Tuesday, September 23, 2008


If we are experiencing depression era problems in the markets , should we adopt the same depression era policies that exacerbated it?

From Thomas Sowell:

"a recycling of the kinds of policies and rhetoric of the New Deal that prolonged the Great Depression of the 1930s far beyond the duration of any depression before or since."

From: Federal Reserve Bank of Minneapolis Quarterly Review
Winter 1999, vol. 23, no. 1, pp. 25–31 ( attached)
"The capitalistic economy is stable, and absent some change in technology or the rules of the economic game, the economy converges to a constant growth path with the standard of living doubling every 40 years. In the 1930s, there was an important
change in the rules of the economic game. This change lowered the steady-state market hours. The Keynesians had it all wrong. In the Great Depression, employment was not low because investment was low. Employment and investment were low because labor market institutions and industrial policies changed in a way that lowered normal employment."

Monday, September 15, 2008


“This country can't afford another four years of this failed philosophy" Barak Obama stated today referring to ‘the Bush Economy’ and the current financial turmoil on Wall Street.

In her interview, Sarah Palin was asked to specifically list 3 policies that she would enact that are contradictory to, and would ameliorate the ‘Bush Economy.’ The premise is that all of his policies have had adverse effects on the country.

Sarah Palin should have questioned the premise that it was Bush policies that are responsible for the current state of the economy, and our only hope is to take the country in a drastically different direction….change…hope ? Could Charlie Gibson point out 3 specific polices that are directly related to any problems we are having with the economy now? I can say that Bush should have vetoed the passage of the minimum wage, he was wrong when he supported steel tariffs, and I would question the expanded prescription drug benefits. No child left behind was also an unnecessary expansion of government power, but in the right direction with regard to school choice, empowering parents over government.

It seems that any free market oriented position that a candidate takes ( such as maintaining the Bush tax cuts or drilling for more oil) , gets linked to Bush by the media and democrats, and becomes a battle cry against a ‘third Bush term.’
In fact, we now know that the Bush tax cuts led to an increase in taxes paid by the rich as well as a decrease in the magnitude of the budget deficit. ( see WSJ ‘Their Fair Share’ Jul 21,2008). Further, policies supported by the left that have limited exploration and development of domestic supplies over the last 20 years certainly play a larger role in our current ‘energy crisis’ than Bush’s ‘failed’ policies.

Truthfully, many of the problems that we are seeing with the economy are not a direct effect of any of his policies, and cannot be easily corrected by any other president via a regime change. The housing and financial issues that we are dealing with are the result of an accumulation of mistakes, or ‘malinvestment’ as termed by the Austrian school of economics. The length of time it will take to recover from this depends on the extent to which it takes to correct for a phenomenal misallocation of financial resources and assets.

As I believe Bush himself said ( and was ridiculed by the media for thinking so simplistically) the current situation is analogous to recovering from a hangover, which also has no ‘quick fix.’ This analogy originates from the Nobel Prize winning economist Milton Friedman. So much for ‘simplistic.’