“I’m waiting for Spain to melt down the World Cup to pay off its debts, or more seriously, real defaults from Spain, Greece and maybe California and New York. Let’s get on with it and put the structural reforms behind us. That would be a true buy signal.”
— Andy Kessler, July 16, 2010
“A currency union is strongest without fiscal union.”
— John H. Cochrane, May 18, 2010, in a terrific commentary on the Greek crisis and the European Union
“Architects of the legislation that binds the nation’s communications infrastructure in the year 2010 were born in the 1870s and 1880s. There is talk today in Washington about categorizing technologies and platforms developed in the 21st century under different Titles of legislation written by people born in the 19th century. We don’t need to jettison all the wisdom of the ancients, but perhaps there’s a better way?”
— Nick Shulz, at the Enterprise Blog, March 25, 2010
“If we determine that a dollar shall be our unit, we must then say with precision what a dollar is.”
— Thomas Jefferson, 1784, as quoted by Judy Shelton
“No moment in technology history has ever been more exciting or dangerous than now. The Internet is like a new computer running a flashy, exciting demo. We have been entranced by this demo for fifteen years. But now it is time to get to work, and make the Internet do what we want it to . . . .
“Practical business: who will win the tug of war between private machines and the Cloud? Will you store your personal information on your own personal machines, or on nameless servers far away in the Cloud, or both? Answer: in the Cloud. The Cloud (or the Internet Operating System, IOS — ‘Cloud 1.0′) will take charge of your personal machines. It will move the information you need at any given moment onto your own cellphone, laptop, pad, pod — but will always keep charge of the master copy. When you make changes to any document, the changes will be reflected immediately in the Cloud. Many parts of this service are available already.”
— David Gelernter, “Time to Start Taking the Internet Seriously”
“Only someone who has Asperger’s would read a subprime-mortgage-bond prospectus.”
— Dr. Mike Burry, in an excerpt of Michael Lewis’s new book The Big Short.
“Rationing happens today! The question is who will do it.”
— Rep. Paul Ryan, February 2, 2010, in a terrific interview on health care reform that drills to the center of the debate.
Also see:
“The irony of the zero-rate policy, coupled with Washington’s preference for a weak dollar, is a glut of American capital in Asia (as corporations and investors shun the weakening U.S. currency) and a shortage at home. For gold and oil, the low-rate policy works, weakening the dollar so commodity prices go up and providing traders with ample funds to buy into the expanding bubble. Those markets are almost daring the Fed to try to break out of its zero-rate box.
“But for small businesses and new workers, capital rationing is devastating, spelling business failures and painful layoffs. Thousands of start-ups won’t launch due to credit shortages, in part because the government and corporations took more credit than they needed (because it was so cheap).”
— David Maplass, The Wall Street Journal, December 4 2009
“O Lord that lends me life,
Lend me a heart replete with thankfulness.”
— William Shakespeare
“I hope that they (government regulators) leave it alone . . . The Internet is working beautifully as it is.”
— Tim Draper, Silicon Valley venture capitalist, who along with many other SV investors and executives signed a letter advocating new Internet regulations apparently unaware of its true content.
“The Americans have not had to deal with a true economic rival since the British more than half a century ago. America today is as unaccustomed to global economic competition as the British were at their apex. The U.S. often seems lumbering and ill-suited to the demands of economic rivalry.
“The only way to avoid Britain’s fate and meet the challenge of China is to reinvigorate economic life. This is a multiyear endeavor that must be done primarily through innovation, not legislation. America needs to retool its domestic economy to build on the global success of many U.S. companies. It must focus on inventing new products and generating new ideas, rather than defending the rusty industries of yesterday. Fights over health care and climate change are the cultural equivalent of fiddling while Rome burns.
“China thrives because it is hungry, dynamic, scared of failure and convinced that it should be a leading force in the world. That is why America thrived a century ago. Today, such hunger and dynamism seem less evident in American life than petulance that the world is not cooperating.
“The U.S. is in danger of assuming that because it has been a dominant nation on the world stage, it must continue to be so. That is a recipe for becoming Britain.”
