Sages are divided on the question of whether the massive creation of money will lead to inflation. The very raising of the question indicates that the war has already been lost, as the main function of a central bank is to ensure enough stability to encourage economic growth.
The debate would be bad enough in itself were it not accompanied by a number of new elements. A good party hostess would not try a new, untested recipe on her guests. Yet the escalation of government intervention in the economy and private financial affairs amounts to a gigantic experiment in which I am one of the mice. This is no doubt intellectually stimulating to policy practitioners in Washington. Indeed, perhaps the most interesting opportunities for the ambitious nowadays are in the capital, for two decades an outpost of mental somnolence and irrelevance while financial and technological innovation surged. (The less ambitious, who 10 years ago might have taken a flyer in the stock market, now occupy themselves with how much of a subsidy for home weatherization and solar power systems they can obtain from various government agencies.) The supremely ambitious are busy inventing the next Internet and creating firms for trading bonds and credit in a manner not practicable for public operators.
It is worth reviewing all of the changed circumstances now in play. In addition to the explosion of government debt, deficits and money, I can think of a long list. I am not doing it for the purposes of establishing a case for or agin' because of the Popperian impossibility of ever proving that things would have been worse without government action, or that they are improving because of such action. Both are truly untestable assertions. I offer this list simply to look at all the new cards on the table in an effort to see what game we are now playing.
NEW CARDS ON THE TABLE
-- collapsing imports, collapsing exports and protectionist impulses associated therewith
-- collapse of individual investors' confidence in the stock market as a vehicle for retirement savings and investment after the double whammy of crashes in 2000-2002 and 2008
-- attempts by the public to regain financial ground by purchasing CDs paying negative real interest -- a state of affairs that can only lead to cynicism toward thrift
-- collapse of professional confidence in the financial markets
-- massive and continuing government activism in the mortgage and government bond markets, on ever-changing terms
-- increasing unemployment or underemployment, inevitably leading to trouble in securitized credit-card assets and commercial credit
-- Demagogic attacks on capitalists and the attendant destruction of the workers employed by said capitalists
-- Large-scale business failures (e.g., General Motors)
-- Reductions in private capital caused by tax increases, new restrictions on movement of money overseas and attacks on tax havens.
-- Proflieration of government boondoggles
-- Triumph of entertainment as driver of value in media and other enterprises
-- Fewer opportunities for investment overseas due to local laws favoring locals (e.g., China's swing toward exclusionary mainland markets from the more-open Hong Kong exchange.)
-- Impending European disintegration
-- Severe recessions in Japan and Canada
Saturday, April 25, 2009
Wednesday, April 15, 2009
Manhattan Barbecue
A Southern friend's post on my Daily Speculations site about a new barbecue restaurant find in Florida so inflamed my latent longing for baby back ribs that I resorted to the one barbecue place for miles around.
My neighborhood is dominated by French chic, beer bars and sushi palaces once popular with Wall Street traders, and this joint doesn't look like much. It's a tiny little place on the corner of Greenwich and Reade streets with no chairs, only takeout, and you have to wait 10 minutes even if you're the only one in line. The menu reads "Tribeca's Corner Store since 1991."
I didn't have any expectations, this far south of Harlem, but what is a barbecue fanatic to do? I paid my $19.50 and came back in 15 minutes, dragged my prize home and ripped into the package.
It wasn't Austin fall-off-the-bone, but it was pretty darn good to my deprived taste. The sauce was nice and spicy, and the cook had properly basted and baked it on, on, unlike the classic Manhattan horror of dank brown ribs with sugary sauce on the side.
I tore into those ribs like a crazed Bacchante, and before I came to my senses I had eaten four. I forced myself to put the rest in the fridge, one of my more outstanding instances of self-control. I have a dinner engagement at Bouley tonight with the other Daily Speculations founder, and wished to maintain some decorum, not to mention appetite.
Oh, I forget the cole slaw, which probably had as many calories as the ribs, but was excellently spiced, with a touch of vinegar, and fresh. Just a couple of spoonfuls, and I was satiated.
My neighborhood is dominated by French chic, beer bars and sushi palaces once popular with Wall Street traders, and this joint doesn't look like much. It's a tiny little place on the corner of Greenwich and Reade streets with no chairs, only takeout, and you have to wait 10 minutes even if you're the only one in line. The menu reads "Tribeca's Corner Store since 1991."
I didn't have any expectations, this far south of Harlem, but what is a barbecue fanatic to do? I paid my $19.50 and came back in 15 minutes, dragged my prize home and ripped into the package.
It wasn't Austin fall-off-the-bone, but it was pretty darn good to my deprived taste. The sauce was nice and spicy, and the cook had properly basted and baked it on, on, unlike the classic Manhattan horror of dank brown ribs with sugary sauce on the side.
I tore into those ribs like a crazed Bacchante, and before I came to my senses I had eaten four. I forced myself to put the rest in the fridge, one of my more outstanding instances of self-control. I have a dinner engagement at Bouley tonight with the other Daily Speculations founder, and wished to maintain some decorum, not to mention appetite.
Oh, I forget the cole slaw, which probably had as many calories as the ribs, but was excellently spiced, with a touch of vinegar, and fresh. Just a couple of spoonfuls, and I was satiated.
