China’s Communist Party newspaper appears to have fallen for the Onion’s naming of North Korea’s Kim Jong Eun as 2012’s sexiest man alive. Read the full story here: http://on.wsj.com/115JT3t.
“Bombings in Gaza, and rocket attacks on Israel, leave death in their wake — as well as questions about how to count, categorize and interpret the casualty counts.”
“Stabilising Spain’s finances without tearing its social fabric apart is being made harder by a new wave of Catalan secessionism.”
See today’s Houston Chronicle article entitled Foreign holdings of US debt hit $5.46 trillion”. Putting this number into perspective, this represents an increase over the past two years of roughly $1.26 trillion. As I document in my November 5, 2010 blog posting entitled “Political economy and the (inflationary) future“, foreign holdings of US debt two years ago stood at around $4.2 trillion.
For my friends out there who are data geeks, the US Treasury Department regularly updates information concerning foreign holdings of treasury securities (by country) at http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt.
From the “Prager University” series of YouTube videos, Mr. Prager provides an historical synopsis of the Arab-Israeli conflict dating back to the founding of the state of Israel in 1948.
“Soon after the president announced the death of Osama bin Laden, crowds gathered at Ground Zero in New York City to sing, celebrate and remember those who died there (source: http://ti.me/iFexwL).
A particularly important “political economy” topic these days is the unprecedented extent to which the US federal government is spending money it doesn’t have. The federal government has historically collected about 18.4% of gross domestic product (GDP) in tax revenues and spent roughly 21% of GDP on average. Currently, tax receipts are lower than the long run historical average, thanks to the “Great Recession” (probably around 15-16% of GDP), and federal spending is much higher than the long run historical average (upwards of 25% of GDP). The gap between what the government takes in and what it pays out is commonly referred to as the “deficit”; for the fiscal year just ended (on August 31, 2010), the total deficit was nearly $1.6 trillion. The annual fiscal deficit gets added to the total “national” debt, which as of October 31, 2010 stands at $13.6 trillion (cf. http://www.treasurydirect.gov/govt/reports/pd/mspd/2010/opds102010.pdf).
The national debt of the United States (as of 10/31/2010) is split into two categories:
- Public Debt ($9 trillion)
- Intragovernmental Holdings ($4.6 trillion)
Public debt is any money that is owed to investors, foreign governments, mutual funds, hedge funds, pension funds, foreign investors, etc.; i.e., in the form of US treasury securities. “Intragovernmental holdings”, on the other hand, is money that the government borrowed from itself. The major “source” for this is the so-called Social Security trust fund, as well as other government-administered programs which happen to run “surpluses” in an accounting sense. Of course, this money will have to be repaid in the future, and demographics ensure that the Social Security trust fund surplus will soon turn into a growing deficit in the absence of any meaningful reforms (e.g., the imposition of a higher age for eligibility, allowing for private accounts, etc.).
I’ll finish by focusing attention on the public debt. Nearly half of the $9 trillion in public debt (actually, $4.2 trillion) is held by foreign investors (cf. http://www.ustreas.gov/tic/mfh.txt). China is the biggest holder of U.S. public debt – 21% of all public debt held by foreigners, in fact. One can only wonder how this fact influences US foreign policy (since we “need” China’s dollars very badly), but I digress. Lately, the US has been putting huge political pressure on China to allow its currency (the yuan) to appreciate substantially (cf. “China Currency Bill Advances”, 9/25/2010 WSJ). If this happens, US products will become more competitive vis-à-vis Chinese products in global markets, but it will do so at the cost of leaving the Chinese with less dollars for buying our bonds. Since we are in the process of exhausting China’s appetite and ability to fund our deficits, we now turn our attention to the Federal Reserve. By buying public debt from the US Treasury, the Fed is effectively expanding the money supply while also providing the US Treasury with the dollars that it needs to finance the deficit; indeed, last Wednesday the Fed announced that it would purchase up to $600 billion in US Treasury securities as part of its so-called Quantitative Easing (QE II) program. However, this Faustian bargain will most likely come at the cost of a return of inflation at some point in the future. The good news right now is that there is hardly any inflation at all in the economy, so the Fed is betting that the future inflation related to its large scale purchases of Treasury debt won’t be “bad”. I hope they’re right, but history and Milton Friedman tell me that this kind of movie has been played before and that it usually turns out rather badly (in the form of inflation; see “Milton Friedman vs. the Fed”).
Here’s a list of articles that I have been reading lately:
“TED Talks Christien Meindertsma, author of “Pig 05049” looks at the astonishing afterlife of the ordinary pig, parts of which make their way into at least 185 non-pork products, from bullets to artificial hearts.”
“Data could provide an alternative to official statistics.”
