America’s subsidy-dependent ethanol farmers may not like it, but a recent U.S. pact with Brazil could pave the way to an efficient global market in biofuels—and that could change the game.

The only obstacle to our getting Brazilian ethanol is a 54 cent per gallon tax on imported ethanol, designed to protect a U.S. industry which is in no position to provision our own market (and probably will not be for some years to come, if ever).

From The Secret of Viable Ethanol.

Beyond myth and emotion, here’s the truth about our trade deficit. It’s big, but it’s not necessarily bad. In fact, it may be helping us live better, now and in the future. Rutgers University economists Chad Bown and Rachel McCulloch explain in “Question & Answer: The Trade Deficit.”

Here is an excerpt:

“It’s helpful to think of trade as representing a kind of new technology that allows us to get more or bet­ter output from the same available inputs—which is the definition of increased productivity. There is a clear overall benefit, but trade, like improved technology, does hurt some people in the process. Over time, how­ever, our rising standard of living depends on higher productivity—whether achieved through improved technology or gains from trade.”

Interesting blog, “4-Block World,” check it out here.

The website Longbets.org takes bets on predictions that are “societally or scientifically important.”

Here is a list of predictions and bets on record.

Here is an example of a bet that “By 2030, commercial passengers will routinely fly in pilotless planes.”

From today’s WSJ: “The U.S. economy resurged at the end of 2006, overcoming a slump in housing as consumers sustained by lower energy prices freely spent money.

GDP climbed at a 3.5% annual rate October through December, the Commerce Department reported today. The 3.5%, fourth-quarter increase not only defied original expectations but also was much better than Wall Street generally thought in predictions made this week. The median estimate of 22 economists surveyed Monday by Dow Jones Newswires was 3.0% growth.

For the year, GDP, advanced 3.4%, compared to a 3.2% increase in 2005 and 3.9% growth in 2004.” (see graph above)

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“You know, for all this talk about recession, (with some pundits calling for a recession just about every year—Paul Krugman comes to mind), the reality is that economic growth has been steady and strong following the 2001-2002 recession. Think lower marginal tax rates, implemented in 2003 to strengthen work incentives, and significantly increase after-tax investment rewards.”

~Larry Kudlow in Kudlow’s Money Politic$

“When you own a diversified portfolio of stocks, it is rarely the stock selections that make you money but the performance of the stock market overall—which, thankfully, usually goes up. What a truly talented stock-picker will do is select stocks that beat the market, after costs, without exposing you to more risk than the market. Because the vast majority of stock-pickers can’t do this, you are almost always better off in a diversified portfolio of low-cost index funds. Properly constructed, such a portfolio will, over decades, make you more money, with less risk, than even an above-average stock-picker (let alone a chair-throwing, self-aggrandizing clown).”

From “Pay No Attention to That Crazy Man on TV,” from Slate.com.

My advice: Watch Jim Kramer for entertainment purposes only, and buy and hold the Fidelity S&P 500 Index Fund as a major part of your investment portfolio – the expense ratio on that fund is only 1/10 of 1% ($100 annually on a $100,000 investment – you can’t invest more cost effectively on your own, and no broker will manage your investments for 1/10 of 1%) and you’ll beat 97% of actively managed mutual funds in the long run, after expenses and taxes.

Recently, CNN’s Anderson Cooper condemned price gouging in New Orleans as if he was reporting an inherently unjust practice that no reasonable person would accept. So perhaps we need to consider why price gouging is not only not bad, but why it is essential to the welfare of everyone involved. Without “price gouging” after natual disasters, people often don’t get the essential goods they need. Free markets after hurricanes or earthquakes are both humane and necessary.

Read more here, “Price Gouging is Essential and Humane.”

Milton Friedman in his 1967 presidential address to the American Economic Association:

“Every major contraction in this country has been either produced by monetary disorder or greatly exacerbated by monetary disorder. Every major inflation has been produced by monetary expansion.”

Exhibit A: There was no inflation in the U.S. until after the creation of the Federal Reserve.

From the front page of last Saturday’s WSJ:

In August 2005, Hurricane Katrina flattened two bridges, one for cars, one for trains. Sixteen months later, the automobile bridge remains little more than pilings. The railroad bridge is busy with trains.

The difference: The still-wrecked bridge is owned by the U.S. government. The other bridge is owned by railroad giant CSX Corporation. Within weeks of Katrina’s landfall, CSX dispatched construction crews to fix the freight line; six months later, the bridge reopened. Even a partial reopening of the road bridge, part of U.S. Highway 90, is at least five months away.

“It shows the difference between the private sector and the public sector,” says a government bureaucrat. “By the time CSX was done with its bridge, we were just getting around to letting the contract on ours.”

MP: The main difference between capitalism and socialism? Capitalism works.