Rebel Yid on Twitter Rebel Yid on Facebook
Print This Post Print This Post

The Power of 20%

Thomas Sowell

Thomas Sowell

Kyle Peterson interviews Thomas Sowell in the Wall Street Journal in The March of Foolish Things:


So how can the case for reform be made? Let’s say the Republican presidential nominee has a speech lined up at the historically black Howard University. What should the candidate say?

Mr. Sowell says he should tell the audience that “one of the worst things for blacks is the minimum wage. The worst thing,” he says, is “the public schools run by the teachers unions who will protect the most incompetent teacher there is, who will fight tooth and nail against your being able to make a choice and go to voucher schools.” Lay out the case, Mr. Sowell says, and “address them as if they’re adults. You’re not going to get 50-plus percent of the black vote. But good grief, if the Republicans got 20% of the black vote it would be a revolution.”

Print This Post Print This Post

Order and Liberty


From Barron’s, Chinese Puzzle by Thomas Donlan:

Worldly wise investors and sophisticated geopoliticians sometimes forget that Chinese markets reflect the power of the country’s government more than its economy. The price of stocks in state-owned and state-funded corporations has too little to do with their profits and too much to do with their political connections.

Just as admirers of Maoist communism ignored murder and starvation on a scale that overwhelmed the evils of Hitler and Stalin, admirers of Chinese economic reform have often ignored the chain-mail authoritarian fist inside the velvet economic glove.

In a famous comment in 2009, Thomas Friedman of the New York Times acknowledged the fist and ignored it: “One-party autocracy certainly has its drawbacks,” he said. “But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages.”

Growth and prosperity in China have been handed down from governmental heaven through the diktats of central planners, and financed through manipulation of money and exchange rates.

Central planning that is intended to eliminate chaos eventually creates it. As Friedrich Hayek wrote in The Road to Serfdom, state economic planning is unavoidably arbitrary: “The more the state plans, the more difficult planning becomes for the individual.”

Among many examples of this principle: If a government tweaks money supply to hit targets for interest rates and exchange rates, it will provide stability in those things, but the economy will fluctuate. Or, if the government tries to guarantee general economic growth, as measured by employment, gross domestic product, consumer confidence, business investment, or all of them, rates of interest and exchange will fluctuate. Either way, the economy will be under control of an unstable, unpredictable thing that seeks order instead of liberty, and so can deliver neither.

All over the world, there are people who imagine themselves to be masters of the material universe. They are the greatest threat to liberty and prosperity.


Read the entire Donlan link.

Historian Paul Johnson laments the history of trying political solutions to economic problems.  (I would add the poor record of trying political and economic solutions to cultural deficiencies.)

In today’s Wall Street Journal, Ben Bernanke reviews the success of the Fed in managing the 2008 collapse.  How The Fed Saved the Economy.  I agree that he deserves much credit, but managing a crisis is distinct from managing an economy. The problem with the use of many Keynesian concepts lies in  making that distinction.  Bernanke also notes the limits of Fed policy; at some point fiscal policy clearly matters.

For years the Fed has bailed out poor fiscal policy. Faced with zero interest rates they are out of ammo. It makes one shudder when one of the justifications for raising rates is being able to cut them again in case we lapse back into a recession.

Print This Post Print This Post

Thoughts on the Economy 2015 10 02


Steel prices are the lowest they have been in 15 years. In China it is cheaper than cabbage. Stainless and aluminum are also very low.

Oil is also bouncing around new lows.

A sharp drop in industrial commodities has some forecasting relevance. If it is confirmed by lower shipping rates, container imports, railroad utilization we could be facing a new recession.  Business seems weak in many areas.

Three postings to read:

from National Review, Checkmate: The Economic Chess Masters Play a Losing Game by Kevin Williamson- the new realtionship wiring in our connected economy makes traditional econ math models far less reliable.

from Marginal Revolution, Quick thoughts on the new employment report by Tyler Cowen- wages and employment are subject to new dynamics

from Carpe Diem Today is Manufacturing Day, so let’s recognize America’s world-class manufacturing sector and factory workers by Mark Perry- the efficiency gains in manufacturing is one of those critical dynamics.

This chart from Mark Perry speaks volumes:

US manufactruring

these changes provide a serious challenge to economic policy especially relative to wages and employment. It may be transition similar to the transition from agriculture to industry- a change that ignited the Progressive era.  We may be on the verge of a new era that will require substantially different thinking than we are getting.

Print This Post Print This Post

A Series of Relationships

Kevin_Williamson (1)

from National Review, Checkmate: The Economic Chess Masters Play a Losing Game by Kevin Williamson:

Our metaphors fail us. Our political leaders still talk about the economy as though it were one of Henry Ford’s factories: It creates so many jobs, produces so many pieces, consumes so much steel and rubber, and if government lent it some money at subsidized rates, maybe it could add another line, which would “create jobs,” etc. Create jobs creating what? No politician ever wants to think about that too deeply, because it means thinking about why demand for their pet projects is insufficient without their artificially inducing it through subsidy or mandate. At his worst, President Obama really does seem to believe that paying a man to dig a hole in the morning and fill it up in the afternoon makes the country richer because it contributes to consumer spending. This is superstition. Pull the consumption lever, watch production ramp up. But the 21st-century economy isn’t a series of levers; it’s a series of relationships. The nature of our technologically enabled present global connectedness means that for the first time in human history all economic activity happens in immediate relation to everything else. You cannot isolate the variables, which is a real problem if you believe in political management of the economy and see the policy question as nothing more than a really tough math problem.

The persistent failure of our current approach to economic policymaking suggests a very different role for government from the one that exists in the mind of the purported chess masters in Washington. President Obama, whose background is in the crank-turning mechanicalism of the law, is not intellectually up to the challenge. It isn’t clear that there is anybody on the scene who is.

Read more at:

Print This Post Print This Post

Modern Fallacies


Perhaps the greatest of modern fallacies is that economic problems can be solved by political means, and that charismatic leadership can be a positive unifying force if only political restraints are sacrificed.