Russell Roberts's Blog, page 1503

Big Banks as Bootleggers

Here is a post on how the actions of the Fed and Treasury in the last few years have benefited the large banks and eroded the advantages of the smaller banks. Wouldn't surprise me–it's a perfect bootleggers and baptists scenario. But it's not just that politics make strange bedfellows (government actions that supposedly reduce systemic risk are favored by many for altruistic reasons and the banks like it because it increases their profits. The nature of the intervention is what is key–it is always skewed toward cronies–the political powerful. My version take on Bruce Yandle's deep idea is here.

Keynesian sentence of the day

From the front page of today's Washington Post:

After two years on the sidelines, American consumers are spending again and raising hopes that they are ready to shoulder the burden of the nation's economic recovery.

"You sound like a democrat"

In this appearance on "To the Point" with Warren Olney, I follow Jared Bernstein and discuss various economic issues including inequality, GM, the tax cuts, the deficit, and the state of the economy.

Bernstein segment starts around the 23:30 mark. I start around the 35:30 mark. At one point, Olney says I sound like a Democrat. I reassured him I wasn't (and that I wasn't a Republican, either). There are a few amusing moments and some economics along the way.

Maybe the coolest thing ever

OK, maybe it isn't THE coolest thing, but it's in the top 100. (HT: Maggie's Farm) This is so beautiful and so important–a visual representation of human progress over the last two hundred year. We humans have done pretty well, lately. Enjoy.

On this Theory, Borders are Wealth-Enhancing Opportunities

Here's a letter to Newsmax.com:

Announcing a possible announcement that he might soon announce a presidential bid, Donald Trump, as you report, said today that "the United States should tax Chinese products to reduce foreign imports and create American jobs" ("Trump Seriously Thinking About White House Bid," Dec. 2).

Genius.  But why stop there?  Let's amend the Constitution so that each state can tax goods and services produced in other states.  California could then tax products from Nevada, Michigan, New Jersey, and each of the other states that now are home to producers with total freedom to market their wares, untariffed, in high-unemployment California.  If Mr. Trump's economics is correct, the result would be tariffs imposed by Sacramento that end this theft of California jobs by out-of-state producers.

And ditto for every other state in the union.  By so multiplying the opportunities to impose job-creating taxes on goods and services produced in other political jurisdictions, Americans' economic security would be assured…. assuming, that is, that Mr. Trump's economics is correct.

Sincerely,

Donald J. Boudreaux

Trumped-Up Fiction

If myths could be buried, this item would be yet another nail in the coffin of the data-less myth that Americans "don't make things any more."  Alas, one can neither reason nor empirically demonstrate people out of positions that they reached without reason or empirical support.

Getting Better

Hans Rosling does it again!  Whatever the cause, life on earth today, for the typical person, is far better than it was even a few decades ago.  (HT Danny Shapiro)

Some Links

George Selgin, in this video, clearly explains why the Fed has been a failure on its own terms.

And here's another excellent video of George Selgin, here discussing his book Good Money.

Former GMU econ student Ryan Young advises that you not allow the IRS to prepare your tax filings.  I'm sold.

AEI's Hiwa Alaghebandian explains, in this video, some flaws in Keynesian economics.

Coyote Blog documents yet another indispensable way that government builds infrastructure.

Here's a video of a rich, lazy, privileged, privilege-seeking American capitalist looking to stick it to the poor and working Americans.  [image error]   (HT Andy Roth)

Paul Jacob offers some common sense on net neutrality … and on apartment neutrality.

CRONY

Bloomberg reports:

Citigroup Inc., recovering from its $45 billion bailout in 2008, is in advanced talks to hire former White House Budget Director Peter Orszag, people with knowledge of the matter said.

Orszag, 41, may take a job in the New York-based firm's investment-banking division, the people said, declining to be identified because the discussions are private. An announcement may come as early as today, one of the people said.

Notice that he's going to take "a job." It doesn't tell us what kind of job because it doesn't really have to. The important thing is that he's on the payroll. What skills does he bring to the table? He's a smart guy but one thing he brings is his ability to call people in the White House and the Fed and have them return his call.

Here are a few more cronies:

His successor as budget director, Jacob Lew, worked at Citigroup from 2006 to 2009.

Calls and e-mails to Orszag weren't immediately returned. Citigroup spokeswoman Danielle Romero-Apsilos said she couldn't comment.

Before joining the White House as director of the Office of Management and Budget, Orszag was director of the Congressional Budget Office and a senior fellow at the Brookings Institution.

He previously served as economic adviser to President Bill Clinton and was a staff member of Clinton's Council of Economic Advisers.

Orszag's tenure at the Clinton White House overlapped with Citigroup's former executive-committee chairman, Robert Rubin, who served as Treasury secretary from 1995 to 1999. In 2006, when Rubin, 72, helped to found an economic research group at the Brookings Institution called the Hamilton Project, Orszag was named its first director. Obama, then a senator from Illinois, spoke at the project's unveiling.

Rubin, who in late 2007 helped oversee the search that led to the appointment of Vikram Panditas chief executive officer, retired from Citigroup last year.

Citigroup repaid $20 billion of its bailout money last year and the rest was converted into stock. The Treasury Department still owns 11 percent of the bank's shares.

As Arnold would say: have a nice day.

I am increasingly pessimistic about the fake nature of Wall Street as part of the capitalist system. It is part of the crony capitalist system. I am ashamed at how long it has taken me to notice this. But once you start paying just a bit of attention, it's hard not to notice.

Domestic Protectionism

Here's a letter to the Wall Street Journal:

Reporting on the EU's antitrust investigation of Google, you note that "Under EU antitrust law, companies with a dominant position in their markets have a special responsibility to treat their rivals with care" ("Europe Zeroes In on Google," Dec. 1)

In other words, under EU antitrust law, companies that have worked harder and more creatively than have their rivals at anticipating and satisfying consumer demands have a special responsibility to stop serving consumers so effectively in order that these companies' rivals can be protected from the consequences of their failure to excel at satisfying consumer demands.

Sincerely,

Donald J. Boudreaux