part 1
Part 2
Part 3
Part 4
Part 5
Part 6
Part 7
A Lesson on Statesmanship
Barack Obama is off to a turbulent start in his first term as US president. If he wants to ensure a second term, he will have to prove that he has the diplomatic skills necessary to be the leader of the free world.
After welcoming British Prime Minister Gordon Brown to Washington in an unremarkable fashion, President Obama will make his first visit to the UK since his election. There he will do his best to ensure that the special relationship between the US and its strongest ally continues.
Whenever I think of that relationship, I can't help but think of the scene in Love Actually when Hugh Grant's usually-diffident Prime Minister summons the courage to stand up for his country's pride in the face of an American president with a superiority complex:
"I love that word 'relationship.' Covers all manner of sins, doesn't it? I fear that this has become a bad relationship; a relationship based on the President taking exactly what he wants and casually ignoring all those things that really matter to, erm... Britain. We may be a small country, but we're a great one, too. The country of Shakespeare, Churchill, the Beatles, Sean Connery, Harry Potter. David Beckham's right foot. David Beckham's left foot, come to that. And a friend who bullies us is no longer a friend. And since bullies only respond to strength, from now onward I will be prepared to be much stronger. And the President should be prepared for that."
President Obama's visit to London and Strasbourg will be anything but. With the rest of the world still questioning his backbone and America's role in international affairs, Mr. Obama must set the record straight.
For the British perspective (albeit a conservative, Thatcherian one), check out Nile Gardiner's analysis of Obama's slights against our nation's top supporters in today's Daily Telegraph.
After welcoming British Prime Minister Gordon Brown to Washington in an unremarkable fashion, President Obama will make his first visit to the UK since his election. There he will do his best to ensure that the special relationship between the US and its strongest ally continues.
Whenever I think of that relationship, I can't help but think of the scene in Love Actually when Hugh Grant's usually-diffident Prime Minister summons the courage to stand up for his country's pride in the face of an American president with a superiority complex:
"I love that word 'relationship.' Covers all manner of sins, doesn't it? I fear that this has become a bad relationship; a relationship based on the President taking exactly what he wants and casually ignoring all those things that really matter to, erm... Britain. We may be a small country, but we're a great one, too. The country of Shakespeare, Churchill, the Beatles, Sean Connery, Harry Potter. David Beckham's right foot. David Beckham's left foot, come to that. And a friend who bullies us is no longer a friend. And since bullies only respond to strength, from now onward I will be prepared to be much stronger. And the President should be prepared for that."
President Obama's visit to London and Strasbourg will be anything but. With the rest of the world still questioning his backbone and America's role in international affairs, Mr. Obama must set the record straight.
For the British perspective (albeit a conservative, Thatcherian one), check out Nile Gardiner's analysis of Obama's slights against our nation's top supporters in today's Daily Telegraph.
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