Posts tagged with: Business/Finance

noun_project_19538As the US federal government sidled up to the debt ceiling earlier this week without quite running into it, one of the key arguments in favor of raising the debt ceiling was that it is immoral to breach a contract. The federal government has creditors, both from whom it has borrowed money and to whom it has promised transfer payments, and it has an obligation to fulfill those promises.

As Joe Carter argued here, “Member of Congress who are refusing to raise the debt ceiling (or raise taxes) until their ancillary demands are met are acting immorally, since they are refusing to pay the debts they themselves authorized.”

But as Connie Cass writes, the idea that the United States has never defaulted isn’t quite true. As she writes,

America has briefly stiffed some of its creditors on at least two occasions.

Once, the young nation had a dramatic excuse: The Treasury was empty, the White House and Capitol were charred ruins, even the troops fighting the War of 1812 weren’t getting paid.

A second time, in 1979, was a back-office glitch that ended up costing taxpayers billions of dollars. The Treasury Department blamed the mishap on a crush of paperwork partly caused by lawmakers who — this will sound familiar — bickered too long before raising the nation’s debt limit.

So if it is immoral to default, then America has done so at least twice.
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“Detroit developed best when it was bottom-up,” says Harry Veryser, economist and professor at University of Detroit Mercy. “When small communities, small parishes, small schools were formed… that’s when Detroit prospered.”

In a recent discussion on what makes cities flourish, Chris Horst and I argued that cities need a unique blend of local community action, good governance, and strong business to thrive. Cities like Detroit have monstrous and complex problems, and the solutions will not come from additional top-down tweaking and tinkering. Rather, any such solutions will stem from complex networks of strong families, life-giving churches, healthy businesses, and intersecting institutions, all of which is furthered when governments rightly relate to their citizens. (more…)

Blog author: johnteevan
posted by on Monday, October 7, 2013
Photo Credit: Alan Cleaver via Compfight cc

Photo Credit: Alan Cleaver via Compfight cc

This first appeared in my newsletter, Economic Prospect, in late 2008. Looking back after five years I still like it.

The American failure to save is matched by our insistence on spending to have it all. One part of the problem is the consumer’s love of debt. The other part is the government’s love of debt. Both love debt to enjoy things now and to put off the day of reckoning. How did we get so far from the idea of being content with having enough food, clothing, and shelter?

  1. This is a complex issue based at first in ‘scarcity’ which leads people to create products to fill real needs. When these products are produced people have jobs and can afford more products. Say’s Law says that production creates its own demand.
  2. There comes a point where we move beyond some invisible line and marketing takes over to create imagined needs in people. These needs are filled by more products creating more jobs. This happened after WW2 and made us very prosperous.
  3. Then there is a third stage when the credit industry takes over and tries to convince people to borrow not just for houses or cars (durables) but for anything to enhance their way of life. This started in the 1970s. Consumer debt is $2 trillion but this kind of borrowing creates still more jobs at least for as long as the party lasts.

But the day of reckoning has arrived. Will we get the point and change our behavior? Apparently not. First, the government sold bonds, then raided the trust funds (Social Security), then we borrow to stimulate the economy…then we just borrow without limit.

If Americans are not saving, who will loan us all this money? The answer is the Chinese and Asians who are amazing savers. They will loan us the money. China already owns nearly $2 trillion in U.S. government bonds. This is not a small issue.

Economics in One Lesson : The Shortest and Surest Way to Understand Basic Economics

Economics in One Lesson : The Shortest and Surest Way to Understand Basic Economics

This classic work provides the layman with a clear understanding of the economic way of thinking. A must-read for the beginner!
$14.00

polish moneyPoland’s prime minister, Donald Tusk, announced Wednesday that the government would attempt to cut government debt by taking money from its citizens’ private pension funds. Poland currently has a two-fold pension system: mandatory contributions are made to the state pension fund and then to private funds. It is the state funds, known as ZUS, that the Polish government plans to “transfer” money from. According to Reuters:

…Prime Minister Donald Tusk said private funds within the state-guaranteed system would have their bond holdings transferred to a state pension vehicle, but keep their equity holdings.