“A personal case study looks at some of the ways higher taxes may affect the earnings of high-income taxpayers.”
“The Wall Street Journal on the 21.4% federal spending increase in two years.”
“In the Wall Street Journal, Main Street columnist William McGurn writes that congressional hearings can be used to sell market-friendly fixes.”
“In the Wall Street Journal, James Kirchick writes that the continent’s progressive image is a fabrication of the American liberal mind.”
“In The Wall Street Journal, Business World columnist Holman Jenkins, Jr. says that TV’s fight to preserve its power in the face of digital ubiquity may be a lost cause.”
“Jonathan Karl reviews Susan Dunn’s Roosevelt’s Purge: How FDR Fought to Change the Democratic Party.”
Irwin on France’s role in the Great Depression
“In the latest EconTalk, Doug Irwin argues that France played a much larger role than previously thought in causing the Great Depression. We talk about how the gold standard worked and how French monetary policy forced deflation on the rest of the world.”
“Bad words, once glorious, have been emptied of meaning by common use, argues Jan Morris in a Wall Street Journal op-ed.”
“In the Wall Street Journal, OpinionJournal columnist John Fund interviews Scott Rasmussen, who says that understanding the tea party is essential to predicting what the country’s political scene will look like.”
Paul Johnson – The Quest For God – The ReAL Book Review
I really like Gerard Reed’s book reviews; here’s one about British historian Paul Johnson’s new book entitled “The Quest for God”. I first became aware of Paul Johnson more than 20 years ago, when I became deeply influenced by Paul Johnson’s essay entitled “The Heartless Lovers of Humankind” (see http://www.fortfreedom.org/h11.htm).
“In The Wall Street Journal, Carnegie-Mellon University economist Allan H. Meltzer says the Federal Reserve shouldn’t deliberately use inflation to reduce unemployment.”
“Peter Diamond, Dale Mortensen and Christopher Pissarides shared the 2010 Nobel Prize in Economic Sciences for their work on the efficiency of recruitment and wage formation as well as labor-market regulation.”
“In the British film Four Lions, five Muslim men from Sheffield, England—four from immigrant families along with an English convert—seek to break out of their ho-hum average-ness by doing something which they think will launch them into hero status in their community.They plot a terrorist attack in the name of “jihad” in the U.K. In this farcical film, black satire meets terror-jihad and it is a match made almost in heaven. The would-be jihadists, however, end their lives only in tragedy, not in paradise.”
“At a time when capitalism, free markets, corporate greed, (WallStreet 2), bankers’ bonuses, is making headlines, here is the MBA Oath. The oath is a voluntary pledge for graduating MBAs and current MBAs to “create value responsibly and ethically’.”
Joe Queenan on Jimmy Carter’s Addiction to Writing Books
“The American people wanted Jimmy Carter out of office in the worst way, and to this day they are paying the price. If we had to do it all over again, I think a lot of people would vote to amend the Constitution and allow presidents to run for five, six—as many terms as they wanted. That wouldn’t leave them much spare time to write books.”
Here’s a list of articles that I have been reading lately:
“British Prime Minister David Cameron writes in The Wall Street Journal that the U.S. and Britain have a clear common agenda: succeeding in Afghanistan, securing economic growth and fighting protectionism.”
“The average cable subscription costs $900 a year, but you can radically reduce that amount and still watch everything you want.”
Here’s the bottom line from Sandy Leeds’ editorial, published in today’s Austin American Statesman:
“The bottom line is that we’re in trouble. Social Security is woefully underfunded and Medicare is an even larger problem. This is going to increase the amount that we’re going to have to borrow from investors – and there’s no certainty that investors will always be willing to lend to us. Most importantly, we’re never going to solve these problems until the electorate understands the issues and starts to pressure our elected officials into making the hard (but right) decisions. We’re not doing anyone any favors by convincing them that we have “built up a big trust fund.””
Quoting from Stanford Professor John Taylor’s Blog (Economics One): “Everyone now seems to agree that the exploding federal debt is a serious problem that must be addressed. But how? The following … charts provide some data to help answer that question.”
“A Wall Street Journal editorial says the global warming alarmists still won’t separate science from politics.”
Here’s what we have to look forward to as Obamacare starts to come “on line” (Massachusetts passed so-called Romneycare in 2006, and Obamacare structurally closely resembles Romneycare, only on a national as opposed to individual state level)… “The relentlessly rising cost of health insurance is prompting some small Massachusetts companies to drop coverage for their workers and encourage them to sign up for state-subsidized care instead, a trend that, some analysts say, could eventually weigh heavily on the state’s already-stressed budgets”.
“To analyze whether a recent spate of suicides at a set of Chinese manufacturing facilities represents an unusual outbreak, it helps to make the right comparisons.”