Canada, Land of Smaller Government – Jason Clemens, The Wall Street Journal “[T]he Canada of the 1970s and early 1980s—the era of left-wing Prime Minister Pierre Trudeau—no longer exists…In 1995, the federal government, led by the Liberal Party, passed the most important budget in three generations. Federal spending was reduced almost 10% over two years and federal employment was slashed 14%. By 1998, the federal government was in surplus and reducing the nearly $650 billion national debt…all government spending peaked at 53% of Canadian GDP in 1992 and fell steadily to just under 40% by … [Read more...]
Ethanol Subsidies Four Decades Later – Still Wrong
Survival of the Fattest – Review & Outlook, The Wall Street Journal “The best refutation of the theory of the survival of the fittest is probably the corn ethanol lobby, whose annual $6 billion in federal subsidies have managed to outlive both its record of failure and all evidence and argument…CBO reveals that it costs taxpayers $1.78 in ethanol "incentives" to reduce U.S. gasoline consumption by one gallon…Given these realities, the only mystery is how an industry that produces a fuel that no one would willingly buy has managed to be subsidized over four decades at costs that are higher … [Read more...]
Raters Now Liable for Mistakes
Bond Sale? Don't Quote Us, Request Credit Firms – Anusha Shrivastava, The Wall Street Journal “Standard & Poor's, Moody's Investors Service and Fitch Ratings are all refusing to allow their ratings to be used in documentation for new bond sales…Each says it fears being exposed to new legal liability created by the landmark Dodd-Frank financial reform law…The new law will make ratings firms liable for the quality of their ratings decisions, effective immediately…That is important because some bonds, notably those that are made up of consumer loans, are required by law to include ratings in … [Read more...]
Big Troubles in China
Hong Kong's Populist Turn – Review & Outlook, The Wall Street Journal “Hong Kong's prosperity was built on its economic freedom…So it's alarming to see the territory's leaders turning their backs on that tradition…Hong Kong became wealthy by resisting the statist fashions of the postwar West. It would be tragic if it adopted those fashions just as we are re-learning the damage they can do.” Chinese Banks: Informal Securitisation Increasingly Distorting Credit Data – Chu, Wen, and He, Fitch “Against this backdrop, the reported deceleration in lending in H110 (Chart 1) has received much … [Read more...]
Gold ETFs and Gold to Go
Notable & Quotable – The Economist, The Wall Street Journal “Investment in gold ETFs and similar products reached a record high in 2008, of 321 tonnes—and then almost doubled, to 617 tonnes, last year. The stock of gold held by such funds more than doubled to 1,839 tonnes in the two years to the end of 2009…The 229 tonnes of gold sold in the form of official coins last year was the most since 1986, thanks to demand from retail investors in America and Europe…In Abu Dhabi those seized by an urge to buy bullion can now head to the lobby of the Emirates Palace hotel, where the Gold-to-Go … [Read more...]
Donuts and Coffee to Measure the Economy
Using Starbucks, Dunkin’ Donuts to Track Economy – Phil Izzo, The Wall Street Journal The most recent leading indicators are pointing down, indicating more economic weakness in the months ahead. Be your own economist by going to your local Dunkin' Donuts or Starbucks to track activity. You may be surprised how closely both track the economy. – E.J. Smith … [Read more...]
Fund Firms Try ETFs
Mutual-Fund Firms Jumping Into ETFs – Chuck Jaffe, The Wall Street Journal “Last week, the news out of Chicago was that there might soon be a day when at least half of the mutual-fund community converts its traditional funds into ETFs. The changes about to hit both the fund and ETF business were on display last week, and ordinary investors should be aware of what is coming, because it will change the landscape of the business.” … [Read more...]
States Hurt as Federal Dollars Dry Up
States Face New Pinch as Stimulus Ebbs – Deborah Solomon, The Wall Street Journal "Stimulus is going to run out and there isn't sufficient economic growth and revenue growth that's going to come in and make up for the loss of those funds," said Scott Pattison…Thirty states have budgeted for the Medicaid funds, which would provide additional money for six months beginning Jan. 1. Of those states, only nine have contingency plans in place if the money doesn't arrive, according to the National Conference of State Legislatures…Already, state and local governments have cut more than 230,000 jobs … [Read more...]
Henrik Fisker and the Auto Industry
Driven: How Henrik Fisker Aims to Floor the Auto Industry – Chuck Squatriglia, WIRED.com The big automakers are bogged down by excessive management and staff. They’re inefficient. We’re modern, fast, and light. Take the design process: At a typical car company, it lasts about 12 months. At Fisker it’s two. And we don’t feel the need to create every component in-house, either. We encourage suppliers to use our vehicles as a test bed for new ideas. Then we help them develop the technology and adapt it to our car. … [Read more...]
Yuan Revaluation
The China Currency Syndrome – Review & Outlook, The Wall Street Journal “To the extent that a revalued yuan raises production costs in China, some of its manufacturing will move to Vietnam, Bangladesh or other lower-cost countries…As for the U.S., the yuan has become a convenient scapegoat for Washington's policy mistakes. The neo-Keynesians who've been running U.S. economic policy since 2007 promised that their stimulus would deliver millions of new jobs. Now that those jobs have failed to materialize, Democrats blame China's exchange-rate policy. But no country in history has devalued … [Read more...]