Stilltitled

You better budget based upon what you can raise, because we don’t have the money to continue over and over again to shovel out extraordinary, special municipal aid to municipalities who have not responsibly budgeted, no matter where you’re located in the state. The state can no longer be your court of last resort. We are broke.

—Chris Christie, who put struggling towns in New Jersy “on notice” that he would not fund them in 2011, with intimations of the flypaper effect

It’s the same old nonsense again and again, no matter what the people say. As long as we continue to subsidize mismanagement and corruption and bad municipal practices, it won’t stop.

–Assemblyman Joseph Malone (R-Burlington, NJ)

If one wishes to find the true source of the economic debacle of 2008, one need only look to the government policies that cajoled, encouraged and then demanded that banks loan money to people to buy houses they couldn’t afford — and then put the American taxpayers on the hook for the loans that will never be paid back. This proposal is not going to put one American back to work, which is where the Administration should be focused

–Rep. Jeb Hensarling (R., Texas): WSJ. Once again, Jeb demonstrates that he has absolutely no idea what is going on as he imagines a world where the real estate bubble was a function of the US government’s diabolical control of banks such as Morgan Stanley, Goldman Sachs, Lehman Brothers, Bear Stearns, Merrill Lynch, Citigroup, and others. In other words, there was never any risk that these banks would be nationalizedThey already were, and that’s why we ran into trouble with the real estate bubble. As Simon Johnson remarked, “push every republican to take a public stand, and you will be amazed at what you hear.”

Douglas Elliot brings some sanity to the discussion…

I am concerned, as a general matter, about arbitrarily limiting the size of the banks, since our modern, complicated, global economy demands that the U.S. have at least a few banks capable of providing a very wide range of services each on a large enough scale to be efficient. However, there certainly may be circumstances in which regulators ought to push a bank or banks to be smaller in general or smaller in certain activities. The question is how to balance the considerations and avoid arbitrary limits or decisions.

—Douglas J. Elliott, Fellow, the Brookings Institute, as he correctly observes that “it is somewhat difficult to draw a bright line between ‘proprietary investments’ and traditional liquidity management activities…between investment and trading.”

It should be absolutely clear that banks which are too big to fail must be shrunk, and that using government-guaranteed consumer deposits to trade securities for profit is a terrible idea. It is a relief to see these holes in the regulatory structure get some attention.

–The Economist, cutting to the quick

China’s investment rate is extremely high in comparison with other major economies, and has been increasing steadily since 2001, creating first overheating and then overcapacity…

The government was too generous in helping revive real-estate demand, and, overwhelmed by fear of the negative impact of falling asset prices on economic growth, has been too cautious in dealing with bubbles when they have reappeared.

–Yu Yongding: 19 January 2010, op-ed, Korea Times. Despite recent increases in inflation, he would maintain, “Overcapacity is an important factor that will contain inflation.” Arthur Kroeber of Dragonomics argues that it’s too late, and inflation may be developing at the edges, “If that happens, the government will have to choose between a lower growth target or accepting higher inflation.”

When banks benefit from the safety net that taxpayers provide, it is not appropriate for them to turn around and use that cheap money to trade for profit.

–President Obama on the call to limit risk-taking by large banks

Our conventional military dominance drives our adversaries to cheat, lie and steal. The offensive technical capability to play this game is well within the reach of the principal adversaries of the United States. In fact, one could argue that some of our adversaries are better at this game than we are.

—James Gosler, a fellow at Sandia National Laboratories and a visiting scientist at the National Security Agency

Originally we were saying, “well, whoever got it has the secret sauce to Google and some 30 other California companies, and they can replicate it. But some of the more devious folks in our outfit were saying, “Well, they could also insert their own code — and the probably have.”

–Rick Howard, director of security intelligence at VeriSign iDefense, remarking on the possibility of long-term vulnerabilities through Trojan horses which become part of the release code for applications and systems such as Cisco’s IOS, Adobe’s Flash and Acrobat, among others.

Frankly, if all the news organizations locked pinkies, and said we’re all going to put up a big fat pay wall, you know what, more traffic for us. News is a commodity; I’m sorry to say.

—Vivian Schiller, former SVP & GM of NYTimes.com, current CEO of NPR: Newsweek, July 2009. On the recent news regarding the NYT metered reading model, she recently observed to BusinessInsider:  “The whole industry will be watching to see how that works and whether they should follow suit…except NPR. Our very successful pay model (300mm+ a year across NPR and NPR member stations) is voluntarily and will remain thus.”

But the Times did get people to pay, right? [Newsweek]
We far exceeded our expectation—225,000 subscribers paid $50 a year, in addition to the home delivery subscribers, who got all of the Web for free. But guess what, that’s $10 million. Instead of 225,000 who pay the $50, let’s say it’s one million subscribers. OK. That’s $50 million a year. That’s not going to save any newspaper. It’s going to kill your advertising base. The numbers don’t work.

Capacitance Electronic Discs take the world by storm with vinyl video discs in the early eighties. How far we’ve come…

This announcement allows us to begin the thought process that’s going to answer so many of the questions that we all care about. We can’t get this halfway right or three-quarters of the way right. We have to get this really, really right…This is a bet, to a certain degree, on where we think the Web is going. This is not going to be something that is going to change the financial dynamics overnight.

—Arthur Sulzberger Jr., on the announcement that the NYT would start charging in 2011, suggesting that they’re going to charge, but they have to think about it. Janet Robinson would seemingly suggest the solution as being somewhere between the “quick” and the “right.”

The system will not reset quickly and without permanent changes. This will feel like a new normal.

–Mohamed El-Erian, in his 12 May 2009 commentary

I don’t think it’s different this time. We’ve had financial-market crises and big workforce changes before, and growth has pretty consistently come in around 2.5 percent over the past 50 to 60 years.

—Christopher Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ in New York. He pegs potential growth at 2.6%.

Growth in the economy and profits is likely to accelerate. [Historically,] returns have been about 7 percent. We think they’ll likely be above that for some period.

—Kevin Gardiner, head of investment strategy at Barclays Wealth in London. Bloomberg data suggests that earnings for S&P 500 companies will grow 24.9% in 2010.

The inventory cycle is a turbocharger right now. But when we talk about the ‘new normal’ growth rate, we’re talking in trends as opposed to single quarters.

–Paul McCulley, Managing Director, PIMCO, in his December 2009 outlook.

Drew Matus, a senior economist at Bank of America Merrill Lynch in New York.

Catching Up

The next couple of years we’ll be accelerating to catch up, and then we delve into the new-normal environment…When people talk about the new normal, they’re not talking about 2010 or 2011, they’re talking 2013 and beyond

—Drew Matus, a senior economist at BofA Merrill Lynch, providing a half-way point between an unbridled resumption of growth and El-Erian’s ‘new normal.’ He anticipates potential growth of 2.25%.

there are not more useful Members in a Commonwealth than Merchants. They knit Mankind together in a mutual Intercourse of good Offices, distribute the Gifts of Nature, find Work for the Poor, add Wealth to the Rich, and Magnificence to the Great.

–Joseph Addison, Spectator, no. 69, reflecting a general optimism around the rise of global trade through an emerging middle class that he attributes to an up-to-then invisible structure of mutual dependance through trade to properly distribute the wealth of nature: “Nature seems to have taken a particular Care to disseminate her Blessings among the different Regions of the World,with an Eye to this mutual Intercourse and Traffick among Mankind, that the Natives of the several Parts of the Globe might have a kind of Dependance upon one another, and be united together by their common Interest.”