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  • Naive Keynesianism To Keep You From Believing Macroeconomic Idiocy Of Various Kinds [View article]
    Did you wonder why the blue line shows 'business investment in equipment and software' instead of a more straightforward measure of capital formation?

    I did.

    So, I searched the web and found the article "Here's Who To Blame For America's Lousy Economy.." by the renowned conservative Henry Blodget (on the Business Insider web site). He includes a table showing simply 'private investment as a percent of GDP.'

    It is worthwhile comparing the two sets of data.
    Aug 21 08:20 AM | 1 Like Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    "With all respect, this is basically saying the same as Kudlow and Moore, with equal lack of analysis."

    What is an appropriate level of analysis? Including a graph that shows that corporate taxes are 1.6% of GDP and concluding that "US corporations pay surprisingly little in taxes"?
    Aug 18 10:51 PM | 4 Likes Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    "US executive branch about as biz friendly as possible. Unions get no support."

    Here it is probably appropriate to recall the Boeing factory in South Carolina and the actions of the National Labor Relations Board.
    Aug 18 10:45 PM | 6 Likes Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    The article is not mentioning the elephant in the room which is that during the current recovery policy makers have been distinctly business unfriendly. And yes, 35% marginal corporate tax is part of it, as is the new mandatory employee benefits aka Obamacare, as is the entire climate of policy uncertainty, where the only thing one can count on is that any new policy would be anti-business.

    Why is it so strange that businesses are reluctant to invest?

    Running a business is about making a profit, not about making a political statement. If corporations have record cash holdings it is an indication that investment risk and uncertainty is so high that they are willing to forgo the chance of additional profit. It is not a validation that there is no need to make the investment climate better.
    Aug 18 09:57 PM | 5 Likes Like |Link to Comment
  • Strong Buying Opportunity: General Electric's Synchrony Financial Quiet Period Expiration [View article]
    One way to conceptualize what GE will be doing is that they will offer their stake in SYF to GE shareholders and use the entire proceeds for immediate share buyback.
    Aug 15 11:48 PM | Likes Like |Link to Comment
  • Taxes Don't Lie [View article]
    'it was borrowed money, so it did not actually drain any current spendable income from any "worker,"'

    This is not entirely correct. Borrowed money is not free lunch. It needs to be paid out of future taxation plus interest. So, yes, it is "workers" who pay for it.

    'most of it was spent on job-creating or job-supporting activities, thereby supporting and stimulating the economy'

    This is slightly wrong. If one looks back at the American Recovery and Reinvestment Act of 2009, only a very small percentage of it went to job-creating infrastructure work, notwithstanding all the 'shovel-ready' rhetoric of the time.

    'the simplest comparison is with Europe'

    This is not quite so simple. The reason that the European countries did not spend their way out of the recession was not for lack of will. They tried, and it was only the threat of imminent bankruptcies, caused by the highly bloated budgets with which they arrived into the crisis, that made them change course.

    'even eliminating corporate taxes altogether would not improve our economy, nor would it end the whining by corporate management for "more relief" from their obligations to society.'

    This is slightly misleading. The reason to support eliminating corporate taxation is not so that there is less aggravation to corporate management. Taxes are just one of the many costs of doing business. The real cost to society of corporate taxation is jobs eliminated as business investments have to clear a higher hurdle to get started. So, it is very much about improving the economy.

    'while taking advantage of a high-quality infrastructure ...'

    Just to inject a sense of proportion, the entire Transportation Department budget for fiscal 2013 was 24B. This works out as 0.69% of all Federal spending in 2013.

    Aug 13 12:10 PM | 5 Likes Like |Link to Comment
  • The Trouble With Discount Rates [View article]
    "There are good reasons to believe the historical ERP is optimistic. History has been kind to the United States ..."

    If the historical 4.5% US equity risk premium is higher than what we could expect going forward, using that number in DCF calculations will result in lower asset values.