— Zachary Karabell, The Wall Street Journal, October 13, 2009
“TANGIBLE COMMON EQUITY, n. unknown origin. Definition unknown; purpose unknown; how it’s calculated, unknown; what federal regulators think it means, unknown. Usages: “Macbeth,” Shakespeare, W., Act II, Scene (i): “Is this TCE which I see before me…I have thee not, and yet I see thee still.”
“TARP, n. acronym. 1. A synthetic device designed to cover up an unsightly mess, or to protect perishable goods (firewood, banks) from the ravages of the elements, typically costing somewhere between $12.99 and $700 billion. 2. Prime example of how governments use otherwise anodyne acronyms, abbreviations and sports metaphors to disguise matters of controversy. See also TALF, TLGP, TURF, FHFA, BACKSTOP, WRAP, OFHEO and SPECTRE.”
— example entries from the “Devil’s Dictionary: Financial Edition,” by Matthew Rose, The Wall Street Journal, September 15, 2009
“In the end, perhaps the most misleading claim of the peak-oil advocates is that the earth was endowed with only 2 trillion barrels of ‘recoverable’ oil. Actually, the consensus among geologists is that there are some 10 trillion barrels out there. A century ago, only 10 percent of it was considered recoverable, but improvements in technology should allow us to recover some 35 percent — another 2.5 trillion barrels — in an economically viable way. And this doesn’t even include such potential sources as tar sands, which in time we may be able to efficiently tap.
“Oil remains abundant, and the price will likely come down closer to the historical level of $30 a barrel as new supplies come forward in the deep waters off West Africa and Latin America, in East Africa, and perhaps in the Bakken oil shale fields of Montana and North Dakota. But that may not keep the Chicken Littles from convincing policymakers in Washington and elsewhere that oil, being finite, must increase in price.”
— Michael Lynch, New York Times, August 24, 2009
“When George W. Bush nominated Ben Bernanke to be Federal Reserve Chairman in late 2005, we wrote that there was ‘at least rough justice’ in the fact that Mr. Bernanke would have to clean up a monetary bubble that he had helped to create. Alas, that was truer than even we feared, and yesterday President Obama rewarded Mr. Bernanke for his efforts by nominating him for a second four-year term.
“One request: This time around, could he make the mess and clean-up a little less bloody?
“A striking fact of the last two years of financial trouble is how accountability has differed in the public and private spheres. On Wall Street and across the country, decades-old firms have failed, fortunes have vanished, and some former captains of finance face jail or fines. In Washington, meanwhile, most regulators and Members of Congress remain on the job, often with enhanced power.”
— The Wall Street Journal, August 26, 2009
“The flow of capital away from the U.S. is broad, deep and long-term. Investors can buy 20-year debt denominated in Brazilian reals or Chinese yuan, a monumental shift in the allocation of long-term capital. U.S. companies are shifting operations offshore in order to build and innovate more profitably. Meanwhile, the U.S. government is trapping billions of tech dollars — the lifeblood of innovation — offshore through an excessive repatriation tax. This is blocking much-needed industry consolidation, because an acquirer is forced to pay for the offshore cash without getting access to it.”
— David Malpass, August 20, 2009
“There’s also no denying that these distribution deals have benefited consumers. More than 30 devices have been introduced to compete with the iPhone since its debut in 2007. The fact that one carrier has an exclusive has forced other companies to find partners and innovate. In response, the price of the iPhone has steadily fallen. The earliest iPhones cost more than $500; last month, Apple introduced a $99 model.
“If this is a market malfunction, let’s have more of them. Isn’t Washington busy enough re-ordering the rest of the economy?”
– The Wall Street Journal, July 7, 2009
“In a few years we might actually find that we are hungry for more capitalism, not less. An economic crisis slows growth, and when countries need growth, they turn to markets. After the Mexican and East Asian currency crises — which were far more painful in those countries than the current downturn has been here — the pace of market-oriented reform speeded up. If, in the years ahead, the American consumer remains reluctant to spend, if federal and state governments groan under their debt loads, if government-owned companies remain expensive burdens, then private-sector activity will become the only path to creating jobs. With all its flaws, capitalism remains the most productive economic engine we have yet invented.”
