source
Tuesday, March 31, 2009
New Book: Readings in Applied Microeconomics
A central concern of economics is how society allocates its resources. Modern economies rely on two institutions to allocate: markets and governments. But how much of the allocating should be performed by markets and how much by governments? This collection of readings will help students appreciate the power of the market. It supplements theoretical explanations of how markets work with concrete examples, addresses questions about whether markets actually work well and offers evidence that supposed “market failures” are not as serious as claimed...
The selections should be comprehended by undergraduate students who have had an introductory course in economics. This reader can also be used as a supplement for courses in intermediate microeconomics, industrial organization, business and government, law and economics, and public policy.
click here for the preface and table of contents
The selections should be comprehended by undergraduate students who have had an introductory course in economics. This reader can also be used as a supplement for courses in intermediate microeconomics, industrial organization, business and government, law and economics, and public policy.
click here for the preface and table of contents
Jeffrey Miron: Drugs and Violence
Recent estimates suggest thousands have lost their lives in this "war on drugs."
The U.S. and Mexican responses to this violence have been predictable: more troops and police, greater border controls and expanded enforcement of every kind. Escalation is the wrong response, however; drug prohibition is the cause of the violence.
Prohibition creates violence because it drives the drug market underground. This means buyers and sellers cannot resolve their disputes with lawsuits, arbitration or advertising, so they resort to violence instead.
Violence was common in the alcohol industry when it was banned during Prohibition, but not before or after.
Violence is the norm in illicit gambling markets but not in legal ones. Violence is routine when prostitution is banned but not when it's permitted. Violence results from policies that create black markets, not from the characteristics of the good or activity in question.
The only way to reduce violence, therefore, is to legalize drugs. Fortuitously, legalization is the right policy for a slew of other reasons.
Monday, March 30, 2009
General Motors, Wagoner, Obama, and Fascism
Dave Henderson writes:
source
Obama on warranties:
He has already, in less than 100 days, moved the U.S. economy further towards fascism. Sean Hannity and other critics keep criticizing Obama for his socialist leanings. But the more accurate term for many of his measures, especially in the financial markets and the auto market, is fascism.
President Obama shouldn't get all the blame. Former President Bush took us a big step in that direction with his bailout. But when a President actually fires the president of a major company and decides to change the terms of that company's warranty on its products, that President has taken a major step.
source
Obama on warranties:
It is my hope that the steps I am announcing today will go a long way towards answering many of the questions people may have about the future of GM and Chrysler. But just in case there are still nagging doubts, let me say it as plainly as I can -- if you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired, just like always. Your warrantee will be safe.
In fact, it will be safer than it's ever been. Because starting today, the United States government will stand behind your warrantee.
source
Sunday, March 29, 2009
The Dow Rally: Will It Continue?
Since hitting 12-year lows on March 9, the broader S&P 500 (SPX) index has gained 20.6%, ending higher for three weeks straight.
As market pros debate how much longer the so-called bear market rally can last, contrarians believe that all the wariness will help the recent advance grow longer legs.
"For every one person who thinks this could be the start of a new bull market, there are 99 who think it's a dead cat bounce," said Tom Sowanick, chief investment officer at Clearbrook Financial.
Peter Schiff on the Economic Crisis
President Obama and the majority of our leadership on both sides of the aisle are confident that the right mix of monetary and fiscal policy can restart the spending party that defined America for a generation. And as the bleary-eyed revelers wisely reach for a cup of black coffee or stumble into a rehab center, Obama is pouring grain alcohol into the punch bowl hoping to lure the walking zombies back onto the dance floor. Europe and Asia fully understand that Obama will ask them to lend the booze.
Washington is telling us that our problems result from a lack of consumer spending. Therefore, the solution is for government spending to pick up the slack. However, if Americans are too broke to spend, then how can our government spend for us? The only money they have is taken from us through taxation. To postpone immediate tax hikes (adding interest for good measure), Washington plans to borrow more from abroad. However, if our foreign creditors refuse to pony up, much of the money will simply be printed instead.
Printing money is merely taxation in another form. Rather than robbing citizens of their money, government robs their money of its purchasing power. Many people assume that if government provides the funds we can spend our way back to prosperity. However, it’s not money we lack but production. If the government simply prints money and doles it out, we will not be able to buy more stuff; we will simply pay higher prices. The only way to buy more is to produce more. It is production that creates purchasing power, not the printing press!..
