Odds and Ends #3

1.  The oxymoron "self regulation" is interesting.  It would be deemed ridiculous as applied to chemical companies, big pharma, nuclear energy, or the airline industry.  However, there are still many who decry excessive government regulation and believe that Wall Street is capable of self-regulation, as Bernie Madoff once argued.


2.  The author predicts that thermoset plastics and Thermoplastics--both employing carbon fibers--will become the next big thing in automotive technology, making cars lighter.  I hesitate to say this--I was originally quite skeptical--but I suspect that in another 5-10 years, we will will gradually go to an "ammonia economy" using fuel cells and electric motors.  Liquid ammonia poses fewer technical  and cost challenges than hydrogen in terms of use and storage, and hydrogen is easily converted to ammonia and vice versa.  A better, less expensive battery technology could still thwart this trend, though.

3.  Here is an article that makes a compelling argument that Quantitative Easing (QE) actually costs jobs.  A company enjoying loans at near-zero interest rates is more likely to make big capital expenditures--which impact cash flows only slightly--rather than hiring more people--which make a much bigger negative impact on cash flows.  Therefore, QE ends up spurring capital investments, automation (to replace workers), capital investment in low-wage countries, and merger and acquisition activity.  Also, QE costs jobs that would otherwise be created by higher interest income levels and the resulting consumer spending.  Finally (and this is my own opinion), extremely low interest rates are also fueling stock buybacks that, again, primarily benefit the rich and do nothing to spur hiring.  If our unemployment rate is inching down, it may be in spite of quantitative easing.  The article ends with these conclusions:  

"...it is well-documented that quantitative easing increases inequality.  Quantitative easing doesn't help Main Street or the average American. It only helps big banks, giant corporations, and big investors.  Too much inequality causes economic downturns and decreases aggregate consumer demand ... and companies fire workers when demand decreases.  So quantitative easing also indirectly - but in a very real fashion - destroys jobs by destroying consumer demand."

4.  Here's my quote for the month, by Edward Gibbon (author of "Decline and Fall of the Roman Empire):

“The five marks of the Roman decaying culture:
Concern with displaying affluence instead of building wealth;
Obsession with sex and perversions of sex;
Art becomes freakish and sensationalistic instead of creative and original;
Widening disparity between very rich and very poor;
Increased demand to live off the state.”