http://www.realclearmarkets.com/articles/ en-us Copyright 2008 Wed, 02 Jul 2008 03:06:45 -0600 http://www.sixapart.com/movabletype/ http://blogs.law.harvard.edu/tech/rss The terrorists who attacked the World Trade Center on 9-11-01 were striking a blow—a devastating one they hoped--at what they saw as the heart of capitalism and free markets in the United States. But in the aftermath of the attack, what the rest of the world saw was a wounded but game city that quickly pulled itself up off the mat--from the rapid return of the New York Stock Exchange, located just a few blocks from Ground Zero, to the speedy work of putting the city’s essential systems back on line and getting companies back to business. But even as New York rebounded, a strange, parallel storyline emerged in the planning to rebuild on Ground Zero. Less inspiring, the themes of that story were resignation, a lack of faith in free markets, and a perplexing willingness to capitulate to those who would destroy the institutions that are at the heart of our democratic capitalism. There are many players in this parallel storyline, from urban planners who saw the wholesale destruction as an unprecedented opportunity to shape 16 acres of prime city real estate into their version of the 21st century city, which didn’t include a return of commerce, to advocacy groups who viewed the site (and the promise of billions of dollars in federal aid) as an opportunity to advance agendas for everything from subsidized housing to a kind of super urban arts community. http://www.realclearmarkets.com/articles/2008/07/the_zero_at_ground_zero.html http://www.realclearmarkets.com/articles/2008/07/the_zero_at_ground_zero.html Steven Malanga Wed, 02 Jul 2008 03:06:45 -0600 The World Trade Organisation is losing its place at the centre of the global trading system. Absent reforms, the rules-based architecture of international trade may collapse into a “might makes right” affair.]]> http://www.realclearmarkets.com/articles/2008/07/has_the_wto_reached_a_tipping.html http://www.realclearmarkets.com/articles/2008/07/has_the_wto_reached_a_tipping.html Richard Baldwin Tue, 01 Jul 2008 12:18:49 -0600 The Age of Turbulence, the various FOMC members were persuaded “that the Fed would have to raise rates soon.” In describing the thought processes at work, Greenspan plainly wrote that in order to “subdue inflationary pressures, we were trying to slow the economy by making money more expensive to borrow.” Greenspan’s thinking belies the consensus today suggesting rate increases would aid the dollar. More realistically, the Fed has traditionally hiked rates to reduce dollar demand. From January to mid-October of 1987 the Fed raised it target rate 125 basis points, but the dollar weakened in gold terms from roughly $400/ounce to a high of $481. ]]> http://www.realclearmarkets.com/articles/2008/07/in_2008_shades_of_october_1987.html http://www.realclearmarkets.com/articles/2008/07/in_2008_shades_of_october_1987.html John Tamny Tue, 01 Jul 2008 03:14:38 -0600 NEW YORK – Reconciling global economic growth, especially in developing countries, with the intensifying constraints on global supplies of energy, food, land, and water is the great question of our time. Commodity prices are soaring worldwide, not only for headline items like food and energy, but for metals, arable land, fresh water, and other crucial inputs to growth, because increased demand is pushing up against limited global supplies. Worldwide economic growth is already slowing under the pressures of $135-per-barrel oil and grain prices that have more than doubled in the past year. ]]> http://www.realclearmarkets.com/articles/2008/06/saving_resources_to_save_growt.html http://www.realclearmarkets.com/articles/2008/06/saving_resources_to_save_growt.html Jeffrey Sachs Mon, 30 Jun 2008 12:44:26 -0600 There have been many accusations about speculators driving up the price of oil. This of course implies that a handful of people can manipulate prices outside of the laws of supply and demand. Perhaps it is also possible that the world is flat and the moon is made of cheese. A simple analogy can explain why this is incorrect. Dear Aunt Ethel decides to open a booth at the county fair making her wonderful apple pies. Every pie costs her $2 to make so she sells them for $2.50. Almost immediately, her pies are a hit, and a line grows in front of her booth. Her sister Eileen is running the cash box and suggests to Ethel, who is making and baking the pies, that they raise the price to $3 since the pies are so popular. Ethel agrees and they raise the price. The line continues to grow. They raise the price again to $4, then to $5, yet the line continues to grow and customers are starting to get impatient. http://www.realclearmarkets.com/articles/2008/06/oil_speculation_and_apple_pie.html http://www.realclearmarkets.com/articles/2008/06/oil_speculation_and_apple_pie.html Brian Shelley Mon, 30 Jun 2008 03:29:33 -0600 "We appear to be entering a period of serious stagflation with sharply rising expected and actual inflation combined with large downside risks to growth and employment." "I would argue that what we are seeing is an acceleration