To solve our problems we must first come to terms with their source. That is what the voices from abroad are telling us. We borrowed and spent ourselves to the brink of bankruptcy, and now we must save and produce ourselves back to prosperity.
Of course, this simple solution is rejected by Keynesian economists who insist that we must keep spending. The “paradox of thrift,” as they call it, holds that if we stop spending the recession will worsen. While this is true, it is hardly a paradox. As they say in the fitness game, “no pain, no gain.” No one said this was going to be easy, but the only way to rebuild a viable economy is to let the phony one collapse. If we follow the Keynesians, the fault lines will continue to widen until our wealth, our lifestyle, our very ability to prosper is swallowed up. The calls from abroad will only get louder until we face this ugly truth.
My thoughts: Schiff is once again correct. The path to prosperity is savings and production, not consumption, credit, and inflation. Economic problems require economic solutions. Keynesianism at its root is not about economics. Keynesianism is about providing an (pseudo)intellectual justification for government planners to intervene in the economy.
Saturday, March 28, 2009
Friday, March 27, 2009
Thursday, March 26, 2009
4th Quarter 2008 GDP: -6.3%
The Commerce Department reported that the third and final reading for U.S. economic growth during the fourth quarter of 2008 resulted in a minor downward revision from a seasonally adjusted, annualized growth rate of minus 6.2 percent to minus 6.3 percent.This marks the worst quarter for the U.S. economy since early 1982 when the economy contracted at an annual pace of 6.4 percent during the second of two early-1980s recessions. The second quarter of 1980 saw a contraction at a 7.8 percent pace and the post-WWII record stands at -10.8 percent in early 1958.
For the year, the economy expanded 1.1 percent, the smallest advance since the 0.8 percent expansion in 2001.
from the Mess that Greenspan Made
Wednesday, March 25, 2009
The Federal Budget
The White House said it would launch a search for new tax revenues, as Congressional leaders moved to scale back proposed spending increases and tax cuts in President Barack Obama's ambitious budget.
The Current Crisis: An Asessment
The good news from our historical study of eight centuries of international financial crises is that, so far, they have all ended. And we confidently predict this one will end, too. We are just not quite so sure it will be nearly as soon as the chirpy forecasts coming from policymakers around the globe. The U.S. administration, for example, is now predicting that growth will renew in the latter part of this year and continue at a brisk pace of 4 percent for several years thereafter. Is this a fact-based forecast or wishful thinking?
A careful look at the international evidence on severe banking crises suggests a far more cautious assessment. The recessions that follow in the wake of big financial crises tend to last far longer than normal downturns, and to cause considerably more damage. If the United States follows the norm of recent crises, as it has until now, output may take four years to return to its pre-crisis level. Unemployment will continue to rise for three more years, reaching 11–12 percent in 2011...
Financial crises don't last forever. But this one could last a lot longer if policymakers don't start basing their actions on more realistic assessments of where we are and what is likely still to come.
read the article
A careful look at the international evidence on severe banking crises suggests a far more cautious assessment. The recessions that follow in the wake of big financial crises tend to last far longer than normal downturns, and to cause considerably more damage. If the United States follows the norm of recent crises, as it has until now, output may take four years to return to its pre-crisis level. Unemployment will continue to rise for three more years, reaching 11–12 percent in 2011...
Financial crises don't last forever. But this one could last a lot longer if policymakers don't start basing their actions on more realistic assessments of where we are and what is likely still to come.
read the article
Tuesday, March 24, 2009
Monday, March 23, 2009
A Good Day on Wall Street
Stocks surged Monday, recharging the rally, after Treasury's plan to buy up billions in bad bank assets and a better-than-expected existing home sales report raised hopes that the economy is stabilizing.The Dow Jones industrial average (INDU) gained 497 points, seeing its biggest one-day point gain since Nov. 21. The gain was equivalent to 6.8%, which was the biggest one-day percentage gain since Oct. 28.
The S&P 500 (SPX) index rose 54 points, its best one-day point gain since Nov. 13. The percentage gain of 7.1% was the best since Oct. 28.
The Nasdaq composite (COMP) added 99 points or 6.8% for the best one-day point and percentage gain since Oct. 28.
Geithner Plan
The Treasury Department unveiled its long-awaited plan to remove many of the troubled assets from banks' books Monday, representing one of the biggest efforts by the U.S. government so far aimed at tackling the ongoing financial crisis.Under the new so-called "Public-Private Investment Program," taxpayer funds will be used to seed partnerships with private investors that will buy up toxic assets backed by mortgages and other loans.