    Is the author arguing that current stock valuations are too conservative?
    Aug 12 08:34 AM | Likes Like |Link to Comment
  • S&P Economists And Inequality [View article]
    David, is it possible that the wages in China continue to rapidly increase, as they have done in recent years, to the point where the cost advantage of manufacturing in China just about equalizes the added risk of doing business there?
    Aug 11 05:24 AM | 1 Like Like |Link to Comment
  • S&P Economists And Inequality [View article]
    So, what would be some ways to make capital welcome in America again?
    Aug 10 12:01 PM | Likes Like |Link to Comment
  • S&P Economists And Inequality [View article]
    Nice article. The claim that inequality causes slower growth because the rich save too much is so ridiculous that it always amazes me when people are able to say it with a straight face. Just one thing to ponder: US vs. Europe.

    There are really two kinds of inequality. Inequality of pay for labor. Inequality of income from (successful) entrepreneurship as opposed to income from everything else.

    It seems counterintuitive at first, but increased inequality of pay for labor is a sign that things are going well. Here is one way to think about this. Should the difference in productivity (and hence, pay) between unskilled labor and the most skilled labor (that the educational system can produce) increase with time or decrease with time?

    As for entrepreneurs, I probably agree that people like Gates, Bezos, and Zuckerberg would have had enough incentive to build their businesses if it meant that they get 'only' 100M (to pick a random number) instead of the billions they did make. But how to set up such a system without completely undermining property rights? I am open to suggestions. One thing to remember is that such people are getting filthy rich not because everyone else is getting poorer. Quite the opposite.

    Both of those inequalities are 'good' inequalities. So, is there such a thing as 'bad' inequality? Yes. Think South Africa. Think Brazil. In those cases, inequality is not a cause of weak economy, but a symptom, a symptom of an educational system that is failing a vast segment of the population.

    This observation can be brought back to the US. If you care about the poor, care about education. Care a lot.
    Aug 10 04:41 AM | 2 Likes Like |Link to Comment
  • The Problem With The Fed Paying Interest On Reserves [View article]
    "This means, that if the Fed began paying 1% interest on reserves, when it began to "tighten", then $26 Billion USD ( $2.6 Trillion x 1% = $26 Billion) would be reduced from the amount distributed to the US Treasury."

    This is a little overstated to make the point. A much more likely number for a possible interest on reserves is 0.1%.
    Aug 6 07:21 AM | Likes Like |Link to Comment
  • Wages And Productivity [View article]
    Let's take a simple example, a burger franchise where the workers are paid less than their productivity.

    To a leftist this looks like a power struggle. The employer has overpowered the employees to accept lower wages. He needs to be picketed. He needs to be regulated. He needs to be forced to pay what is 'fair'.

    To an entrepreneur this looks like an opportunity. If the employees are willing to work for less than their productivity, it is possible to duplicate the business and collect excess profit. And duplicate, and duplicate, for as long as the wages have not gone up to make that impossible. Hence, the wages do go up to make that impossible.
    Aug 5 12:40 PM | 7 Likes Like |Link to Comment
  • Stopping Corporate Flight By Taxing More? [View article]
    The only appropriate level of the corporate tax is 0%.

    The corporate tax is not a 'free lunch.' It is not being paid by the CEO. It is not being paid by the shareholders of the corporation. It is being paid by the consumers of the products of the company as a hidden (and arbitrary) percentage of the purchase price.

    Why impose a roundabout sales tax with the side effect of discouraging companies from incorporating in the US?
    Aug 2 10:40 AM | 3 Likes Like |Link to Comment
  • The Implications Of A K-1 Tax Form When Trading ETPs [View article]
    The real issue with ETPs that turn out to be a partnerships is not so much the effort of entering one more form in your tax return, but the bookkeeping required as the basis of the shares changes every year. Whenever there is an alternative it is just not worth it.
    Jun 23 07:26 PM | Likes Like |Link to Comment
  • Polski Koncern Naftowy - An Interesting Central European Play [View article]
    "My one concern here is that, with the exception of Germany, just about all of the countries mentioned are possible targets as Russia reconstitutes the old USSR."

    Isn't this a little too cynical? All those countries are members of NATO.
    Jun 21 12:28 PM | Likes Like |Link to Comment