- The DJIA lost 3.57 percent today. Last Friday it lost 3.12 percent. This is nowhere near even the 20th worst day in the DJIA’s history—a 6.98 percent loss on September 29, 2008. But the past two trading days do represent the DJIA’s 19th and 20th worst daily point losses ever.
- Most economists think Greenspan’s Fed left interest rates too low for too long when rates hovered between one and two percent for 32 months between December 2001 and May 2004. But that’s nothing compared to today, which marks roughly 80 months of near-zero rates.
- Even if the U.S. stock market recovers somewhat in the next few weeks, problems in China have proven to be very fundamental and very serious. I take this as another good reason to believe my 8-month old prediction—that the Fed will not raise rates in 2015. China is in full-on stimulus mode, and sharp divergence between central banks’ policies makes conducting monetary policy in the U.S. difficult. If the Fed continues to flirt with the idea of a rate hike, it will be while China, Japan, and the Eurozone still meddle with stimulus. At the very least, this risks boosting the dollar’s value even further and weakening U.S. exports in the process. Larry Summers made this point in the Financial Times today. I explained it last fall.
From Stuart Butler, writing at RealClearMarkets.com.
Imagine if prisons faced a readmissions penalty. Let’s say that if an unusually high number of released inmates from a particular prison were convicted and sent back to prison within three years then the prison’s budget would be cut and the bonuses and salary increases of senior prison staff trimmed back. Just as with hospitals, the first reaction would be to complain at the “unfairness” of being held liable for a released inmate’s return to crime. But after that the prison management would start to do a much better job than today in preparing inmates for re-entry into the community. Petty restrictions and surcharges on phone calls to family members would quickly go – the erosion of family ties increases the likelihood of a return to crime. Limits on GED textbooks would certainly vanish.
Prisons would get serious not only about training inmates but also about working with potential employers to help line up jobs. Instead of dumping released prisoners on the street, prison managers, like today’s hospital managers, would become more interested in arranging stable housing for their ex-customers.
From Philip Giurlando’s review of Mein Kampf:
This sad historical episode reveals an important point: that any moral system that rests on equal human dignity cannot flow from the scientific observations of biologists. In other words, universalist moral systems, like liberalism, socialism, or the United Nation Declaration of Human Rights (UDHR) rely on assumptions that are not scientific. The idea that all humans have equal worth is a statement of value that is not verifiable according to the standards of science. Rather, it rests on faith, but this does not make it less true. It means that a strictly scientific materialist worldview is insufficient for the belief in universal human equality. One could even assert that human decency is inversely proportionate to the distance that we create between ourselves and the dictates of nature. The natural world indeed operates in a hierarchical, predatory, and ruthless fashion that ensures the survival and reproduction of the strongest. Hitler not only recognized this, he celebrated and derived his morality from it, as did eugenicists. Universal moral systems like the ones mentioned above can accurately be characterized as attempts to use human agency to overcome these ruthless processes of the natural world. Therefore, attempts to derive moral systems from nature, or to ascribe some transcendental moral agency to the earth, should be taken with a grain of salt.
Love is, as far as I can tell, the most mature response to any situation – the pinnacle of what it means to be truly human. Love is a wrench in the wheels of cause and effect, of reactionary living, of casual imitation. Yes, speed and events are all around us in the information age, but motion, true motion, is rare. Love is the movement.
The good reason for slow economic growth is that government statisticians are having a hard time measuring true output. Productivity and GDP growth are not as slow as the official numbers say. For example, when people download free apps to improve their communication and travel, that isn’t measured in GDP, yet our standard of living is clearly higher.
One thing we are confident about is that quantitative easing (QE) hasn’t made a dime’s worth of difference. Although it stuffed the banking system chock full of idle excess reserves, new figures from the government show weaker economic growth in 2012-13, while the Fed was engaged in expansive QE3, and then slightly faster growth in 2014, when the Fed was tapering and then ending QE.
When we put all this together, the picture is reasonably clear. The economy has been in recovery for six years and the unemployment rate has finally fallen to a level even the Fed thinks is close to full employment. Unemployment claims have been below 300,000 for twenty-one straight weeks, and at less than 0.2% of total jobs are at historical lows.
So, even though growth remains slow, it’s hard to argue rates should stay at zero. While some investors fear rate hikes, we see them as ratifying the strides the economy has made in the past several years. Surely, this is no economic boom like 1980s or 1990s. But even a modestly growing economy should have short-term rates higher than zero.
From Christopher Westley in today’s Mises Daily:
Sick minds deemed the supply of death perfectly inelastic and therefore worthy of tax. But it’s not just people who die in Connecticut. Wealth does too, illustrating what happens when greed is unconstrained by market forces. Some writers might consider Connecticut’s economy something of a model worth emulating, but the fact is that Connecticut — like every other tax jurisdiction — grows its public sector at the expense of its private, and that when capital predictably flows elsewhere, economic opportunity diminishes.