Quotulatiousness

March 21, 2019

“It’s back to normal, basically. The emperor is naked. Votes are for sale. Caveat emptor“

Filed under: Cancon, Economics, Government, Politics — Tags: , , , , — Nicholas @ 03:00

Chris Selley somehow seems, I dunno, a bit … cynical about Prime Minister Trudeau and Finance Minister Morneau’s 2019 federal (election) budget:

Ahoy there, relatively young and middle-class Canadian! Did you vote Liberal in 2015? And are you, shall we say, somewhat less enthused about that prospect four years later, for various reasons we needn’t go into here?

Now, what if Justin Trudeau were to offer you a down payment on a shiny new condominium?

Well, that’s just the kind of guy he is. Starting this year, so long as your household income is below $120,000, the Canada Mortgage and Housing Corporation will pitch in 5 per cent of the price of your first home — 10 per cent if it’s a new home, the construction of which the government hopes to incentivize.

That’s Item One in the 460-page federal budget tabled Tuesday in Ottawa.

On a new $400,000 condo, you could put down your own $20,000; CMHC would chip in another $40,000; and your monthly mortgage payment, on a 25-year term at 3.25 per cent, would drop by a not inconsiderable 12 per cent. You would reimburse CMHC, interest-free, if and when you sell. Cost to the taxpayer: $121 million over six years.

If you’re worried giving home-seekers free money might just push the price of a $400,000 condominium nearer to $440,000, Finance Minister Bill Morneau would first of all like you to stop. (“You’re wrong,” he admonished a reporter who dared suggest it during a press conference in the budget lockup Tuesday.) But if all else fails and you’re forced to rent, the feds also found $10 billion extra over nine years to throw at the Rental Construction Financing Initiative, a CMHC program that offers low-interest loans to qualified builders. The goal is 42,500 new rental units in a decade.

Can’t even think of home ownership until you pay off your student loans? Again, the government is here to help: From now on you’ll pay the Bank of Canada’s prime interest rate, instead of prime plus 2.5 points. And for the first six months after you graduate, you’ll pay nothing. The budget document introduces us to Angela, a recent psychology grad carrying $13,500 in student debt who landed a job at “a medium-sized consumer goods company.” (It doesn’t matter where she works. The writers just wanted to add some colour.) Angela will save something like $2,000 in interest over 10 years.

There’s also the new Canada Training Benefit, which the government intends to help Canadians with “the evolving nature of work.” (Maybe your parents were right, Angela. Maybe that psych degree wasn’t the best idea, Angela.) Starting in 2020, the feds will chip in $250 a year, and you can use the accumulated credit to pay up to half the cost of courses or training. And you can draw on up to four weeks of EI to complete it.

March 16, 2019

MMT – Magic Money Theory

Filed under: Economics, Government, Politics — Tags: , , , , , , , — Nicholas @ 05:00

Antony Davies and James R. Harrigan explain just why so many progressives are so excited about MMT:

Modern Monetary Theory, or MMT, is all the rage in the halls of Congress lately.

To hear the Progressive left tell it, MMT is not unlike a goose that keeps laying golden eggs. All we have to do is pick up all the free money. This is music to politicians’ ears, but Fed Chairman Jerome Powell is singing a decidedly different tune. Said Powell recently on MMT, “The idea that deficits don’t matter for countries that can borrow in their own currency … is just wrong.”

MMT advocates see this as outdated thinking. We can, they claim, spend as much as we want on whatever we want, unencumbered by trivialities like how much we have. But MMT is a bait-and-switch wrapped in a sleight-of-hand. It focuses on debt and dollars rather than resources and products. Debt and dollars are merely tools we use to transfer ownership of resources and products. It’s the resources and products that matter. Shuffling debt and dollars merely changes the ownership of resources and products. It doesn’t create more.

[…]

So here’s the sleight of hand. MMT advocates say that we won’t experience inflation because the U.S. dollar is a reserve currency — foreigners hold lots of U.S. dollars. First, increasing the money supply, other things constant, does create inflation. But when a reserve currency inflates, the pain gets spread around the world instead of being concentrated within one country. In short, MMT advocates believe our government should print money and let foreigners bear some of the inflation pain. Second, there’s no law that says that the U.S. dollar must be a reserve currency. The British Pound was one, but as its value declined, foreigners stopped holding it. Foreigners will stop holding U.S. dollars too as their value declines.

