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John Lounsbury  

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  • Perpetualization Of The Too Big To Fail Banks [View article]
    Commenters so far are right on target. Here is some supporting data:

    1. From Josh Brown, in 2013 Financials had more than 16% of the capitalization of the S&P 500 and nearly 20% of the earnings. http://bit.ly/1QSmPzh

    2. From Vestin, in 2014 Financials had nearly 15% of the S&P 500 capitalization and 24% of the Dow Jones Industrials http://bit.ly/1QSmV9P

    3. From Wikinvest, at the end of 2009 Financials had 15% of the S&P 500 capitalization http://bit.ly/1QSmV9R)

    4. From S&P Dow Jones Indices, as of 30 April 2015 Financials had more than 16% of the S&P 500 capitalization.

    So the BEA (quoted in this article) says says the financial sector contributes 7.1% (average for the last 3 years) to GDP yet they are taking more than twice that in earnings and capitalization.

    Matt Taibbi can hold on to his vampire squid metaphor - it still applies.
    May 16, 2015. 04:16 PM | 4 Likes Like |Link to Comment
  • There Is Little 'Fact' In The Austerity Vs. Deficit Spending Debate [View article]
    sfpdf - - -

    The article you linked has an unstated assumption which is incorrect, namely that money which is borrowed (or lent) is done so from savings (or has some relationship to savings in a fractional reserve banking system). This assumption is that the "loanable funds theory of banking" is applicable to the real economy. See http://bit.ly/1b4iyse. Note in the first sentence the word "hypothetical" is used. This hypothetical concept has been used forever in economic textbooks for conceptual development. Unfortunately, fairy tales oft repeated can become considered real.

    The real world money and banking system creates credit based on assets pledged as security, be those physical items with current value or future earnings in supplement or in place of things with physical value. The role of the central bank is to moderate (and supplement when necessary) the required reserves among member banks. Savings have nothing to do with loan creation.

    Therefore the idea that the government and the private sector are competing for the same savings and that increased government deficits crowd out private credit creation is fallacious.

    The relationship to Cullen Roche's paper is that Cullen shows the direct empirical relationship (not a theory, but real monetary balances) in real time between money created by government deficit and the increase of money in the private sector. This is not just a correlation but a cause and effect relationship of sectoral balance accounting (which is what the complicated equations explain).

    Hard to Love is correct that Cullen Roche is not describing MMT but rather the monetary operation of the economy which is the same as the operation MMT discussants site in their work.


    sfpdf, you do not need to apologize for not being an economist. There are times when learning basic relationships may actually be easier when you don't have to unlearn some of the things you mistakenly thought you knew. That is a condition that many economists have to work through as the field progresses and some do so more successfully than others.
    Apr 26, 2015. 04:57 PM | 1 Like Like |Link to Comment
  • There Is Little 'Fact' In The Austerity Vs. Deficit Spending Debate [View article]
    sfpdf - - -

    Interested in your thought that government spending can crowd out private investment. Where does the money the government spends go? Doesn't it go to the public for the most part? Do you then propose that the public will invest less if it receives an increase in money? Why?

    For background for why I ask this question see the excellent paper by Cullen Roche http://bit.ly/1JqxGPI

    For a short note and a 60-year graphic: http://bit.ly/1JqxH5W
    Apr 26, 2015. 12:51 AM | 2 Likes Like |Link to Comment
  • The Economy Is Growing Slower While The Markets Rise [View instapost]
    Part of the divergence between cash flow and stock index advance can be accounted for by the spike in margin debt so far in 2015. See Doug Short: http://bit.ly/12gjPAx
    Apr 25, 2015. 03:41 PM | Likes Like |Link to Comment
  • Rooftop Solar Will Prevail Against Utility Obstruction Efforts [View article]
    Tom - - -

    This is actually the way the utility industry is organized today. The generators and the distributors are separate companies in most cases and where they are combined all generators must be allowed access to any transmission lines that exist. This was established by Order 888 of the Federal Energy Regulatory Commission (FERC) issued in 1996. So, in principle (and in many cases in practice), the suggestion you make already has the necessary framework provided. Some utility bills today will show separate delivery and generation charges. All that would be needed is to break the delivery charge into two parts: the fixed grid connection fee and the delivery charge per kwh used.
    Apr 16, 2015. 04:27 PM | Likes Like |Link to Comment
  • There Are Strange Data Points For Our Forward Looking Markets [View instapost]
    One of the factors that still has some flotation left to ride out this soft spot. But we will need something else to pick up in another six months.
    Apr 11, 2015. 01:47 PM | Likes Like |Link to Comment
  • Rooftop Solar Will Prevail Against Utility Obstruction Efforts [View article]
    Unless I missed it, no one has discussed solar farms. This is the way that utilities can fight back and actually win. A centralized solar photovoltaic facility can generally produce electricity at a significantly lower cost per watt than distributed rooftop systems. Where I live (North Carolina) numerous planning permits have been granted and now construction permits are being approved for solar farm facilities. I haven't seen the numbers of how much solar PV electricity will be coming on line in the next year or two here but it must be significant based on the zoning changes and construction permits approved. And building a solar farm power facility takes only a few months, not the years involved with other power generating plants.

    Why is this happening? Solar is cheap. Estimates I have seen are that distributed solar costs about $0.10 to $0.12 per kwh right now for rooftops and less for solar farms. Dubai will be producing solar electricity at less than $0.06 per kwh with facilities currently under construction.

    And just this week oil and gas rich United Arab Emirates has found that they can save billions by converting 25% of their electricity from gas powered generation to wind and oil. See http://bit.ly/1FpPnNW

    The projections I have seen from sources such as the U.S. Energy Information Administration and the International Energy Agency are that distributed solar production cost will come below $0.06 per kwh by 2018-2020 and centralized solar costs will be down in the range $0.02 to $0.04. These are a fraction of current generation costs for all other generation technologies, all of which are rising in cost over time, not coming down.

    There is a limit to how much solar can be assimilated within a grid, or by local use where generated, because of storage needs. How storage technology develops will determine how much solar can be economically used. However, the most successful utilities will be those that optimize their centralized solar production at the various stages of energy storage development.

    The economics of rooftop solar is not yet clear. It may end up being a costly experience over the long haul if utilities develop their centralized solar facilities efficiently.
    Apr 10, 2015. 12:46 AM | 4 Likes Like |Link to Comment
  • Rooftop Solar Will Prevail Against Utility Obstruction Efforts [View article]
    Valuebug - - -

    The economics of small scale thermal conversions to create electricity is not attractive. But there is no reason to use grid electrical power for attic fans - solar cell powered fans are readily available and cheap. I replaced my line powered fans four years ago.
    Apr 10, 2015. 12:13 AM | 3 Likes Like |Link to Comment
  • Is Obamacare Retarding Economic Growth? [View article]
    Excellent discussion in the article and the comments. One aspect of Obamacare that has not been mentioned is the efficiency it introduces to the labor market. No longer are many employment decisions made with employer provided healthcare as a significant consideration. This improves labor market efficiency in at least three closely related ways:
    1. People no longer are "trapped" into keeping a job they don't like because of health insurance concerns.
    2. People can move to a job that they are enthusiastic about and maintain healthcare coverage regardless of pre-existing conditions or relative merits of insurance plans offered by the employers.
    3. Companies can make hiring and firing decisions free from consideration of the future cost commitments for company paid healthcare coverage.

    The productivity of a labor force thus freed from an artificial constraint will undoubtedly increase.

    Of course, there is another advantage of Obamacare (or any other universal coverage program which requires customer costs decisions to be made by the customer): Costs will be restrained by market forces. This was well discussed in the preceding comments.

    Now we can go back to arguing about how to increase the availability of healthcare coverage, be it ACA, ACA modified, single payer in some form (which I would argue does require customer cost control in some way or it will lead to rationing), or something else not mentioned.

    If Obamacare has a list of benefits, a major factor among them must be that there is now more widespread discussion of healthcare systems than before.
    Apr 4, 2015. 03:39 PM | 2 Likes Like |Link to Comment
  • The Federal Reserve Has Painted Themselves Into A Corner [View article]
    EK1949 - - -
    :-)
    Mar 29, 2015. 02:27 PM | Likes Like |Link to Comment
  • The Federal Reserve Has Painted Themselves Into A Corner [View article]
    Green Elmo - - -

    Yes, most of what I said is contentious and that is why I said it. Without contention where is a debate?

    What has been going on in this comment stream is a discussion on one level but at the highest level we are debating. Unfortunately there is more debating on Seeking Alpha than in Washington. :-(
    Mar 22, 2015. 02:47 AM | 5 Likes Like |Link to Comment
  • The Federal Reserve Has Painted Themselves Into A Corner [View article]
    Green Elmo - - -

    Your questions are all political and should be resolved politically. The way money is spent is a political decision and I was talking about how much money should be spent as a precondition to determine how it is spent.
    You can clearly start from your questions and work back to how much money.
    Bottom line, we are constrained to live within a political process and I feel that has been failing us.
    What Socialism is acceptable? As much as needed to provide basic safety nets but not so much as to suppress individual initiative, which is the driving force of economic advancement for any society.
    Unfortunately, I believe, the correct amount of Socialism at any time is not the right amount for many other times. So we are unlikely to be able to optimize "Socialism".
    Mar 21, 2015. 04:32 PM | 5 Likes Like |Link to Comment
  • The Federal Reserve Has Painted Themselves Into A Corner [View article]
    Logical Thought - - -

    We clearly have different definitions of money and different understanding of the differences between sovereign debt and non-sovereign debt. Since I expect you are confident in your understanding there is little we can discuss. My understanding is that the U.S. is not insolvent, can never be insolvent and all such discussion is done for political manipulation.

    You do not accept my understanding (based on your statement) so we have no common ground for discussion because I cannot endorse the concept of U.S. government debt as burden on our children. It is only a burden by political choice to subcontract the creation of money to private bankers.

    Private banking should be the business of the private sector and should not be a parasite on the public function. Get the government out of private finance and get private finance out of the government. That would be the end of TBTF and a return to more fundamental capitalism.
    Mar 21, 2015. 04:20 PM | 3 Likes Like |Link to Comment
  • The Federal Reserve Has Painted Themselves Into A Corner [View article]
    EK1949 - - -

    I probably did not express myself as clearly as I would wish. In the paragraph following the one you quoted (the one you said was wrong) I intended to make clear that the rest of the house was fiscal and that political incompetence by dragon fighters (in the age of mechanized weapons) were clueless.

    So I agree with your statement except for: "Good Fed policy with bad fiscal policy isn't a box for the Fed." I would argue that bad fiscal policy limits what the Fed can do effectively. Isn't that a "box"?
    Mar 21, 2015. 04:09 PM | 1 Like Like |Link to Comment
  • Are Debt Levels Too High, Or Are Consumers Simply Not Feeling Rich? [View article]
    We will be discussing your linked article in the "What We Read Today" column at Global Economic Intersection within the next few days.

    Excellent analysis and should provoke some controversy. I will have to review the comments on your article on SA as well.
    Mar 4, 2015. 04:52 PM | Likes Like |Link to Comment
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