Detroit on the Hudson
Here's a view from Manhattan.
In my neighborhood near the World Financial Center, work continues in a desultory manner on dozens of partially finished buildings designed for Wall Street firms that not likely to occupy them.
Merrill and Deutsche Bank are building two new skyscrapers a block away. Merrill's seems particularly redundant, as its new owner, Bank of America, is building its own skyscraper up in Midtown.
Giant cranes are parked all along the West Side Highway on the new World Trade Center site. Work seems to continue, but the tempo might be best described as Adagio. The glass buildings along the highway look unoccupied.
Around the neighborhood, trendy restaurants once "fully committed" for weeks in advance welcome walk-in customers like long-lost friends.
Further uptown, so many members at a private tennis club have taken "leaves of absence" that the club is hurting from the lost dues.
Personal trainers at Manhattan health clubs quietly ask their few remaining clients whether the economy will start improving soon. Seeing more than two people in the executive locker room is a rare event.
One of Manhattan's most popular dance instructors is giving up and moving to Florida, to set up a home base for weekend seminars in Asia.
The Really Big Money still keeps buying the $2,000-$10,000 dresses at the designer shops on Madison Avenue, but half the customers in the street's chic cafes are speaking French.
I haven't seen any statistics on migration out of Manhattan, but a quiet, steady, massive outflow is in the air.
I find the new, quieter Manhattan rather pleasant, in a slightly melancholy way. The boomtown may have been insane, but energy emanated from the sidewalks. Prices demanded suspension of belief, but private money kept the parks and streets clean and the art museums and opera world-class. Thousands of interesting little businesses opened doors and prospered.
Now, I feel sorry for the little shop owners and their employees. Even my friend the short-order cook at the hamburger joint in my old Midtown neighborhood says business is lousy.
I'm told that things were pretty bad for several years after the 1987 crash. When I came to Manhattan in 1995 that slump was just ending. Today's Great Deleveraging will have a far greater impact. Manhattan is no longer Wall Street's company town, and nobody is quite sure what it will be.
The city has definitely had the wind knocked out of it, if not the heart. The bright and the brave see opportunity here.
In my neighborhood near the World Financial Center, work continues in a desultory manner on dozens of partially finished buildings designed for Wall Street firms that not likely to occupy them.
Merrill and Deutsche Bank are building two new skyscrapers a block away. Merrill's seems particularly redundant, as its new owner, Bank of America, is building its own skyscraper up in Midtown.
Giant cranes are parked all along the West Side Highway on the new World Trade Center site. Work seems to continue, but the tempo might be best described as Adagio. The glass buildings along the highway look unoccupied.
Around the neighborhood, trendy restaurants once "fully committed" for weeks in advance welcome walk-in customers like long-lost friends.
Further uptown, so many members at a private tennis club have taken "leaves of absence" that the club is hurting from the lost dues.
Personal trainers at Manhattan health clubs quietly ask their few remaining clients whether the economy will start improving soon. Seeing more than two people in the executive locker room is a rare event.
One of Manhattan's most popular dance instructors is giving up and moving to Florida, to set up a home base for weekend seminars in Asia.
The Really Big Money still keeps buying the $2,000-$10,000 dresses at the designer shops on Madison Avenue, but half the customers in the street's chic cafes are speaking French.
I haven't seen any statistics on migration out of Manhattan, but a quiet, steady, massive outflow is in the air.
I find the new, quieter Manhattan rather pleasant, in a slightly melancholy way. The boomtown may have been insane, but energy emanated from the sidewalks. Prices demanded suspension of belief, but private money kept the parks and streets clean and the art museums and opera world-class. Thousands of interesting little businesses opened doors and prospered.
Now, I feel sorry for the little shop owners and their employees. Even my friend the short-order cook at the hamburger joint in my old Midtown neighborhood says business is lousy.
I'm told that things were pretty bad for several years after the 1987 crash. When I came to Manhattan in 1995 that slump was just ending. Today's Great Deleveraging will have a far greater impact. Manhattan is no longer Wall Street's company town, and nobody is quite sure what it will be.
The city has definitely had the wind knocked out of it, if not the heart. The bright and the brave see opportunity here.
Sunday, April 12, 2009
Opiate of the Markets
I have been far too happy to write about politics and the economy lately. I just can't work up a head of steam about the doings in Washington or anywhere else.
The market has been cheerful right along with me, despite a constant stream of warnings that the recession is far from over and that stocks will soon plunge again.
Maybe those trillions of stimulus dollars are finally starting to kick in. Recall the classic Fed prescription:
Take this money and call me in six to eighteen months.
And yet, and yet...I really don't understand why this particular instance of massive money creation is different from all other instances of massive money creation. Why shouldn't inflation be a concern? Are U.S. bonds ridiculously overpriced?
The market has been cheerful right along with me, despite a constant stream of warnings that the recession is far from over and that stocks will soon plunge again.
Maybe those trillions of stimulus dollars are finally starting to kick in. Recall the classic Fed prescription:
Take this money and call me in six to eighteen months.
And yet, and yet...I really don't understand why this particular instance of massive money creation is different from all other instances of massive money creation. Why shouldn't inflation be a concern? Are U.S. bonds ridiculously overpriced?
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