A temporary timeout was called this week in the on-going Greek debt tragedy. Euro-zone officials and Greek politicians agreed on Friday to a four month extension of the default deadline to give themselves more time to find a solution to the intractable problem that the Greek government owes more debt than it can pay back. This exercise in can-kicking spurred me to read the 1977 book, Democracy in Deficit, by Nobel Laureate James M. Buchanan and Richard E. Wagner. I'm interested in their insights into how western democracies have gotten themselves into so much debt, and if they see a possible path out of the woods. I'm only five chapters into the book, with seven to go. But already, the authors have revealed the complete change in the mindset of western society wrought by the economic ideas of Lord Keynes.
Buchanan and Wagner describe the mindset of the public, including government officials, prior to the ascendancy of Keynesian economics. They call it the Old-Time Fiscal Religion, an appropriate description for the commonly held and faithfully adhered to principles of public finance, prior to the Keynesian revolution. As they briefly describe the old "fiscal constitution", it had three main principles.
First, frugality in public finance was considered a virtue, and profligacy was not. Calvin Coolidge was our last truly frugal President, although President Eisenhower might qualify as frugal (there were three years of budget surplus in his eight years in office) when compared to the record of Presidents since he left office. more >>
Recently released statistics say that the percentage of adults younger than 30 who own a private business is the lowest in a generation. Today only 3.6% own a stake in a private company, compared to 6.1% in 2010. Even more troubling, this number was 10.6% in 1989.
This trend of a lost generation of entrepreneurs has profound implications for the growth of our economy. John Davis, chair of the Families in Business Program at Harvard Business School, worries that this trend will cause the U.S. economy to be less vibrant. He calls the plunge in business ownership a "worrisome finding."
We have a generation averse to risk and hard work. More of them want a government job or a disability check. Forty years ago we rode dirt bikes and bumper cars, our popular rides of choice, at the county fair. Today, the most popular rides are those motorized carts at Wal-Mart. more >>
The Dow Jones Industrial Stock Index started the week on Monday, January 26 standing at 17,672.6, where it had closed the previous Friday after a 141.38 sell-off. Monday morning it lost another 100 points, but by the end of the day it had recovered and was up 6.1 points. On Tuesday, the Dow Jones Index lost 291.49 points. On Wednesday the index lost another 195.84 points. Thursday seemed brighter, with the index moving up 225.48. Alas, the Dow Jones Industrials fell 251.9 points on Friday, to end the week at 17,164.95, a loss of 513.75 for the week, and a loss of over 650 points if you add in the previous Friday.
To put these numbers into perspective, the Dow would have to rise an average of 27 points per week to gain an 8% return for the whole year, close to its historical average return. The last six trading days wiped out nearly a half-year of average gains.
There are many explanations. Oil prices, Fed statements, European currency moves, elections in Greece, violence in the Ukraine, etc, etc. But these are not satisfying to the average Sally and Joe. They just want to get off the roller coaster, and find a safe place for their retirement savings. They would just like to earn a little more than inflation, to improve their life in retirement. more >>
Once again the left is offended by a commercial, which shows patriotism and the traditional values, which is exist in most main street towns in America. Airing this past Sunday during the Golden Globes, the McDonalds ad featuring their various sign messages is one of the best commercials on the market since the "God Made a Farmer" commercial done by Dodge for the 2013 Super Bowl.
The company notes on its Tumbler page, "there's a story behind every one. that captures a moment in time and reflects the lives of the community it serves."
Yet, almost immediately those on the left started wining about how dare McDonalds try to put any good message out when they are refusing to allow the unions to take over and not jumping on the raise the minimum wage band wagon. more >>
One hundred years ago this month, a brilliant young British economist, Dennis Robertson, published, A Study of Industrial Fluctuations. Economists regard it as a classic in the theory of the business cycle. Yet Robertson is not well known, though he was an economics pioneer who anticipated many ideas that today are associated with others. He was a student of John Maynard Keynes, and his friend and colleague during a fertile period of collaboration in the 1920s.
I bring up this milestone in the history of economics to highlight a shared belief and a polar opposite perspective between the two men, which has had profound effects on us today, and will have profound effects on our children tomorrow. Robertson and Keynes (who were both childless, by the way) were of the shared opinion that more focus be given to economic welfare in the short run. Robertson believed there was too much savings for the benefit of descendants; to the effect it permanently reduced economic well-being. Robertson wanted people to consume more and save less, thereby moderating the business cycle and enhancing economic welfare.
Keynes too, focused on economic prosperity today, not in some distant future. He famously wrote, "in the long run we are all dead". Keynes was even more explicitly against savings. He advocated policies to force dis-saving. He urged the government to borrow savings and spend them now to create income. (This was during the Great Depression, and many, including Robertson, called for similar policies, but with different supporting arguments.) more >>
Some churches are countering the trend of Black Friday shopping and materialism by promoting "Bless Friday," an observance promoting charity work that seeks to bless the less fortunate.
Eva Kaminski, associate director of Communications at Memorial Drive Presbyterian in Houston, told The Christian Post that Bless Friday is "an encouragement for people to shift their focus from shopping to serving."
"Bless Friday is something that our congregation and staff have embraced. The beauty is in the soul-building that occurs when we focus on others instead of self, and serve in Christ's Name," she said. more >>