Category Archives: Economics

A Great Economist Has Passed

I’m hearing that Milton Friedman died last night. RIP and condolences to Rose.

More thoughts later.

[5 PM Update]

Glenn has some relevant links

As many have noted, he wasn’t just an economist, but (like Hayek) a tireless fighter for human liberty.

[Update at 7:30 PM EST]

Here’s another link roundup. Here’s one from Brian Doherty:

Undoubtedly the most successful and influential proponent of libertarian thought in the 20th century, Milton Friedman, died last night at age 94. His successes as both a technical economist and libertarian polemicist are enormous. We can thank him, in large part, for happy events from the elimination of the draft to the conquest of inflation. Just a quick note now

Housing Prices: Chicken Little vs. Pollyanna

Chicken Little
“The sky is falling”

Pollyanna
“what a perfectly lovely, lovely house! How awfully glad you must be you’re so rich!”

  • No capital gains taxes
  • Thick mortgage backed securities market
  • Fewer new buyers chasing money
  • Falling real estate commissions
  • Rising incomes
  • Changing commuting patterns
  • “breathtaking profit”
  • Active Federal Reserve Board
  • Industry sensitive to interest rates
  • Rising population
  • Middle income wages rising in money terms
  • Median age rising
  • Family size falling
  • Rise in ownership of 2nd homes
  • Rise in telecommuting
  • Home entertainment such as video games eclipsing movies
  • Capitalization and standardization of home building industry (e.g. Toll Brothers)

A moderation in an accellerator suggests just a slow-down in the rate of growth of housing prices to me, but don’t listen to me–I just cashed out a 40% capital gain in my last house tax free and locked in a super low rate from a private equity mortgage lender and didn’t use a real estate agent to buy and used a cut commission agent to sell. Clearly I’m a Pollyanna.

Must Be Peak Oil

Prices could plunge:

…many of the conditions that drove investors to bid up oil prices are ebbing. Tensions over Israel, Lebanon and Nigeria are easing. The hurricane season has presented no threat so far to the Gulf of Mexico. The U.S. peak summer driving season is over, so gasoline demand is falling.

With fear of supply disruptions ebbing, oil prices began sliding. With oil inventories high, refiners that turn oil into gasoline are expected to cut production. As refiners cut production, oil companies increasingly risk getting stuck with excess oil supplies. There’s already anecdotal evidence of oil companies chartering tankers to store excess oil.

All this is turning financial markets increasingly bearish on oil.

“If we continue to build inventories, and if we have a warm winter like we had last winter, you could see a large fall in the price of oil,” said Gary Pokoik, who manages Hedge Ventures Energy in Los Angeles, an energy hedge fund. “I think there is still a lot of risk in the market.”

As it stands now, the recent oil-price slump has brought the national average for a gallon of unleaded gasoline down to $2.59, according to the AAA motor club. In the Seattle area, prices per gallon have fallen to $2.856 currently from $3.071 a month ago, a decline of 7 percent, according to AAA.

Should oil traders fear that this downward price spiral will get worse and run for the exits by selling off their futures contracts, Verleger said, it’s not unthinkable that oil prices could return to $15 or less a barrel, at least temporarily. That could mean gasoline prices as low as $1.15 per gallon.

I, of course, blame George Bush. Like the booming economy, it’s all part of the evil Rethuglican plot to maintain control of the government, and not relinquish power this fall. Speaking of which, maybe I should put up a Bruce Gagnon countdown clock. It would be updated daily, counting the number of days that Bruce remains correct, and the number of days that Bush has continually refused to relinquish his power since January, 2001.

Stop The Presses!

In a “man bites dog” moment, Lester Brown gets something right:

Just a single fill of ethanol for a four-wheel drive SUV, says Brown, uses enough grain to feed one person for an entire year. This year the amount of US corn going to make the fuel will equal what it sells abroad; traditionally its exports have helped feed 100 – mostly poor – countries.

From next year, the amount used to run American cars will exceed exports, and soon it is likely to reduce what is available to help feed poor people overseas. The number of ethanol plants built or planned in the corn-belt state of Iowa will use virtually all the state’s crop.

This will not only cut food supplies, but drive up the process of grain, making hungry people compete with the owners of gas-guzzlers. Already spending 70 per cent of their meagre incomes on food, they simply cannot afford to do so.

Time to stop this latest nuttiness in farm subsidies.