rightcoastconservative

Bad policies are not enough to derail the most powerful economic engine the world has ever seen -- the US economy. Here is where we are headed in 2012: Higher stocks prices, lower bond prices. A slowly expanding economy -- roughly 2 percent. Because of the way GDP is measured, the reported numbers will bounce around, but should average about 2 percent for 2012 as a whole. China will stumble but recover. Bad government policy will be overcome by the hard work and entrepreneurial spirit of ordinary Chinese. China will continue to be on a roll. Europe will sink further into the abyss. The failure to rationalize sovereign debt problems (meaning the failure to begin some managed default process) will mean negative economic growth in Europe for 2012. At the end of the day, it will turn out that Europe is less important than everyone thinks. Except for very isolated situations, Europe as an economic entity has been moribund for a generation. That situation will only become more obvious...

Laura d'Andrea Tyson has now joined the chorus of academic economists spouting economic nonsense. (Although Tyson is more a politico and a professional board sitter these days and is definitely one of the 1%). Tyson has a piece in today's NYTimes attacking the Wyden-Ryan proposal to reform medicare that would move medicare more into the free market. Tyson notes that the cost of medicare, in the past ten years (and especially in the last three years) has grown more slowly than private insurance. That is an absurd comparison. Medicare grows by whatever it's budget is and that's that. Private insurance is beset by changes in state legislation (and virtually every state has dramatically altered it's health insurance rules making them more expensive by mandate) in the past ten years. Tyson also seems relatively unconcerned that medicare has a $ 66 Trillion unfunded liability into the future while private insurance has a zero unfunded liability into the future. Tyso...

Most thoughtful observers realize that the US and the major Western economies are going to have significant inflation at some point. It is unlikely that politicians will ever deal forthrightly with the entitlement issues and the only thing left is to monetize the debt -- print money -- and hope that rampant inflation will destroy the value of the outstanding sovereign debt. An interesting future. The conclusion that some draw is that gold (and perhaps other precious metals) should thrive in a world of out-of-control inflation and the absence of a safe haven asset. It is an appealing idea and gold has done well in recent years, until recent months. But, how do you value gold? or silver? Normally things have some alternative use. But the prices of gold and silver are way beyond any alternative use value. Gold could trade anywhere -- up or down. There is no way of establishing a value for gold. Should gold be a part of a diversified portfolio? No. But gold mining companies shoul...

The year 0f 2011 saw a confluence of mishaps, with the MENA unrest, Japan disaster, US debt ceiling scare and Eurozone's can of worms. We believe that it is very unlikely that 2012 will contain more uncertainties than 2011. After the convergence of these "Black Swan" events, there is also a lot of divergence in the recovery, making it difficult to coordinate economic policy. Firstly, there is a 2 speed-global recovery as developing economies, particularly Asia, is outperforming the West. Secondly, within Europe itself, there is a lot of divergence in how each country is coping with the crisis. Only Germany, Sweden and Switzerland have so far returned to pre-crisis growth levels; whilst Greece, Portugal and Ireland are clearly outliers in terms of demand growth. Finally, there is a lot of mixed recovery in Japan as well, where companies with capital of at least 1bn yen are back to nearly full capacity production as early as May. However, companies with capital between 1...

Professor John Cochrane of the University of Chicago opines today on the implementation of "too big to fail" in the Dodd-Frank legislation in the Wall Street Journal. As Professor Cochrane notes, the Dodd-Frank structure has nothing to do with the problems that beset the financial industry in the 2008 collapse but instead empowers arbitrary control of the US financial institutions by an unelected bureaucracy, accountable to no one. Cochrane, correctly, redirects our attention to the stifling impact the Dodd-Frank "reforms" are having on our financial system and, as a result, on our economy. Economic stagnation by design. That's the Dodd-Frank regime. The spirit of Dodd-Frank has breathed life into an anti-lending campaign by bank regulators the past two years. The result -- a bifurcation in the lending market. For those who don't need credit, it is available in abundance. For those who need credit, it is prohibited by the activities of the regulators. ...

CIMB research remain cautious on Malaysia's growth outlook for 2012 as several factors will put the brakes on growth - slower export growth due to the fragile western economies as well as slower consumption and investment growth due to heightened uncertainty and volatile financial markets. The implementation of ETP and stimulus measures cannot take up all the slack left by weak exports. Slowing growth, rising risks We expect GDP growth to slow to 3.8% in 2012 from an estimated 5% in 2011. The factors that shape the prognosis are: continuing weak global growth, pressured by volatile financial markets and Europe's sovereign debt worries; a downturn in Malaysia's export cycle; an expected slowing of consumption and investment due to worries over economic conditions What to expect in 2012? While not forecasting a global recession, a combination of fiscal tightening and a potential bigger financial shock from the debt crisis are expected to result in weaker global growth in 201...

Today's NY Times has yet another economist in action. Nancy Folbre, whose byline in today's blog puts her at University of Massachusetts as an "economics professor," argues that "...most ordinary people understand that the incentives built into the global capitalist system tend to reward some very bad behaviors." She then goes on to list things like "dumping waste products into the environment" and other capitalistic ills. That would suggest that where there is no capitalism, there must be no real environmental damage. Is she kidding? The non-capitalist countries lead the league in environmental pollution. Try breathing the air in a typical non-capitalist country. I guess Professor Folbre doesn't travel much. So, what does Professor Folbre recommend? She cites "calls for changes to articles of incorporation that would allow companies to pursue social missions without fear of shareholder litigation." What a great idea! Who wo...