Alan Meltzer’s Three Laws of Regulation:

1. Lawyers and bureaucrats regulate, but markets circumvent regulation.
2. Regulations are static. Markets are dynamic.
3. Regulation is most effective when it changes the incentives of the regulated.

Meltzer's new book: Why Capitalism?

A review of the headlines of the past decade seems to show that disasters are often part of capitalist systems: the high-tech bubble, the Enron fraud, the Madoff Ponzi scheme, the great housing bubble, massive lay-offs, and a widening income gap. Disenchantment with the market economy has reached the point that many even question capitalism itself.

Allan H. Meltzer disagrees, passionately and persuasively. Drawing on deep expertise as a financial historian and authority on economic theory, he provides a resounding answer to the question, "why capitalism?" Only capitalism, he writes, maximizes both growth and individual freedom. Unlike socialism, capitalism is adaptive, not rigid--private ownership of the means of production flourishes wherever it takes root, regardless of culture. Laws intended to tamper with its fundamental dynamics, such as those that redistribute wealth, fail. European countries boasting extensive welfare programs have not surpassed the more market-oriented United States. Capitalism does require a strong legal framework, Meltzer writes, and it does not solve all problems efficiently. But he finds that its problems stem from universal human weaknesses--such as dishonesty, venality, and expediency--which are not specific to capitalism. Along the way, he systematically analyzes the role of government, positing that regulations are static, but markets are dynamic, usually seeking ways to skirt the rules. Regulation is socially useful if it brings private costs into line with social costs (for example, the cost of taxes to hire policemen compared to that of the impact of rampant crime); if it doesn't, regulation simply invites circumvention.

Consumer Price Index: 2.9% Annual Rate

The Labor Department reported that the consumer price index rose 0.2 percent in January, paced by a surge in apparel costs, and the official measure of U.S. inflation now stands at an annual rate of 2.9 percent, down from a 3.0 percent rate in December.

The so-called “core rate” of inflation – excluding food and energy – also rose 0.2 percent in January and now sports a 2.3 percent year-over-year gain, its largest 12-month increase since September 2008.

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Creating Jobs?

Starbucks has distributed more than 500,000 red, white and blue wristbands in the last three months, and, no, it's not just because the coffee giant is feeling patriotic.

The wristbands, sold for $5 each, are intended to fund loans to small businesses, nonprofits and other organizations that will create American jobs.

New figures released by the company on Thursday, show the ongoing Create Jobs for USA program has so far raised more than $2 million. Coupled with $5 million in seed money already donated by Starbucks, the company expects the program to create at least 2,300 jobs.

That said, the money takes time to trickle down to business owners and heads of nonprofits. To get from the Starbucks cash register to a small business or agency, the donations first pass through the Opportunity Finance Network, which then gives grants to community development financial institutions, or CDFIs. Those lenders are tasked with doling out low-interest loans to small businesses and nonprofits in need.

So far, 278 loans have been made in 31 states across the country.

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Are Capital Gains and Dividend Taxes Too Low?

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Cost to Become President

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National Debt

Back in the old days, the only time the nation would rack up debt was when they were at war and then they’d pay it down...All that changed not long after the last vestiges of a gold standard were abandoned in the 1970s and it’s been a three-decade long climb up debt mountain ever since. Moreover, since the graphic above includes only public debt, the picture is significantly worse when including intergovernmental liabilities such as social security.

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Trade at All Time High

Total U.S. international trade (exports + imports) set a new record of $4.76 trillion in 2011 (see chart above), as both annual exports ($2.1 trillion) and imports ($2.66 trillion) reached record high levels last year, according to today's BEA report.

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Mortgage Deal

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Cartoon: Taxes

Cartoon: Financial Advisor

iPhone v Microsoft

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Wall Street Likes Romney

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Jan Unemployment Rate: 8.3%

The Labor Department reported that nonfarm payrolls rose by 243,000 from December to January and the jobless rate fell from 8.5 percent to 8.3 percent. Private sector job gains of 257,000 were broad based with professional and business services leading the way and the unemployment rate fell to its lowest level since February 2009.