The goal is to buy up at least $500 billion of existing assets and loans, such as subprime mortgages that are now in danger of default.
Treasury said the program could potentially expand to $1 trillion over time, but that the hope is that it would not only help cleanse the balance sheets of many of the nation's largest banks, which continue to suffer billions of dollars in losses, but help get credit flowing again.
Today, we are announcing another critical piece of our plan to increase the flow of credit and expand liquidity. Our new Public-Private Investment Program will set up funds to provide a market for the legacy loans and securities that currently burden the financial system.
The Public-Private Investment Program will purchase real-estate related loans from banks and securities from the broader markets. Banks will have the ability to sell pools of loans to dedicated funds, and investors will compete to have the ability to participate in those funds and take advantage of the financing provided by the government.
The funds established under this program will have three essential design features. First, they will use government resources in the form of capital from the Treasury, and financing from the FDIC and Federal Reserve, to mobilize capital from private investors. Second, the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer, and that the taxpayer shares in the profits from these investments. These funds will be open to investors of all types, such as pension funds, so that a broad range of Americans can participate.
Third, private-sector purchasers will establish the value of the loans and securities purchased under the program, which will protect the government from overpaying for these assets.
The new Public-Private Investment Program will initially provide financing for $500 billion with the potential to expand up to $1 trillion over time, which is a substantial share of real-estate related assets originated before the recession that are now clogging our financial system. Over time, by providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets. The ability to sell assets to this fund will make it easier for banks to raise private capital, which will accelerate their ability to replace the capital investments provided by the Treasury.
Cartoon: AIG and Campaign Contributions
While some bailed-out banks, such as Wells Fargo and JP Morgan Chase, have reduced their campaign donations, others have discreetly made donations this year, Newsweek reported. Bank of America's political action committee (PAC) gave $24,500 in January and February, "including $1,500 to House Majority Leader Steny Hoyer and another $15,000 to members of the House and Senate banking panels," the weekly news magazine said...
Citigroup, which has received a total of $45 billion in federal aid, donated $29,620 to members of Congress, including $2,500 to House GOP Whip Eric Cantor. In February, the U.S. government boosted its stake in the troubled financial firm to 36 percent – a move that aimed to avoid nationalization of Citi, once the world's biggest financial firm. Analysts said the conversion gave the government effective control as the bank's largest shareholder...
read the article
My thoughts: We have the best politicans money can buy.
Sunday, March 22, 2009
CBO Analysis of 2010 Budget Proposals
A Preliminary Analysis of the President’s Budget and an Update of CBO’s Budget and Economic Outlook
Gary Becker on Free Markets and the Economy
"What can we do that would be beneficial? [One thing] is lower corporate taxes and businesses taxes and maybe taxes in general. Particularly, you want to lower the tax on capital so you raise the after-tax return to investing and get more investing going on."..
What Mr. Becker has seen over a career spanning more than five decades is that free markets are good for human progress. And at a time when increasing government intervention in the economy is all the rage, he insists that economic liberals must not withdraw from the debate simply because their cause, for now, appears quixotic...
Mr. Becker sees the finger prints of big government all over today's economic woes. When I ask him about the sources of the mania in housing prices, the first culprit he names is the Fed. Low interest rates, he says, were "partly, maybe mainly, due to the Fed's policy of keeping [its] interest rates very low during 2002-2004."...
"Keynesianism was out of fashion for so long that we stopped investigating variables the Keynesians would look at such as the multiplier, and there is almost no evidence on what the multiplier would be." He thinks that the paper by Christina Romer, chairman of the Council of Economic Advisors, "saying that the multiplier is about one and a half [is] based on very weak, even nonexistent evidence." His guess? "I think it is a lot less than one. It gets higher in recessions and depressions so it's above zero now but significantly below one. I don't have a number, I haven't estimated it, but I think it would be well below one, let me put it that way."
read the WSJ article
What Mr. Becker has seen over a career spanning more than five decades is that free markets are good for human progress. And at a time when increasing government intervention in the economy is all the rage, he insists that economic liberals must not withdraw from the debate simply because their cause, for now, appears quixotic...
Mr. Becker sees the finger prints of big government all over today's economic woes. When I ask him about the sources of the mania in housing prices, the first culprit he names is the Fed. Low interest rates, he says, were "partly, maybe mainly, due to the Fed's policy of keeping [its] interest rates very low during 2002-2004."...
Mr. Becker says that the market-clearing process, so important to recovery, is well underway. "Construction in new residential housing is way down and prices are way down. Maybe 25% down. Lower prices stimulate demand, reduced construction reduces supply."
