Saturday, November 22, 2008
Sunday, November 9, 2008
Flea Market
What are all the hawkers going to do now that there is no more Obama campaign? Gotta keep the movement alive, what with all the jobs in auto manufacturing and finance going down the drain.
Sights from the flea market:
Sights from the flea market:
- "I voted for change" t-shirts
- Stacks of Wednesday's times, sold by a young African-American kid. $10 a copy.
- Large glossy photographs, caption "President Barack Obama." That was fast.
The Wrong Incentives
Risk-free rates (Treasury yields) are very low, including long-term yields. This discourages saving.
Risk premia are at ridiculous levels. This discourages investment.
So US consumers are incented to buy now rather than save, and US companies are incented not to invest. Consumers in other countries do not face this issue to the same degree as we do because their government yields are typically higher. The spike in the dollar exacerbates the issue. This is exactly the opposite of the adjustment that has to take place. Does the economy currently present exactly the wrong incentives for recovery?
Risk premia are at ridiculous levels. This discourages investment.
So US consumers are incented to buy now rather than save, and US companies are incented not to invest. Consumers in other countries do not face this issue to the same degree as we do because their government yields are typically higher. The spike in the dollar exacerbates the issue. This is exactly the opposite of the adjustment that has to take place. Does the economy currently present exactly the wrong incentives for recovery?
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