This is a hoax, isn't it? Where do I check that?
Even at Chicago they've heard of expections.
Gene Coyle
On Oct 10, 2008, at 1:10 PM, Charles Brown wrote:
An Economy You Can Bank On
By CASEY B. MULLIGAN
<Casey B. Mulligan is a professor of economics at the University of
Chicago.>
"The non-financial sectors will not suffer much from the banking
crisis, because the general economic importance of banks has been
highly exaggerated."
"It turns out that John McCain, who was widely mocked for saying that
"the fundamentals of our economy are strong," was actually right.
We're in a financial crisis, not an economic crisis. We're not
entering a second Great Depression.
How do we know? Well, the economy outside the financial sector is
healthier than it seems.
One important indicator is the profitability of non-financial capital,
what economists call the marginal product of capital. It's a measure
of how much profit that each dollar of capital invested in the economy
is producing during, say, a year. Some investments earn more than
others, of course, but the marginal product of capital is a composite
of all of them - a macroeconomic version of the price-to-earnings
ratio followed in the financial markets.
When the profit per dollar of capital invested in the economy is
higher than average, future rates of economic growth also tend to be
above average. The same cannot be said about rates of return on the
S.& P. 500, or any another measurement that commands attention on Wall
Street.
Since World War II, the marginal product of capital, after taxes, has
averaged 7 percent to 8 percent per year. (In other words, each dollar
of capital invested in the economy earns, on average, 7 cents to 8
cents annually.) And what happened during 2007 and the first half of
2008, when the financial markets were already spooked by oil price
spikes and housing price crashes? The marginal product was more than
10 percent per year, far above the historical average. The
third-quarter earnings reports from some companies already suggest
that America's non-financial companies are still making plenty of
money.[...]"
Full:
<<http://www.nytimes.com/2008/10/10/opinion/10mulligan.html?_r=1&ref=opinion&oref=slogin
>
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