Quotulatiousness

September 2, 2011

US flood insurance is “a veritable bucket of fail”

Filed under: Economics, Government, Politics, USA — Tags: , , , , , — Nicholas @ 12:12

Felix Salmon on the state of US flood insurance:

Ben Berkowitz has a big report on the the National Flood Insurance Program — something which is a veritable bucket of fail. In a nutshell, it undercuts private insurers and therefore is the only game in town; it insures only a small minority of homeowners; and it loses gobs of money. In September 2005, the NFIP was $1.5 billion in hock to the federal government; that number has now ballooned to $21 billion, and is certain to rise further.

There’s a simple answer to all these problems: let the NFIP raise its rates. And I don’t understand why it’s not being allowed to do so. If the rates rose, then that might allow private insurers into the flood-insurance game, giving consumers a choice and helping to get the word out about how insuring your home against flood damage is a really good idea. The NFIP could become profitable, and thereby start paying back all the money it owes. And while homeowners are quite price sensitive when it comes to flood insurance, the fact is that so few homeowners take out flood insurance right now that the number would be unlikely to fall dramatically if rates went up to a reasonable level.

August 30, 2011

The Canadian economic recovery

Filed under: Cancon, Economics — Tags: , , — Nicholas @ 07:06

David Lee compares the Canadian experience in the most recent recession with that of other nations:

As Republicans and Democrats pushed America further and further to the left and Europe approached ever closer to its socialist ideals, Canada’s political discussion turned from which party could offer the greatest subsidies to the greatest number, to which party’s program of tax cuts would be of more benefit to the economy. For a country where an openly avowed socialist party regularly polls in the top three in provincial and federal elections, this is no small feat. For perhaps the first time in its history, Canada finds itself at the most pro-market limit of the political spectrum among the world’s industrialized nations.

It is not only in this regard that Canada has become an island unto its own. Equally unique to the country is its economic performance subsequent to the financial crisis of 2007 and throughout the ensuing alternations between recession and stagnation that has characterized the experience of the greater part of the developed world since. As the world teeters from crisis to crisis, Canada has proven remarkably resilient in spite of its heavy economic dependence on international trade. Whether there is any significance to the coincidence of these two anomalies will be examined in what is to follow.

By no means is this piece to be taken as an unqualified endorsement of the policies undertaken by the incumbent administration. Despite the overall tenor of the article, this piece could have just as easily been scathing indictment as commendation. The appraisal to be made varies directly with the choice of benchmark. Measured against examples that more closely approximate the free-market ideal such as 1980s-era Hong Kong and Jacksonian America, Canada falls hopelessly short.

August 27, 2011

World collapse explained in three minutes

Filed under: Economics, Europe, Government — Tags: , — Nicholas @ 13:39

August 24, 2011

What the US economy really needs

Filed under: Economics, Government, USA — Tags: , , , , , — Nicholas @ 09:22

What it really needs is less interference from the government, which is why Michael Tanner is asking them to stay on vacation:

As the economy continues to teeter on the precipice of a double-dip recession, there is a growing demand for the president and Congress to rush back from their vacations and do something. But why?

What is it that we really think the president can do?

While the president’s latest economic plan remains a deeply held secret until after his vacation, pretty much everyone in Washington expects him to call for . . . drumroll please . . . a stimulus plan.

Now why haven’t we thought of that before? Oh, that’s right. We have.

In fact, we have now had at least five — or is it six? — stimulus plans since this recession started.

August 23, 2011

Markets hate uncertainty

Filed under: Economics, Government, History — Tags: , , , — Nicholas @ 13:34

I’ve often remarked that the economy won’t — can’t — recover as long as governments (the US government in particular) keep messing around with the rules of the game. Amity Shlaes explains why:

One product makes clear exactly how unusual this year’s slide has been, and offers a clue as to why 2011 broke the rules. It’s called the Congressional Effect Fund. Founded by Wall Streeter Eric Singer in 2008, the fund is premised on the idea that equity markets dislike a hostile Washington, tolerate a friendly Washington, but prefer an inactive Washington above all.

It follows that stock-market rallies would come most often when Congress is idled — in recess, at home, in the districts. From 1965 until early this summer, the Standard & Poor’s 500 Index, Singer’s proxy for stocks, rose 17 percent while Congress was out of session versus only 0.9 percent while Congress was working in Washington.

In one study, four scholars took a step back to look at a century of returns — from 1897, just after the Dow Jones Industrial Average was founded, to 1997 — and found that average daily returns when Congress was out of session were almost 13 times higher than when it was in. Their explanation: “Perhaps the market enjoys the temporary certainty exhibited by the absence of Congressional decisions.”

