Friday, March 07, 2008

The Age of Milton Friedman:Good Time To Be Alive

Amidst all of the gloom and doom, here is some good news from a recent paper by Harvard economist Andrei Shleifer titled "The Age of Milton Friedman":

The last quarter century has witnessed remarkable progress of mankind. The world’s per capita inflation-adjusted income rose from $5,400 in 1980 to $8,500 in 2005 (see chart above). Schooling and life expectancy grew rapidly, while infant mortality and poverty fell just as fast. With the conspicuous exceptions of China and the Middle East, the world has made significant strides in democratization. Compared to 1980, many more countries in the world are democratic today.

We’ve seen remarkable declines in infant mortality in all regions, with the worldwide population-weighted average dropping from 64.5 to 37.5 per thousand births. The World Bank reports that between 1980 and 2000, the share of the world’s population living on less than $1 a day fell from 34.8 percent to 19 percent. It forecasts that the number of people living on less than $1 a day will continue to fall sharply despite population growth, and account for 10 percent of the world’s population by 2015. Billions of people in Asia have been lifted out of poverty thanks to economic growth; Sub-Saharan Africa, with little or no economic growth, is where the really poor are concentrated.

As Pete Geddes reminds us "By most measures, this appears to be a very good time to be alive."

Shleifer continues:

The last quarter century also saw wide acceptance of free market policies in both rich and poor countries: from private ownership, to free trade, to responsible budgets, to lower taxes. Three important events mark the beginning of this period. In 1979, Deng Xiao Ping started market reforms in China, which over the quarter century lifted hundreds of millions of people out of poverty. In the same year, Margaret Thatcher was elected Prime Minister in Britain, and initiated her radical reforms and a long period of growth. A year later, Ronald Reagan was elected President of the United States, and also embraced free market policies. All three of these leaders professed inspiration from the work of Milton Friedman. It is natural, then, to refer to the last quarter century as the Age of Milton Friedman.

(HT: NCPA and Greg Mankiw)


At 3/07/2008 11:23 AM, Anonymous Anonymous said...

Deteriorating conditions in the term funding market prompted the Federal Reserve today to expand the ways it delivers liquidity to banks, which includes using less liquid assets as collateral for term repurchase transactions.

Senior Federal Reserve staffers said today that these decisions were in response to what they saw as a rapid deterioration in term funding markets that has accelerated over the past few days.

While Fed staffers said they are not sure their new measures will calm the turmoil in the credit markets, they said they expect the measures to be helpful, and hope they can improve conditions.

The Fed announced today that it would begin 28-day term repurchase agreements that are expected to total 100 bln usd to "address heightened liquidity pressures in term funding markets." Fed staffers said this is a dramatic increase in this sort of funding, and said their hope is that these longer-term funds would help ease the market.

However the way in which the Fed is allowing banks to access these funds is also important. Normally, the Fed takes Treasury securities as collateral from banks first when arranging repos, then considers pledges of federal agency debt and Treasury securities in a second "tranche", and then considers mortgage-backed securities in addition to agency debt and Treasury securities in a third tranche.

Under the system proposed today, banks can pledge any of the three categories as collateral. A Fed staffer said today that taking on less liquid assets from banks as collateral is meant to help the liquidity problem that has arisen, in part, because it has become difficult to trade certain asset classes.

Mortgage-backed securities in particular have become less liquid as the mortgages behind these securities have failed in increasing numbers.

The Fed also said today that the size of term repo operations could increase beyond 100 bln usd, "if conditions warrant."

Nixon is the real hero by taking the US off the gold standard in 1971 and allowing a pure fiat money backed by nothing other then a printing press and expanding the money supply. All good things come to an end and the inevitable collapse of the dollar is now upon us. Hyper inflationary depression looms.

At 3/07/2008 11:42 AM, Anonymous Anonymous said...

"Other than overleverage, bad debts, sinking home prices, no jobs, shrinking wages, cash strapped US consumers, rising oil prices, a sinking US dollar, $500 trillion in derivatives not marked to market, rampant overcapacity, underfunded pension plans, looming boomer retirements, no funding for Medicaid, no funding for Medicare, and no Social Security trust fund, everything is just fine.

At 3/07/2008 12:34 PM, Anonymous Anonymous said...

Boy, you two must be great guests at a party! While there are admittedly, problems in the financial and housing markets, a recession looming, and deficit spending in Washington, the global perspective is very promising.

Surely, increasing economic freedom, and the great gains made by millions living in poverty count for something.

A recession is not the end of life as we know it. It is merely a periodic downturn in the normal business cycle. Compared with the desparation and degradation experienced in other regions of the world, it pales in insignificant.

Perhaps, we do need a reality check periodically to remind us of the importance of keeping our financial house in order. These events are stressful but we make it through them and in so doing, we learn to trust ourselves. We are tested by fire and we know we can make it.

You don't have to be Barack Obama to have in the resilience of the U.S. and its people. The evidence of over 200 years of history confirms this self-evident truth to even the most humbug of observers.

At 3/07/2008 2:11 PM, Blogger VH said...

"Yet while elevation, mental and physical, of the masses is going on far more rapidly than ever before-while the lowering of the death-rate proves that the average life is less trying, there swells louder and louder cry that the evils are so great that nothing short of a social revolution can cure them. In presence of obvious is proclaimed, with increasing vehemence, that things are so bad that society must be pulled to pieces and re-organized on another plan." Herbert Spencer (1820-1903)

At 3/07/2008 3:54 PM, Anonymous Anonymous said...

Nice quote, Vulcanhammer.

At 3/08/2008 3:36 AM, Blogger juandos said...

""Other than overleverage, bad debts, sinking home prices, no jobs, shrinking wages, cash strapped US consumers, rising oil prices, a sinking US dollar..."...

Well boo! hoo! Move to Liberia if you think life sucks here...

Cash strapped consumers? Hmmm, overstretched credit card usage by dumb people maybe?

Shrinking wages? Get another job if you don't think you are getting enough compensation UNLESS your employer thinks you are over compensated now...

Sinking house prices? From the over inflated prices of a few years ago (people should've jumped then) seems like a welcome relief...

Rising oil prices? Thank the collection of seditious parasites called Democrats...


Post a Comment

<< Home