Recently in Economy Category

OK — we all know by now it's tough out there: rising unemployment, the credit freeze and major business failures. It's enough to make you want to climb into your Christmas stocking, skip Christmas, and hide there until it all passes over.

However, not all is gloom and doom. Forrester Research (Nasdaq: FORR, an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology) estimates that internet sales will surpass $200 billion this year, up from $175 billion in 2007.

Why is that? Simply because the internet offers unique savings and marketing opportunities to businesses.

Tyler Cowen (of the Marginal Revolution blog) and a George Mason economist participated in a Big Think Forum on Business and Economics.

The full talk started with a discussion of capitalism and morality but it ended up focusing on the financial crisis, and he makes some great points about the nature of markets and their role and purpose in our lives.

Building on an unacknowledged base of Randian enlighten self-interest, Tyler Cowen begins by making the case that markets and capital helps us to realize ourselves, to become more of what we are as individuals.

Ok: why did Iceland's banking system completely unravel and collapse? Because the government  decided to let them fail? Nope — the government couldn't save them:

Iceland’s banking system is ruined. GDP is down 65% in euro terms. Many companies face bankruptcy; others think of moving abroad. A third of the population is considering emigration.

Iceland experienced the deepest and most rapid financial crisis recorded in peacetime when its three major banks all collapsed in the same week in October 2008. It is the first developed country to request assistance from the IMF in 30 years.

Negotiations with the IMF have finished, but at the time of writing the IMF has delayed a formal decision. Icelandic authorities claim this is due to pressure from the UK and Netherlands to compensate the citizens who deposited money in British and Dutch branches of the Icelandic bank Icesave. The net losses on those accounts may exceed the Icelandic GDP, and the two governments are demanding that the Icelandic government pay a substantial portion of that. The likely outcome would be sovereign default. (VoxEu).

Sovereign Default means "national bankruptcy."

You don't have to look far for evidence that "Latte Drinking Liberal Elitists" have ZERO understanding about economics:

I figure that under Democrats taxes might be a little higher, but this is more than offset by both increased business income and increased returns from the stock market under a the Democrats as compared to the economy under Republicans.(Ron Chusid The Useful Idiot on the Liberal (ill)Values Blog: Why We Latte Drinking Liberal Elitists Can Vote Democratic.)

It might seem incredible that over the past year, with the looming credit crisis and the bursting housing bubble, a normal functioning human being could really think that raising taxes on the most productive segment of the population is a good idea, but — never underestimate the utter intellectual corruption of an "elitist" hopelessly steeped in liberal ideology.

This is exactly why the Democratic and Neo conservative-admin engineered bailouts will solve nothing. Yves Smith of the Naked Capitalism Blog is pissed off:

John Samples makes the case the Paulson Paul is really only an attempt to delay solving the problem, to kick the can (the "problem") down the road, and why 100 time out 100 times, this just makes the problem worse.

Basically, the political elites are desperately trying to prop the economy up just long enough to get passed the next election cycle, even if the consequences of kicking the can down the road means we'll being facing a crisis even worse than what we're facing today.

And then, of course, they're trying to hedge their bets, i.e., the political elites feel also that they are in a damned if they do and damned if they don't:

A big shout out to The Cato Institute!

Dear Cato,

Thank you so much for all your hard work on opposing the bailout. This is a political crisis not an economic crisis, and the congress and the admin are not going to give up:

While many of you may be popping champagne bottles tonight in honor of the bailout plan that never was, we need to realize that this is only one step. The bailout is by no means dead. Having dealt with the legislative process before, here is my speculation about what may happen in the coming days, and the options that Congress has before it. (From a contributor to the Naked Capitalism Blog).

It was a battle won, not the war; not a strategic but a tactical victory.

You may feel at times like a voice in the wilderness, but you have no idea how important you really are. PLEASE keep up the great work!

A very grateful supporter,
           The Charters Of Dreams.

Dear Readers of The Charters Of Dreams, please consider giving a tax deductible contribution to the Cato Institute. The Cato Institute is a 501(c)(3) educational institute.

Finally — it's not over. We need to give the credit and banking markets a chance to clear the bad debts off their balance sheets. Sign the petition and call your representative today.

Arnold Kling (once of Freddie Mac and who co-edits EconLog) explains the housing bubble and gives a brief history of Fannie and Freddie. He explains that it was no surprise (at least to him) that we’d end up in this kind of mess. He then discusses if there any method to the bailout madness, and he blasts the Paulson plan as highly vulnerable to corruption, manipulations and abuse, and he offers some clear headed alternate solutions.

Here he is talking with Will Wilkinson of The Cato Institute on Free Will: Financial Apocalypse Explained -- See the videos segments below:

The Naked Capitalism Blog calls it:

As with Iraq, the fear card worked.

"Congressional leaders and the Bush administration last night struck a historic accord to insert the government deeply into the nation's financial markets, agreeing to spend up to $700 billion to relieve Wall Street of troubled assets backed by faltering home mortgages.

Negotiators emerged from a marathon session in the Capitol about 12:30 a.m. to announce that they had reached agreement on a proposal to give Treasury Secretary Henry M. Paulson Jr. broad authority to organize one of the biggest government interventions in the private sector since the Great Depression.

Full details of the plan were not immediately available. Lawmakers said their staffs would continue working through the night to commit them to paper.

Sen. Richard C. Shelby (R-Ala.), the senior Republican on the Senate Banking Committee, who has refused to participate in the talks, said a "critical mass" was forming behind the measure because lawmakers fear that their failure to act would cripple financial markets. The House is expected to vote on the plan as soon as today, with the Senate following as soon as Monday." (Lawmakers Reach Accord on Huge Financial Rescue, Washington Post, 09 . 28 . 2008).

Much of the blogosphere is up in arms because of the provision in Senator Dodd’s financial bailout bill that might funnel profits from the bailout plan to ACORN Housing (related to the disreputable activist group ACORN), and other more reputable service organizations.

I have read Dodd’s proposed statute and in some respects, it is far worse than has been reported. Senator Dodd has placed a loophole in the bill that is explicitly designed to siphon off tens or hundreds of billions of dollars to the Housing Trust Fund and the Capital Magnet Fund even if there are no net profits in the $700 billion venture.

Hat tip to Jim Lindgren over at the Volokh Conspiracy.

You know, it would be easier for me to believe this was a crisis, if the people in charge were acting like it was a crisis, instead of just an opportunity for graft. Then again, to some of these people, everything is just an opportunity for graft. (from Instapundit.com)