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Saturday, December 31, 2011

Jean-Baptiste Say - Treatise on Political Economy

The same principle leads to the conclusion, that the encouragement of mere consumption is no benefit to commerce; for the difficulty lies in supplying the means, not in stimulating the desire of consumption; and we have seen that production alone, furnishes those means. Thus, it is the aim of good government to stimulate production, of bad government to encourage consumption.
For the same reason that the creation of a new product is the opening of a new market for other products, the consumption or destruction of a product is the stoppage of a vent for them. This is no evil where the end of the product has been answered by its destruction, which end is the satisfying of some human want, or the creation of some new product designed for such a satisfaction. Indeed, if the nation be in a thriving condition, the gross national re-production exceeds the gross consumption. The consumed products have fulfilled their office, as it is natural and fitting they should; the consumption, however, has opened no new market, but just the reverse.

Say on Production

We produce also by buying a product in one place, where it is of a less value, and conveying it to another, where it is of greater value. This is the work of Commercial Industry.
How does commercial industry produce utility, as it neither changes the form nor the substance of a product, which is sold just as it is bought?
It acts like the fisherman, of whom we have just spoken; it takes a product from a place where it cannot be used; from a place, at least, where its uses are less extensive, less precious, to a place where they are more so, or where its production is less easy, less abundant, and dearer. Wood is little used, and consequently of very limited utility in the mountains, where it so far exceeds the wants of the inhabitants, that it is sometimes left to rot; this utility,  however, becomes very considerable when the same wood is transported into a city. Hides are of little value in South America, where they have a great number of wild animals: the same skins have a great value in Europe, where their production is expensive, and their uses much more multiplied. Commercial Industry, in bringing them, augments their value by all the difference between their price in Brazil and their price in Europe.

The No. 1 U.S. Export This Year Will Be Petroleum

The New Age of America's Energy Abundance: The No. 1 U.S. Export This Year Will Be Petroleum
by Professor Mark J. Perry

Who Will Bail Out the Fed?

Who Will Bail Out the Fed?

By James G. Rickards
Author of Currency Wars, The Making of the Next Global Crisis 
From Occupy Wall Street to the halls of Congress there is anger at bailouts orchestrated by the U.S. Federal Reserve. These bailouts have not been limited to banks but include brokers, money market funds and foreign corporations. The Fed has released details grudgingly and some disclosures were forced by the Dodd-Frank legislation. Gradually the bailouts have been revealed as if a veil were slowly being drawn to display a densely formed mosaic. The bailouts have enriched stockholders, bondholders and CEO’s while unemployment remains at depression levels and forty-six million Americans survive on food stamps.

But what if the Fed itself needed to be bailed-out? The Fed may be a central bank, but it is still a bank with a balance sheet and capital. A balance sheet has two sides consisting of assets and liabilities. The Fed’s assets are mostly government securities it buys and its liabilities are mostly the money it prints to buy them. Capital consists of the assets minus the liabilities.

The Fed has capital of about $60 billion and assets approaching $3 trillion. If the Fed’s assets declined in value by just 2 percent, that decline applied to $3 trillion in assets produces a $60 billion loss—enough to wipe out the Fed’s capital. A 2 percent decline is not unusual in today’s volatile markets.

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How Perverted Incentives Caused the Financial Crisis

Friday, December 30, 2011

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