– Fareed Zakaria, June 16, 2009
“Instead of more delectable disputations about the exact size of the state, we need to change the focus of the argument. Of course there are important choices to be made and it is vital, in my view, that we spend on infrastructure investment (notably in London) rather than on consumption. But we are not dedicating anything like enough political energy and interest to the real issue: who the hell is now speaking up for the wealth creators of this country?”
– London mayor Boris Johnson, June 15, 2009
(hat tip: Neil Pickett)
“The largest scientific and economic questions are being addressed by others, so I will confine myself to reporting about how all this looks from the receiving end of the taxes, restrictions and mandates Congress is now proposing.
“Quite simply, it looks like imperialism. This bill would impose enormous taxes and restrictions on free commerce by wealthy but faltering powers — California, Massachusetts and New York — seeking to exploit politically weaker colonies in order to prop up their own decaying economies. Because proceeds from their new taxes, levied mostly on us, will be spent on their social programs while negatively impacting our economy, we Hoosiers decline to submit meekly.”
– Gov. Mitch Daniels of Indiana, on the cap-and-trade tax, May 15, 2009
“Even when you make [a tax form] out on the level, you don’t know when it’s through if you are a crook or a martyr.”
– Will Rogers, as relayed by Tom Herman, the excellent long-time tax writer for The Wall Street Journal, in his last column today, April 15, 2009
“I made a decision a long time ago not to make my career a bet on bad things happening. I think that approach simply corrodes your strategic thought capacity. Human history is progress, so if you’re constantly having to screen out the good to spot the bad, your vision will unduly narrow. If you bet on progress, you can easily contextualize the bad, because progress is never linear. But if you bet on retreat, you must consistently discount advances as ‘illusions’ and ‘buying time’ and so on, and after a while, you’re just this broken clock who’s dead-on twice a day.”
– Thomas P.M. Barnett, April 10, 2009
“Beginning in 2003, the Fed filled the liquidity punch bowl. Low rates and the weakening dollar created a monumental carry trade (borrow dollars, buy anything). This transmitted the Fed’s monetary excess abroad and into commodities. As the punch bowl overflowed, even global bonds bubbled (prices rose, yields fell), contributing to the global housing boom.”
– David Malpass, March 27, 2009
Thanks to Steve Forbes for reprinting an excerpt of a 2008 article of mine in the Far Eastern Economic Review.
Dollar Defense
The value of money is not like any other product, whose value is set in the marketplace. The value of money in a floating-rate environment where fine-tuning central banks print money cannot be ‘’set by the market.” This is an illusion. Money is not a product or commodity. Money is an abstract concept — a measuring rod, a standard of value, a unit of account that must remain constant over time. Only then can workers and businesses, entrepreneurs and investors engage in meaningful trade, risk new money in forward-looking ventures, and lend and borrow money on reasonable terms. Movement in the value of money is not a helpful ”adjustment” but harmful noise that impairs the transmission of all-important information. How can one determine the price of a house or a complex mortgage security, for example, when the value of money itself is under suspicion?
To achieve a dynamic and growing economy, you need an utterly undynamic, stone-cold unit of money. It is the information-rich creative spikes of entrepreneurship and profit — or economic entropy — that comprise all economic growth. A high-entropy message requires a low-entropy carrier.
The great events of the globe increasingly are governed by the movements of world currencies. We need a return to currency stability. But that requires a return to dollar stability. And the dollar is the responsibility of the Federal Reserve.
– Bret Swanson, in the Far Eastern Economic Review
“If our brains were simple enough to understand, we would be too dumb to understand them.”
“All you need to do is grant visas to two million Indians, Chinese and Koreans. We will buy up all the subprime homes. We will work 18 hours a day to pay for them. We will immediately improve your savings rate — no Indian bank today has more than 2 percent nonperforming loans because not paying your mortgage is considered shameful here. And we will start new companies to create our own jobs and jobs for more Americans.”
– Shekhar Gupta, editor of The Indian Express newspaper, speaking to Tom Friedman
“This is the killer quote from Geithner’s speech: ‘We are exploring a range of different structures for this program, and will seek input from market participants and the public as we design it.’ In other words, we have a plan to have a plan. Ouch.”
