In January of 2009, the Federal Reserve started buying mortgage-backed securities that would total $1.25 trillion by the time the program ended at the end of the first quarter of 2009. According to an article in The Wall Street Journal, this program led many investors to buy corporate bonds. The author attributes the “rebound in the stock market” to the bond boom that came as a result of the buyback program.
With the buyback program ending today, some people are questioning whether or not the market is actually as strong as it seems. One portfolio manager, Joe Ramos, points out: “If we have an anemic recovery, then most of the market is overrated.” Jim Sarni, another portfolio manager, however disagrees, saying that the demand for high-yield bonds will sustain itself and the market will continue to rally.
Personally, I think that the bond buying will continue for at least a short period, but I think it will stop sooner than bullish investors like Sarni think it will.
For another class, I read this summary of Henry Hazlitt's book, Economics in One Lesson. Thought written more than 60 years ago, his ideas have become more relevant with each passing decade, especially in the context of government spending during the past ten years or so. Even the summary is a bit lengthy, so you'll probably want to just skim it but here are two excerpts:
“It is highly improbable that the projects thought up by the bureaucrats will provide the same net addition to wealth and welfare, per dollar expended, as would have been provided by the taxpayers themselves, if they had been individually permitted to buy or have made what they themselves wanted, instead of being forced to surrender part of their earnings to the state.” (p. 36) "When the government makes loans or subsidies to business, what it does is to tax successful private business in order to support unsuccessful private business.” (pp. 47-8)
When government forcibly redistributes wealth from the rich to the poor, the increased costs that inevitably result cause a reduction in real wages.
The Wall Street Journal had an article titled “The ObamaCare Writedowns” that focuses on the effects the new healthcare plan will have on business. One of the major selling points of the new healthcare plan was that it will cut healthcare related costs over the next decade. However, it's already having immediate problems in the business world. Businesses like AT&T are making significant writedowns (estimated $1 billion) to compensate for the health bill. Everyone will have health insurance, but at what cost to business? Is it wise to pass something that may help the individual save on health costs or help those who are supporting the individual by giving them a job and monthly paycheck? This new plan neither supports the individual nor the company which leaves one question; who is ObamaCare supporting?
One big selling point of healthcare reform is that it will save money over time. I have a hard time believing that the goverment could correctly define "savings" at this point. I have yet to meet someone who believes that making private firms accept everyone as insured and then using goverment money which is generated through taxation to pay the difference of what they can afford and the newly generated cost will save money.
This has all the signs of Socialism written on it and in an economy that is down more taxation and imposed regulation will only slow the process of employment recovery and growth.
This is a good example of government subsidies moving an industry out of equilibrium. If the government subsidies had equaled the environmental costs of coal power generation as perceived by the Spanish public, then the value of the externalities would still be paid through private means in a typical Coasean scenario making the “green” option viable with or without government help. The problem of the government subsidies is the governments have a hard time judging the true cost of an externality thus they often over of under subsidize or over subsidize projects that could be taken care of in the market.
I have been at SUU for close to four years now and, I have never heard one of my economics or finance professors say that buying a home is not a good investment. I ran some numbers to justify my point of view and this is what I found. My roommate and I pay $700 a month for renting a house in Cedar City, UT. We would pay this amount (700*12 months * 50 years) = 420,000 over our life time. Comparing this to if we were to borrow a $300,000 loan at 6 percent equals $367,680. There is a huge difference here, I can buy a home for $367,680 over 30 yrs and save $52,320 over 20 yrs not paying rent. I’m not counting the increase in value my home will gain over 30 yrs or the money I will be saving not making a mortgage payment over the next 20 yrs. What if I wanted to move and sell my house? Yes, the housing market could be in a slump and I might not recoup all the money I borrowed from the bank. So I lost some money but I also lose for paying rent for fifteen years and I decide to move. When housing prices rise rental fees rise, they do not remain the same. My conclusion it is always a good investment to buy a home when you are planning on staying somewhere for a long time.
1) This article notes that the state of US politics is not in an unusual position considering that we have changed into a large democratic regulatory-welfare state.
2) Secondly, the US is functioning as a large democratic regulatory-welfare state ought to.
3) Thirdly, because this article came from an Austrian School website, it also discusses the inherent inefficiencies of a command economy as would be the case with the bureaucratically run health care system as planed by the left.