AEI Monday afternoon links 1. Chart of the Day I (above) shows the close historical relationship between corporate profits and the stock market values, which have both increased (and decreased) together over time in a very similar pattern. One exception is the steep rise in stock prices between 1995 and 2000 that was not accompanied by a similar rise in corporate profits, and was therefore an unsustainable stock market boom known as the “Dot.com bubble.” 2. George H.W. Bush, the “Free Trade President.” From the Washington Post article by Amanda Erickson “How George H.W. Bush pushed the United States to embrace free trade“: [President Bush] … had another major foreign policy achievement: He was a champion of free trade and a key architect of globalization, a legacy in danger under the
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1. Chart of the Day I (above) shows the close historical relationship between corporate profits and the stock market values, which have both increased (and decreased) together over time in a very similar pattern. One exception is the steep rise in stock prices between 1995 and 2000 that was not accompanied by a similar rise in corporate profits, and was therefore an unsustainable stock market boom known as the “Dot.com bubble.”
2. George H.W. Bush, the “Free Trade President.” From the Washington Post article by Amanda Erickson “How George H.W. Bush pushed the United States to embrace free trade“:
[President Bush] … had another major foreign policy achievement: He was a champion of free trade and a key architect of globalization, a legacy in danger under the Trump administration. Bush saw trade as a tool for increasing international cooperation and peace, and he advocated for a liberalized economy.
As president, he ignored pleas from American automakers to protect their profits by keeping Japanese cars out of the United States, or at least making them more expensive. “There would be an immediate boost to the industry and to the economy if Japan would temporarily back off from their relentless pursuit of increased U.S. market share,” Chrysler chief Lee Iacocca wrote to the president in 1991. Bush refused to help and would not name Japan an unfair trading partner. The president opposed government-imposed quotas and joined the leaders of General Motors, Ford and Chrysler on a trip to Japan to meet with the top officials at Toyota and Honda.
His biggest accomplishment, though, was the negotiation of NAFTA, and he signed the accord just a month before leaving office. It was the result of years of work. NAFTA would become a model for international trade deals around the world.
Clarification: … if Japan would temporarily back off from their relentless pursuit of
increased U.S. market share serving Americans with lower priced, higher quality and more dependable vehicles than the Detroit Three.
3. Quotation of the Day I is from David Savickas’s op-ed in Real Clear Markets:
Before approaching any analysis of the Trump administration’s trade policy, it is important to recognize that the President is nothing but an unrepentant protectionist. The hopes that he may have been a closet free trader have been greatly exaggerated.
4. Quotation of the Day II is from Scott Sumner (bold added):
Automation is not just adding robots to existing factories (although that happens on occasion)—it’s closing down older obsolete plants and building new plants with state of the art technology in entirely new locations. Protectionists who talk about “trade” generally mean international trade. But domestic “trade” is every bit as disruptive, as newer technologies cause firms to relocate to new areas, reflecting changes in comparative advantage.
Furthermore, even if countries like China did not exist, America’s working class would have suffered a major loss of manufacturing jobs. Indeed that massive [factory] job loss is a global phenomenon.
5. Who’d a-Thunk It I? Communist Havana is Collapsing, Building by Building? From USA Today:
Some 3,856 partial or total building collapses were reported in Havana from 2000 to 2013, not including 2010 and 2011 when no records were kept. The collapses worsened an already severe housing shortage. Havana alone had a deficit of 206,000 homes in 2016, official figures show.
Officials estimate 28,000 people live in buildings that could collapse at any moment. Some residents refuse to leave structures that authorities have declared unsafe. “Of course we’re scared but what are we going to do?” said Yanelis Flores, 42, who rejected a government offer to move into a shelter.
6. Who’d a-Thunk It II? The No-Tipping Restaurant Model Doesn’t Work? From The Independent:
A restaurateur and former advocate of a no-tipping model has reverted back to being gratuity-friendly in his restaurants – after the increased cost of dishes turned customers away. Andrew Tarlow, the owner of Brooklyn restaurants Roman’s, Diner, Achilles Heel, and Marlow & Sons, was one of the first to embrace the new style of dining in America where gratuity is included in the price of the meal – after other big names in the food industry such as Danny Meyer revealed their intentions to do the same.
7. Chart of the Day II (above) shows the phenomenal rise in “Saudi America’s” oil production, from about 5 million barrels per day (bpd) in 2008 to 11.5 million bpd in September on the way to 12 million bpd early next year. Earlier this year, the US surpassed Saudi Arabia’s oil production in February and then Russia in June to become the world’s No. 1 oil producer. Maybe that’s part of the reason that gas prices are below $2 per gallon in 20 US states and as low as $1.68 in Texas.
8. Creative Destruction Has Begun To Pop The College Bubble writes Dennis Weisman, professor of economics emeritus at Kansas State University in The Federalist. And it’s about time. Here’s just one part of the higher education bubble that is overripe for popping:
Universities tend to undervalue superior teaching and overvalue mediocre research. The social value of a stellar teacher is far greater than that of a mediocre researcher, but this is not reflected in university reward structures. It should not come as a surprise that most academic articles are read by surprisingly few, if they are read at all.
Despite being highly paid “professors” I would say it’s more accurate to describe that group as “highly paid researchers” who teach as little as possible and minimize their interactions with the students who are paying their salaries, so that the proffesoriate can spend as much time as possible on producing as much as research as possible that will read by almost nobody. /rant
9. Great Moments in Nanny Statism and Government Overreach. Michigan lawmakers want to end gender classification of fast-food toys. Wouldn’t another nanny state solution would be to pressure McDonald’s to offer Happy Meal toys for each of the 50+ gender identities now recognized by Facebook?
10. Video of the Day (below): Socialism Leads To Violence (oh… and poverty, misery, crumbling infrastructure, hunger, deaths, etc.)