The Blessings of Failure

By | 2014-09-11T10:55:45+00:00 August 30th, 2011|Global Market Update|

Many people talk about the successes of the market. But what it really allows is failure. Centuries ago, if you couldn’t pay your debts, you were put in debtor’s prison where you wrote letters imploring family and friends to bail you out. In ancient Rome, if you pledged yourself as collateral and didn’t pay the loan you would become your creditor’s slave. Colonial Virginia was settled by many indentured (i.e. indebted) servants working off their debts via labor. In the US we abolished debtor’s [...]

A Perfect Storm?

By | 2017-07-17T12:35:02+00:00 August 29th, 2011|Economics, Global Market Update|

What are the economic effects of Hurricane Irene? The storm caused major flooding and disrupted businesses all along the East Coast. It tested flood-level records in New York City and much of the eastern seaboard. Also, the storm itself disrupted plans all along its path, as people prepared for the storm and cleaned up their yards and […]

Polishing the Apple

By | 2017-07-17T12:35:02+00:00 August 26th, 2011|Global Market Update|

Is Steve Jobs irreplaceable? There’s no doubt that Steve Jobs made Apple what it is today. 15 years ago the company was ailing financially and received a bail-out from—Microsoft. It had been a niche supplier of computers for schools, never penetrating the business market. Investors had written it off. The stock went nowhere for a long time Then came the iPod, iTunes, the iPhone, and the iPad. Apple redefined the music business, which had been in flux due to Napster and file-sharing. Apple dominated [...]

All That Glitters (Part 3)

By | 2014-09-11T10:53:58+00:00 August 25th, 2011|Global Market Update|

What’s wrong with the gold standard? Lots of people are talking about it. Most of the world was on a gold standard from the 19th century until the 1970s. For millennia, gold has been a store of value. Now, gold prices are soaring and people are concerned about potential inflation. A gold-backed dollar would limit the power of the central bank so it appeals to a lot of conservatives. But government must still set the price of gold in dollars, unless we want to [...]

Home Alone?

By | 2014-09-11T10:53:19+00:00 August 24th, 2011|Global Market Update|

Lots of people are worried about immigration. Is this realistic? The assumption is that immigrants take jobs and push down wages in the receiving country. In fact, because of the law of comparative advantage, total income in the receiving area often rises rather than falls, even if wages in some fields, like construction, do come under pressure. This is little-known fact is consistent with economic theory: specialization leads to increased productivity. Immigrants who aren’t fluent in the receiving country’s language might focus on manual [...]

Mr. Buffett, Taxes, and Investment

By | 2014-09-11T10:52:27+00:00 August 23rd, 2011|Global Market Update|

A couple weeks ago Warren Buffett wrote an op-ed piece advocating higher taxes. Predictably, the headline was inflammatory. Predictably, both Democrats and Republicans latched onto the article as an excuse to bash each other, as did the New York Times and the Wall Street Journal. The heart of the matter is fairness. Mr. Buffett does not think it fair that his marginal tax rate should be 15%, while his secretary’s is 35%. (I noticed that his secretary must be very well paid, since only [...]

Your Parent’s Market?

By | 2014-09-11T10:51:48+00:00 August 22nd, 2011|Global Market Update|

Some folks are saying this is not your parent’s (or grandparent’s) market. Are they right? Strictly speaking, this is true: volume has never been higher, and volatility is intense. There have been fewer than 300 four percent moves in the Dow since 1900 – less than 1% of all the trading sessions. But more than 10% of these big moves have come since October 2007. On a deeper level, though, claiming that things are different this time wrong. The market is driven by financial [...]

A Russian Future?

By | 2014-09-12T10:42:29+00:00 August 20th, 2011|Global Market Update|

Are we facing a Russia-moment? On August 17, 1998 the Russian government devalued the ruble, defaulted on domestic debt, and declared a moratorium on payment to foreign creditors. By October the stock market had fallen over 20% from its high and the 10-year US Treasury market had rallied about 1 ½ percent. Market volatility rivaled that of October 1987. Economists couldn’t see a way out for Russia—and they were right. Its economy didn’t begin to recover until 2000, and didn’t get to its prior [...]

A Russian Moment?

By | 2011-08-19T05:53:18+00:00 August 19th, 2011|Economics, Global Market Update|

Are we facing a Russia-moment? On August 17, 1998 the Russian government devalued the ruble, defaulted on domestic debt, and declared a moratorium on payment to foreign creditors. By October the stock market had fallen over 20% from its high and the 10-year US Treasury market had rallied about 1 ½ percent. […]