Tuesday, April 06, 2010

The false recovery? 

The bear case for the economy, and the illusion of the high savings rate.

The way out of the trap is to lower the amount of capital needed to do any particular new thing. The best way to do that is to shorten the amount of time it takes to do that thing, because time costs not just a little money, but a lot. And, of course, the best way to shorten the time of a project from inception to return in many industries is to reduce regulation (including for these purposes obstructionist litigation or political processes) or make the regulators work at a much faster tempo. Sadly, our government is heading in the opposite direction.


By Blogger Purple Avenger, at Tue Apr 06, 11:36:00 AM:

Janzen is right. This "recovery" is phony as a $3 bill.  

By Anonymous Anonymous, at Tue Apr 06, 12:53:00 PM:

You point to lightening the burdens of regulation, and I agree that would help spur growth. Another thing that would spur growth would be to lower the cost of capital, by reducing government borrowing and reducing tax rates (particularly taxes on capital).

Alas, all three of these ideas will require a monumental election victory awarded to a candidate of strong ideals. Has anyone seen a candidate fitting that description anywhere around?

We are so screwed.  

By Blogger randian, at Tue Apr 06, 01:19:00 PM:

Tell that to Barney Frank, who wants to add a 120-day hold period to private offerings, and eliminate Federal preemption of state Blue Sky laws for Regulation D 506.  

By Anonymous feeblemind, at Tue Apr 06, 03:33:00 PM:

I think your comments are spot on TH.

Just the other day, I was thinking about how fast things were done immediately after Pearl Harbor. In Nebraska, air bases and a naval ordinance facility appeared out of corn fields in less than a year, not to mention the transition of industry from a peacetime to wartime footage.

It is amazing how fast people can complete projects if the Government just gets out of the way.  

By Blogger A_R, at Tue Apr 06, 03:33:00 PM:

Sorry, but DC won't a) give up its hard won power/athority b) won't stop spending and c) loves regulation almost as much as the citizenry loves breathing.

Those three elements alone are the paramount issues that retard growth and prosperity.

Its kinda hard to both grow the economy when lousy fiscal policy, overbearing governmental regulation, and being brow-beaten into submission by a lacky press corpse.

And, they wonder why the Tea Parties are growing, getting a cross section of fly-over country, and all those opposition billboards are springing up everywhere....  

By Anonymous Blacque Jacques Shellacque, at Wed Apr 07, 01:42:00 AM:

And, of course, the best way to shorten the time of a project from inception to return in many industries is to reduce regulation...

No effin' way in hell, at least not with the current batch of incompetent idiots running the show.  

By Anonymous Anonymous, at Wed Apr 07, 09:38:00 AM:

The bear case should be predicated on the large increase in taxes coming with the expiration of the "Bush cuts" and the prospect of huge increases coming from the recent health insurance nationalization. The prospect of tax increases will do the damage long before the actual tax impact is felt.

I admit I can't figure out what's going on with the economy. Ships and trucks are still empty, so trade remains at very low levels. Usually that means bad news. Commodities are recovering nicely, consistent with a recovery (or with a monetary bubble). Government borrowing hasn't impacted the artificially low level of interest rates, yet. The savings rate is already declining, and consumer spending seems to be sputtering to life. No inflation to be seen, so far, and the danger of deflation seems to be receding. There is a big treasury auction this afternoon, and it'll be news if demand is good (especially given the lackluster demand at the last 10 year auction).

Despite all the ins and outs of the economy, normal stuff mostly, I still think the tax story is ultimately going to be the most important for all of us non-federal workers. High taxes are always bad news.  

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