Category Archives: Economics

Miscellaneous economy stuff

Economic Coercion

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The subheadline on The Wall Street Journal‘s Sunday editorial summarizes one spin on the case.

The best defense would be for the West to work together against Beijing’s bullying.

The editors then summarize the related conclusion of a Center for Strategic and International Studies report:

All of this suggests that the West can work together to deter China by increasing the costs of economic coercion.

No.

Rather than wasting time resisting the Peoples Republic of China’s bullying or “deterring” the PRC from its economic coercion, the better move would be for the West to work together to eliminate the PRC’s ability to economically coerce at all: cancel trade relations with the PRC and move supply chains—from dirt in the ground to product components and finished products—out of the PRC altogether.

Time to Stop

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Despite sanctions, Russia is succeeding in importing technical products like computer chips, lasers, and the like, products which are usable in the barbarian’s weapons systems as well as his more general economy. Russia is doing so with the active complicity of a few ex-Soviet republics that remain in the sway of the barbarian.

In total, US and EU goods exports to Armenia, Georgia, Kyrgyzstan, Uzbekistan, and Kazakhstan rose to $24.3 billion last year from $14.6 billion in 2021. These countries collectively increased their exports to Russia by nearly 50% last year to around $15 billion.

They brag about it, too.

Imex-Expert offers to “import sanctioned goods from Europe, America to Russia through Kazakhstan.” Its website boasts: “Bypassing sanctions 100%.”

This graph illustrates the extent of the problem.

It’s time to stop exporting any tech products—all of which are dual-usable—to these nations (Georgia’s complicity is especially disappointing). Not cut sales off company by company; that’s just nickel and dime quibbling. Cut off tech sales to these nations altogether.

Failure Proofing

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The FDIC, in the wake of its own failure regarding the Silicon Valley Bank and Signature Bank collapses (primarily caused by those banks’ managers’ failures, but the FDIC had its role, too, along with the Federal Reserve’s regulators), now wants to excuse failure by making those who failed whole again—and do it at the expense of the rest of us.

Those who failed, in this context, are those with uninsured deposits—deposits larger than the presently insured $250,000—at banks. The FDIC actually is proposing an assessment on larger, successful banks which would be used to…repay…those uninsured depositors who would otherwise be left holding the bag in a bank failure. Even an FDIC bureaucrat knows that such an assessment wouldn’t be paid by any of those larger, successful banks, but by those banks’ customers in the form of higher fees, higher loan interest rates, and lower deposit interest rates.

Ostensibly, the assessment is backward-looking and is only a one time good deal for those bag holders of SVB and SB.

The proposed special assessment would recoup the $15.8 billion paid out from the FDIC’s Deposit Insurance Fund to protect depositors in SVB and Signature who had deposits in excess of the $250,000 insurance threshold. It would do so by imposing a fee of 0.125%—or 125 basis points—on insured deposits at banks with $5 billion in assets or more, which would remain in effect for eight quarterly assessment periods starting in the first quarter of 2024.

If this goes through, though, you can bet your own deposits, large or small, that the assessment will be made permanent and available to all future depositors. The FDIC never should have bailed out those two banks’ uninsured depositors in the first place; now it wants to cover up its mistake by spreading it around.

This is the path to destruction. If there is no failure, there can be no improvement, no progress, only poverty—and not only economic.

Not At All

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California’s Proposition 12, which sets animal-welfare standards for meat sold within the state, has been upheld by the Supreme Court. It’s a ruling that should have been expected, and appellants’ claim that the California law violates the Commerce Clause notwithstanding, the ruling is proper. What a State requires of products sold entirely within it is not interstate commerce—which is the province, and the only aspect that is the province, of the clause.

All Prop 12’s law does is place requirements on the meat sold within the State; it imposes no requirements on how other States comport themselves, including how they raise their food animals. Nothing in the law forces other States to incur the costs of complying with it.

It is true enough that

Californians account for about 13% of the country’s pork consumption but raise hardly any pigs. That means that the costs of complying with Proposition 12 fall mostly in states like Iowa, which raises a third of the country’s pigs.

The Prop 12 law often is viewed as an attempt by California to dictate regulate what other States do regarding their own production requirements. The decision to accede to California’s “regulatory” efforts, though, is a purely business one and not at all a legal one. In fact, the ruling also makes it easier, from a legal standpoint, for states like Iowa to not sell their pork products in or into California at all.

And that’s what I recommend. There are a lot of markets other than California, including export markets, that would easily absorb those 13%. It’s long past time producers in the other 49 States, and our several territories, start ignoring California and its foolishnesses.

Debt Limit Extensions

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James Freeman quoted Capital Alpha Partners‘ James Lucier’s prediction concerning reaching the current debt limit and Congress’ response to it:

We think that Congress will pass a temporary extension of the debt limit deadline for 30, 60, or 90 days.

The House already has passed a temporary debt limit extension—of ~365 days.

The sad fact is that all debt limit extensions, of however many years, are merely temporary, and that will continue to be the case until Congress quits spending more money than the Federal government takes in. The most efficient way of achieving that end is to cut spending—not merely reduce its rate of growth.

That efficiency will take We the People getting off our duffs and electing Representatives and Senators—and Presidents—who have the courage to do the cutting.