And here’s the bait-and-switch. MMTers say that if inflation does become a problem, the government can simply raise tax rates to soak up excess dollars. In short, the government would print money with one hand, buying whatever it wants and causing inflation. It would then tax with the other, thereby removing dollars from the economy and counteracting the inflation. In the end, all that’s happened is that the government has replaced goods and services that people want with goods and services politicians want.

After a bout of MMT, we might have the same GDP and zero inflation, but what constitutes that GDP would have changed dramatically. Instead of having more cars and houses, we might have more tanks and border walls.

December 27, 2018

QotD: The deep state

Filed under: Bureaucracy, Education, Government, Quotations, USA — Tags: , , , , — Nicholas @ 01:00

The deep state is no myth but a sodden, intertwined mass of bloated, self-replicating bureaucracy that constitutes the real power in Washington and that stubbornly outlasts every administration. As government programs have incrementally multiplied, so has their regulatory apparatus, with its intrusive byzantine minutiae. Recently tagged as a source of anti-Trump conspiracy among embedded Democrats, the deep state is probably equally populated by Republicans and apolitical functionaries of Bartleby the Scrivener blandness. Its spreading sclerotic mass is wasteful, redundant, and ultimately tyrannical.

I have been trying for decades to get my fellow Democrats to realize how unchecked bureaucracy, in government or academe, is inherently authoritarian and illiberal. A persistent characteristic of civilizations in decline throughout history has been their self-strangling by slow, swollen, and stupid bureaucracies. The current atrocity of crippling student debt in the US is a direct product of an unholy alliance between college administrations and federal bureaucrats — a scandal that ballooned over two decades with barely a word of protest from our putative academic leftists, lost in their post-structuralist fantasies. Political correctness was not created by administrators, but it is ever-expanding campus bureaucracies that have constructed and currently enforce the oppressively rule-ridden regime of college life.

In the modern world, so wondrously but perilously interconnected, a principle of periodic reduction of bureaucracy should be built into every social organism. Freedom cannot survive otherwise.

Camille Paglia, “Hillary wants Trump to win again”, Spectator USA, 2018-12-04.

November 30, 2018

England: South Sea Bubble – Lies – Extra History

Filed under: Americas, Britain, Business, Economics, Government, History — Tags: , , , , — Nicholas @ 02:00

Extra Credits
Published on 9 May 2015

Support us on Patreon! http://bit.ly/EHPatreon
____________

No historian is perfect, so it’s important we acknowledge our mistakes where we find them (with the help of our viewers, no less)! After we clear up some discrepancies that emerged during the South Sea Bubble series, we turn to answering some common questions that came up during this series on economic history. In a period where financial masterminds like John Blunt engaged in trickery meant to confuse other people and hide his real activities, it’s no wonder that many viewers had questions about what insider trading is and how Blunt could endlessly inflate stock prices for his unprofitable company. This is a history show, but we do our best to explain! As a bonus, James also reads Robert Knight’s letter to Parliament on the eve of his illegal flight and tells some cool stories about Robert “It was Me” Walpole.

November 29, 2018

England: South Sea Bubble – It Was Walpole – Extra History – #5

Filed under: Americas, Britain, Business, Economics, Government, History — Tags: , , , , — Nicholas @ 02:00

Extra Credits
Published on 25 Apr 2015

Support us on Patreon! http://bit.ly/EHPatreon
____________

Robert Walpole’s attempts to use the South Sea Company scandal to enhance his own ambitions are threatened by the appearance of Robert Knight, a former South Sea employee whose records of corporate bribery implicate Walpole and his friends in Parliament. But faced with threats of retribution if he ever shares these records, Knight flees the country rather than face a public inquiry. Although he gets caught and sent to prison in Antwerp, Walpole deftly engineers his release and escape. With Knight finally gone, Walpole teams up with John Blunt to pin the blame for the South Sea stock bubble on his political opponents, conveniently clearing the way for himself to become essentially the first Prime Minister of England. He also makes sure that all of his own supporters get off easy (if not scot free) for their involvement, and even Blunt walks away from the South Sea Bubble with more money than he started with.

