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Category Archives: Meltdown

Japan’s Recent Past = America’s Future?

By | | Book reviews, Meltdown
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Years ago, the Antiplanner met some students from the Maxwell School of Public Administration. I asked them what they learned at the school.

“We learned about the Golden Triangle,” they said. That sounded suspiciously like the Iron Triangle, a concept used by public-choice economists to describe the natural alliance between elected officials, bureaucrats, and special interest groups: the elected officials fund bureaucracies, who pass money and resources to the special interest groups, who donate money to the elected officials’ political campaigns.

According to the students, the Golden Triangle “is bureaucrats, elected officials, and special interest groups — with bureaucrats at the apex of the triangle, running things.” Does the Maxwell School think this is a good thing? “It’s an ideal to be achieved, but we haven’t gotten there yet,” they said.

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Streetcar Stimuli

By | | Meltdown, News commentary
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Remember how the collapse of the I-35W bridge in Minneapolis proved we had to invest in infrastructure? And then it turned out that the bridge collapsed because of a design flaw, not a lack of maintenance?

I guess cities got the message, because instead of using their stimulus funds to replace dated and defective infrastructure, they are building new infrastructure that will immediately be obsolete and soon be defective. Specifically, many cities have decided to blow hundreds of millions of dollars of their stimulus funds on streetcars.

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Privatizing Fish Makes Iceland Rich Enough to Lose It All

By | | Meltdown, News commentary
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Vanity Fair has a fascinating story about Iceland, a nation whose economy is far worse off than our own. Its no wonder: until last month, the nation’s central banker was a poet, the finance minister a veterinarian, the business minister a philosopher.

Iceland: Beautiful and broke.
Photo by stuckincustoms.

How did this happen? Back in the 1970s, the nation privatized its ocean fisheries by giving percentage shares of fishing rights to fishermen. This gave the fishermen an incentive to promote, rather than overfish, the fisheries. Plus, they could sell their shares or borrow against them. “In a single stroke the fish became a source of real, sustainable wealth rather than shaky sustenance,” says writer Michael Lewis.

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Stimulus Status Report

By | | Meltdown, News commentary, Transportation
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When Obama started talking about an $850 billion infrastructure package to stimulate the economy, state and local transportation agencies began licking their chops. The federal government currently spends only about $45 billion per year on transportation of all kinds, so $850 billion would be almost 20 years of spending.

Free money.
Flickr photo by Tracy O.

As it turns out, only about $45 billion of the stimulus package is for transportation, which will be like the feds doubling spending for one year. The stimulus bill will not build a lot of new highways or light-rail lines. But it might set some bad precedents for future federal spending.

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Bailouts and Stimuli

By | | Meltdown
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The Antiplanner doesn’t always agree with Nobel-prize-winning economist Joseph Stiglitz, but his take on the auto bailout makes sense. Too many bailout proponents speak as though the bailout is the difference between life and death for the Big Three. In fact, all it may mean is life or death for the value of the Big Three’s shares.

Chrysler ecoVoyager fuel-cell hybrid-electric concept car.

Most of the nation’s airlines were in bankruptcy sometime in the past decade — you probably flew one when it was in chapter 11. Shareholders were wiped out, but the planes kept flying and airline workers kept working.

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Infrastructure and the Economy

By | | Meltdown
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Many members of Congress are eager to pass an infrastructure “stimulus” bill early in the Obama administration. There are many reasons to think that this is a bad idea. Such a bill is likely to do little to stimulate the economy. But it probably will do much to prolong the recovery period.

Over at Marginal Revolution, economist Tyler Cowan worries that the added debt required by an infrastructure bill will “ruin my country and cause its economy to crumble or explode.” Even if that is not true, he says, then an infrastructure project makes sense only if either the “project worth doing in its own right” or “53 percent or more of the expenditures [will] come on-line in the next nine months.”

The Antiplanner would argue that both of those should be true. If the project is not worth doing in its own right, it won’t provide much of a secondary stimulus — it will just provide a few jobs during actual construction. If the project is worth doing but not “shovel-ready,” then funding it will increase the nation’s debt but not provide any immediate stimulus.

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Trillions Are the New Billions

By | | Meltdown
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Numerous news stories report that the cost of the “bailouts” so far has “reached” $8.5 trillion. Some more cautious stories say they “could” reach $8.5 trillion. ABC News Chris Cuomo says reassuringly that we might get about half back in loan repayments.

The source of this $8.5 trillion is apparently Bloomberg, and their scorecard is here. First, the totals don’t add to $8.5 trillion, only $8.35 trillion. But that’s quibbling. A closer look reveals a far greater portion of the claimed $8.5 trillion isn’t real.

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Bubbles, Panics, and Recessions

By | | Book reviews, Meltdown
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In the past thirty years, the world economy has suffered several major bubbles. First came the Japanese stock market and property bubbles that peaked in 1989. Scandanavia suffered real estate and stock bubbles at about the same time. These were soon followed by stock market and real estate bubbles that peaked in southeast Asia in about 1997. High-tech and telecommunications bubbles (which some count as two different bubbles) peaked in 2001. Finally, we have the current housing bubble that peaked in 2006.

Are these bubbles more frequent than in the past? Are all of these bubbles somehow related? Why is real estate connected with most of these bubbles? What tools do central bankers and other government agencies have to prevent or minimize the bubbles?

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