That's the good news. But he complains about "counterproductive" government policies "designed to lower mortgage rates to stimulate demand."..."Keynesianism was out of fashion for so long that we stopped investigating variables the Keynesians would look at such as the multiplier, and there is almost no evidence on what the multiplier would be." He thinks that the paper by Christina Romer, chairman of the Council of Economic Advisors, "saying that the multiplier is about one and a half [is] based on very weak, even nonexistent evidence." His guess? "I think it is a lot less than one. It gets higher in recessions and depressions so it's above zero now but significantly below one. I don't have a number, I haven't estimated it, but I think it would be well below one, let me put it that way."
read the WSJ article
Peter Schiff on the Fed
My thoughts: Schiff is right. Inflation is here. The money supply has gone vertical. It will take time for this to translate into higher prices, at which point it will be too late to do anything. The guy arguing against Schiff is expecting Bernanke to to reduce the money supply at the perfect moment to prevent inflation. Bernanke has not done anything correct yet. So why are people expecting him to get this right?
Saturday, March 21, 2009
Obama's Budget Deficits
According to the Congressional Budget Office, President Obama's budget will produce $9.3 trillion worth of red ink over the next 10 years. The CBO says that is $2.3 trillion worse than the White House predicted. Economists say that amount is "unsustainable." Unsustainable? What does that mean? What is the end result of continuing down this path? Meanwhile, politicians in Washington wail and gnash their teeth over AIG bonuses but give no thought to spending money on things we don't need with money we don't have.read the CBO report
The Fed: Falsehoods and Myths
Among other false items, which are too numerous too list in their entirety:
Myths:
- The federal government in Washington is an essential agent in providing economic security and stability for the country as a whole. False.
- The entire economy of the country can be beneficially manipulated through macroeconomic policies devised and executed in Washington. False.
- Americans cannot be trusted to operate the price and market system on their own. They need constant supervision and regulation (from Washington) of almost every element of economic activity. False.
- The economic activity of Americans needs constant correction and adjustment by Washington (as to consumption, saving, employment, interest rates, investment, production, credit, liquidity, mortgages, etc.) False.
- Americans cannot be trusted to produce money and credit on their own. They need Washington to do this. False.
- The country’s economy is unstable and needs constant control and guidance from Washington. Otherwise, recessions and unemployment occur that Americans cannot themselves correct. False.
- Economic stability requires an overall monetary policy stemming from Washington. False.
- Americans are unable to produce a stable price level (to the extent that such a thing is measurable). They need the FED to do this for them. False.
- Maximum employment is a socially optimal objective. False.
- The federal government and the FED do not create economic instability and insecurity. False.
- The federal government and the FED are capable and adept at moderating and alleviating economic instability at little or no cost. False.
- Exceptional performance of the economy, when it occurs, is due to the skill and wisdom of Washington’s economic policy makers who successfully manipulate Americans into behaving in their own interests. False.
- The FED has had success in producing price stability and moderating the business cycle. False.
Myth #1 is that its inflation offsets the negative economic effects that are occurring. Their theory is that the costs, if any, of inflation are lower than the benefits.
Myth #2 is that the FED’s loans offset economic problems by providing liquidity to the private sector and supporting credit extensions.
Myth #3 is that the FED promotes systemic stability by supporting such institutions as AIG, Citigroup, Fannie Mae and Freddie Mac.
Myth #4 concludes by saying that the government has an interest (on behalf of the public) in supporting the systemic company when it has troubles.
No part of Myth #4 is true, and every part of it is inconsistent with a free market economy. Either one has a market economy or one has state socialism or fascism. There is no middle ground, for the reason that when the government becomes a player in any given market, the fundamental character of that market disappears.
read the entire essay
My thoughts: Bread and circuses will keep the American people occupied until we run out of bread and circuses.
DiLorenzo on Ben Bernanke
Either Ben Bernanke has no understanding of how markets work and is equally ignorant of the massive regulatory influence the government has on housing and financial markets, or he is lying through his teeth when he says that under-regulated markets have run amok. The former is a possibility since Bernanke is a "macroeconomist." So-called macroeconomics has never been real economics but rather an endless series of engineering-type models purporting to guide politicians in centrally planning an economy...
During the Q&A session after Bernanke’s Council on Foreign Relations speech he took on an extraordinarily smug and arrogant tone as he explained that, during his academic career at Princeton, he was aware of "a few" people in the economics profession who believed that markets did a better job than central planners like himself, but that he hoped "there are no longer any people like that around." "We’re all socialist central planners now" is essentially what he was saying, some two decades after it was proven beyond all doubt that attempts to centrally plan an economy invariably lead to nothing but economic and human catastrophe...
Either Ben Bernanke is completely ignorant of the vast literature on the causes of the failures of socialist central planning, the economics of bureaucracy, the economics of public choice, the economics of regulation, the field of law and economics, and of markets, risk taking and entrepreneurship, or he is simply another evil, opportunistic, egomaniacal, empire-building bureaucrat who lives in a world of delusions surrounded by equally delusional sycophants...
To paraphrase P.J. O’Rourke, author of Parliament of Whores, a book about Congress, giving Ben Bernanke – or any Fed chairman – money-printing ability and regulatory power is like giving whiskey and car keys to teenage boys.
read the entire essay
My thoughts: Yep. Could Bernanke be the worst decision of the Bush Administration? Will Obama re-nominate Bernanke? Does Obama like to use teleprompters?
The Dollar: Bernanke, China, and Printing Presses
This week the Federal Reserve finally made clear what should have been obvious for some time – the only weapon that the Fed is willing to use to fight the economic downturn is a continuing torrent of pure, undiluted, inflation. The announcement should be seen as a game changer that redirects the fury of the financial storm directly onto our shores.
In its statement, the Fed announced its intention to purchase an additional $1 trillion worth of U.S. treasury and agency debt. The purchases, of course, will be made with money created out of thin air through the Fed’s printing presses. Few can doubt that they will persist with these operations until the economy returns to its former health. Whether or not this can ever be accomplished with a printing press alone has never been seriously considered. Bernanke himself admits that we are in uncharted waters, with no map or compass, just simply a hope that more dollars are the answer.
Rather than solving our problems, more inflation will only add to the crisis. Falling asset prices, the credit crunch, declining consumer spending, bankruptcies, foreclosures, and layoffs are all part of the necessary rebalancing of our economy. These wrenching movements, however painful, are the market’s attempts to resolve the serious problems at the root of our bubble economy. Attempts to literally paper-over these problems will lead to disaster...
Just last week, Chinese premier Wen Jiabao voiced concern about his country’s massive investments in U.S. government debt. In the most unequivocal statement yet by the Chinese leadership on this issue, Wen made it plain that he was concerned with depreciation, not default. With his fears now officially confirmed by the Fed statement, we must wonder when the Chinese will finally change course.
There is a growing consensus that if China no longer wants to buy our bonds, we can simply print the money and buy them ourselves. This naïve view fails to consider the consequences implicit in such a change. When the Treasury sells bonds to China, no new dollars are printed. Instead, China prints yuan which it then uses to buy treasuries. This effectively allows America to export its inflation to China. However, now that we will be printing the money ourselves, the full inflationary impact will fall directly on us.
My thoughts: Bernanke is busy trying to paper over the current recession instead of allowing the malinvestments to clear. This policy, if successful, will only create the the illusion of prosperity. Bernanke contiunes to lay the groundwork for the most serious recession we have seen since the Great Depression. The process started in September 2007 with the slashing of interest rates. Now the printing presses will be running around the clock. The stage is being set for a inflationary recession that will make the late 1970s and early 1980s look like a bull market.
Friday, March 20, 2009
TALF: Term Asset-Backed Securities Loan Facility
The government's efforts to tame the credit crisis faces one of its biggest tests yet as the Federal Reserve finally launches a $1 trillion program aimed at reviving lending for both consumers and business.Last November, the Fed announced the creation of the Term Asset-Backed Securities Loan Facility, or TALF. Under the plan, the Fed will effectively serve as a matchmaker, partnering buyers and sellers of newly issued, top-rated securities backed by a variety of loans including student, small business, auto and credit card loans.
The TALF program was originally supposed to start in February, but an expansion of the program and several adjustments to it have pushed back its launch until now.
My thoughts: Can you say double digit inflation? I knew you could.
Budget Deficit: $1.85 Trillion
The U.S. budget deficit in 2009 is projected to spike to between $1.67 trillion and $1.85 trillion, according to estimates released Friday by the Congressional Budget Office...
"CBO's estimates of the deficits under the president's budget are higher each year than those estimated by the administration -- by $93 billion for 2009 and by about $2.3 trillion for the 2010-2019 period," the report said...An annual deficit between $1.67 trillion and $1.85 trillion would mark a record in dollar terms and the highest as a share of gross domestic product since World War II. It would represent between 11.9% and 13.1% of GDP.
