Tag Archives: political economy

The Value of Debt

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There seems to be little in the People’s Republic of China, at least with respect to government and government-backed debt.

Bond investors who put their faith in Chinese state-owned enterprises are swallowing another bitter pill, just two months after an earlier wake-up call.
This week, the province of Qinghai persuaded a narrow majority of investors holding dollar debt with a face value of $850 million to sell their holdings for as little as 37 cents on the dollar….
The tender came two months after a similar debt purchase and exchange deal involving bonds issued by Tewoo Group, a commodity trader based in the northern port city of Tianjin.

As someone else once said, I am altering the deal. Pray I do not alter it further.

Contradictions

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Japan raised its sales tax—consumption tax/value added tax—and promptly saw a 6.3% year-on-year drop in GDP in the last quarter of 2019. Consumer spending (did I mention that the tax was a consumption tax?) fell by 11.5% that quarter.

Color me—and hosts of others much smarter than me—unsrurprised.

Now come the contradictions, from the just US Congress-revived IMF, yet.

The International Monetary Fund thinks the consumption-tax rate will have to rise to 15% over the next decade, and to 20% by 2050. But first the fund’s wizards say Tokyo must expand its Keynesian spending to make the economy “strong” enough to bear the tax hikes to pay for the spending.

Increasing government spending, which is tax increases now or later, reduces consumption by a number of paths: it takes money out of consumers’ hands directly via those taxes; by competing for the same goods and services as consumers’, it drives up the prices of those goods and services to consumers, which reduces consumers’ purchase of them; by competing for the same resources that private enterprises need to produce it drives up the price of the resources, which drives up the prices of the end-product goods and services to consumers, which….; and it crowds out many private enterprises and consumers altogether.

And so, of course, it’s necessary to raise even further the taxes on all that reducing consumption.

Business is falling off. Gotta raise prices to make up for the decreased revenue.

Make sense? It does to the IMF. And to the Japanese government.

A Court Missed

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This time, the DC Circuit Court has erred.  The Trump administration—Health and Human Services—had allowed Arkansas, among other States, to set work requirements on its citizens as prerequisites to eligibility for the State’s Medicaid program. Folks and organizations sued over that, and the case wound up in the DC Circuit Court.  That Court held with the suers and has blocked Arkansas from proceeding with the work requirements.

Writing for the Court, Senior Circuit Judge David Sentelle held, in part, that HHS didn’t address the purpose of Medicaid in a way that suited him:

to provide health care coverage to populations that otherwise could not afford it….

Sentelle wrote further,

The means that Congress selected to achieve the objectives of Medicaid was to provide health care coverage to populations that otherwise could not afford it.
To an extent, Arkansas and the government characterize the Secretary’s approval letter [allowing Arkansas’ work requirements] as also identifying transitioning beneficiaries away from governmental benefits through financial independence or commercial coverage as an objective promoted by Arkansas Works.

Sentelle then wrote that Azar’s approval letter did not discuss this aspect of the matter, either. That, though, is because it’s so blindingly obvious that explicitly writing, in effect, “this, too,” would have been merely redundant.

Of course, HHS did properly account for the principal purpose. Requiring efforts to work or to learn work skills directly accounts for Medicaid’s principal purpose, by helping folks become able to afford health-care coverage and so no longer be part of those “populations that otherwise could not afford it.”

The ruling needs to be appealed to the Supreme Court, and the Supremes need to uphold HHS’ requirement.

The DC Circuit messed up.

 

The Court’s ruling can be read here (maybe. The Circuit’s Web page is having trouble with this. The Case is Charles Gresham v. Alex Azar, II, Docket 19-5094).

This Loss is No Loss

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Recall the fact of the tweet that the NBA’s Houston Rockets General Manager sent in support of the Hong Kong freedom protesters.  Recall further the NBA’s abject cowardice in deeply kowtowing to the People’s Republic of China in response to the latter’s projected upset over the tweet and the NBA’s impudence.  The kowtowing was rationalized from the league on down to individual players that they all had money at risk from the GM’s tweet—as if their personal pocketbooks could compare with the sacrifices of life and limb, in addition to economic loss, of those freedom protesters as they struggled for their basic freedoms.

That cowardice was only emphasized, not mitigated, by NBA commissioner Adam Silver’s refusal to tell his teams they had to limit what they said. That came lately.

Recall further, the hoo-raw over the picayune nature of the NBA’s kowtowing and the cynically fiscally-driven rationalizing in which the NBA engaged in defending its response to the PRC government—and its institutional abandonment of those Hong Kong freedom protesters.

Now some information is coming out regarding the cost of the NBA’s behavior—the cost to those pocketbooks the NBA has been so desperate to protect.

The loss “will be in the hundreds of millions,” NBA commissioner Adam Silver said on Saturday, the first time he’d used such a number to estimate the cost to the league’s China business. The hit amounted to “probably less than $400 million,” Silver said in response to speculation that the losses could reach $1 billion….

Silver added,

We were taken off the air in China for a period of time, and it caused our many business partners in China to feel it was therefore inappropriate to have ongoing relationships with us.

The NBA is still receiving only greatly reduced coverage in the People’s Republic of China.

This isn’t a cost, or a loss. It’s the beginning (and, sadly, probably the end) of the price the NBA should pay for abandoning our American principles, and with them the good people of Hong Kong, in favor of the good opinion of an American enemy.

Stakeholder Capitalism

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Vivek Ramaswamy, writing in Wednesday’s Wall Street Journal, offered a brief definition:

“Stakeholder capitalism” is…the fashionable notion that companies should serve not only their shareholders, but also other interests and society at large.

Ramaswamy is right. What the virtue-signaling social justice warriorlettes (of which Ramaswamy is not one) miss, though, is that companies serve “other interests” and society at large by doing well, making money for their owners, and creating jobs for “other interests” and members of society at large—us citizens.

It ripples. Business owners, whether direct owners or shareholder owners, whose businesses prosper have more money with which to start new businesses; or invest in new, or existing businesses; or grow existing businesses; or expand R&D spending; or…pursue their own other interests and their own views of what society at large needs rather than those things the VSSJws demand they pursue.

Employees of those prospering businesses, new employees of those new and expanded businesses, all have more money with which to pursue their own other interests and their own views of what society at large needs, even start their own new businesses or invest in new or existing businesses, rather than doing what the VSSJws demand they pursue.