He said that what remained in citizens’ pension pots in the private funds will be gradually transferred into the state vehicle over the last 10 years before savers hit retirement age.

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Remember the “fiscal cliff”? It wasn’t a cliff.

Over at Neighborhood Effects, James Broughel asks the question, “Has the Sequester Hurt the Economy?”

So have the sequester cuts hurt the economy? One possible answer comes from a new paper by Scott Sumner of Bentley University. Sumner argues that cuts to government spending don’t have serious deleterious macroeconomic effects when the Federal Reserve is targeting inflation. This is because the Fed ensures that prices stay stable under an inflation targeting regime, which keeps demand stable even in the face of government spending cuts. Similarly, when the Fed stabilizes the price level it also offsets any beneficial effects that fiscal stimulus might have, which helps explain the lackluster results from the 2009 American Recovery and Reinvestment Act (aka the “stimulus”).

Implicit in Sumner’s theory is that expansionary austerity, or the idea that the economy can grow even in the face of large government spending cuts, is indeed possible. Some of my colleagues at the Mercatus Center have described other ways in which expansionary austerity is possible.

First of all, I would like to be clear that I do not disagree that “expansionary austerity” may be possible. Nor do I disagree that the sequester cuts have not significantly hurt the economy. However, while the sequester included spending cuts and, therefore, technically qualifies as “austerity,” it was not what everyone was making it out to be. (more…)

Peter Greer has spent his life doing good, from serving refugees in the Congo to leading HOPE International, a Christian-based network of microfinance institutions operating in 16 countries around the world. Yet as Greer argues in his latest book, The Spiritual Danger of Doing Good, “service and charity have a dark side.”

The Spiritual Danger of Doing Good, Peter Greer

Pointing to a study by Fuller Seminary’s Dr. J. Robert Clinton, Greer notes that “only one out of three biblical leaders maintained a dynamic faith that enabled them to avoid abusing their power or doing something harmful to themselves and others.” From King David’s power trip with Bathsheba and Uriah to Jonah’s end-of-life anger and selfishness, the Bible is filled with examples of self-destruction amid service.

“When I looked to Scripture for guidance, what I found troubled me,” Greer writes. “Men and women who had heard from God—who even performed amazing miracles—were just as likely to blow it as everyone else.”

And alas, in all of our discussions about how to best serve our neighbors, how often do we focus on surface-level externalities to the neglect of the human heart? How often do we narrow down our “metrics for success” to exclude any discussion or contemplation about the motivations driving our actions or the potential for pitfalls along the way? (more…)

Is a company “Christian” because it sells Christian products, like Bibles and greeting cards with Scripture verses on them? Is a company Christian because its owners says it is? in god we trustWhat makes a company “Christian” and do we need them?

This is the question posed at by Hugh Whelchel at the Institute for Faith, Work and Economics. He points out that many well-known American businesses proclaim that they are Christian: Hobby Lobby, Chik-Fil-A and Forever 21, for instance, even though none of them specialize in specifically Christian items or consumers. Now, Hobby Lobby is closed on Sundays, specifically so its employees are free to worship and rest that day, clearly stemming from the owners Christian beliefs. Is that what it takes to be a “Christian” company? (more…)

Rudy Carrasco, frequent lecturer at Acton University and other Acton events, board member of the Christian Community Development Association, and the U.S. Regional Facilitator of Partners Worldwide, recently posted this on his blog, Urban Onramps:

  • We call upon the Church world wide to identify, affirm, pray for, commission and release business people and entrepreneurs to exercise their gifts and calling as business people in the world – among all peoples and to the ends of the earth.
  • We call upon business people globally to receive this affirmation and to consider how their gifts and experience might be used to help meet the world’s most pressing spiritual and physical needs through Business as Mission.