– James Pethokoukis, February 10, 2009
“There is something desperate about the way economists are clinging to their dogeared copies of Keynes’ ‘General Theory.’ Uneasily aware that their discipline almost entirely failed to anticipate the current crisis, they seem to be regressing to macroeconomic childhood, clutching the Keynesian ‘multiplier effect’ — which holds that a dollar spent by the government begets more than a dollar’s worth of additional economic output — like an old teddy bear.”
– Niall Ferguson, February 6, 2009
“it is hard to imagine unemployed investment bankers driving bulldozers on highway projects.”
– Arnold Kling, January 27, 2009, debating the size (or existence) of the Keynesian “multiplier” effect
Environmentalists love the idea of milking Mother Nature for power, but they hate the hardware needed to make it work: huge windmills, acres of solar panels, high-voltage transmission lines to connect them to the places where people live. Of course, they still totally, absolutely, wholeheartedly support green energy — as long as it gets built where someone else goes yachting.
– editorial, The Wall Street Journal, January 24, 2009
we may be approaching a tipping point for democratic capitalism.
– Peter Wehner and Paul Ryan, January 16, 2009
Better yet, Washington might spend its time profitably examining its own role in the recent housing blowout, which has destroyed more wealth than a hundred Madoffs, and about which Mr. Frank himself is an expert.
– Holman Jenkins, January 7, 2009
So nice, we quote him twice:
“. . . [Madoff] is a genius who should immediately be put in charge of the Social Security and Medicare trust funds.”
– Holman Jenkins, December 17, 2008
“Congress, now in the process of convincing itself it should run the auto industry, no doubt will see in Mr. Madoff proof that Congress is needed to manage rich people’s money and ordinary people’s too. Then we’ll all be in the same position as Mr. Madoff’s clients.”
– Holman Jenkins, again!
“Rarely has there been such a case in which the sin is perfectly represented by the physical presence of the sinner. I had never seen him until the news this week, and there he was, a lipless, dull-featured, wig-wearing moron with a foul-mouthed harridan of a wife.”
– Peggy Noonan, commenting on the instantly infamous governor of Illinois, Blago.
“We’ve found that decentralized decision-making, in which millions of independent economic actors make judgments using their own money, results in the wisest allocation of scarce resources across our complex society. And we’ve found the market to be more reliable in heeding price signals and meting out discipline to failing enterprises than government could ever be.”
– Chris Cox, SEC chairman, December 11, 2008, attempting some much needed self-regulation of the public sector.
“What we ended up with is a failure of government, which we have erroneously termed a failure of capitalism.”
– Harvey Golub, December 9, 2008
“Does the government really know whether a company should be saved?”
– Oliver Hart & Luigi Zingales, December 3, 2008
“we have more people in military bands than we have Foreign Service officers.”
– Robert Gates, current and future Secretary of Defense, in what is sure to be an oft-cited quote as the Obama Administration unveils a new diplomatic offensive.
O Lord that lends me life,
Lend me a heart replete with thankfulness.
– William Shakespeare
“It is these periods of transition, where the value of the currency is changing fast, but before price changes filter through all commerce and contracts, when financial and political disruptions often take place.”
“We have the ability to create the most competitive nation in the world — or we could implode. . . . You could create the future or defend the past.”
– Sam Palmisano, IBM CEO, November 21, 2008
“The answer is yes.”
– David Bonior, former U.S. Rep., November 20, 2008, when “asked if this was the industrial policy of the incoming Obama administration….”
“I do not think it is an exaggeration to say history is largely a history of inflation, usually inflations engineered by governments for the gain of governments.”
– F.A. von Hayek
To Hayek’s observation, I would only add the corresponding phenomenon of “deflation.” Both inflation and deflation can be grouped into a singular category. Robert Mundell once called both inflation and deflation a decline in the monetary standard.
“Let us bend over and kiss our ass goodbye. Our 28-year conservative opportunity to fix the moral and practical boundaries of government is gone — gone with the bear market and the Bear Stearns and the bear that’s headed off to do you-know-what in the woods on our philosophy.”
– P.J. O’Rourke, November 10, 2008, repeating George Will’s sentiment, but from a . . . shall we say . . . different angle.
(via Don Luskin)
“Thus does a conservative era end, with a Republican administration’s policy as a punch line.”
– George Will, November 9, 2008