November 28, 2018

England: South Sea Bubble – The Bubble Pops – Extra History – #4

Filed under: Americas, Britain, Business, Economics, Government, History — Tags: , , , , — Nicholas @ 02:00

Extra Credits
Published on 11 Apr 2015

Support us on Patreon! http://bit.ly/EHPatreon
____________

With the South Sea Company’s value dangerously inflated, Blunt drives one more scheme to raise stock prices – and it finally backfires on him. Early investors (including the famous politician Robert Walpole) seize the opportunity to sell their stock while the value is high, and the general public finally realizes that the South Sea Company has no actual worth. Everyone who didn’t sell their stock in the first round finds themselves suddenly bankrupt as the stock value plummets. Even King George, on vacation when disaster strikes, loses a large amount of the royal fortune. Robert Walpole, however, sees this as an opportunity to make himself a hero of the public. Hiding his own involvement in the South Sea Swindle, he cancels all debts owed for the company’s stock to help put its public investors back on their feet. Despite this, the public demands an inquiry and Walpole must walk a thin line between his facade as defender of the people and the reality of his, his party, and the King’s blatant corruption.

November 27, 2018

England: South Sea Bubble – Buying Out Britain – Extra History – #3

Filed under: Americas, Britain, Business, Economics, Government, History — Tags: , , , — Nicholas @ 02:00

Extra Credits
Published on 28 Mar 2015

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____________

The time has come for Blunt to enact the final act of his scheme: taking on the 31 million pound British debt. When Parliament initially balks at transferring responsibility for that much money to Blunt’s insolvent South Sea Company, he bribes them with special deals on his own stock. Despite a legal clause that should have locked the stock price until the company began paying off the debt, Blunt keeps introducing new plans to inflate the stock price and pocket the money for himself. He does everything from selling stocks on layaway to loaning people money so they could buy more stocks from him, creating an artificial demand for South Sea Company stock that drives the company’s worth up to 300 million pounds: a staggering ten times the initial value of the already stunning debt it had assumed. His success, founded entirely on speculation with no actual revenue from trade, not only starves out other businesses across Britain but exceeds the total amount of money in the country’s entire economy. This bubble can not last.

November 26, 2018

England: South Sea Bubble – Too Big to Fail – Extra History – #2

Filed under: Americas, Britain, Business, Economics, Government, History — Tags: , , , — Nicholas @ 02:00

Extra Credits
Published on 14 Mar 2015

Support us on Patreon! http://bit.ly/EHPatreon
____________

Frustrated at every turn by the Whig-controlled Bank of England, Harley and Blunt decide to start their own institution: a trading company that will exchange government debt for stock shares. This new South Sea Company will have a monopoly on trade in the rich new lands of South America, but all the ports there are controlled by Spain, with whom Britain is at war. So Blunt pushes the country into a premature and unfavorable peace with Spain, enlisting famous authors to write his propaganda and convincing Queen Anne herself to tip the balance of Parliament in his favor. After the queen dies and the government changes hands, Blunt kicks Harley and his Tory leaders out of the company. He manages to bring King George I himself on board as a ceremonial leader, linking the success of the South Sea Company with the reputation of the monarchy. But while his maneuvering inflates the value of his company’s stock, it’s never produced anything close to the amount of money he’s convinced people to invest in it.

November 25, 2018

England: South Sea Bubble – The Sharp Mind of John Blunt – Extra History – #1

Filed under: Britain, Business, Economics, History — Tags: , , — Nicholas @ 02:00

Extra Credits
Published on 28 Feb 2015

Support us on Patreon! http://bit.ly/EHPatreon
____________

When Robert Harley steps in as England’s new Chancellor of the Exchequer, he discovers that not only is the government deeply in debt, but no one knows quite how much debt it owes. Because vicious political infighting between the Tory and Whig politic parties made it difficult to pass new tax laws, Harley turned to a private financier named John Blunt to help find enough money for England to keep up with its expenses for the year. Using Harley’s government resources, Blunt instigated a series of get-rich schemes that drove artificial demand for unsustainable land and lottery investments with tremendous short term gains. Before the year was done, Blunt had successfully covered the shortfall for the government that year – albeit at the cost of driving England’s already outrageous debt even higher.

November 23, 2018

“These are deficits of choice, not necessity”

Filed under: Cancon, Economics, Government — Tags: , , — Nicholas @ 03:00

The federal government released its fall economic statement the other day. The contents would not really have been a surprise to anyone who’s been paying attention since the last election, as Andrew Coyne explains:

The 2018 fall economic statement begins with a puzzle. Economic growth, it trumpets, is strong — the strongest in the G7 in, er, 2017. Unemployment is at a 40-year low; capacity utilization is back to pre-recession levels; profits are up; wages are growing faster than they have in eight years.

All this good news has produced a bumper crop of revenues to the federal treasury: an average of roughly $5.5-billion more annually over the next couple of years than was projected in the spring budget. Yet deficits are now projected to be … higher than expected — at $19.6 billion and $18.1 billion, respectively, about 10 per cent over forecast.

