The Bear’s Lair: Biden’s people have lost the denominator

In the recent Congressional Budget Office projections of the budget deficit to 2033 (which as you would expect, make gloomy reading) there is one morsel of good news: revenues in 2024 (and extrapolated to 2033) are higher than previously expected because immigration brought more people into the workforce. That caused me to wonder: to what extent are Biden administration economists counting the output of immigrants, legal and illegal, without counting their costs? If they have missed the post 2021 influx, causing the “denominator” of worker numbers to be understated, productivity is much lower than reported, as is GDP per capita, since the denominator of “capitas” is higher than reported. Since the officially reported figures are inexplicable to any rational economic thinker, the unreported and more negative estimates are likely to be the truth. Continue reading

The Bear’s Lair: Smith, Keynes, Marx or List?

I am always careful to stay out of arguments with professional economists because my economic knowledge is back-of-an-envelope stuff and comes unstuck when folks get technical. Still, the general principles are important. Adam Smith’s free markets have served us well for 250 years and were (mostly) the basis of the Industrial Revolution; Karl Marx’s economic principles have been a disaster wherever they have been tried and Maynard Keynes’s formulations are so attractive to bureaucrats that whenever possible they use them to distort well-functioning economies, awarding themselves more power. Then there is a fourth economic system, mostly used in German-speaking countries: that of Friedrich List. In today’s world, List’s views may well be optimal. Continue reading

The Bear’s Lair: Trump’s policies represent traditional Republicanism

Donald Trump dressed as Abraham Lincoln (AI gen)Former President Donald Trump is often accused of not having a policy program for a potential second administration. Commentators talk of his followers as being mere cultists and suggest that the soft-left belligerence of the George W. Bush administration represented more authentic “Conservatism.” This is wrong; on most subjects (I will discuss the exceptions) Trump has a clear policy position that is close to that of pre-1952 traditional Republicans and chimes in well with his followers’ policy instincts. Trumpism is not a cult; it represents a reversion to the sound policies of Presidents James Garfield, William McKinley and Calvin Coolidge. Continue reading

The Bear’s Lair: Shut down the WEF Communists

The World Economic Forum meeting last week was interesting in that, for the first time, some dissent appeared to the WEF’s party line. That party line is not “corporatism” which requires private property (albeit owned by corporations). With its slogan of “You Will Own Nothing and Be Happy” the WEF negates private property and represents Communism pure and simple. Far from being exterminated in 1991, that pernicious doctrine has advanced to take an ever-greater hold of the world’s central institutions. Eliminating them is our most important ideological task today. Continue reading

The Bear’s Lair: Oligarchy beats oligopoly

There is a central contradiction in modern capitalism. Markets have become concentrated in a few ultra-large companies, which then attempt to broaden their spectrum of employees through “diversity” initiatives. Yet the oligopoly of large companies diminishes competition and harms consumers, while “diversity” weakens trust within the corporations and increases communication costs. How much better was the traditional capitalist model, in which firms were small and oligarchic, with senior employees from a narrow social and geographic background! In such a system, trust is high and communication efficient, while the plethora of competitors ensures consumers of all types and backgrounds are optimally served. Continue reading

The Bear’s Lair: Mexico needs a Milei

Mexico appears to face a dismal future after its election on 6 June this year. The leading candidate Claudia Scheinbaum is a devoted follower of current President Manuel Lopez Obrador, and according to current polls is likely to win and thereafter follow his hard-left policies. The opposition candidate Xóchitl Galvez combines the forces of both previous governing parties, the PRI and the PAN, but appears distressingly moderate (and unlikely to win). Of all the nominal democracies in the world that in practice have entrenched socialism, Mexico most needs the breath of fresh air that the new President Javier Milei represents in Argentina. Continue reading

The Bear’s Lair: Is this the year of the asset price collapse?

The interminably prolonged era of zero-interest-rate “funny money” in 2010-21 produced an unparalleled tsunami of “malinvestment” – investment that was not economically justified in normal conditions – in both the United States and throughout the world. This tottering ziggurat has held up in 2022-23, despite soaring interest rates. But there are signs that, as 2024 begins, asset holders’ ability to prop up their crumbling portfolios is reaching its limits. Providing the Fed and other central banks don’t wimp out too quickly, the collapse of asset prices may finally occur this year. It will be very welcome. Continue reading

The Bear’s Lair: The need for intelligent investors

The wooly-headed economist Henri de Saint-Simon (1760-1825) divided humanity into two classes: the laboring classes (which included merchants and industrial management) and the idling class, who should be suppressed. Investors were included in the idling class, as Saint-Simon failed to recognize the importance of capital allocation in economic development. Keynes, with his “euthanasia of the rentiers” had a similar blind spot. It is time to refute these deluded thinkers: investors have a key role, even the most important role in the economy, and their intelligence and knowledge cannot be assumed and must be worked for. Continue reading

The Bear’s Lair: All I want for Christmas is a bear market

Christmas, 1929

Christmas, 1929

Interest rates turned up decisively during 2021 and inflation has receded somewhat, yet stock prices are close to their all-time highs, far above traditional valuation norms. Analysts expect this trend to continue, with Goldman Sachs this week raising its 2024 target for the Standard and Poor’s 500 index to 5,100. The problem is: continued bullishness will validate both the Biden Administration and the Fed’s “funny money” zero-interest-rate policies of 2010-21. Therefore, my Christmas wish is for a long, deep grinding bear market, to flush out the excesses in the system and produce a long-term improvement in policy. Continue reading

The Bear’s Lair: Most mergers should be stopped, not waved through.

The Biden Administration’s Lina Khan, head of the Federal Trade Commission, is one of the administration’s very few bright spots, intellectually speaking. She has overthrown the existing merger jurisdiction, set up by the late great Judge Robert Bork in the 1980s, to question why the FTC should let through mergers as a matter of course. It is a very good question; countless studies have shown that most mergers destroy value rather than enhancing it, reliably enriching only the top managements of the companies concerned. Should the default position not be to ban mergers, and how different would the world look if we followed that approach? Continue reading