Singer is blunter. About Washington’s impact on the economy, he says simply: “Congress subtracts value.”

The regulators are still on the job, but the legislators appear to be the ones causing the greater degree of uncertainty — and thereby limiting market opportunities. Nice work, government.

August 22, 2011

US government spending: “we’ll pay for it all by raffling off unicorn rides and following leprechauns to find pots of gold”

Filed under: Government, Politics, USA — Tags: , , , , — Nicholas @ 13:10

Steve Chapman notes the difficult transition from supporting spending cuts in general to supporting specific program cuts:

The good news is that the idea of serious spending restraint has more support than ever before. The bad news is that getting people to support the concept is easy. The hard part is getting beyond the concept, and there is no sign so far of doing that.

Several Republican presidential candidates, including Michele Bachmann, Ron Paul, and Rick Santorum, have taken what sounds like an uncompromising stand. They’ve signed on to a plan sponsored by a group called Strong America Now to eliminate the federal deficit by 2017 without tax increases.

But the plan is not a plan. It’s a fantasy. As Strong America Now’s website explains, it is supposed to “detect and eliminate 25 percent of spending per year across the federal government.” Per year. Seriously.

Not only that, but those cuts are supposed to excise nothing but vast quantities of waste — rather than programs that actual people care about. And my impression is that we’ll pay for it all by raffling off unicorn rides and following leprechauns to find pots of gold.

[. . .]

Social Security, Medicare, and Medicaid soak up some 40 percent of the budget, and their share will expand as baby boomers sidle off into retirement. But in an April Economist/YouGov survey, only 7 percent of Americans — including just 9 percent of Republicans — favored lower funding for Social Security. Medicare? Also 7 percent, with 11 percent of Republicans agreeing.

Even the rise of the Tea Party and the fight over the debt ceiling have not caused people to come to grips with fiscal reality. An August Economist/YouGov poll found that 56 percent of Americans said we can bring spending under control without reductions in Social Security and Medicare. Only 24 percent admit what every fiscal expert knows.

August 14, 2011

Mark Steyn wants to thank Londoners for re-enacting chapter 5 of his new book

Filed under: Books, Britain, Economics, Liberty, Media, USA — Tags: , , — Nicholas @ 18:33

In a column at the Orange County Register, he shows how well-timed certain recent news items have been for illustrating parts of his latest book, After America:

The trick in this business is not to be right too early. A week ago I released my new book — the usual doom ‘n’ gloom stuff — and, just as the sensible prudent moderate chaps were about to dismiss it as hysterical and alarmist, Standard & Poor’s went and downgraded the United States from its AAA rating for the first time in history. Obligingly enough they downgraded it to AA+, which happens to be the initials of my book: After America. Okay, there’s not a lot of “+” in that, but you can’t have everything.

But the news cycle moves on, and a day or two later, the news shows were filled with scenes of London ablaze, as gangs of feral youths trashed and looted their own neighborhoods. Several readers wrote to taunt me for not having anything to say on the London riots. As it happens, Chapter Five of my book is called “The New Britannia: The Depraved City.” You have to get up pretty early in the morning to beat me to Western Civilization’s descent into barbarism. Anyone who’s read it will fully understand what’s happening on the streets of London. The downgrade and the riots are part of the same story: Big Government debauches not only a nation’s finances but its human capital, too.

August 11, 2011

Canada’s debt crisis happened at a fortunate time

Filed under: Cancon, Economics, History — Tags: , , , — Nicholas @ 12:03

Father Raymond J. de Souza explains why Canada’s financial success story can’t be easily replicated by Europe or the United States:

The slaying of the deficit by Paul Martin saved Canada from the sovereign debt turmoil now afflicting Europe and America. While full credit is due to Mr. Martin, and it is gratifying to see other countries look to our experience, the turnaround in fiscal policy that Canada achieved in the 1990s is simply impossible to achieve in Europe or the United States in the near term. When we had our debt crisis, sparked by downgrades of the federal government’s credit rating between 1993 and 1995, we could make tough choices with the prospect of almost immediate results. No country has that option today.

That is only partly due to politics. Many have observed that the Liberal majority government of the day had the power to take dramatic action. That understates the case. Not only did the Grits have a majority, they had the near-certainty of another majority in 1997, given the disarray among the four opposition parties. The Chrétien government of 1995 was the most electorally secure government in Canadian history. No other country — not even Canada — has that circumstance today.

[. . .]

