Fed's Balance Sheet

Here’s a neat little chart from the St. Louis Federal Reserve Bank.  It shows all maturities of U.S. debt held by the Fed.  Since the middle of 2009, the Fed has bought something like $1.2 trillion in treasury debt.  This is one way the Fed holds down interest rates – with the Fed buying, true demand for treasuries is masked or distorted.  This false demand for treasuries has lifted bond prices and kept rates artificially low.  Lower rates also encourage more borrowing, which we’ve done with impunity over the last four years.

At some point, the Fed will want to unload all this debt.  When and how they accomplish this will certainly be interesting.

Assembly Fetish?

Dear President Obama,

You’ve a particular fondness for unions.  There’s nothing inherently wrong with this affectionate relationship, I suppose.  After all, unions regularly fill your and other Democrat’s campaign coffers with millions.  Publicly showing them some love would only seem natural.  And since unions are tantamount with manufacturing, one could reasonably assume that your affection also extends to this rather small sector of the U.S. economy.  But why do you have this seemingly paradoxical love affair?

If I weren’t somewhat informed (and secretly knew that your ballyhooed love affair with unions and manufacturing begins and ends with campaign donations), I might get the impression, at least according to your rhetoric, that aspiring to be an assembly line worker is synonymous with reaching the American dream.  I can only assume, then, that you are eagerly pushing, with the same gusto as you portray publicly, your two children to join the union some day and find their rightful place on the assembly line, happily securing bumpers to the next generation Chevy Volt.

Do you really think Americans should go off to university, rack up thousands in government-administered student loans, and then spend the next 25 years putting parts together?  Is this your vision of our future?  Is this the path to prosperity for America?  You have publicly stated, on many occasion, that every American should go to college.  Yet, amassing a mini-mortgage for the right to assemble parts seems silly and completely unnecessary.  The opportunity costs would be extraordinary.

So, I must ask you this simple question:  is your fetish with assembling things just a sham to illicit donations from the UAW, or do you honestly believe that every assembly line worker in America should be college educated?

Merry Christmas.

Brad D.

Who gets to set interest rates?

So if this is fraudulent, why is it okay for central banks to keep interest rates low? In fact, since central banks want to keep rates in the basement, shouldn't they be sending thank you notes to these banks?

Korean Car Wash

One of the great things about Korea is the industriousness of its people.  Where there’s a need, you’ll find a Korean filling that need.  Case in point: mobile Korean car wash. 

 

I snapped this photo coming out of church Sunday.  This Korean will wash your vehicle for under $10, while you worship.  The most surprising aspect of this free-market entrepreneurism is that it took place on a US military installation.  Army posts aren’t known for their laissez faire policies. 

 

Most Americans would scoff at performing such a menial task.  Additionally, unemployment insurance and SSDI provide strong incentives to avoid this type of work altogether.  And while the Koreans have a social securitysystem similar to ours, Korean pride runs deep.  Social customs and self-respect compel many Koreans to work, even into their older years, and even if that work is less than glamorous.

So, the next time you need a car wash, look no further than your local post Chapel on Sunday morning.  You can wash your car and your sins away, all in the same place.

On Being a Professor

Not knowing what I want to be when I grow up, I’ve been looking into teaching.  And during my research into what life might be like as a professor, I was a bit surprised to learn that life as an associate professor, or the mid-career stage of teaching, isn’t as glamorous as I had imagined.

The Chronicle of Higher Education has an informative and insightful article on what life is like for many professors after they receive tenure.  I, mistakenly it seems, thought that life would be great.  After all, you’ve just received tenure – the ultimate reward for all those years of labor, research, teaching, and grinding away.  Tenure, it seems, should be the good life.  But often it’s not.

Read the whole article here. 

I think this article further supports my infant, but maturing belief that any vocation can appear beautiful, illustrious, seductive, and exciting from an observer, but in reality is far from that dreamy fairytale I too often imagine.

Exchange Problem

I'm taking the family to Japan over Thanksgiving.  I spent about 9 months in Iwakuni, Japan back in the early 1990s during my time in the US Marine Corps.  Iwakuni is a small town about 25 miles south of Hiroshima.  If all goes well, I take the kids to see firsthand what an atomic bomb can do to a city.  (Do you think the A-Bomb was a silver lining for the Japanese economy?)

However, before we go, I'll want to get some Japanese Yen.  Fortunately, Seoul has no shortage of money exchangers.  Here's the situation: I gave the money exchanger $300 and asked for Yen.  I was given 24,400 Yen and 3,500 Korean Won.  Apparently, the smallest Japanese Yen bill they deal with is 100 Yen.

Here's your homework.  At 1 USD to 1,088 Won, what was the USD to YEN exchange rate I received?  (I want to know how much Yen $1 buys)

So You Want to Tax the Rich

Obama believes that his re-election grants him moral authority to raise taxes (rates).  After all, he ran on a platform of raising taxes (rates) on the rich, and the people sent him back to 1600 Pennsylvania.  Using the same logic then, the people also returned the GOP to the House and ergo they then must have a mandate to cut spending, no?

The clamor to raise taxes on the rich seems to grow louder every day.  And so I must ask – for what end? To improve the economy? To reduce the deficits?  Because it’s only fair?

Who among us ascribes to the philosophy that confiscating more income from the top X percent will improve overall economic conditions for the 1-X percent?  Or said another way,(the taxers believe that) removing money from an economy will allow economic indicators to rise.  If this theory holds true, let’s take all their income!  

Perhaps the majority of the cheerleaders for higher tax rates believe we should use the revenue to reduce the deficit.  Ah, seems like a worthy goal, but can it be done?  In other words, can the government confiscate enough income from the rich to meaningfully reduce the deficit?  I remain skeptical: