US Government Is Already Broke

Published in the Financial Post (www.nationalpost.com), January 25, 2013

In Tuesday’s Financial Times, well-known columnist Martin Wolf argues that “America’s fiscal policy is not in crisis.” “The federal government,” he writes,“is not on the verge of bankruptcy.” “This,” Wolf admits, “is a highly controversial statement.”

Indeed, many analysts believe that the U.S. federal government is bankrupt. They include, among others, economists Jeffrey Hummel of San Jose State University and Laurence Kotlikoff of Boston University. As early as 2006, Kotlikoff wrote an article in the journal of the Federal Reserve Bank of St. Louis, asking the question “Is the United States Bankrupt,” to which he answered affirmatively. Continue reading

Obama’s Inaugural Address: the Citizens’ Citizens

Presidential inaugurations are, at best, similar to royal marriages in England, where simple people dream of the Prince Charming; at worst, they resemble nationalist orgies where people proclaim their faith in, and submission to, their dear leader. There was both in Barack Obama’s inauguration today. Continue reading

James Buchanan (1919-2013)

Published in the Financial Post (www.nationalpost.com), January 10, 2013 [Note that the copy editor mistakenly removed the quote marks around “politics without romance,” which is an Buchanan’s expression.]

If one expression can capture the work of James Buchanan, who died yesterday aged 93, it is “politics without romance.” His approach generated a whole school of economic analysis called “Public Choice.” Closely associated to Buchanan were Gordon Tullock, Richard Wagner, Geoffrey Brennan, and other economists working mainly at the Virginia Polytechnic Institute and, later, George Mason University.

For his work in this field, Buchanan won the 1986 Nobel Prize in Economic Sciences.

Buchanan’s starting point was so simple enough that it now seems rather obvious. Continue reading

The Price of Gold

At the end of November, Goldman Sachs predicted a short-term (over a three-month horizon) increase in the price of gold, followed by a downward trend through 2014. Accompanied by a new, bullish outlook for the American economy, this bearish forecast for gold made the financial news (see for example the Financial Times of December 7, 2012). Since then, the price of gold has been trending downwards, but things could change.

This sort of forecast raises interesting questions on the factors that influence the price of the yellow metal. Continue reading