• November 26, 2012

Capital Formation and the Fiscal Cliff

In today’s economic environment, we often complain about volatility and uncertainty, but there is one thing I think we can be fairly certain of: taxes are going up. I constantly try to impress upon my kids, most of whom are now adults, that ideas and actions have consequences. In today’s letter we will look at some of the consequences of an increase in taxes. Please note that this is different from arguing whether taxes should rise or fall. For all intents and purposes that debate is over. As...

• November 19, 2012

Where Will the Jobs Come From?

For the last year, as I travel around, it seems a main topic of conversation is “Where will my kids find jobs?” It is a topic I am all too familiar with. Where indeed? Youth unemployment in the US is 17.1%. If you are in Europe the problem is even more pronounced. The basket case that is Greece has youth unemployment of 58%, and Spain is close at 55%. Portugal is at 36% and in Italy it’s 35%. France is over 25%. Is this just a cyclical symptom of the credit crisis? Much of it clearly is, but I...

• November 12, 2012

Central Bank Insurance

“Without that sense of security which property gives, the land would still be uncultivated.”
– Francois Quesnay

“There were at least one million people marching in the streets,” said Alejandro.

“No,” said Juan, “it was not anywhere close to that number. I don’t think there were more than 600,000.”

When I had driven past the center of town earlier that afternoon, around five, there were only a few thousand. “Where’s the rest of the demonstration?” I asked.

“Oh,” Enrique replied,...

• November 5, 2012

Three Men Make a Tiger

I am just a poor boy.
Though my story's seldom told,
I have squandered my resistance
For a pocketful of mumbles,
Such are promises
All lies and jest
Still, a man hears what he wants to hear
And disregards the rest.

     – From “The Boxer,” by Paul Simon

In a few hours we will know the outcome of the US elections (hopefully without a repeat of 2000!). So, given that eventuality, why should we bother to explore the rather significant disparity in the models being used to create the...