Posts Tagged ‘Economy’

How the Mississippi Delta swamped John Law’s economic theory and contributed to the French Revolution

Thursday, August 13th, 2009

Long blog post title, but that is the gist of this piece at “Law of easy money - A 300-year-old example of quantitative easing.”

Basically, John Law, economic advisor to French King Louis XV, created a paper based money plan not backed by gold and silver as an economic stimulus package for France based on investing in the development of French colonies including the Mississippi Delta.

Here is an excerpt:

The money raised from these share issues was used to repay the government’s debts; on occasion, Law’s bank lent investors the money to buy shares….The problem was that the delta was a mosquito-infested swamp….So a vicious circle was created, in which a growing money supply was needed to bolster the share price of the Mississippi company and a rising share price was needed to maintain confidence in the system of paper money. You can see parallels with recent times, in which money was lent on the back of rising asset prices, and higher prices gave banks the confidence to lend more money.

When the scheme faltered Law resorted to a number of rescue packages, many of which have their echoes 300 years later. One was for the bank to guarantee to buy shares in the Mississippi company at a set price (think of the various government asset-purchase schemes today). Then the company took over the bank (a rescue along the lines of Fannie Mae and Freddie Mac). Finally there were restrictions on the amount of gold and silver that could be owned (something America tried in the 1930s).

All these rules failed and the scheme collapsed. Law was exiled and died in poverty. The French state’s finances stayed weak, helping trigger the 1789 revolution….Of course, the parallels with today are not exact….But one lesson from Law’s sorry tale endures: attempts to maintain asset prices above their fundamental value are eventually doomed to failure.

You can read the full article online at the Economist: Law of easy money - A 300-year-old example of quantitative easing

The Economist: The United States of Entrepreneurs

Monday, May 25th, 2009

This is a great read from the March 12 issue of the Economist.

For all its current economic woes, America remains a beacon of entrepreneurialism. Between 1996 and 2004 it created an average of 550,000 small businesses every month.

America was the first country, in the late 1970s, to ditch managerial capitalism for the entrepreneurial variety. After the second world war J.K. Galbraith was still convinced that the modern corporation had replaced “the entrepreneur as the directing force of the enterprise with management”. Big business and big labour worked with big government to deliver predictable economic growth. But as that growth turned into stagflation, an army of innovators, particularly in the computer and finance industries, exposed the shortcomings of the old industrial corporation and launched a wave of entrepreneurship.

America has found the transition to a more entrepreneurial economy easier than its competitors because entrepreneurialism is so deeply rooted in its history. It was founded and then settled by innovators and risk-takers who were willing to sacrifice old certainties for new opportunities.

American companies have an unusual freedom to hire and fire workers, and American citizens have an unusual belief that, for all their recent travails, their fate still lies in their own hands. They are comfortable with the risk-taking that is at the heart of entrepreneurialism.

The article lists four American economic advantages: a mature venture-capital industry, a close relationship between universities and industry, a historically open immigration policy, and “venturesome consumers.

Americans are unusually willing to try new products of all sorts, even if it means teaching themselves new skills and eating into their savings; they are also unusually willing to pester manufacturers to improve their products. Apple sold half a million iPhones in its first weekend.

The Economist suggests several items that threaten America’s “entrepreneurial ecology”: “patent trolls” and a burdensome legal system, a complicated tax system, and a rising xenophobia “making the coutnry less open to immigrants.” It contrasts these threats with what has already happened with “Old Europe.”

Europeans have less to gain from taking business risks, thanks to higher tax rates, and more to lose, thanks to more punitive attitudes to bankruptcy (German law, for example, prevents anyone who has ever been bankrupt from becoming a CEO). When Denis Payre was thinking about leaving a safe job in Oracle to start a company in the late 1980s, his French friends gave him ten reasons to stay put whereas his American friends gave him ten reasons to get on his bike. In January last year Mr Payre’s start-up, Business Objects, was sold to Germany’s SAP for €4.8 billion.

European egalitarianism, too, militates against entrepreneurialism….The Europeans’ appetite for time off does not help….Europeans are also much more suspicious of business…entrepreneurs have to grapple with a patchwork of legal codes and an expensive and time-consuming patent system. In many countries the tax system and the labour laws discourage companies from growing above a certain size. A depressing number of European universities remain suspicious of industry, subsisting on declining state subsidies but still unwilling to embrace the private sector. The European venture-capital industry, too, is less developed than the American one.