What explains this surprising result? Simple: as it has done throughout its tenure, the Trudeau government took the revenue windfall, and spent it — every last dollar and then some.

This is what the government calls “carefully managing deficits over the medium term.” It used to talk about reducing or even eliminating deficits. Now it seems devoted to doing whatever it takes to keep them in the $20 billion range, in perpetuity.

To be sure, the current set of projections, like its predecessors, shows deficits declining majestically in later years. But somehow in the here and now they never do. Once upon a time, this was supposed to be owing to a shortfall in revenues, the fruit of the Harper government’s supposed obsession with austerity.

By now this is not even pretended. The last Harper budget projected revenues for the current fiscal year at $326.9 billion, enough for a small surplus. The latest estimate has them at $328.9 billion — yet the deficit stands at $18.1 billion. Even allowing for a couple of billion dollars in accounting adjustments, it’s clear what is going on. These are deficits of choice, not necessity.

October 21, 2018

This is why Keynesianism doesn’t work in practice – the politicians flub the hard part

Filed under: Economics, Government, Politics — Tags: , , — Nicholas @ 03:00

Tim Worstall explains the fatal flaw in Keynes’ economic theory … not so much in the theory part, but in the practical application by flesh-and-blood human beings:

We’re told that government borrowing is falling, the deficit closing. This therefore means that it’s possible to relax austerity, to start spending more upon sweeties for the voters. This being exactly and precisely why Keynesianism as a practical matter doesn’t work. For politicians will follow the fun bit and not the difficult part. Thus as an overall theory it simply is, to use a governmental phrase, no longer operative.

[…]

Think of what that basic Keynesian idea is. When the economy’s in the doldrums we should blow out the deficit in order to increase demand and thus boost the economy. But when we’re running at the resource limit then any such attempts will just turn up as inflation. So, we should stop doing that. Also, as Keynes himself pointed out, when the Sun shines is the time to repair the roof. Perhaps pay down some of that national debt so that the next time we need to blow that deficit out we’ve got space to do so.

Do note that this basic set up is also entirely consistent with modern monetary theory. When the economy is running at its limits then we should be taxing more of that created money back to prevent inflation. That is, running a smaller budget deficit, possibly even a surplus.

So, what happens to kill either theory in reality? Well, here we are. Unemployment at its lowest since the early 1970s. Employment to population ratio at its highest since then. And what are people talking about? Blowing out the deficit again to buy sweeties for voters. That is, the political imperatives just don’t militate in favour of anyone using these theories as they’re supposed to work.

In the meantime, of course, we’ve effectively changed the meaning of the word “austerity“:

Austerity is a political-economic term referring to policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. Austerity measures are used by governments that find it difficult to pay their debts. The measures are meant to reduce the budget deficit by bringing government revenues closer to expenditures, which is assumed to make the payment of debt easier. Austerity measures also demonstrate a government’s fiscal discipline to creditors and credit rating agencies.

To a modern politician — or political activist — “austerity” now means something more like “only spending a bit more this year than you did last year”. British commentators have been accusing the government’s “austerity” measures for all kinds of negative effects, yet there have been no large scale austerity measures brought in.

July 17, 2018

QotD: The incentive problem for universities

Filed under: Economics, Education, Government, Quotations, USA — Tags: , , — Nicholas @ 01:00

Incentives matter. This is a fundamental tenet of economics: People respond to their incentives. If something in a market seems to be going wrong, it’s because the incentives have gotten screwed up.

Looking at the market for education, it’s hard not to think that there’s something wrong with the incentives. Tuition keeps going up and so does debt. The percentage of people who are not paying off that debt — either because they are in default, deferment, or an income-based repayment program — is staggering. Naturally, a lot of folks would like to get the government in there to start tweaking those incentives until the market stops being so crazy.

One issue involves the incentives that schools have to ensure that their graduates get value out of their degrees. At the moment, a school can enroll you in practically any program, and the government will lend you money for tuition and living expenses, whether or not that degree is likely to produce the means to repay the loan. Since schools are often in a better position to know the economic value of their degrees than naive potential students, that twists the incentives. Eventually, the student will pay, either with money or trashed credit. If the loan defaults, taxpayers will pay too. The school has the most information about the transaction and yet it has the least at stake. No wonder we have such high tuition, so many dubious degree programs and such a troubling rate of default.

