Monday, September 30, 2013

Lowdown on the Shutdown

You may think that this poem's on the deficit,
So kindly allow me to preface it
That the shutdown impending
Is not about spending;
There's no one who even professes it.

It's a high-stakes political drama,
Unneeded if heads had been calmer,
A tactical ruse
By those who refuse
Affordable Care from Obama. 

The Tea Party Capitol faction
Appears to take no satisfaction,
Though we're not in the black
In the age of Barack,
That the deficit's cut to a fraction. 

The foregoing limerick is just a reminder that, as the US federal government heads toward a shutdown over the parties' inability to agree on a budget, that the budget itself is not the issue; neither are debts and the deficit. Although the fact is not well publicized, and has more often been deliberately obscured, the federal budget deficit has been cut in half since President Obama took office in 2009. 

The the intractability of the fight over the budget is therefore a strategy by the House Republicans, and especially their Tea Party faction, to throw yet another attempted roadblock in front of the rollout of Obamacare. 

Tuesday, September 24, 2013

Crowdfunding Gets A Jumpstart

The SEC softened the rules
On investment publicity tools
So that now you're allowed
To pitch to the crowd
And separate money from fools. 

Once your IPO had to be edited
To keep the investors accredited -
No public appeal
For an IPO deal -
But did Congress know better? You bet it did!

No more need for advisors advisin' it,
To prevent any legal surprise in it;
Just poke ev'ry friend
For cash they can send
To your shack with a couple of guys in it.

As the Wall Street Journal put it: Bring on the fundraising billboards!  Yesterday new rules under the JOBS Act went into effect, lifting the longstanding ban on general solicitation of private investments.  For the last 80 years, for an IPO or other securities offering to get exemption from SEC registration requirements necessitated compliance with Regulation D. Under Reg D, a company or fund looking for investors had to avoid any "general solicitation" and ensure that every investor was "accredited;" essentially, wealthy and sophisticated. 

Under the Jumpstart Our Business Startups Act, however, investments can be solicited as generally as you want - through blogs, tweets, TV, radio, Facebook, LinkedIn, YouTube, you name it. Such openness puts the onus on entrepreneurs to take "reasonable steps" to ensure that angel investors are also accredited investors, and puts a higher burden of trust and due diligence on investors, who must be sure that they can place not only their money, but also their private financial data in the hands of up & coming impresarios. 

Let the crowdfunding begin!

Wednesday, September 18, 2013

Surprisingly Easy

The Fed has decided "No Taper"
Of its purchase of fixed-income paper;
Without the renewal
Of stimulus fuel,
The economy's running on vapor. 

Says Bernanke: "It's certainly bad enough
That employment amounts didn't add enough,
Given all of our pains
To stimulate gains;
Think of what it would be if we hadn't've."

"My economists tell me, statistically,
That it's hard to project optimistically,
When the Capitol sounds -
On political grounds - 
Unlikely to stimulate fiscally."

"QE should never be cut down
With the risk of a government shutdown,
So you'll just have to wait
'Til growth may reflate
And the jobless rate's more than somewhat down."

Tuesday, September 17, 2013

The Frontrunner

If the smart money can be believed
Dr. Summers' retreat has achieved
That Yellen looks strong
For Fed Chair, as long
As the President isn't too peeved. 
Barack wants a servant devoted;
For Larry, his voice was full-throated,
But some would impugn
His trial balloon
As too freighted with bags to be floated.

Who the next Chair will be there's no tellin',
Though the bond market clearly loves Yellen,
And stock market buys
Reacted with highs,
While the dollar was laden with sellin'. 

Janet's a calm, steady hand
When tapering QE is planned,
And it's all to the good
That the Chairmanship would,
With a woman, be ably manned. 

The Wall Street Journal reports that, now that Larry Summers has officially removed himself from consideration for the Fed Chairman's post, current Vice Chair Janet Yellen is the front-runner. This is somewhat surprising in that President Obama and his White House team were said to be very upset at the public resistance to Prof. Summers, their preferred choice, and might have resented the liberal pressure to go with Dr. Yellen instead. The reaction of the markets shows that traders expected a quicker tapering of quantitative easing from him than her, though a close reading of their relevant remarks does not offer clear confirmation of such a distinction. 

What is clear is that Dr. Yellen's career offers a wealth of reassuring experience to indicate a likelihood of consistent leadership on issues of not just monetary policy, but also financial sector regulation, which the country very much needs. 

Wednesday, September 4, 2013

Economics Takes A Back Seat

As the Congress debated criteria
To punish the leaders of Syria,
They discussed what was planned,
And whether we stand
On a footing that's clearly superior.

It's an issue remarkably grave
Of lives we may take or may save,
And the president's foe
May not "just say no,"
Though to do so they certainly crave. 

In the midst of this deliberation
Came a man from the econ vocation
Who said: "I have checked
Its likely effect
On oil, FX and inflation."

Though no-one may doubt the veracity
Of remarks in an econ capacity,
At the juncture we faced
They're seen in bad taste, 
As is gen'rally understood tacitly. 

As Congress and the nation debate the morality, strategy and efficacy of punitive attacks on the Syrian military, economic issues take a back seat. Even the most stridently partisan voices on such issues as fiscal and monetary stimulus or the debt ceiling are muted this week, as those whose forte is defense and foreign policy take center stage. 

One welcome result is that boundaries of Capitol partisanship are at least temporarily redrawn, as Republican leaders such as Senators McCain and Graham side with President Obama (as does the Democratic leadership), while leftists and Tea Partiers may be thrown together in opposition.  Is it too much to hope that, when the Debt Ceiling deadline comes up again in October, the partisans will have less appetite for the usual theatrics?

Sunday, September 1, 2013

Is Economics A Science?

Science may help to convey
The world that we live in today,
To predict and construe
And hypothesize, too,
In a rational, testable way.
Economists have their devices
To model employment and prices
And cloak their decrees in
The mantle of reason;
The question is: if that suffices. 

The label of "science" may serve
To misname economists' oeuvre,
When considering deeply
Their failure to keep the
Investors ahead of the curve. 

It's been said that the econ profession
Made an unscientific impression 
When the models they picked
Could rarely predict
How soon we will have a recession. 

An incontrovertible fact is 
That theory may falter in practice
When we try to project
And falsely expect
That people are rational actors. 

If we try not to place our reliance
That with logic man stays in compliance,
It might be allowed 
By the PhD crowd:
Economics, though dismal, is science. 

Greetings to all those making the trek back to college or graduate school this weekend, as I am with our college sophomore today (go Greyhounds!). Here is a special shout-out to those of you returning to study the Dismal Science, which has recently come under attack in a New York Times opinion piece for a surplus of the former and a surfeit of the latter.  Though highly regarded economists arose in honorable and forthright defense of the profession, it seemed as though the gates had been opened for Wall Street skeptics to voice long-held doubts

Take heart, students, and be not troubled by such thoughts. Remember though, that while the science of economics may labor to measure and model how prices and employment have done and will do, the philosophy of economics may not shrink from the debate over what they should do. While studying social science, consider toward what sort of society you are working, and remember that all of those economic actors are people. 

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