Tag Archives: political economy

“Banking System is Safe”

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That’s what President Joe Biden (D) claims after the Silicon Valley Bank collapse.

Americans can rest assured that our banking system is safe. Your deposits are safe. Let me also assure you that we will not stop at this. We will do whatever is needed.

But that’s true only if regulators do their job and enforce the rules in place—as they chose not to do in the runup to SVB’s failure—and if risks are well-known and left to the responsibility of the risk-takers in a free market rather than laid off to us taxpayers to make those taking the risks whole.

That last just transfers the risks to us and leaves the risk-takers entirely free of risk. That last, also, is what concerns Senator Tim Scott (R, SC), even though Biden claims that taxpayers won’t cover the losses. Yes, we will. SVB doesn’t have enough book value, even were its liquidation not done at fire sale prices, to cover the billions of investor—venture capitalists, startups, bond holdings, and on and on—losses that will occur. Scott’s concerns:

We just heard recently that they’re going to really have the greatest form of corporate cronyism that we’ve seen in a very long time. They’re going to insure all the deposits, even the ones over the $250,000 limit, which means that the most sophisticated investors are now going to have the insulation of the federal government. That is problematic. It sends a very negative statement to the marketplace….

Scott’s concerns are well-founded. Here’s what Treasury Secretary Janet Yellen, Fed Chairman Jerome Powell, and FDIC Chairman Martin Gruenberg said in their Sunday joint statement

Today we are taking decisive actions to protect the US economy…providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.

That bailout is destructive of our banking system and of our economy at large.

I’ll have more on that last tomorrow.

Ending Subsidies

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President Joe Biden wants to end fossil fuel subsidies, per his budget offering.

I actually partly agree with him on this. But only partly, because he’s only partly ending subsidies—those for fossil fuels. He needs to end—or propose ending; it’s Congress that has to do the deed—all subsidies for any purpose in any industry.

Still he could make a major step forward were he to produce a favorable answer to my question:

Will Biden also end the “green” energy subsidies, or will the Progressive-Democrat continue to insist on picking industrial winners and attacking those industries of which he personally disapproves?

Guess.

Bye Bye

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The People’s Republic of China’s Foreign Minister, Qin Gang, seems to be dismayed with us. The Wall Street Journal‘s headline says it:

China’s Foreign Minister Says Ties With US Risk Going Off the Rails

According to the WSJ, Qin said that

the Biden administration was insincere in saying it wanted to preserve relations and warned the US against engaging in what he called new McCarthyism.

And his boss, PRC President Xi Jinping

criticized what he termed a US policy of “all-round containment, encirclement and suppression” of [the PRC].

Never mind that the PRC badly wants not just encirclement and containment, but a rollback from its seizure and occupation of the South China Sea and other nations’ islands therein, along with a pushback from its overt threats against the Republic of China.

Not to be outdone by his boss, Qin went further:

If the United States does not hit the brakes but continues to speed down the wrong path, no amount of guardrails can prevent derailing, and there will surely be conflict and confrontation.

It’s long past time to disconnect economic and technological ties with the PRC altogether, to rapidly plus up the RoC’s ability to defend itself, and to increase our defense assistance to the other nations rimming the South China Sea.

A Strong Economy

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Stipulate, arguendo, that we actually have one of those going on. Federal Reserve Chairman Jerome Powell wants to cool it down hard.

The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.

That is the Fed’s standard answer for dealing with inflation, manipulating interest rates are its primary tool, and it’s not an entirely wrong answer. Burgeoning economic activity that has demand for goods and services overwhelming the ability of producers to deliver the goods and services is a major driver of inflation, and that inflation hammers us average Americans by badly devaluing our incomes. Dampening demand is a way to deal with inflation.

However.

Consumer demand isn’t the only component of overall economic demand: Federal spending is another major player, and the Federal government creates completely artificial demand with its spending.

Repeat my opening stipulation. If our economy is strong, we don’t need nearly so much Federal spending. The Biden administration—and any following series of administrations—need to cut out the stimulus spending, cut back on “baseline” spending, and get out of the way of the private economy. Absent Federal…interference…in our economy, spending and supply will align quickly as us Americans decide for ourselves what we will buy, what we will produce, and the price levels at which we will carry out the relevant exchanges.

Take note, also: that puts a premium on the Republican House and Senate caucuses standing firm on requiring spending cuts beginning next fiscal year and continuing into the out years as a quid pro quo for raising the debt ceiling this year.

Needs

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In an editorial centered on the travails of a small pharmaceutical company, Novavax Inc, in developing medicines—here, particularly, Novavax’ Wuhan Virus vaccine in alternative to Pfizer’s and Moderna’s—there were these claims by then-NAIAD head Anthony Fauci in explaining the apparently deliberate regulatory delay in getting FDA approval:

We don’t need another vaccine.

And

It just seems rather unusual that people are waiting for something else when you have vaccines that have been given to now nine billion people[.]

This is another instance of Government presuming to dictate to us average Americans what our needs are instead of accepting that we know our needs and how to satisfy them much better than any Government bureaucrat.

Novavax’ alternative vaccine was 90.4% effective against symptomatic infection and offered 100% protection against moderate and severe illness, and now the company is on the verge of bankruptcy due to this governmental arrogance.

So much for medicine innovation.