Tag Archives: economics

Preparedness

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That seems a commodity in short supply these days. Its lack is especially expensive for student loan borrowers in today’s economic climate. The lede pretty much says it all.

Tens of millions of federal student-loan borrowers will soon owe monthly payments for the first time in more than three years. Some of them aren’t ready for it.
The payment and interest pause put extra cash into people’s pockets, but they tended to spend it rather than save it, according to recent research. Some borrowers are now concerned about being able to cover their student-loan bills this fall.

Not being required to make the payments is not the same as being barred from making the payments. Neither is it a block on putting those HIAed loan payments aside against a return to having to repay or to pay down other debts.

Some borrowers took the payment pause as an opportunity to save the extra money or use it to pay down other debts. But the more common response was to spend it….

But we’re supposed to be sympathetic to these spenders, even to spend our money, through our tax remittances, helping them cover the outcomes of their shortsightedness and irresponsibility.

Investing in the People’s Republic of China

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Foreign direct investment in the PRC has fallen to $20 billion in the first quarter of this year, compared with $100 billion in last year’s first quarter. This is strongly influenced by, if not a direct result of, PRC President Xi Jinping’s “security” policy that explicitly targets foreign investors as likely spies.

A Xi-led campaign this year has hit Western management consultants, auditors, and other firms with a wave of raids, investigations, and detentions. Meanwhile, an expanded anti-espionage law has added to foreign executives’ worry that conducting routine business activities in China, such as market research, could be construed as spying.

There’s this, also:

A senior official in a county of southern Guangdong province, which earlier this year set a goal of attracting nearly $300 billion in investment in the next five years, told a visiting American trade group recently that the county would reward any US corporate “decision maker” investing there 10% of the value of the promised deal, according to people briefed on the matter.
The trade group turned down the county official’s offer, which in the US would constitute an illegal bribe, the people said.

The Guangdong senior official knew his offer would be a bribe under US law, and he made the offer anyway.

There is no investment in anything in the PRC that’s worth the political, or the legal, risk.

More than that, as long as the PRC continues its genocide (in the present time against the Uighurs, but those people have not been the PRC’s only targets), it’s morally impossible to invest in any way, in any thing, in the PRC.

That’s apart from, and in addition to, the national security risk presented by any trade with or within the PRC, given its present control over our supply chains, particularly in critical items such as the rare earths it embargoed from Japan for a time and its current bar of gallium and germanium export to us.

We, and the West at large, have nothing to gain from investing in or trading with this enemy nation, and everything to lose.

Another Excuse…

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…for Leftist-dominated governments to grab power. Farmers Insurance, and other insurance companies, are moving to restrict policy sales in California and Florida due to rising payout costs from a recent spate of natural disaster claims. Public Citizen said that such moves are

prime example of the insurance industry’s hypocrisy on climate change.

Progressive-Democratic Party politicians insist that insurance companies aren’t doing enough to combat global warming and want to impose requirements on them to do more. Connecticut’s Leftist politicians are proposing a 5% surcharge on “any premium payments from any fossil fuel company” to any insurer licensed in the state.

Insurers, in a free market economy, are in the business of insuring risk—transferring the risk of a business venture, or ownership of a home, from the venturer/homeowner to the insurer in exchange for a fee based on the risk’s likelihood of occurring and its cost should it occur.

Insurers, in the Progressive-Democrat economy, are tools of the State, usable by the State to achieve the Progressive-Democrats’ personal goals.

Another Reason…

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…to disband altogether the Securities and Exchange Commission and build a new exchange watchdog from the ground up. Now it wants a database of all investor personal information whenever those investors make a move in our stock market.

The Consolidated Audit Trail (CAT) database was originally proposed by the SEC in 2010 to help regulators track order and trading activity throughout US markets for listed equities and options. According to the ASA, the database will list all the financial holdings and personal information of investors, including their name, phone, address, brokerage accounts, birthdate, and Social Security numbers.

Then, a year ago,

the SEC released an order that granted temporary relief from certain requirements of the CAT, delaying its full implementation until 2024. In the interim, the SEC is requesting the information be given voluntarily, with expected forced implementation by next year’s deadline, according to the ASA [American Securities Association].

This is just weasel-working around the SEC’s demand to have all personal information, even though it has no need for those data.

This SEC has shown, once again, that as an institution it cannot be trusted with American investor data.

Owning vs Renting

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The cost of renting a house or apartment continued to rise last month.

Shelter costs, which account for about 40% of the core inflation increase, rose 0.4% for the month and are up 7.8% over the past year.

This emphasizes, for me anyway, one advantage of owning a home over renting it that gets little attention. That’s the advantage of locking in the “rent” rate, the cost of having shelter.

Having bought the house (assuming it’s done with a regular mortgage rather than one with a balloon payment after a few years), the owner now is protected from much of the damages of inflation: unlike rent rising (and it’s usually an annual increase, even with low inflation), the owner’s mortgage payment remains static—it cannot rise. Further, as inflation takes its toll, that mortgage gets paid with increasingly cheaper dollars, a phenomenon that’s made more apparent as pay raises occur—also, in the main (though not always), annually—even as inflation does not rise as quickly—which periods occur fairly often: those periods between recessions or stagnations.

And this: as interest rates fall, which they do relatively frequently, it’s usually possible to refinance the mortgage to a lower rate, and so to a lower monthly payment. Rents almost never fall (except in the most extreme economic conditions), and that increases the advantage of owning vs renting.

Of course, during times of high inflation, it’s much harder to buy a home in the first place—prices are much higher and rising, and interest rates tend to be high and rising. Once that upfront cost is met, though, the advantage is established. Rents are much higher, too, and rising, and so it’s also much harder to get into a rented home, but even after the renter is in, that cost continues to vary steadily upward.

Lastly, even in today’s government-diktated renting environment, it’s still harder to get thrown out of an owned home through mortgage default than it is from a rented home through rent nonpayment.

And none of that reaches the “investment for retirement” aspect of owning vs renting that is at the center of the most common form of the debate.