By Tim Worstall, Contributor Matt Yglesias has an interesting idea. Why can’t Apple simply buy itself off the stock market and go private? The price earnings ratio seems good enough that it might be able to pull off such a deal. I’ve certainly mentioned the idea here once before. Yglesias thinks that it’s just too big a deal. The markets aren’t large and liquid enough to be able to finance it: The problem here is that in inflation-adjusted terms the largest leveraged buyout in history was KKR‘s $55.38 billion aquisition of RJR Nabisco back in 1989 (that was $31.1 billion 1989 dollars). Could Apple tap its ~$140 billion in cash reserves to cut down on its borrowing needs and make the scenario more realistic? It sure could. But the problem is that a $512 billion loan isn’t really any more realistic than a $567.38 billion loan. It’s just way too much money. They say some banks are too big to fail, but Apple is too big to buy. I wouldn’t say I am wholly and entirely convinced by that argument. I think it’s maybe vaguely possible that such a deal could be put together. It’s not as if the financial markets are suffering from a lack of liquidity at present after all.
Tag Archives: Contributor Matt Yglesias
Inflation and National Savings
By Karl Smith, Contributor Matt Yglesias writes whenever I look at the trend in the personal savings rate I wonder to what extent the low inflation environment of the “Great Moderation” played a role. If people suffer from money illusion (which they do) then a low interest rate environment is going to make interest rates look lower than they really are, and perhaps discourage saving and encourage borrowing. Two things …read more
Source: FULL ARTICLE at Forbes Latest
Which Should We Have: Public Utilities Or Regulated Private Monopolies?
By Tim Worstall, Contributor Matt Yglesias ponders this point. Which is it better for us to have public utilities or regulated private monopolies? He’s right on many levels, the differences tend to be about who gets to collect the rents available from monopolistic positions. Further, that who does get to have what tends to be subject to political fashion and style. However, there’s one thing very wrong with the analysis: Either of these could be great ideas or either of them could be terrible. At the end of the day, it all just comes down to the quality of the governance. With the regulated utility model, the problem you get is “regulatory capture.” Joe Taxpayer has a lot of things to worry about and the governor’s appointments to the regulatory commission are pretty far down the list. Johnny Utility CEO has a lot of things to worry about too, but the governor’s appointments to the regulatory commission are pretty high up the list. So the commissioners end up getting systematically biased toward the interests of the regulated entity rather than the public. But with the publicly owned monopoly model the exact same governance issue arises again. Voters are not informed about or interested in electrical utility management. Management and appointments will be politicized and excess rents will be extracted from consumers. The difference is in where the rents go. The things that’s wrong is in defining what is the monopoly that needs to be either publicly owned or private but regulated? And yes, I’m aware that after the California debacle people are a little wary of this analysis (the problem in California is that wholesale prices were deregulated while retail were not. That’s a recipe for disaster right there.). …read more
Source: FULL ARTICLE at Forbes Latest
What Environmental Benefits Of Working Shorter Hours?
By Tim Worstall, Contributor Matt Yglesias tells us that there would, or at least could, be environmental benefits if everyone worked shorter hours. I’m afraid that this isn’t necessarily true. For a reason that all too few realise. Kate Sheppard writes about some CEPR research arguing for the environmental sustainability benefits of reducing aggregate hours worked. The logic here is pretty simple. If Americans only worked, on average, as many hours per year as Germans work, then American economic output would be lower, and while producing fewer goods and services, we’d also be producing fewer greenhouse gas emissions and other pollutants. …read more
Source: FULL ARTICLE at Forbes Latest
Government Expenditure Growth
By Karl Smith, Contributor Matt Yglesias writes: If you believe that restraining government spending should supercharge private sector economic activity, then you ought to know that since 2010 we’ve been living through a nearly unprecedented level of public sector spending restraint. Counterfactuals are, of course, hard. Perhaps private sector growth would have been even weaker had public sector spending risen at a more normal level. But an unusually low level of spending growth isn’t a policy we might try in the future, it’s a policy that we’re trying right now and have been trying for the past few years. That seems correct though, the graph he has accompanying it seems to just show federal expenditures. We can look at the growth rate of all expenditures directly Now, of course growth rates were higher in the past in part because of higher inflation. If we use “real government consumption and investment” we get the resources used in government production which doesn’t count transfer payments. So, we can try deflating total expenditures by the CPI. We can pull into to 1980 to get rid of some of the previous volatility caused mostly by war. And, of course I like to use a bar chart with the growth rates centered roughly around trend, get a since of how much total growth is sloshing about the trend. So far, not as big a divot in spending as from the 90s, but there is likely still a fair bit of below trend spending growth to come.
Source: FULL ARTICLE at Forbes Latest