Proposition 19 and police power

California’s Proposition 19 to alter the legal status of marijuana may be a test of the power of the police in that state.  A report on the financial implications suggest the greatest impact would be from massive law enforcement cuts.

Cash-strapped California would get some relief by legalizing pot, but the biggest boost would be thanks to massive law enforcement cuts, not new tax revenue, experts say.

….

Jeffrey Miron, a senior lecturer at Harvard University and senior fellow at the Cato Institute who co-authored the study, said the majority of the cost savings would be a result of cuts to law enforcement personnel whose services would no longer be required. And axing police officers, prison guards, prosecutors and judges would hurt the job market, at least initially, he said.

It will be interesting to see how many police will quietly accept pink slips if Proposition 19 passes.

The Living Planet Report

A major weakness of most economic analysis is that once one gets away from the blackboard the real side of the economy is forgotten. Everything is considered in financial terms and people tend to assume unlimited financial resources.  We assume the potential for growth is unlimited.

Last week the WWF (World Wildlife Fund)  offered some evidence as to where the physical aspect of the economy is at with the release of it’s Living Planet Report. This report claims our ecological footprint exceeds the earths biocapacity by 50 percent and that by 2030 we will need two earths to support sustainable life on the planet.

Humanity is currently consuming renewable resources at
a faster rate than ecosystems can regenerate them and continuing to
release more CO2 than ecosystems can absorb.

If this is true, and there is probably some truth in it, then it must be having some impact on the world economy.  Probably some people would be experiencing a decline in their standard of living, resources would become more difficult to extract and therefore more expensive and there might even by a major recession.

Perhaps the real economic challenge of our time is to adjust our economy to cope with zero or even negative growth with a minimum of human suffering.

 

Dangerous debt

I came across this article from the Guardian about the U.S. spend or cut debate shortly after I started reading This Time is Different: Eight Centuries of Financial Folly by Carmen M. Reinhart and Kenneth S. Rogoff.  The article reports Paul Krugman is urging  the Obama administration to go with a trillion dollars of stimulus.

In the book the second paragraph of the preface talks of excessive debt accumulation.  Granted that the authors are talking about dept during a boom, but if that is a problem what is it during a  recession.

If there is one common theme to the vast range or crises we consider in this book, it is that excessive debt accumulation, whether it be by the government, banks, corporations or consumers, often poses greater systemic risk that it seems during a boom.  Infusions of cash can make a government look like it is providing greater growth to its economy that it really is. Private sector borrowing binges can inflate housing and stock prices far beyond their long-run sustainable levels, and make banks seem more stable and profitable they really are.  Such large-scale debt buildups pose risks because they make an economy vulnerable to crises of confidence, particularly when debt is short  term and needs to  be constantly refinanced.  Debt-fueled booms all too often provide  false affirmation of a government’s policies, a financial institution’s ability to make outsized profits, or a country’s standard of living.  Most of these booms end badly. Of course, debt instruments are crucial to all economies, ancient and modern, but balancing the risk and opportunities of debt is always a challenge, a challenge policy makers, investors, and ordinary citizens must never forget

My own reasons for objecting to stimulus spending is stated in the post Economic policy, least squares and the Elliott wave

Food labelling

A committee of the U.S.  Institute of Medicine is recommending food packaging have information regarding calories, saturated fat, trans fat and sodium clearly marked on the front of packages. (See a news report here.)

This is good because the perfect competition model says consumers should have all the information necessary to make  good decisions.

Quantitative easing – increasing the money supply

It appears thee Federal Reserve may try to stimulate the U.S. economy with what is being called quantitative easing. (Here is a report on this.)

To do this the fed would purchase Treasury securities rather than letting them be sold to the public.  This is how central banks try to increase the money supply in the hope it will bring interest rates down.  The money paid for these securities is called high powered money because it is subject to a multiplier effect as bankers use it to make loans.

It will be interesting to see if and how this works.   It depends upon bankers being willing to make more loans and it will depend upon the ability of the economy to increase the output of goods and services.   There is a danger increasing the money supply will only increase inflation.

 

Wishing for peace

Through the milenia religious leaders and wise men have preached peace.  Yet we still have wars and genocides and people being nasty to each other.

Lets wish or prey for the Dalai Lama to be more sucessful with the Happy Thoughts world peace festival.

 

Why does Canada have so few female CEOs?

This question is the topic for  a Globe and Mail online discussion.

There are two simple answers.  Most women are smarter than men and know that the stresses of senior management are not worth it.  They also know that if one wants power it is more effectived to remain in the background and manipulate the men.

 

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