regulatory distortions

Another explanation of Quantitative Easing and other performance enhancing drugs

(cross-post from my other blog, Outrun Change.)

Here’s the on-air confessional interview as it should have happened. Or perhaps it is an animated educational cartoon. You can decide for yourself:

Bernanke to Oprah:  ‘I’ve Been Doping for Years’.

This cartoon gives a superb explanation in 12 minutes of a major factor about how we got into our current economic mess.

The format is an imaginary interview with the chairman of the Federal Reserve Bank, Ben Bernanke, as he confesses to long-term doping of the economy.

[youtube=http://www.youtube.com/watch?feature=player_embedded&v=orh64vypKwU]

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By Jim Ulvog, ago

Quantitative Easing and other performance enhancing drugs

(Cross-post from my other blog, Outrun Change.)

There was a big on-air confessional a while back. Something about bicycles.  Here’s another interview that got overshadowed by that big one. Or perhaps it is an educational cartoon. I’m not sure.

Bernanke to Oprah:  ‘I’ve Been Doping for Years’.

This cartoon gives a superb explanation in 12 minutes of a major factor about how we got into our current economic mess.

The format is an imaginary interview with the chairman of the Federal Reserve Bank, Ben Bernanke, as he confesses to long-term doping of the economy.

[youtube=http://www.youtube.com/watch?feature=player_embedded&v=orh64vypKwU]

(more…)

By Jim Ulvog, ago

Capital appreciation bonds -– compound the interest on a bond for 20 years before starting to make any payments. How’s that for a wonderfully bad idea?

(Cross-post from my other blog, Outrun Change.)

If you thought zero documentation and 120% loans were good for the economy, you will love capital appreciation bonds.

Here’s the deal – what are schools and local governments in California to do once they have run out of cash to pay even the interest on bonds, can’t cover the principal on the cost of new buildings, and face huge voter resistance to any increase in spending? What to do when you just want to keep spending?

How about issuing capital appreciation bonds. That allows the government agency to keep spending whatever they want.

You can borrow money, make no payments for 20 years, compound the interest into principal, and burden the adult children of current students with the huge payments.

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By Jim Ulvog, ago

When government whim can make or break a company, it makes sense to pay big bucks for political intelligence.

When you read the Wall Street Journal article on a company that gathers political intelligence and sells their knowledge to well-heeled customers, don’t get upset with the company or their customers. Check out Buying ‘Political Intelligence” Can Pay Off Big for Wall Street.

If that irritates you, perhaps the cause is a regulatory structure that can make or break a company based on one single decision.  Huge fortunes ride on decisions made every hour.

The front page article in last week’s paper reports that the SEC is investigating an outfit called Marwood Group. They gather all the public information they can find on decisions the FDA, and presumably other regulators, might make. If I read the article right, their focus is health care issues. 

They read the tea leaves and report back to their subscribers, who then make their own investment decisions.

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By Jim Ulvog, ago

Rap video on government distortions of supply and demand

Check out Supply & Demand: A Thug Story

Government interference with the pricing mechanism produces shortages which are resolved by non-price mechanisms: discrimination, waiting lines, rationing, black markets, or favoritism.  Markets messed up?  Look for government messing with price signals to find the cause.

[youtube=http://www.youtube.com/watch?v=7MY7E_VhKMM&feature=player_embedded#t=149]

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By Jim Ulvog, ago