About 50 million homeowners have mortgages. Who wouldn't like the government to cut their monthly payments by 20 percent or 30 percent? But Frank's plan reserves that privilege for an estimated 1 million to 2 million homeowners who are the weakest and most careless borrowers.
Wednesday, April 2, 2008
What do you get when you reward carelessness?
Even my kids know the answer.
What would it take to compensate you for moving your business from Denmark to Angola?
But the US is slipping. From the Economist:Fundamental features of America's business environment will remain attractive (deregulated labour markets, the high quality of infrastructure, leadership in technology) ... Other countries will make improvements to their business environments, while the overall quality of conditions in America will stagnate.
What would it take to compensate you for moving from Oslo to Caracas?
...a 300% raise. From the Economist.
We knew this already--but keep reminding us
Anyone who reads this blog knows about the US entitlement problem. Treasury Secretary Paulson took the first of twelve steps by recognizing that the problem exists:
The Social Security program is financially unsustainable and requires reform...[and] the Medicare program poses a far greater financial challenge than Social Security.Not exactly a rousing call to arms. I prefer Cato's characterization as it comes close to using what is known as the "dead baby defense". If you can link a policy to infant mortality, you win the debate.
...It cannot pay future benefits without drowning our children and grandchildren in a sea of debt and taxes.
Game Theory View of Doping in Sports
The most recent Scientific American offers an article by Michael Shermer that views sports doping from a game theoretical perspective. A few of the key ideas:
Game theory highlights why it is rational for professional cyclists to dope: the drugs are extremely effective as well as difficult or impossible to detect; the payoffs for success are high; and as more riders use them, a “clean” rider may become so noncompetitive that he or she risks being cut from the team.
The game theory analysis of cycling can readily be extended to other sports. The results show quantitatively how governing bodies and antidoping agencies can most effectively target efforts to clean up their sports.
Tuesday, April 1, 2008
Expensive euro ends Irish miracle
In this blog, we have lauded Irish economic policy.
Starting more than three decades ago, policymakers slashed corporate taxes, pumped money into higher education, deregulated aggressively, and courted multinationals desperate to escape the slow-growth, red-tape environment of Continental Europe. The strategy worked brilliantly: Ireland's economy expanded an average of 6% annually for a decade or more.But now the miracle is over, as the euro surges against the dollar and sterling, the currencies of Ireland's two biggest trading partners. GDP growth is forecast at 1.6%.
How to prepare for a slump
The financial and housing sectors have already begun to slow down. What should your company do if the slowdown spreads to the rest of the economy? Here is the answer from McKinsey:
The prospect of a prolonged downturn should lead to the introduction of more severe contingency plans for managing credit risk, freeing up cash, selling assets, and reassessing growth. But executives should also think through the opportunities that a downturn provides. .... A downturn can be a great opportunity to hire talent, to continue spending on long-term strategic initiatives, and to target acquisitions.3 Companies that now enjoy strong balance sheets have a good position to take advantage of current credit market conditions and reap outsized value for shareholders.
...Executives must therefore understand how to make costs more variable, and CFOs need to understand how to get their balance sheets ready to do so. The desirable moves include shaping the investor base to generate support for ideas that might seem to go against conventional wisdom in a downturn and could require a reduction in dividends. Companies shouldn’t rule out investigating and approaching potential financial partners, such as private-equity players or sovereign wealth funds, whose resources could help their allies to make the most of a slump.
Dem's vs. Repub's on interpreting failure
There are two policy reactions to observed failures. Democrats are more likely to think that more regulation is necessary to prevent future failure while Republicans are more likely to intrepret failure as the normal functioning of markets which punish bad behavior more swiftly and surely than the government could. The loss associated with failure creates an incentive to avoid future failure.
These two views are manifest in this video policy debate. In the case of Bear Stearns, Democrats want new regulations while Republicans think the market punished Bear Stearns for investing heavily in mortgage-backed securities.
These two views are manifest in this video policy debate. In the case of Bear Stearns, Democrats want new regulations while Republicans think the market punished Bear Stearns for investing heavily in mortgage-backed securities.
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