It was at this point during the president’s Ohio speech to GM workers today that I thought he was going to talk about card check: “And yes, just in case you were wondering …”
First, the great Stan Collender:
But the real purpose of the speech was to refocus the financial services reform debate in Washington. The president may have been speaking to Wall Street executives, but the real audience was members of Congress, especially Democrats, some of who in the next few weeks will be marking up various pieces of financial services regulation legislation. He had to show that the general issue hasn’t gotten lost in the health care debate and to say that the effort is still needed even if things seem to be better (“Normalcy cannot lead to complacency”).
Ed Yardeni gets it right, again:
Central banks, including the Fed, caused the housing bubble. Now they are once again conspiring to inflate the next bubble, i.e., the US Government Bubble. Over the past 12 months through August, they purchased $868.9bn of US Treasuries. Over this same period, the federal deficit totaled $1332.6bn and publicly-held federal debt soared $2005.0bn. This helps to explain the most recent conundrum in the bond market, i.e., why yields remain so low despite huge current and projected federal budget deficits.
While I love the idea of Free Market Day, I have to disagree with the typical post-mortem assessment of Lehman. This was not a binary choice; The Lehman decision was not an either/or situation, limited to a gladiatorial thumbs up/thumbs down.
At a House Financial Services Committee hearing just after Lehman Brothers filed for bankruptcy protection a year ago, the committee chairman, Barney Frank, suggested that September 15, 2008 be commemorated as Free Market Day, since Lehman was allowed to fail and free markets allowed to work. Frank then added that because AIG was bailed out the next day, “the national commitment to the free market lasted one day.”
As Bruce Bartlett correct observes:
Although it is thought that inflation is an effective way of
reducing the burden of debt, this is no longer true. For one thing, a
declining portion of the debt is financed with long-term securities.
Today, just 3% of the debt consists of bonds with maturities of 20
years or more; 10 years ago, the proportion was four times greater. To
the extent that the debt consists of short-term securities that must
constantly be rolled over, inflation does nothing to erode its value
because interest rates just rise to compensate, raising interest
payments and borrowing, thus maintaining the real value of the debt.
Barry Ritholtz ticks off ten technologies:
My top 10 list (in order of biggest near term potential):
1. Nano Technology (Think of the line “Plastics” in The Graduate).
2. Green (low carbon) Energy (generation)
3. Battery technology (storage)
4. Genomics/Stem Cell Research
5. Web 2.0/3.0 — smaller, niche companies using increased bandwidth
6. Robotics — the continued replacement of humans by machine, for both labor and judgement