of expected consumer price inflation in the context of a sharp expansion in global liquidity. It is hardly surprising that the prices of those commodities, such as oil, for which the short-run price elasticities of supply and demand are low move upwards strongly when there is a rise in expected general inflation. The oil market is a very convenient vehicle to speculate on expectations of higher levels of general price inflation. Hence my view is that the 40% jump in oil prices that has occurred over the past few months - roughly the period during which financial conditions have been loosened sharply - is a reflection of the expectation of either an acceleration of global inflation, or a depreciation of the US dollar, or some combination of the two." - Malcolm D Knight, General Manager, Bank for International Settlements It was only five years ago that the central bankers of the world, and especially the Fed, was worried about deflation. Ben Bernanke was introduced to the world at large with his famous helicopter speech about how the Fed could deal with a deflationary environment. Who would have thought that what passed as humor to a group of economists would be taken so seriously by the rest of the world?]]> http://www.realclearmarkets.com/articles/2008/06/the_slow_motion_recession_revi.html http://www.realclearmarkets.com/articles/2008/06/the_slow_motion_recession_revi.html John Mauldin Sat, 28 Jun 2008 09:54:32 -0600 On the day after an unusually important Fed policy meeting both gold and stocks severely rebuked the central bank's decision to take no action in support of the weak dollar or to curb rapidly growing inflation. Gold spiked $30, a clear message that Bernanke & Co. won't stop inflation. Stocks plunged over 200 points, an equally clear message that the Fed's cheap-dollar inflation is damaging economic growth. http://www.realclearmarkets.com/articles/2008/06/wheres_bernankes_inner_volcker.html http://www.realclearmarkets.com/articles/2008/06/wheres_bernankes_inner_volcker.html Larry Kudlow Fri, 27 Jun 2008 05:03:00 -0600 Central banks are increasingly transparent but is the spotlight stifling? Analysis of FOMC transcripts before and after Committee members knew that they would be published shows how transparency deadened the debate and reduced the number of challenges to Greenspan’s position.]]> http://www.realclearmarkets.com/articles/2008/06/the_dangers_of_central_bank_tr.html http://www.realclearmarkets.com/articles/2008/06/the_dangers_of_central_bank_tr.html Ellen Meade & David Stasavage Thu, 26 Jun 2008 11:16:33 -0600 PALO ALTO, Calif. -- Fifty years ago, Jack Kilby, who grew up in Great Bend, Kan., took the electrical engineering knowledge he acquired as an undergraduate at the University of Illinois and as a graduate student at the University of Wisconsin to Dallas, to Texas Instruments, where he helped invent the modern world as we routinely experience and manipulate it. Working with improvised equipment, he created the first electronic circuit in which all the components fit on a single piece of semiconductor material half the size of a paper clip. On Sept. 12, 1958, he demonstrated this microchip, which was enormous, not micro, by today's standards. Whereas one transistor was put in a silicon chip 50 years ago, today a billion transistors can occupy the same "silicon real estate." In 1982 Kilby was inducted into the National Inventors Hall of Fame, where he is properly honored with the likes of Henry Ford and Thomas Edison. http://www.realclearmarkets.com/articles/2008/06/building_a_wall_against_talent.html http://www.realclearmarkets.com/articles/2008/06/building_a_wall_against_talent.html George Will Thu, 26 Jun 2008 04:51:35 -0600 “did not realize until it was too late that the only closed political economy is the world economy. Britain could not be starved into submission by blockade unless she were totally cut off from the world. As long as Britain could trade with any nation outside France, it was thus trading indirectly with France.”—Jude Wanniski, The Way The World Works Seeking to prove that Fidel Castro was still among the living last year, Cuban officials released a photo of the ailing dictator, one in which he was wearing an Adidas track suit. Adidas is a German company, and presently there’s no Germany/Cuba trade embargo as there is between the U.S and Cuba. But had Castro been decked out in Nike (Beaverton, OR) gear, the picture wouldn’t have been any more remarkable. ]]> http://www.realclearmarkets.com/articles/2008/06/trade_embargos_are_an_unworkab.html http://www.realclearmarkets.com/articles/2008/06/trade_embargos_are_an_unworkab.html John Tamny Thu, 26 Jun 2008 03:36:52 -0600 The June 24-25 meeting of the Federal Open Market Committee will reveal the Fed's attempts to repair the damage from its self inflicted wounds that caused confusion and consternation in the market over exactly what the central banks intends to do about a very real inflation problem. The last few weeks have not been kind to the market or the Fed. Standing in the heat of a sudden outbreak of hawkish rhetoric, the market quickly priced in up to four rate hikes before the end of the year, sent 30 