• Recent Black Swan Events

    Feb 2 • Thinking Economically • 450 Views

    Thinking about probable new financial regulation, I remembered Nassim Nicholas Taleb

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  • Can Less Become More for the Federal Reserve?

    Feb 1 • Thinking Economically • 257 Views

    Econ talk lecture (January 11, 2010) http://www.econtalk.org/archives/2010/01/belongia_on_the.html
    Michael Belongia, University of Mississippi economics professor (and past St Louis Fed ecoonmist) interviewed by Russ Roberts
    It was a good interview. (a little longer than one hour)
    I was most impressed by comments on the Fed

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  • J.D. Salinger and the Estate Tax

    Jan 31 • Thinking Economically • 298 Views

    Reading J.D. Salinger’s obituary, I thought about the estate tax and then beyond to a Mark Helprin interview last June.
    Have you wondered, with the 2010 suspension of the estate tax (called by some the “Throw Momma From the Train Act”), what J.D. Salinger’s heirs will avoid paying? Then, though, as Floyd Norris discusses in his blog, how would his heirs and the government value the unpublished manuscripts he left if Congress creates a retroactive tax?

    Writer Mark Helprin discussed the topic last summer when he suggested that copyrights should be extended. He says it is unreasonable that heirs should receive tangible property but cannot have similar rights to literary property.

    The Economic Life:
    Taxation can be perceived as wealth redistribution. The question we as a society face is how much we want to redistribute wealth from those who have more to those with less.

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  • A Very Expensive Traffic Ticket

    Jan 30 • Thinking Economically • 318 Views

    Recently, in eastern Switzerland, an affluent driver who was exceeding the speed limit by more than 35 miles an hour received a ticket. The ticket sounds like a predictable penalty; the fine, however, was not. The fine totalled $290,000 because it was based on his wealth.

    People pay government money for many reasons: income taxes, excise taxes,traffic tickets, tariffs.
    When though, should government charge everyone the same amount for the same offense or property or service and when should the wealthy should pay more.

    The Economic Life:
    Some say it is never fair for those with less to pay more and yet it happens everyday at the cash register. For every sales tax, whenever everyone pays the same amount, the poor are paying a higher percent of their income. For that reason the tax is called regressive. By contrast, as with the Swiss speeder, when the more affluent pay a higher proportion of their income than those with less, the tax is called progressive.

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  • The FCIC Sounds Good

    Jan 29 • Thinking Economically • 275 Views

    Reading Dr. Ed’s Morning Briefing (a great newsletter from Ed Yardeni–the 1/13 briefing), I was encouraged to hear about a member of the new Financial Crisis Inquiry Commission (The new FCIC website is at www.fcic.gov).

    One of eight commissioners on the commission, Brooksley Born had been the head of the CFTC (Commodity Futures Trading Commission). She resigned, though, after almost three years because President Clinton’s financial team (Greenspan, Summers, Rubin) disagreed with her concern about credit swaps and other derivatives. While she pushed for regulation, the administration worried instead that she would create turmoil and diminished value of the dervivatives she targeted.
    You might want to look at a “Frontline” report (55 minutes) about “The Go-Go Years” that includes a focus on Alan Greenspan and Brooksley Born.

    The Economic Life:
    Just like bubble gum, hot air that has no substance inflates financial bubbles until they pop. Derivative related securities that ranged from credit default swaps to collateralized debt obligations (CDOs) helped to inflate the housing bubble because they made more money available for mortgages. More money for mortgages pushed home prices up.

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