Posts filed under “Philosophy”
Jim McTeague of Barron’s asked a question that led to an even more interesting question. It started as the usual Presidential Election and the stock markets related inquiry — Is President Obama a positive or negative for stock and bond markets? — as I thought about the question, it devolved into something entirely else.
I had several thoughts that unintentionally skirted the question, but stimulated a deeper discussion:
1) Do Presidents get too much blame and/or credit for the Economy?
Generally speaking, this tends to be true. We focus lots of energy at the top, but the broader economy is part of a massive set of forces, much of which is typically beyond the White House’s ability to deal with.History shows that some Presidents have had major impacts, but that seems to be the exception, not the rule.
2) Why do some Presidents significantly impact the economy positively?
It appears that a combination of two factors: Luck, and the proper response to existing circumstances. That is what separates the great economies from the middling ones. Look at the circumstances that met FDR, Clinton and Reagan. Big challenges, appropriate responses.
Take RR is a good example: He had the luck to come into office in year 14 of a 16 year Bear Market; he also had Paul Volcker as Fed Chief who forced a wrenching recession early in his term. But Reagan’s response to those circumstances — significant tax cuts and Federal spending, followed by gradual tax increases, helped add up to a booming economy.
3) Why do some Presidents seem to do such a bad job for the economy?
Similar answer: Luck, and an inappropriate response. Hoover, Carter, and Bush 2 are examples. Hoover came into office 8 months before the 1929 crash; Carter took over after the malaise of Vietnam war and Watergate; Bush 2 came into office a year into the dotcoms implosion and at the start of a recession.
Note that the response by each was a failure: Bush for example, started a costly unnecessary war in Iraq, cut taxes, blew up the deficit, and added tot he ongoing financial deregulations. Given an opportunity to instill Capitalistic discipline on Banks, he went all socialist on them instead.
Ultimately, the right combination seems to be Luck + the right response. Most Presidents seem to lack one or the other (or both).
4) Can we predict how well any Presidents economic policies will play out?
Here is the kicker: All of the above is meaningless, for we have little ability to forecast how ANY president will do economically. The economic performance of both Reagan and Carter surprised most forecasters. Expectations for Clinton was that he would fail, cause a recession, explode the deficit — the opposite happened. And Bush seems to have defied even his worst critics — to the downside.
All told, we are not very good at forecasting these things.
Fascinating back and forth in last night’s discussion of what Causation actually is. I want to respond broadly to some of the advocates who still seem to be missing the concept of Proximate Cause. We can substitute all sorts of things in the general statement “The housing boom and bust was caused by ____” —…Read More
I did an interview with a print reporter yesterday about what has been going on with lack of prosecutions, the banks, and Wall Street in general. We discussed the corrupt exchanges and HFT. I dropped lots of F-Bombs, called out cowards and crooks and held nothing back. (“That fucker belongs in prison; this son of…Read More
Last week, I discussed “The Big Lie goes viral” in terms of the causes of the financial crisis. But that commentary begged the issue: What exactly is “Causation“? This is a precise term of art that has a very specific meaning. Many of the world’s greatest thinkers, from Aristotle to Kant to Hume, have examined…Read More
The world’s population is expected to hit seven billion in the next few weeks. After growing very slowly for most of human history, the number of people on Earth has more than doubled in the last 50 years. Click below to find out where you fit into this story of human life? Source: The World…Read More
Our quote of the day comes from an article in this Sunday’s NYT magazine, Don’t Blink! The Hazards of Confidence by Daniel Kahneman: “The illusion of skill is not only an individual aberration; it is deeply ingrained in the culture of the [financial] industry. Facts that challenge such basic assumptions — and thereby threaten people’s…Read More
A fantastic quote bubbled up in comments the other day: “There are two novels that can change a bookish fourteen-year old’s life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to…Read More
> The graphic above, via Jon Bruner of Forbes, reflects the enormous American contribution to Arts & Sciences over the past century. What is intriguing is not just that the US has won so many prizes, but that the a third of American Nobels have gone to immigrants to the US: “The United States has…Read More
Interesting quote from The New Yorker: “Who will be the next Steve Jobs? I doubt it will be Mark Zuckerberg. He gives every indication of being the next Bill Gates: a smart dude who has one great idea at the right time, builds a monopoly, and then keeps it by releasing stuff that’s good enough…Read More