The article goes on to discuss how Europe is changing toward an entrepreneurial mind-set and to briefly address “Slowcoach Japan.” You can read the full article at the Economist online: A special report on entrepreneurship: The United States of Entrepreneurs

Barbour: Abundant cheap energy, not “cap and trade”

Wednesday, April 22nd, 2009

Mississippi Governor Haley Barbour promotes his energy policy (”more energy”) in today’s Washington Times. Barbour has encouraged energy expansion and infrastructure enhancement in Mississippi as a vital component of economic development. He has said that in the future, businesses won’t ask how much energy costs, but whether they can get it.  And he wants Mississippi to be able to meet the needs of job creating businesses. Now, President Obama’s policies threaten that not only in Mississippi but across the country.  Here are some excerpts from Barbour’s column:

Conservative economic policy is under attack on many fronts by the Obama administration and its liberal allies in Congress: taxes, spending, government borrowing and free-market capitalism itself. As we fight on these fronts, conservatives also must be focused on another issue of critical importance to our country’s economic and national security: energy.

America needs more American energy, but the Obama policy is for less American energy and more expensive energy.

As a candidate, Mr. Obama told the San Francisco Chronicle last year: “Under my plan of a cap-and-trade system, electricity bills will necessarily skyrocket.”

And the cap-and-trade tax he has proposed in his budget fulfills his prediction. It will be the biggest tax increase in history and will clobber low- and middle-income families. His additional proposal for $81 billion of tax increases on the oil and gas industry will add that much more to gasoline and electricity prices, while also reducing supply, thereby driving fuel costs even higher.

Over and above the gigantic cost increases to families, these skyrocketing electric rates and motor-fuel prices will dramatically drive up the cost of doing business in our country. Small businesses, America’s economic engine that creates nearly 80 percent of all net new jobs, will pay far higher utility bills, and the cost of manufacturing goods in the United States will make many of our products uncompetitive and drive production and jobs overseas.

While the Obama policy is to drive energy costs through the ceiling, what Americans want and need is abundant, affordable, reliable, American energy. And, with the right energy policy, they can have it.

A policy based on more American energy would mean our families and, critically, our economy would benefit from all the available energy sources our tremendously endowed country has to offer: more oil and gas, not less; more nuclear power; cleaner coal-generated electricity; and wind, biomass, hydro and solar to the maximum degree they can contribute. And that will increase over time. Conservation and efficiency also can and must play a larger role in our energy equation.

A policy of more American energy will result in more abundant, more reliable and lower cost energy, and because it’s all American, it will reduce our reliance on foreign oil even more than efficiency and conservation, as important as they are.

The answer to our energy policy is: All of the above - more American energy. We need it all.

Such a policy reduces, then eliminates excessive U.S. dependence on foreign oil. It keeps costs where Americans can afford the quality of life they deserve and work so hard to attain, and allows our nation’s businesses and industries to stay competitive.

More American energy is the right policy for conservatives and for our country.

You can read the full piece here: Barbour: Cheap energy, yes; cap and trade, no

RR: Tax Tea Party Day

Thursday, April 9th, 2009

Everywhere you look, Americans are fed up. Frustration, the opposite of hope. But they are determined to make a real change and folks around the state and country will be speaking out on tax day. I wrote about the Jackson event, here are some excerpts:

Eight blocks north of the Medgar Evers Post Office in downtown Jackson - which traditionally stays open to midnight accepting last minute tax mailings - attorney Mark Mayfield, talk radio host Kim Wade and others will lead a Tax Day Tea Party on the south steps of the Mississippi Capitol.
I spoke with Mayfield and Wade at the WJNT-1180AM studio about this tea-roots movement.

Wade and Mayfield said they are not targeting or supporting any party.

“The tea party is not an ends in and of itself,” explained Mayfield, “it is the beginning of a movement.” They said when people leave the event they will possess a game plan to get involved in 2010 and 2011.

Mayfield and Wade hope this event spurs lovers of liberty and economic prosperity to throw their hats in the ring of campaigns. “Debt and regulations suffocate the free market,” said Mayfield, “we need leaders who understand this, and citizens who will hold them accountable.”

“We’re really in trouble when Eastern Europe is warning us away from socialism,” Wade continued, “The warning signs are here. Now its time for us to take our country back.”