yr. mortgage rates sharply higher and sent rates on jumbo mortgages up by 70 basis points. The Fed, recognizing the dislocation it had caused in interest rates and rate expectations, walked the market back toward a more reasonable set of expectations. The ten-year and 30 year mortgage rates now stand above where they were in August 2007, before the beginning of the credit crises. http://www.realclearmarkets.com/articles/2008/06/losing_control_the_fed_at_the.html http://www.realclearmarkets.com/articles/2008/06/losing_control_the_fed_at_the.html Joseph Brusuelas Wed, 25 Jun 2008 03:22:07 -0600 The Death and Life of Great American Cities and The Economy of Cities—Jane Jacobs explained that effective economic development and urban renewal arise from the bottom up as the product of thousands of enterprises and people working on their own without a master plan, rather than from the top down, as planned by politicians or bureaucrats. The vibrancy and diversity of city markets and neighborhoods lie in “the creation of incredible numbers of different people and different private organizations, with vastly differing ideas and purposes, planning and contriving outside the formal framework of public action,” she observed. This week, it is exactly three years since the U.S. Supreme Court’s Kelo decision, which endorsed a very different view of how local economic progress occurs. In that decision, the court said that it was okay for government to condemn and take private property and use it for new economic development if officials believed that the seizures would "provide appreciable benefits to the community, including…new jobs and increased tax revenue." The court’s decision expanded the so-called “takings” clause of the Constitution’s Fifth Amendment, which previously had been interpreted to mean that government could only take private property to create a public “good,” such as construction of a needed new highway or water pipeline. ]]> http://www.realclearmarkets.com/articles/2008/06/pols_remain_masters_of_domain.html http://www.realclearmarkets.com/articles/2008/06/pols_remain_masters_of_domain.html Steven Malanga Wed, 25 Jun 2008 03:09:19 -0600 Central banks cannot achieve price and financial stability with one instrument (interest rates). A counter-cyclical regulatory system is needed to dampen asset booms and to smooth busting bubbles. To use such macro-prudential instruments effectively, regulators need courage, quantitative triggers, and independence; they will be criticised by lenders, borrowers and politicians in both booms and busts. The events of the last year have reminded us all that a central bank does not just have one responsibility, that of achieving price stability. It is indeed its first core purpose (CP1); but as the sole institution that can create cash, and hence bank reserve balances, a central bank has a responsibility for acting as the lender of last resort and maintaining financial stability. This is its second core purpose (CP2).]]> http://www.realclearmarkets.com/articles/2008/06/how_can_central_banks_tackle_f.html http://www.realclearmarkets.com/articles/2008/06/how_can_central_banks_tackle_f.html Charles Goodhart Tue, 24 Jun 2008 12:00:58 -0600 The state of the U.S. economy remains a contentious issue among economic commentators. Some argue we are and have been in a recession for some time, while others argue the economy never was contracting and won’t in the future. When we consider that a lot of the discussion hinges on GDP data points, it could more realistically be argued that the discussion is pointless. That is so given the misleading nature of Gross Domestic Product (GDP) calculations. http://www.realclearmarkets.com/articles/2008/06/the_recession_debate_misses_th.html http://www.realclearmarkets.com/articles/2008/06/the_recession_debate_misses_th.html John Tamny Tue, 24 Jun 2008 03:40:15 -0600 Forget the housing collapse, the "credit crunch" and -- in isolation -- higher oil prices. The real economic menace may be resurgent inflation, which is the broad rise of most prices. To understand why, some history helps. The government's worst domestic blunder since World War II was the unleashing of high inflation: In 1960, annual inflation was 1.4 percent; by 1979, it was 13.3 percent. This terrified Americans, who feared falling living standards. It also destabilized the economy, causing harsher recessions that culminated with 10.8 percent unemployment in 1982. We don't want to go there again, and Federal Reserve Chairman Ben Bernanke has been insisting that we won't. In a recent speech, he argued that the economy today is much different from what it was in the mid-1970s. He's right. In 1974, inflation (as measured by the consumer price index) was 12 percent. Unemployment in the parallel recession peaked at 9 percent in early 1975. We're not close to that havoc. Unfortunately, Bernanke's comforting analogy is misleading. The question is not whether it's 1975; it's whether it's 1966. http://www.realclearmarkets.com/articles/2008/06/the_return_of_inflation.html http://www.realclearmarkets.com/articles/2008/06/the_return_of_inflation.html Robert Samuelson Tue, 24 Jun 2008 03:36:49 -0600