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Bernanke the Keynesian

He answered that clearly during his testimony today, when he said:

As is often the case, the ability and willingness of households to spend will be
an important determinant of the pace at which the economy expands in coming
quarters.

Only a Keynesian believes that consumption drives the economy rather than production.

Consumers are buying iPhones ONLY because Steve Jobs and his team designed and manufactured them. No production, no consumption.

Leading Indicators Revised

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US Manufacturing

The true economic measure of the success of any company or industry is not the number of workers, the amount of output, or the level of sales revenue, it's the level of profitability. Based on that measure, American manufacturing is alive and well, and doing better than ever before.

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Who Pays Better?

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Interest Rates and Fed Chairmen

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Personal Consumption Expenditures

PCE decreased less than 0.1% in December, and real PCE decreased 0.1%. Note: The PCE price index, excluding food and energy, increased 0.2 percent.The personal saving rate was at 4.0% in December.

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Home Sales

2011 was the worst year for new home sales since the Census Bureau started tracking sales in 1963. The three worst years were 2011, 2010, and 2009 - and 2008 is also on the worst ten list.

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4th Quarter 2011: 2.8% Growth

This is the first of three estimates for the period and marks the best growth rate in a year-and-a-half following a reading of 1.8 percent in the third quarter. But, don’t be surprised if the most recent data is revised lower since downward revisions have been the norm in recent quarters, the third quarter data starting out at a similar level – a 2.5 percent rate – when it was initially reported.

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iPhone Economy

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Marginal Tax Rates

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Federal Share of State Spending

State officials have become addicted to federal subsidies because they allow them to spend money taken from taxpayers across the country instead of having to ask their voters to pony up the funds. As the following charts shows, total state spending continued to increase during the economic downturn because the federal government picked up the slack. Note that the federal share of total state spending went from 25.7 percent in 2001 to 34.1 percent in 2011.

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National Debt

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Index Funds and Fund Managers

Gold: Bull or Bear?

Gold set a record on September 5 at $1,895 an ounce (London PM Fix) and to date has fallen as low as $1,531 (December 29), a decline of 19.2%. In order to determine how long it might take to breach $1,895 again, I measured how long it took new highs to be mounted after big corrections in the past....

Once gold breaches its old high, you'll probably never be able to buy it at current prices again.
That's a rather obvious statement, but let it sink in. Buying now at $1,600 and then watching the price fall to, say, $1,500, wouldn't be fun – but it'll probably hit $2,000 or higher before the year's over, never to visit the $1,600s again this cycle. If that turns out to be correct, the next four months will be the very last time you can buy at these levels. You'll have to pay a higher price from then on.

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Stop SOPA and PIPA

Debt to GDP Ratio

Often pundits will say that our current debt to GDP ratio is not unreasonable because it is not too high relative to the period following the WWII and the Great Depression.

It is true that during the post WWII era, government spending exceeded GDP. Nevermind that FDR’s New Deal actually prolonged the Great Depression. And ignore the fact that despite conventional wisdom, World War II did nothing to create prosperity. As Bob Higgs has argued extensively, no amount of money pumped into a depressed economy can bring about genuine economic recovery unless investors and business leaders feel secure in their property rights.

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Made in ???

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Ben Bernanke and Housing Prices

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How to Measure Defense Spending?

“Defense spending at lowest levels in 60 years”:


In fact, Pentagon spending in real, inflation-adjusted dollars has roughly doubled since 2000 and is up about 50 percent since 1970, at the height of the Vietnam War.

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Retail Sales: Increased 0.1% in December

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North Dakota Oil Production

North Dakota's oil production has now surpassed OPEC-member Ecuador's daily production of 485,000 barrels.

As a result of the ongoing oil boom in the Bakken area, North Dakota continues to lead the nation with the lowest state unemployment rate at 3.4% for November, more than 5 full percentage points below the nation's average 8.7% rate for November. There are nine North Dakota counties with jobless rates at or below 2% for November, and Williams County, which is at the center of the Bakken oil boom, boasts the lowest county jobless rate in the country at 0.9%.

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Note: The US consumes about 19,000,000 barrels a day.

Manufacturing Growth

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Federal Budget as Household Budget

Youtube video here: http://www.youtube.com/embed/Li0no7O9zmE