Megan McArdle, “Don’t Make Colleges Pay for Student-Loan Defaults”, Bloomberg View, 2016-09-07.

June 17, 2018

Blackmailing the Bishop – Blackadder – BBC

Filed under: Britain, Humour, Religion — Tags: , , — Nicholas @ 02:00

BBC Comedy Greats
Published on 11 Jan 2010

The baby-eating Bishop of Bath and Wells comes to collect a debt, but finds himself the victim of a fiendish plot.

May 11, 2018

Imagine Ontario’s election

Filed under: Cancon, Politics — Tags: , , , , , — Nicholas @ 03:00

Andrew Coyne on the fantasy campaign that is just kicking off in Ontario:

The first NDP ad of the 2018 Ontario election campaign invites viewers to “imagine a place” where hydro is cheap, drugs are free, and dental care is on the house — all at no cost to anyone except the “very rich” who will be “asked” to “pay a little more,” which I gather is NDPese for “taxed within an inch of their lives.”

That word — “imagine” — might be the theme of the coming election. The three major parties appear to be living in a world of the imagination, with platforms full of imaginary promises paid for with imaginary dollars. The province is sinking ever deeper in debt, notwithstanding the Liberal government’s desperate efforts to conceal it, its debt-to-GDP ratio headed for 45 per cent even after a decade or more of uninterrupted economic growth. A recession of any length or severity would blow that number skyward.

Beyond that the picture only grows darker, with the first of the baby boomers just into their 70s and the costs of health care projected to rise, relentlessly, as they grow into their dotage. And yet all three parties are merrily racking up new spending promises — daycare, pharmacare, dentacare, the works — with money they wouldn’t have even if the official budget numbers were genuine, and not, as the province’s auditor general has lately warned, a swindle and a fraud (I paraphrase). It’s an election in la-la land.

Oddly, this does not seem to be the conventional view. The advance word on the election, rather, is that Ontario is facing a choice of unprecedented starkness, a polarizing election with no one seeming to occupy the middle ground.

“It’s hard to remember a provincial campaign that’s featured two leaders so diametrically opposed to each other,” broadcaster Steve Paikin wrote recently, of the Liberals’ Kathleen Wynne and the Conservatives’ Doug Ford. “The political centre,” agrees the Globe and Mail’s Marcus Gee, “has vanished like a puddle in the sun.”

It’s true that the Liberals and the NDP are in something of a bidding war for the left-of-centre vote. If the March budget signalled a retreat from the Liberals’ not-overly-stringent devotion to fiscal restraint, the NDP platform goes further in every direction: about $4 billion a year further, in fact.

March 17, 2018

Toys ‘R’ Us did for toys what Borders and Barnes & Noble did for books

Filed under: Business, Economics, USA — Tags: , , — Nicholas @ 03:00

We have lived through the golden age of the big box store, and the less-fit are now going to the wall. Virginia Postrel looks at the history of Toys’R’ Us and how it changed the toy market:

I wasn’t a Toys ‘R’ Us kid.

By the time the big box wonderland arrived in my hometown, I was a 25-year-old business reporter living 900 miles away. So instead of conjuring up memories of dolls, bikes and video games, the chain’s imminent demise reminds me of what the world was like before it arrived: Most toys were available only around Christmas and even then the choices were limited unless you lived in a big city. We got my doll house in Atlanta.

Toys ‘R’ Us changed that. “They got a million toys at Toys ‘R’ Us that I can play with,” boasted its famous jingle. “The selection — more than 18,000 different toys in every store — is almost inconceivably vast,” wrote David Owen in a 1986 Atlantic article on the toy business. “There’s an enormous opportunity in America if you’re willing to make a commitment to inventory,” founder Charles Lazarus told him.

Indeed there was.

What Toys ‘R’ Us did for toys, Home Depot and Lowe’s did for hardware; Best Buy and Circuit City for electronics and music; Borders and Barnes & Noble for books; Bed, Bath and Beyond and Linens n’ Things for home goods; and Staples, Office Depot and Office Max for office supplies. The rise of category killers in the 1980s accustomed consumers of all ages to unprecedented variety and choice—in any season and just about any locale. In less populated areas, Walmart filled in the gaps.

By internet standards, the selection Owen termed “inconceivably vast” now looks paltry. “I stopped by my local Best Buy to do research, and found they stock something like 30,000 different titles,” I wrote in 1999. Looking at that text today I wondered if the number was a typo. A mere 30,000? Surely there was a missing zero. Or two.

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