The Bear’s Lair: De-globalization gathering momentum

President Trump’s sudden announcement of tariffs on steel and aluminum is by no means unprecedented – Presidents Reagan and George W. Bush took similar actions. Yet it emphasizes a reality first pointed out in these columns in 2010 and in a presentation later that year: the globalization project, beloved of Whig economists and big-government types everywhere, is falling apart. De-globalization is here to stay and, contrary to Whig belief, it will be good for the world economy and for our living standards. Continue reading

The Bear’s Lair: The 1820s are more relevant than the 1950s

Many supporters of Donald Trump have expressed nostalgia for the 1950s, when large companies, strong unions and international competition that had been bombed flat guaranteed well-paid blue-collar jobs. Yet the current situation looks nothing like the 1950s. With robots, genetic engineering, self-driving vehicles, serious emerging market competition and debt defaults on the horizon, we are entering a new economic age, not yet christened, in which both jobs and policymaking are more uncertain than ever before. To me, the new age looks like Britain’s 1820s. Continue reading

The Bear’s Lair: Ferment brings us the future

Large organizations are almost never innovators. You can quote the occasional exception, such as the Manhattan Project, but even in space exploration the ability of Elon Musk’s SpaceX, on a tiny budget, to outdistance NASA in rocket design, shows that big is generally intellectually barren. Throughout history, the periods of greatest innovation have coincided with the periods of market chaos, with a myriad of small competitors and no established standards. We need to figure out a way to encourage such periods. Continue reading

The Bear’s Lair: Debt and Taxes become more inevitable

The White House’s 2019 Budget is pure fantasy, but it assumes a deficit in the year to October 2019 of $984 billion. However, Congress’s 2-year Budget deal has added at least $80 billion more spending, pushing the deficit well over $1 trillion. Since we are at the top of a business cycle, with unemployment around 4%, this is very disquieting. However, the driver of current deficits is more a past lack of productivity than a burst in profligacy, and it is there that we must look for a solution. Continue reading

The Bear’s Lair: An Anglo-Saxon Chronicle of Failure

Theresa May’s negotiations for Britain’s exit from the European Union are not going well. Time and again, she has been forced to back down, notably over an outrageous EU demand for 40 billion pounds of exit money. Since that demand, negotiations have grown no easier, as the EU has attempted to impose further outrageous conditions, such as a veto over Britain’s trade treaties. There is a historical precedent for this: the late Saxon King Ethelred’s feeble and unsuccessful attempts to buy off Danish invaders with large gifts. Ms. May, starting merely as “Appeaser Teresa,” has become Ethel the Unready. Continue reading

The Bear’s Lair: Go Far East, young man

The announcement last week that Chinese researchers had cloned monkeys represents slow progress – it is now nearly 22 years since British researchers produced Dolly the cloned sheep. However, that delay is largely due to obstructive Western regulation, and the time taken for emerging market China to catch up to the intellectual frontier of a West made stagnant by bureaucrats. Progress on human genetic engineering can now resume, from a largely Asian base. The implications are substantial, both positive and negative. Continue reading

The Bear’s Lair: Cooperatives are a useful capitalist tool

Britain’s Labour Party has now committed to re-nationalizing many of the utilities that were privatized to such fanfare under Lady Thatcher in the 1980s. Reluctantly, we should admit that in certain respects, the Labour Party has a point; monopolies owned by private equity groups, as have appeared in the water industry, offer no accountability to anybody. But there is a better alternative, bringing both accountability and a proper incentive structure, much used in capitalism’s earlier days: the customer-owned cooperative. Continue reading

The Bear’s Lair: The secular stagnation that wasn’t

Rarely can two economists of such eminence have been made to look foolish so quickly. In 2015, Robert J. Gordon wrote a book proclaiming that the lousy productivity growth that we had seen in recent years was the best we could expect, and in January 2016 Paul Krugman reviewed it enthusiastically in the New York Times. Within two years, it is becoming increasingly clear: productivity is rebounding to historic levels, its malaise having been due to the misguided economic policies Krugman and Gordon favored, and its recovery at least partly due to the policies of a President both men regard with unmitigated and unprecedented loathing. Cheerful, hysterical laughter is the only possible response, together with an iron determination not to let either man near the levers of economic power again. Continue reading

The Bear’s Lair: Neither a borrower nor a lender be

According to a Fed report this week, U.S. consumer credit increased $28 billion in November, the largest rise in 16 years, with credit card debt rising at annual rate of 13.3%. This is of course a sign of consumer confidence, another sign that President Trump’s administration has revolutionized the U.S. economic outlook. However, it is bad news in the long run; the U.S. consumer is already over-indebted, as is government as is business. We need to restructure capitalism so that people don’t binge on debt every time there is an economic uptick. To do that, we must reverse many of Maynard Keynes’ precepts. Continue reading

The Bear’s Lair: Crashes and depressions in 2018

2018 looks to be a jolly year; it has the potential for no less than four kinds of financial disaster: a major “fringe market” crash in crypto-currencies with credit implications, a stock market crash of the old-fashioned kind, a massive bond market crash as yields return to reality and a recession, which Trump-haters no doubt hope will be deep and long. Yet history shows that the four types of disaster need not be connected, and not all need occur simultaneously. For us as investors and participants in the economy, that should be a huge relief. Continue reading