Weekend Links

This NY Times piece from Robert Frank again had me checking my calendar to see if April Fool's Day had snuck up on me:

"What I have in mind is a surtax on extremely high levels of consumption. It would be enacted right away, but not take effect until unemployment again fell below 6 percent...."

"A progressive consumption surtax would produce immediate, off-budget economic stimulus by giving wealthy families powerful incentives to accelerate future spending. For example, a family that had been planning to build a new wing onto its mansion, or buy a yacht, would want to make those purchases now rather than be taxed on them later."

This, of course, is the opposite of "Extend and pretend."  Like the homebuyer tax credit and cash for clunkers, this tax would pull future demand forward.  Alternatively, we could tell the wealthy people who would be subject to Frank's consumption tax that their money will become worthless in a few years! That should get them to spend it now! (/SARCASM) 

Barry Ritholtz took Alan Greenspan to school:

"As noted last night, Alan Greenspan has blamed the crisis on a lack of regulation rather than ultra-low rates. (You can find his Brookings institute paper The Crisis here).

While the lack of regulatory enforcement — ironically, mostly notably by the Greenspan Fed — was no doubt a large part of the problem, his exoneration of ultra low rates is belied by history.

I detail all of this elsewhere; but perhaps the impact of low rates would be more easily understandable to the Maestro if we put it into numerical bullet point form"

click through to Barry's page for the bullet point list, which is a doozy.

Dealbreaker's Bess Levin is inimitable.  And she's also going to hell, but she'll make us laugh on the way.  Regarding Pope Benedict's recent comments regarding "defeating the individualistic and materialistic mentality," Bess quips:

"So…I have no idea what he’s getting at. Is he saying that one should not invest in financials? Not invest in the stock market at all? That if you’ve got some extra seed (capital) lying around to inject it in a “community of persons,” like a Little League or all-boys JV soccer team whose locker room doesn’t skimp on the peepholes?"

Michael Panzner highlights the dramatic reversal of fortunes seen by FedEx:

one week: 

"The nascent US recovery could falter because businesses are still reluctant to invest in new equipment and technology, the head of global delivery and logistics company FedEx has warned.

“Business investment went up somewhat in the fourth quarter but is far below what it ought to be in a cyclical recovery like this,” Fred Smith, chairman and chief executive of FedEx, told the Financial Times.

He added that companies were being held back by continuing “uncertainty” over the outlook."

and then the next week:

"FedEx says the global economic recovery is broadening, as Asia continues to show strong growth and the U.S. economy gains steam.

Fred Smith, CEO of the world's second-largest package delivery company, predicted a "relatively strong" first half as major economies emerge from the recession with steady economic growth in the last six months of the year."

This could be as simple as an illustration of the inherent bias reporters can put on their articles by cherry picking quotes, it could mean that FedEx's view of the economy changed over the course of one week, or it could be evidence of something more nefarious...

John Mauldin takes on Paul Krugman's China comments:

"The Chinese could raise the value of the yuan by 25% over the next year and they would still run a surplus, because like the Japanese, they make good stuff we want at prices we like. Would their surplus still be as high? No. Because a 25% increase in prices would mean that we could afford less of what they sell. But of course it would also give them wider profit margins, which would help hold their trade surplus up."

"What Krugman argues is that we should pay more for Chinese goods, so that we will buy less of their goods. As if we wouldn’t buy the same goods from Vietnam or Brazil or Pakistan, if those goods were cheaper than Chinese goods. For the life of me, I can’t see how substituting goods from foreign countries other than China helps our trade deficit.

Are we going to start targeting the currencies of every nation that runs a surplus with us? What about Europe? And Great Britain? Their currencies are dropping against the dollar, in the case of England rather precipitously. Are they pursuing mercantilist policies, Senator Schumer [in reference to his recent scandalous press conference]? What happens when the euro goes to parity against the dollar (and it will!) because the Europeans are having trouble getting their act together? Are we going to demand they force the euro to rise? Tell the ECB to raise rates and shove the whole euro area into an even worse recession?"

-KD