The enormous leap in the annual deficit -- it was $459 billion in 2008 -- is primarily due to the effects of the financial and economic crises and the government's response to them...
My thoughts: $2 trillion. We are six months away from the end of the fiscal year. Another stimulus package and rosy scenario projections will likely drive the deficit well beyond $2 trillion.
AIG, the Constitution, and Bonuses
The House has passed a measure imposing a special punitive tax of 90% on certain employee compensation in response to the AIG scandal. As others have noted, this raises serious constitutional issues. Article I, Section 9, Clause 3 says simply and directly: “No Bill of Attainder or ex post facto Law shall be passed.” The congressional bill being considered in response to the AIG bonuses seems to violate both those prohibitions at least in spirit...My thoughts: The national debt just passed $11 trillion, Congress is considering another stimulus package, and the Fed just created $1.2 trillion. There are more important things for Congress to be angry about. Maybe if Congress took the month off, filled out NCAA tournament brackets and watched basketball things would improve. The bonuses were filling a contractual obligation. If Congress had wanted to attach strings to the bailout money, it should have been done before the bailout occurred.
Bills of attainder, ex post facto laws, and laws impairing the obligation of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation.
James Madison
Aside from the dangers to liberty from overzealous members of Congress, there are issues of priorities here. While Congress has been busy with this particular
inquisition, the Federal Reserve is moving ahead with a new plan to shower the economy with a massive $1.2 trillion cash infusion–an amount 7,200 times greater than the $165 million of AIG retention bonuses.
source
Thursday, March 19, 2009
Wednesday, March 18, 2009
Stimulus Analysis
Given the size, will the stimulus work as advertised? Will the goods and services—be they concrete for new highway projects or groceries for hungry families—pump up flagging demand and boost stalled economic activity?
If so, it will be the first time in modern recorded history...
The biggest problem is that the government can’t inject money into the economy without first taking money out of the economy. Where does the government get that money? It can a) borrow it or b) collect it from taxes. There is no aggregate increase in demand. Government borrowing and spending doesn’t boost national income or standard of living; it merely redistributes it. The pie is sliced differently, but it’s not any bigger.
read the entire essay
If so, it will be the first time in modern recorded history...
The biggest problem is that the government can’t inject money into the economy without first taking money out of the economy. Where does the government get that money? It can a) borrow it or b) collect it from taxes. There is no aggregate increase in demand. Government borrowing and spending doesn’t boost national income or standard of living; it merely redistributes it. The pie is sliced differently, but it’s not any bigger.
read the entire essay
AIG Bailout Controversy
Last Friday, AIG paid out about $165 million in bonus checks to employees who worked in the troubled AIG Financial Products unit. The bonuses were part of a larger package, some $450 million due to these employees in 2008-2009.
New York state Attorney General Andrew Cuomo on Tuesday said that 73 employees got more than $1 million each, including 11 people who don't even work for AIG anymore.President Obama says he wants to try to get the bonus money back. Turns out, it can't be done so easily.
Treasury chief Tim Geithner says he found out about the bonuses last week, although AIG revealed in regulatory filings last year that it was giving such bonuses. The contracts had been set up months before the government became a nearly 80%owner in the company. Treasury's lawyers said it would be legally difficult to block the bonuses.
The best Treasury said it could do right now is to ensure that the public coffers get reimbursed for all the bonuses on top of all the other money AIG owes. Treasury says it will add a reimbursement provision to latest deal to pump another $30 billion into AIG.
In the meantime, Congress is itching to get involved. Senate Democrats are talking about legislation to tax the heck out of the bonuses. Two key senators on Tuesday said they would try to impose a big tax on retention bonuses paid to executives of companies that received bailout money or in which the United States has an equity interest.
read the CNN article
My thoughts: The entire system and idea of bailouts in corrupt. Instead of focusing the wisdom and constitutionality of government interventionism, the media is focused a tiny group of people. The AIG bonuses are less than 1% of the money given to AIG. The money given to AIG is less than 1% of the bailout costs. So a victory may be achieved in a minor battle, while the war is being totally lost.
Tuesday, March 17, 2009
National Debt Hits $11 Trillion
source
The Outstanding Public Debt as of 18 Mar 2009 at 01:26:05 AM GMT
The estimated population of the United States is 305,834,430 so each citizen's share of this debt is $36,089.74.
The National Debt has continued to increase an average of $3.79 billion per day since September 28, 2007!
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