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David Stockman, the former Office of Management and Budget director under President Ronald Reagan, is getting a lot of attention for his Sunday NY Times op-ed and his new book – The Great Deformation: The Corruption of Capitalism in America.
Here he sits down with Bloomberg Television’s Betty Liu to share some thoughts.
There’s been lots of blow-back on this from both the left and the right. One thing seems quite certain – none of it is hurting his book sales.
I just had to share this story at the American by Blake Hurst, a Midwest farmer and President of the Missouri Farm Bureau, as he offered up some thoughts on one of the many asset bubbles that are now helping to restore the U.S. economy to its former glory.
Farmers have cash, and nowhere to invest it but farmland. Farmers largely ignore equities, as they tend to balance the inherent risk in farming by investing in what they perceive as less risky places. We aren’t dumb, however, and have figured out that it’s a losing game to invest in bonds or CDs at rates less than inflation while we’re in tax brackets we never even knew existed.
So, farmland prices are booming. Land prices in the heart of the Corn Belt have increased at a double-digit rate in six of the last seven years.
…
We farmers should be more sophisticated than the average subprime borrower and more risk averse than startup investors in the 1990s. After all, we manage multi-million dollar businesses, and since the average age of farmers is near 60, most of us are survivors of the agricultural asset crash of the early 1980s. In 1981, the average price of farmland in Iowa was $2,147 per acre; by 1986, the average farm brought $787 an acre. That period was the formative experience of my farming career, and one I would not wish to repeat. According to a recent article in the USA Today, a third of Iowa’s farmers left the industry in that crash.In a population thus inoculated, we ought not to catch the fever again. It is a mark of the few investment choices left to farmers that we’ve so eagerly contributed to this unsustainable increase in land prices. We know better, we know it’s likely to end badly, but we don’t feel that we have an alternative.
Of course, low interest rates courtesy of the Fed get much of the blame here as, aside from some outside money coming in to add to the fun, this is really just another example of “reaching for yield” as noted above. It’s no wonder that Federal Reserve Presidents in such areas as Kansas City have voted against the East Coast consensus when it comes to the central bank’s super-easy monetary policy.
The Institute for Supply Management reported that the U.S. manufacturing sector expanded at its slowest pace in three months as the index of national factory activity fell from 54.2 in February to 51.3 in March and the new orders and production indexes both tumbled.
Employment was about the only bright spot in this report as this index rose from 52.6 to 54.2 (recall that numbers above and below 50 indicate expansion and contraction, respectively). The key new orders index fell from 57.8 in February to 51.4 last month, still indicating a modest expansion, while production dropped from 57.6 to 52.2.
Exports orders jumped from 53.5 to 56.0 and recently lower oil prices likely played a role in the prices paid index dipping from 61.5 to 54.5.
I don’t know about you, but I’m not looking forward to the political discourse that we’re likely to hear over the next six months, particularly if the U.S. economy continues to weaken and the finger-pointing increases leading up to the November elections. So, it might be a good idea to only look on the lighter side of the political debate as it relates to voters’ number one issue – the economy – a good example of which is shown below.
From the Nate Beeler archive at the Washington Times.
The Reuters/University of Michigan consumer sentiment index dipped from 75.3 in February to 74.3 in the first of two readings for March in a sign that rising gas prices may now be having in an impact on the mood of the consumer.
Based in large part on a recently improving labor market, the current conditions component remains firm, up from 83.0 to 84.2, however, the expectations component more than offset that gain, down from 70.3 to 68.0.
It’s a good think that equity markets don’t have a gas tank to fill every week or they too might think about pulling back but, so far, they show little sign of doing so, though that could soon change given that inflation expectations show signs of stirring to life.
Survey respondents ratcheted up their one-year outlook on consumer prices from an increase of 3.3 percent to 4.0 percent in a delayed reaction to rising pump prices that the Energy Department said gained another 4 cents over the last week, rising to a national average of $3.83 per gallon.
Five-year inflation expectations (the measure watched more closely by Fed economists) rose just one-tenth to 3.0 percent, indicating that, like Fed Chief Ben Bernanke, most Americans see rising gas prices as being temporary, a belief that, unlike Bernanke’s, could prove to be temporary itself.
The Labor Department reported that, paced by the surging cost of energy products, consumer prices in the U.S. jumped 0.4 percent last month and, on a year-over-year basis, inflation was unchanged at 2.9 percent.
Gasoline prices surged 6.0 percent in February and are now up 12.0 percent from a year ago as the energy index jumped 3.2 percent, now 7.0 percent higher on a year-over-year basis. Falling natural gas prices offset rising heating oil costs as the overall household energy index fell 0.6 percent last month and is down 0.3 percent from last year at this time.
By Tim Iacono, Since 2005
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