The two-hour event kicks off at 4 p.m. on Wednesday, April 15 and will feature patriotic music, a color guard, and speakers including U.S. Rep. Gregg Harper, Lt. Gov. Phil Bryant, state Sen. Chris McDaniels of Jones County and state Rep. Rita Martinson of Madison County..

The full column discusses how conservatives in Mississippi are using Facebook, Twitter, and other social networking technology to spread the word about the event. You can read the full column at the Madison County Journal: Perry / Tax Tea Party Day

RR: Obama’s unilateral economy

Thursday, April 2nd, 2009

Unpopular policies, global outrage, longterm credibility problems domestically and internationally: this is not George W. Bush fighting the War in Iraq, this is Barack H. Obama struggling through an economic recession which his administration owns more every day, and which continues to move his poll numbers down. Here are some excerpts from this week’s column: Obama’s unliateral economy

The economy may become President Barack Obama’s Iraq War. Obama’s predecessor, George W. Bush, faced plummeting poll numbers as the American public, anxious for victory, grew fatigued as Bush strategies (some successful, some not) failed to provide resolution.

Americans agreed we need security; we disagreed on the necessity of an invasion of Iraq. Americans agreed we need economic recovery; we disagree on whether it requires trillions of dollars of spending, taxes, and debt.

By ordering the termination of General Motors CEO Rick Wagoner, or threatening massive targeted tax increases at AIG employees whose contracts provided for bonuses, Obama and the Democrats show every ounce of cowboy arrogance they accused of Bush and Republicans on foreign policy.

Treasury Secretary Timothy Geithner informed Congress last week, “We will work with the Europeans, we cannot move alone,” but he said, “We cannot wait for consensus with the rest of the world.” Geithner’s unilateral economic policy was exactly what the Obama campaign criticized Bush’s foreign policy for embracing.

But Obama’s global economic policy - like Bush’s foreign policy - is not truly unilateral. In addition to a number of smaller nations who turn to America’s leadership, our long stalwart friend Great Britain remains by our side.

But for all the political damage done to Tony Blair’s Labour Party by Bush, Obama inflicts comparable harm on Prime Minister Gordon Brown. The British Conservative party has told Brown “you have run out of our money” and he faces opposition from the Bank of England Governor, as well as a lack of demand for the purchase of U.K. government bonds to finance his growing debt.

German finance minister Peer Steinbruck called Brown’s U.K. stimulus, “crass Keynesianism.” German Chancellor Angela Merkel proclaimed, “I will not let anyone tell me that we must spend more money.” Australian Prime Minister Kevin Rudd said it was “never the intention” of the G20 to create additional global stimulus. France and the Czech Republic agree.

You can read the rest of the column that includes thoughts on the G20 meeting and impressions from Ronald Roosdorp, Private Secretary to the Vice Prime Minister and the Minister of Economic Affairs of the Netherlands who last week addressed a Stennis Institute forum in Jackson, online at the Madison County Journal: Perry / Obama’s unilateral economy.

The morality of free trade

Thursday, February 12th, 2009

This week’s Reasonably Right discusses a paper titled “The Morality of Free Trade” by Belhaven College professor Dr. J. Stephen Phillips. He presented the paper to the Free Market Forum at Hillsdale College last year.

You can read my column in the Neshoba Democrat here: Perry/The morality of free trade

But I highly suggest you read the paper itself here: The Morality of Free Trade

Stimulating Talk on Gallo Show

Monday, February 9th, 2009

This morning, economist James Leggette and I appeared on Supertalk Mississippi’s ”The Gallo Radio Show” to discuss the trillion dollar stimulus packagedeficit spending bill pending before the U.S. Senate. (We were on right after the barber shop quartet.) The grassroots activists and people on the street I see all agree the stimulus bill will not be effective and is a troubling expansion of government. We discussed the legislation to some extent (and I wrote about the House version last week) but it occurred to me, that many people don’t care about the details. IF it is necessary to fix our economy, Americans are willing to sacrifice as they always do. Showing examples of the ludicrous spending measures illustrates the Democrats are employing politics as usual; but for Americans to reject this bill, Republicans must show that it is unnecessary in its current form.  The three Americans to convince first are Senators Specter, Collins, and Snowe. By the way, you should check out Supertalk’s new website where you can now not only listen but also watch the Gallo Show, JT & Dave, and others.

RR: Federal spending takes a hard left

Wednesday, February 4th, 2009

This week Reasonably Right looks at the $819 billion so-called stimulus package. I was proud for the GOP that not a single Republican congressman voted for the measure. And it reminded me that when Republicans departed from their conservative roots, the Democrats promised fiscal responsiblity. But the times, they are a changing. And Republicans hope they are changing in a new political direction. Here are some excerpts:

“Our federal budget should be a statement of our national values. One of those values is responsibility. Without a return to fiscal discipline, the foreign countries that make our computers, our clothing and our toys will soon be making our foreign policy. Deficit spending is not just a fiscal problem - it’s a national security issue as well,” says the 2006 Nancy Pelosi and Rahm Emanuel House Democratic campaign plan, “A New Direction for America.” It took Republicans 12 years to lose their way in the majority, it seems the Democrats have reversed their new direction in fewer than three. Now Pelosi and President Barack Obama are making George W. Bush look like a deficit hawk, and they united Republicans in the process.

Eleven Blue Dog Democratic congressmen joined Republicans in voting against the spending bill, including Mississippi’s Gene Taylor. Taylor appeared on CNN and called the bill “nuts” and said, “President Obama ran on change. This isn’t change…this is just more of the same.”

Democrats Bennie Thompson and Travis Childers from Mississippi voted for the measure. Republican Gregg Harper opposed it saying, “I wish Congress would open their eyes to the wasteful government spending that is contained in this bill and that will drive the country further into debt. The American people know we cannot borrow and spend our way back to prosperity.

The Congressional Budget Office scored the bill’s total cost to taxpayers at over $1.17 trillion. Initially touted as a Franklin Roosevelt style infrastructure funding bill - highways, dams, water, sewer, railroads, parks - liberals hijacked the bill. There is still plenty of spending, but not much on infrastructure and not immediately. Only 15 percent of the new spending would impact the economy this year.

Republicans proposed an alternative focusing on tax cuts and shovel-ready infrastructure to create 6.2 million new American jobs by the end of 2010 at half the cost of the Democrats’ bill. More jobs; less spending.

According to projections from the House Republican Conference, 221,501 small businesses in Mississippi would benefit from the GOP 20 percent tax cut to small employers. More than half a million Mississippians would pay less money into the federal spending under the Republican plan to reduce the 15 percent tax bracket to 10 percent. And, more than 872,000 Mississippians would benefit with the 10 percent bracket’s reduction to 5 percent.

In Mississippi’s four congressional districts, those benefiting the most from the Republican plan would be in the First Congressional District held by Democrat Travis Childers. But, the Democrats defeated this plan.

Republicans in the Senate have scuttled the prospect of quickly approving the House plan. Whatever comes out of the Senate will look very different, but will still likely contain billions in wasteful spending and political handouts. This is just HR1, the first House bill. But as public opinion shifts, Democrats may indeed discover that Americans are looking in a new direction.

You can read the full column at the Neshoba Democrat: Perry/Federal spending takes a hard left

Governor’s Economic Symposium

Friday, December 19th, 2008

Tuesday, Governor Haley Barbour hosted an economic symposium in Jackson.  The impressive event featured Bob Allsbrook, chief economist for Regions Bank, kicking off the discussion with a presentation many investors and corporate leaders would pay good money to hear. His sobering but optimistic presentation presented today’s economic challenges in context of modern and current trends.

The symposium was free and open to the public and mostly attended by business and political leaders.  Governor Barbour’s office has posted the presentation materials by the speakers which included Tommy Dale Favre, executive director of the Mississippi Department of Employment Security; State Economist Dr. Phil Pepper; State Treasurer Tate Reeves; Mac Deaver, President and CEO of the Mississippi Bankers Association; Jay Moon, President and CEO of the Mississippi Manufacturers Association; Steve Rogers, President and CEO of Parkway Properties; Gray Swoope, Executive Director of Mississippi Development Authority; and Dr. Cecil Burge, Vice President for Research and Economic Development at the University of Southern Mississippi.

Here was some coverage of the event:

WLBT - Government, business leaders face troubling economic prospects (watch video here) (12/16/2008)

Commercial Dispatch - Economy session brings bleak news about state trends (12/17/2008)

Mississippi Public Broadcasting (audio file) - Governor’s Economic Summit Looks at Jobs and Economic Growth (12/17/2008)

Mississippi Public Broadcasting (audio file) - Economic Summit Has Business Looking at Dim Future (12/17/2008)

Clarion Ledger - Economic troubles worst in decades (12/17/2008)

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