Richard J Grant

Published in The Tennessean , Sunday, June 27, 2010 Stimulus believers put economic machine ahead of people by Richard J Grant An unfortunate effect from the teaching of mainstream (Keynesian) macroeconomics over the past 50 years has been to give the impression that the economy is some kind of machine that requires a government in the driver’s seat. This view has led to trouble precisely because the economy is not a machine. Our conventional measure of economic activity is what we call the Gross Domestic Product, or GDP. It gives us a rough idea of the dollar value of transactions that have taken place. When GDP falls for about half a year, we call it a “recession.” In the early stages of our most recent recession it was very common to hear people repeat the observation that “consumption makes up 70 percent of our economy.” This superficial observation would be harmless, but it led many to believe that we could make our economy “grow” again by encouraging people to consume more. That ...

Published in The Tennessean , Sunday, June 20, 2010 Progressives don’t realize how much they don’t know by Richard J. Grant On ancient maps it was common to fill in unexplored or feared regions at the edges of the world with pictures of serpents or the warning, “Here be dragons.” Today it remains unwise to venture into such territory unprepared either to survive or to accept the consequences. With greater knowledge and technology, we travel casually beyond the ancient frontiers. But we still fear dragons, the unknown. We also attract trouble when we believe we know more than we really do. That is why we put limits on children. That is also why we put limits on governments. Why do countries with high levels of government control tend also to be countries with high levels of poverty? Government officials cannot possibly possess the knowledge necessary to create and direct resources to their most important and productive uses. The socialists’ belief that it was possible to centrally plan ...

Published in The Tennessean , Sunday, June 13, 2010 Derivatives serve a purpose, when used correctly by Richard J. Grant Readers ask about derivatives. These include forward contracts, futures, options, and swaps. A derivative is a financial security whose value derives from the value of something else that we call the "underlying." The underlying might be a commodity price, an interest rate, a stock price, an exchange rate, or even another derivative. Suppose you buy an ounce of gold for $1000. If the gold price then rises to $1100, you could sell it for a $100 profit, a gain of 10 percent. But if the price had fallen to $900, you would have lost 10 percent. Now suppose that you have only $100 but can borrow $900 to buy the ounce of gold. If the price then rises to $1100, you would once again make a profit of $100. This time your capital gain is 100 percent. But a price fall to $900 would wipe out your initial capital. If it falls further, you lose more than 100 percent. By...

Published in The Tennessean , Sunday, June 6, 2010 Government mired in crisis of size and scope by Richard J. Grant If the General Welfare is our standard of reference, then we are now being shown that those people who are true-believers in Big Government are also the least competent in managing Big Government. Those who are out of touch with reality are most likely to be surprised by the consequences of their actions. They might not even see that those consequences were the result of their actions. Those are perhaps the kindest words that one could say about the Obama administration. This is not a good time for the Obama presidency, which is now surrounded by the smoke of scandal, heavy handedness, incompetence, and strategic confusion. The American people are increasingly worried about the source of that smoke. As governments grow in size and power beyond those very few functions for which they are both suited and justified, they become increasingly unmanageable, inefficient, and cor...