Monthly Archives: March 2015

Central Banks, Interest Rates, and Fear

Posted on by
Reply

The Fed is looking to start raising its benchmark interest rates “real soon now.” This is expected to inject fear into investors used for so long to being coddled and protected from uncertainty by an interventionist central bank.

Christine Lagarde, head of the IMF,

warned Tuesday that markets could be heading for a repeat of the 2013 “taper tantrum,” in which stocks fell and interest rates rose around the world as the Fed considered winding down its “quantitative easing” bond-buying program.

She went on:

I am afraid this may not be a one-off episode. The timing of interest-rate liftoff and the pace of subsequent rate increase can still surprise markets.

This is just foolishness. In a free market environment, surprise not only is normal, it’s the stuff of profit-making. It’s also how enterprises steal a march on their competitors and how startups successfully break into a heretofore stable market. It’s how consumers benefit from the newly available additional choice, the better product, the new idea, ….

Even the “taper tantrum” concern is foolishness. The only ones hurt by that were the investors throwing their tantrum. The stock market quickly returned to its longer term trend, and the tantrum didn’t last long enough to hurt the actual economy.

Surprise in the markets is not a problem for us investors; it’s only a problem for government bureaucrats so dependent on their precious rules. And for crony capitalists fearful of competition.

These Explain a Lot

Posted on by
Reply

Joseph Clancy, Secret Service Director, testified before a House Appropriations subcommittee, and this loose exchange between Clancy and Congressman Chris Stewart (R, UT) ensued:

Clancy: It’s going to take time to change maybe some of this culture. There’s no excuse for this information not to come up the chain. That’s going to take time because I’m going to have to build trust with our workforce. And the best way for me to work or earn that trust with our workforce is by my actions.

Stewart: I understand what you’re trying to do. I really do. But when you say, I have to set an example, I have to earn their trust. Dude, you don’t have to earn their trust. You’re their boss. They’re supposed to earn your trust.

And this:

The Secret Service director said he didn’t learn about the March 4 incident until five days later from an anonymous email, a delay he described as unacceptable. He said he delivered a “good, stern talk” to his staff upon learning he was kept in the dark.

“Good, stern talk?” Why is the head of that staff still on Clancy’s payroll?

Hmm….

Of Course He Will

Posted on by
Reply

The National Labor Relations Board, the union arm of the Wagner Act, enacted a rule a few weeks ago that allows unions to hold organizing votes in non-union companies before company management has a chance to respond.

The Senate passed a resolution canceling the NLRB’s rule with a party line oriented vote. The House is taking up the bill and is expected to pass it as well, and with a party line oriented vote.

President Barack Obama, who succeeded in packing the NLRB for this sort of purpose, is expected to veto the resolution.

Of course he will. Remember this veto in 2016.

Nuclear Disarmament

Posted on by
2

Keith Payne, Director of the Graduate School of Defense and Strategic Studies at Missouri State University (oh yeah, also a former Deputy Assistant Secretary of Defense), had some thoughts on this in an op-ed in The Wall Street Journal earlier this week.

Read the whole thing; I just want to focus on one small remark.

Realists point out that foreign leaders base their decisions about nuclear weaponry largely on their perceived strategic needs, not in response to US disarmament.

He’s on the right track here, but I disagree with him to an extent. Foreign leaders—especially our enemies’ leaders—also base their decisions about nuclear weaponry on the perceived value of those weapons. That value goes up as we disarm and render ourselves less and less capable of answering their nuclear blackmail or outright attack.

We haven’t been attacked with nuclear weapons, ever in our history? Since the early 1950s (I discount the interval between the Manhattan Project and that period for its lack of numbers of nuclear weapons and effective delivery means), the US has had the nuclear weapons with which to respond, not merely in kind, but devastatingly and decisively. In that environment, only one other nation in the world—the USSR—thought extensive nuclear weapons worth the price. The PRC didn’t start getting serious about its own nuclear force development and expansion until after we’d already severely cut our own forces and development capability.

With a nuclear armed Russia “preparing to bring its nuclear weapons into play” over Crimea, a nuclear armed People’s Republic of China seizing the East and South China Seas as their private lakes, and a soon-to-be nuclear armed Iran sworn to destroy Israel and with a long history of arming terrorists, disarming today is utopian folly. Full stop.

More Competition Stifling

Posted on by
1

New tax transparency requirements between multinational corporations and European governments may be broadened further this year to encompass public disclosure of the companies’ tax arrangements in Europe.

… The bill, if approved by European governments, would oblige national tax authorities to inform each other and the commission about tax deals they agree with multinational corporations.

… Under the draft bill, which must be approved the 28 European Union governments, the disclosure of so-called tax rulings would happen every three months and would include deals going back 10 years.

Because governments lowering their tax rates—whether as competition between nations for business investments or just because it’s good for the citizens they serve—is anathema to social democrats. That would be too business friendly. Never mind that being business friendly (which cronyism most assuredly is not) is being jobs- and employment friendly, and so it’s being consumer- and citizen friendly. Social democrats just can’t read past that business friendly part.