Europe and America face weak economic growth, rising debt service costs and no tax reforms to provide robust new streams of revenue. Even if granted the vast powers of the Chrétien government — not for nothing was it called the “friendly dictatorship” — neither Europe nor America have a path to slaying their deficits, aside from ever more brutal spending cuts. And indeed, if serious spending cuts add to unemployment and, in the short term, restrain economic growth, then the deficit may not shrink as welfare costs rise and revenues shrink.

Canada did well to respond to our crisis in the 1990s. We were lucky to have had it when we did.

August 8, 2011

“Canada has become the snotty kid at the front of the class that gets every answer right”

Filed under: Cancon, Economics, Government, USA — Tags: , — Nicholas @ 15:39

Kelly McParland reads the fine print:

Near the bottom of the Standard & Poor’s report that downgraded U.S. debt last week is a tribute to the Canadian economy that could contribute to what’s becoming a serious case of swollen-headedness.

In comparing the U.S. situation to “relevant peers”, i.e. other western economies, it notes that Canada has become the snotty kid at the front of the class that gets every answer right. Of five countries — Canada, the U.S., Germany, France and Britain — Canada has the lowest government debt burden (net debt to gross domestic product), at 34%.

It adds: “By 2015, we project that … net public debt to GDP ratios will range between 30% (lowest, Canada) and 83% (highest, France), with the U.S. debt burden at 79%.”

And while the other four are all expected to see their debt declining, in the U.S. it could still be on the rise. So nya-nya to you, rest of western world.

Reduce US military spending by reducing US military responsibilities

Filed under: Military, USA — Tags: , — Nicholas @ 12:28

August 7, 2011

Mitchell: Obama bears only 15% of the blame for the downgrade

Filed under: Economics, Government, History, USA — Tags: , , , , , , , — Nicholas @ 17:57

In a blog post guaranteed to tick off members of both parties, Daniel Mitchell tries a first approximation of where the blame should be assigned:

Well, it turns out that Social Security is a relatively minor part of the problem, so even though President Roosevelt’s policies exacerbated and extended the Great Depression, the program he created is only responsible for a small share of the fiscal crisis. To give the illusion of scientific exactitude, let’s assign FDR 13.2 percent of the blame.

The health care numbers are much harder to disentangle because it’s not apparent how much of the increase is due to Medicare, Medicaid, Bush’s prescription drug entitlement, and Obamacare. A healthcare policy wonk may know these numbers, but the CBO long-run forecast didn’t provide much detail.

So with a big caveat that these are just wild estimations, I feel reasonably comfortable in saying that both Bush and Obama made matters worse with their reckless entitlement expansions, but that they merely deepened a fiscal hole that was created when President Johnson imposed Medicare and Medicaid.

August 6, 2011

Oh, good: I didn’t miss much while I was away

Filed under: Economics, Humour, Politics, USA — Tags: , , , — Nicholas @ 16:24


Obama: Debt Ceiling Deal A Prime Example Of Democrats And Democrats Sacrificing For The Greater Good

July 31, 2011

Is it time to update this to “16 (trillion) tons”?

Filed under: History, Media, USA — Tags: , — Nicholas @ 17:44

H/T to Gerard Vanderleun.

July 24, 2011

Bank of Ireland “suffered a restructuring credit event”

Filed under: Economics, Europe — Tags: , , — Nicholas @ 10:46

I’m not fluent in banker . . . does this Reuters report really say that the Bank of Ireland is in default?

The ISDA said a restructuring credit event occurred after Bank of Ireland closed an offer to buy back about 2.6 billion euros of Tier 1 and Tier 2 subordinated debt at a discount of up to 90 percent earlier this month.

A credit event is financial industry jargon for default on payment, breach of bond covenants or other event that casts doubt on an issuer’s ability to service its debt.

If it does mean the bank is in default, how come it hasn’t received much attention in the media? (Aside from the focus being on Norway right now for other reasons, of course.)

H/T to Karl Denninger for the link.

July 21, 2011

This is why the Bank of Canada will raise rates soon

Filed under: Cancon, Economics — Tags: , , — Nicholas @ 09:58

Stephen Gordon explains why the Bank of Canada will be raising interest rates in the near term:

The relatively hawkish language in the Bank of Canada’s interest rate decision — most notably the removal of the word ‘eventually’ from the sentence describing the conditions in which interest rates will increase — took financial markets by surprise.

Central banks try to avoid surprises when they can, but in this case the Bank has the best of excuses: the facts changed.

[. . .]

These new numbers may well be revised away in the coming months, but policy makers have to work with the data they have before them. If you take an output gap that is shrinking much faster than you thought and add it to a core inflation rate that is drifting towards and perhaps past the Bank’s 2 per cent target, you will find yourself in a position where you have to start preparing to increase interest rates earlier than you had planned.

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