Tag Archives: markets

“It Depends on Uncle Sam”

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Without more help from Washington, electric-vehicle sales will struggle to live up to the stock-market hype.

That Wall Street Journal lede pretty much tells the tale.

And this:

If the new technology is to live up to high investor expectations, the global record suggests that the US will need to embrace subsidies.

It depends on Uncle Sam. As long as electric vehicles get subsidies of any sort—either on the manufacturing end or to buyers of them on the other end—these battery cars can never be mainstream. As long as they’re getting any sort of subsidy, battery cars are tautologically unready for market.

Inflation Worries

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Jason Furman, ex-President Barack Obama’s (D) Council of Economic Advisers Chairman, wrote about four things about which to worry regarding the current inflation increase and its durability. Three of them were reasonably accurate. He also predicted a Fed response.

First, the economy is beginning 2022 with much tighter labor markets than a year ago. …
Second, demand should remain above pre-pandemic trends, while supply will likely continue to lag behind. …
Third, consumers, businesses, forecasters and financial markets all expect near-term inflation to be about 1 to 3 percentage points higher than a year ago. …

So far, so OK. But his fourth, not so much.

Fourth, the trajectory of Covid and its effect on inflation are highly uncertain.

In fact, it’s badly off the mark. What’s highly uncertain is the Federal government’s trajectory of variable, and often panic-hyped, (over)reaction to the Wuhan Virus. This one is beyond the ken of the Fed, or it should be, and is completely under the control of President Biden-Harris (D).

The Furman’s predicted Fed answer isn’t all that, either.

He [Fed Chairman and nominee for continuation as Chairman Jerome Powell] proved that the Fed’s actions will depend on the data, and the Fed is now on course to start raising rates in March. If inflation remains as high as I fear it will, expect him to continue to follow the data by pivoting further. Given the uncertainty, however, he should stay the course—for now.

No.

If the Fed is going to be serious about lowering inflation back into the neighborhood of its target rate of 2%, it needs to

  • stop buying Treasury debt
  • disgorge its existing Treasury debt instrument holdings (ideally by simply not rolling them at maturity)
  • set its benchmark interest rates at levels historically consistent with 2% inflation
  • sit down and be quiet instead of constantly trying to respond to every jot and tittle of market variation

More Chit-Chat

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Cynically done chit-chat, too.

Biden-Harris says he’s going to distribute bunches more Wuhan Virus test kits to schools to keep them open.

The Biden administration plans to distribute millions of free Covid-19 tests to schools around the country, part of the federal government’s effort to keep schools open amid a surge in coronavirus cases caused by the Omicron variant.
Later this month, the administration will begin shipping five million rapid Covid-19 tests to K-12 schools each month, White House officials said.

That’s in contrast to this:

The rapid tests for schools are in addition to the 500 million rapid tests the administration plans to begin distributing to the public for free in the coming weeks, a White House official said. The administration has faced criticism for testing shortages around the country that led to long lines and empty shelves at the start of the Omicron surge.

Which raises the question: where’s he going to get the tests, since he’s already unable to supply his previously promised tests? And that failure comes months after his decision to reject an industry offer to produce 700,000+ tests per month ‘way last October.

Or: are supposed to let the teachers unions keep our kids’ public schools closed for those months before Biden-Harris’ administration gets around to getting the tests and moseying them out to the schools?

Another question: how about the folks who might actually benefit from access to regular—and frequent, since each test is just a snapshot of the individual getting it, an individual who might get infected the next day, the next hour after the test—testing: folks in retirement and nursing facilities, health care workers, folks with comorbidities?

Promises, promises.

Widening Gyre of Hostages

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In response to Lithuania’s effrontery in contradicting the People’s Republic of China by letting the Republic of China open a “representative office” in the capital city of Vilnius, the PRC not only is banning import into the PRC of Lithuanian products, it’s banning import of all products that contain Lithuanian components. As The Wall Street Journal dryly put it,

The effects are rippling across Europe.

And already Germany is intimating its desire for surrender, which should come as no surprise from a nation already openly obsequious before Russia:

The German-Baltic Chamber of Commerce has warned Vilnius that German subsidiaries are at risk.

The widening gyre may well spread across the pond.

In the US, the Uyghur Forced Labor Prevention Act, which would bar goods made with forced labor in Xinjiang region from entering America, passed the House last month. If it becomes law, US companies should brace themselves.

It’s an open question whether the Progressive-Democrat running the Senate, Majority Leader Chuck Schumer (D, NY), and the President, Biden-Harris, will permit the bill to become law, or whether one of the other will join Germany as hostage and bar the law.

Elisabeth Braw concluded this in her op-ed at the link:

China’s punishment of Lithuania is a wake-up call for companies and countries alike.

Indeed.

It’s time for Europe and the US to stop doing business with the PRC altogether.

The transition will be deucedly expensive, but Europe and the US will be orders of magnitude better off not being as dependent on the PRC as the PRC’s actions are demonstrating us both to be.

That cost, and the reduction in our economic and political freedom of action, which the PRC will continue to inflict will only get far worse, the longer we delay in carrying out that transition.

In the meantime, it would do us and Lithuania, and all other nations wishing to reduce their dependency on the PRC, a world of good for us to increase our trade with Lithuania.

Blame-shifting to Middlemen

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Now Biden-Harris is throwing a billion dollars at the food supply chain problem, even as he’s blaming food supply chain middlemen for his supply problems.

This is just more blame-shifting by Biden-Harris.

Middlemen can, indeed, price gouge. So can end-sellers. So can original producers. However, in the vast main, middlemen drive prices lower: they insulate original producers from end sellers, giving those producers more flexibility in to whom to sell, the middlemen more choices to whom to sell, and they give end sellers more choices of from whom to buy. Competition among middlemen and on both sides of the middlemen drive prices down.

And never mind the risks taken by middlemen. They don’t broker deals between original producers and final buyers; they buy from those producers, own the product, and subsequently must find buyers to whom to sell. Even if middlemen think they’ve lined up their buyers prior to purchasing from producers, many of those deals are only potential and can fall through, or the agreed future price can prove to be wildly inadequate in the realization of delivery.

Biden-Harris actually claimed with a straight face, through his unsigned “fact sheet,” that

[m]ost farmers now have little or no choice of buyer for their product and little leverage to negotiate, causing their share of every dollar spent on food to decline.

Maybe yes, maybe no. But a farmer has far more choice than if there were no middlemen to take the risk of a bumper crop driving down the price he can get on sale after harvest, or of a poor crop driving up the price he could have gotten had the crop done poorly before he committed to sell.

Biden-Harris, aside from the dishonesty of their blame-shifting, in the particular case of farm production is pretending to be ignorant of the time lags involved from crop planting to final crop delivered to the end user, and of the time lags involved from crop planting to final delivery to the livestock rancher to the end user.