Let’s pretend

The reason for the recent rally:

The Dow is heading up, and it’s not because Senatorial opposition to the stimulus is weakening. It started with the news yesterday that the Administration is on the verge of getting one huge thing right and will announce a suspension of certain mark-to-market rules on Monday. This will instantly reduce the risk for financial firms with bad assets on their books from future paper losses that could adversely affect their regulatory solvency.

So, if the financial authorities agree to pretend that the assets held by financial firms are worth more today than anyone is actually willing to pay for them because at some point in the distant future they are expected to be worth more, then investors can pretend that equities across the board are worth more today as well. Taking this logic further, if we all agree to pretend that half the people who aren’t working are actually employed, then the market should absolutely skyrocket!

I’m feeling more confident already. The animal spirits are unleashed. Make way for the Great Bull of 2009!

UPDATE – I don’t know about you, but I am feeling downright stimulated: Amid stunning new job losses and yet another bank failure, key senators and the White House reached tentative agreement Friday night on an economic stimulus measure at the heart of President Barack Obama’s recovery plan. Two officials said the emerging agreement was for a bill with a $780 billion price tag, but there was no immediate confirmation.

A lesson in productivity

The obvious economic consequences of this labor trend appear to escape this NYT writer:

With the recession on the brink of becoming the longest in the postwar era, a milestone may be at hand: Women are poised to surpass men on the nation’s payrolls, taking the majority for the first time in American history. The reason has less to do with gender equality than with where the ax is falling.

The proportion of women who are working has changed very little since the recession started. But a full 82 percent of the job losses have befallen men, who are heavily represented in distressed industries like manufacturing and construction. Women tend to be employed in areas like education and health care, which are less sensitive to economic ups and downs, and in jobs that allow more time for child care and other domestic work.

Here’s another interesting fact. Those disappearing male jobs in manufacturing and construction tend to produce wealth. Jobs in education and health care are less sensitive to economic ups and downs for the simple reason that they are de facto government jobs, which produce no wealth. If you get sick and I work very hard to get you back on your feet, nothing new has been produced. We’re just back at the status quo we were at before you fell ill. Health care is a great thing, but it is a net wealth consumer, not a wealth producer, as the budget of California should suffice to show. And the panoply of Womyn’s Studies and Art History majors, to say nothing of the high school graduates who can’t pass a simple history exam, demonstrate the worthlessness of most modern American education.

But the trend does suggest a plausible answer to the question that John Derbyshire once posed. What follows in the sequence Farm – Factory – Office? Hunter-gatherer! The economic model of women engaged in economically non-productive labor while men sit around and do nothing is not exactly a new one. I believe it’s quite popular in Africa, as a matter of fact.

Compensation caps work

The insanely greedy behavior of UK bankers demonstrates that capping executive compensation will keep companies off the government dole:

Banks dependent on taxpayer support are planning to rush out hundreds of millions of pounds in bonuses to senior bankers and traders before a threatened crackdown. As ministers prepared to curb excessive remuneration, it emerged that Barclays and Lloyds Banking Group were poised to follow Royal Bank of Scotland (RBS) by paying bonuses within weeks.

None of this is going to help bring about economic recovery, I’d just as soon see the banks allowed to fail and their overpaid executives sent to the People’s Republic of China where they could assemble children’s toys. They’d certainly do far less damage in the future that way.