What I find interesting in this language is that the recommendation for business owners is to “receive this affirmation” and move into Business as Mission (BAM). The affirmation needs to come from the Church who is being called upon to “identify, affirm, pray for, commission and release” these business people. There is an order here: first the church affirms, then the business owners go out. Yet, most BAM groups are not addressing the Church. There is much complaining about the Church, in that the Church does not affirm business people or sees business people as less holy, or only wants business people for their money. Yet, the Church is not being challenged, taught, or addressed. When I proposed a shift to my work a year ago to engage the Church more in BAM and directly involve them in this work, I was told by a number of people that it would be foolish to do this. I was told that the Church is too difficult to work with, too bureaucratic, too desiring of power, and that it will not be successful.

 

Golden RiceA piece of news analysis over the weekend by Amy Harmon, a national correspondent for the New York Times, captures well the dynamics of the current debates about the merits of genetically-modified organisms (GMO’s).

Harmon writes specifically about the case of Golden Rice, which has some attributes that should inoculate it against common concerns about GMO’s. Golden Rice is not monopolized by a corporate entity, and has been developed specifically to address urgent health concerns in the developing world:

Not owned by any company, Golden Rice is being developed by a nonprofit group called the International Rice Research Institute with the aim of providing a new source of vitamin A to people both in the Philippines, where most households get most of their calories from rice, and eventually in many other places in a world where rice is eaten every day by half the population. Lack of the vital nutrient causes blindness in a quarter-million to a half-million children each year. It affects millions of people in Asia and Africa and so weakens the immune system that some two million die each year of diseases they would otherwise survive.

Harmon also observes that “beyond the fear of corporate control of agriculture, perhaps the most cited objection to G.M.O.’s is that they may hold risks that may not be understood. The decision to grow or eat them relies, like many other decisions, on a cost-benefit analysis.”

Get_Your_Hands_DirtyAs I argue in my latest book, Get Your Hands Dirty, there is a theological basis for the development of genetically-modified foods. The cost-benefit sorts of reasoning has its place, but as I argue, “The limits of all these arguments about GM food are essentially the same: they argue primarily, if not solely on the basis of pragmatic concerns. While these arguments are attractive, especially to American common sense, they are neither comprehensive nor adequate in and of themselves.”

A Christian examination of GMO’s cannot be limited simply to arguments about expediency. It is necessary to first establish that a moral basis exists for this type of human activity. As I examine the case of GM foods through the lens of creation, fall, redemption, and consummation, I conclude that such a “biblical-theological framework provides some important general affirmations of the genetic engineering movement with regard to food. This reality is in some respect directly related to the truth of human exceptionalism, the priority of human life over and against that of animals and particularly plants.”

So while expediency cannot be the sole arbiter validating GMO’s, the human cost associated with either acceptance or rejection of such foods are relevant. There are some legitimate concerns about GM foods, at both the level of principle and practice. There are no perfect solutions. But even so, as I put it, our “default position should be in favor of innovations which have a realistic possibility of substantively increasing the fruitfulness of the earth.”

Blog author: jcarter
posted by on Monday, August 26, 2013

abc_lululemon_ceo_wanted_sign_jt_130615_wgPro-market advocates often talk about how markets are self-correcting. But why do businesses in free markets fix their own mistakes? Because if they don’t, customers and other stakeholders will punish them:

Lululemon, which produces yoga and other athletic apparel, provoked outrage from its devoted customer base when it released a flawed product earlier this year: see-through yoga pants. Founded in 1998, the company had built trust and loyalty among its yoga-loving clientele for delivering quality products: In just 15 years, Lululemon had grown to over $1.3 billion in annual revenue. So, it’s no surprise that Lululemon’s fans were upset and disappointed at the failure.

But Lululemon’s response to its mistake demonstrates why government intervention in the marketplace is unnecessary and, often, inferior to that of the free market. To address all the complaints the company received from consumers and stores, Lululemon recalled the pants on March 18, offered refunds, and apologized.

Despite the gesture, the market punished Lululemon for its error: Its stock price plummeted the next day, decreasing the company’s value by $250 million. Several weeks later, the chief product officer resigned. The repercussions for Lululemon’s mistake affect the short term as well as the long term: The damage to consumer confidence will take time to rebuild and revenues will reflect the damage.

The incentives for the company to address this mistake couldn’t be any higher. They will be far more powerful in encouraging better customer service than having the government inspect all clothes manufactured.

Read more . . .