The Bear’s Lair: What should we do with higher education?

The current U.S. and British education systems are increasingly dysfunctional. Far too high a percentage of the population has been bullied into attending college, with very little benefit in most cases and with costs that have escalated several times faster than inflation or even incomes. The faculty and administration of top colleges are increasingly isolated from the political outlook of their fellow citizens – and increasingly unconstrained in forcing their warped worldview on the untrained youthful minds in their care. Fortunately, help is at hand, from online learning and artificial intelligence. These will revolutionize both learning and job possibilities, forcing change that may allow us to cut down to size both colleges and their costs. Continue reading

The Bear’s Lair: Trump’s 10% general tariff is a good idea

President Trump has proposed a universal 10% tariff on U.S. imports and has been met by universal derision among professional economists. Not so fast! High tariffs were a feature of Republican governance before the Great Depression. While they operated on a “beggar my neighbor” basis against the British steel industry, for example, they have retained an inchoate appeal to Republican voters that Trump exploited in his 2016 campaign and as President. A low universal tariff, such as Trump now proposes, may be both politically and economically optimal, as I shall explain. Continue reading

The Bear’s Lair: Stock prices are three times their proper level

At the end of 2019, the Standard and Poor’s 500 index of U.S. share prices stood at 3221.29. Since then, the United States has been subjected to a devastating epidemic, has wasted trillions of dollars in response to that epidemic, driving its debt to GDP ratio up to 108%, has suffered debilitating inflation that has caused interest rates to be raised sharply, and has replaced competent economic policies with ones that seem especially designed for economic destruction. Yet the S&P 500 Index is today up a full 40% from its December 2019 level. When examined carefully, the market is not only overvalued, it stands at three times its fair level. Continue reading

The Bear’s Lair: The correct inflation target is Zero

Jason Furman, in the Wall Street Journal, is just the latest former senior financial official (Chairman of the Council of Economic Advisors, 2013-17) to suggest the Fed should raise its inflation target above the current 2%. We know what these people want – a target high enough that rates can be reduced to zero again, below the rate of inflation, benefiting their rich friends with access to leverage. For the rest of us, there is only one proper inflation target: zero. Adopting that target would solve most of the economic problems currently plaguing the West. Continue reading

The Bear’s Lair: The U.S. long-term debt rating should be BBB minus.

Fitch last week was the second rating agency to downgrade the U.S. government’s long-term debt rating from AAA to AA plus – Standard and Poor’s had already done so in 2011 and only Moody’s remains at the highest level. But the U.S. debt to GDP ratio has risen by nearly half since 2011, and the Social Security and Medicare systems have swung from small annual surpluses into massive deficits. Maybe, when looked at rationally and free from political pressure, the U.S. Treasury is barely an investment grade bond issuer, whose long-term debt rating should be BBB minus. Continue reading

The Bear’s Lair: Lawfare ruins everybody’s lives

Georgia Power’s Vogtle 3 nuclear power station went into full operation this month, the first new U.S. nuclear station in 30 years. However, its cost, together with its twin Vogtle 4 has ballooned from $14 billion to $30 billion, with a six-year delay in completion due to innumerable harassing lawsuits from environmentalists and others. It is now believed that Vogtles 3 and 4 may be the last conventional nuclear power stations in the United States, despite the government’s approval for this admirably carbon-free technology. This sad saga is just another of the innumerable costs imposed on us all by uncontrolled lawfare from left-wing interest groups. It is time to root out this abomination; the only question is how best to do so. Continue reading

The Bear’s Lair: What does a true innovation look like?

The subject of Artificial Intelligence has filled the media for the last six months, with both optimistic and dire predictions of its gigantic effect on the world. Yet not all innovations are world-changing, however profitable they may be to their inventors, while some innovations – social media, for example — have changed social mores while being generally damaging to people’s standard of living and happiness. Very few inventions are both revolutionary and wholly beneficial, boosting the living standards of all. I would like to examine one such invention: the river steamboat. Continue reading

The Bear’s Lair: The United States is no longer a role model

For decades after 1945, and especially after 1991, the United States was a role model for the world. Not only was its economy the world’s strongest and most prosperous, but its economic management, while falling short of true capitalism, represented an attainable model both for sluggish European nations and for fast-growing emerging markets. Its diplomats and consultants jetted around the world offering advice to poorer countries, in the solid knowledge that the advice was good and the recipient country would probably take most of it – I should know; I was such a consultant for the U.S. Treasury in Croatia in the mid-1990s. Continue reading

The Bear’s Lair: The unwinding of capitalism

Passively invested funds now account for 45% of all assets of U.S. stock-based funds, up from 25% a decade ago, according to Bank of America Merrill Lynch. Indexed funds also account for 25% of bond funds. Between them, three large investment managers, BlackRock, Vanguard and State Street, manage over $20 trillion of assets and they are all dedicated to the “woke” ESG (environment, social and governance) mantra. If these trends continue, how is such a capitalism supposed to work; indeed, will it be capitalism at all? Continue reading