Monthly Archives: July 2015

Another Misunderstanding

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Paul De Grauwe, John Paulson Professor in European Political Economy at the London School of Economics and Political Science, was quoted in Thursday’s Wall Street Journal as saying

They in fact triggered the banking crisis. They’ve failed in their duty to ensure financial stability.

De Grauwe was asserting that the ECB’s decision to not increase the amount the central bank already had loaned to Greek banks for liquidity purposes was a mistake.

This criticism is nonsense. The ECB triggered no crisis; the Greek crisis already was in full swing, and had been for a number of years and two bailouts wasted by Greek profligacy. The ECB simply said, rightly, that enough was enough. Far from “ensuring financial stability,” the ECB protected their constituent members by ceasing to pour more of their money into a bottomless dry well. Financial stability was, and is, solely in Greek hands to achieve.

OPM is not methadone for the addicted. It’s a hand up for those trying to recover from bad luck and those willing to learn from their mistakes and do better.

Regulatory Control and the Left

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The Treasury Secretary’s Lawyer (who else?), Antonio Weiss, has a piece on The Wall Street Journal defending the Regulatory State’s control over our financial markets.

He opened it with a strawman.

Some say regulation has killed it, and the answer is to roll back financial reform.

A carefully unnamed “some” in his strawman. He’ll have to play with his dolly without this writer. There is, too, his false assumption in that claim: rolling back financial reform assumes there’s been reform to roll back. There certainly has been a potful of added regulation to our financial markets, all spurred by the Democrats’ Dodd-Frank bill. The bill that created a wholly unaccountable—not even through Congress’ control of purse strings—panel, the CFPB, that decides how financial institutions must behave, even to the point of deciding what business counts as a financial institution that must accept the panel’s decrees.

There’s no reform there. Only the deformation of our free market economy.

And there’s this bit:

The marketplace is rapidly evolving. We must address future challenges without rekindling crises of the past.

Because, gotta have a regulation. After all,

However, market participants report difficulty in executing large orders across various asset classes. And there are concerns over whether the growing ownership of corporate bonds by mutual funds could overwhelm market capacity if there were a sudden wave of redemptions. Moreover, the “flash rally” last Oct 15 in US Treasurys, our deepest and most liquid market, saw yields drop dramatically and snap back within minutes, with no clear catalyst.

Can’t let a free market, a market uncontrolled by Know Betters, find its own solutions to the market niche of asset-class-spanning orders, a niche that couldn’t exist before technology (with the Know Betters have demonstrated they have no capability of managing—see the IRS’ computer “upgrade,” or the security of American’s personal records in the not-so-safekeeping of the OPM) made such a thing possible, much less useful. Can’t let those evil mutual funds—Big Wall Street Business, don’t you know—manage their own finances. No, our Know Betters, who have shown they can’t manage a government budget have to do that. Can’t have an error in software go unpunished by Know Better Regulation rather than leaving it to actual experts and businessmen whose interests lie in prompt correction of such glitches.

The Left, the party of Hillary Clinton, Barack Obama, Woodrow Wilson, and Herb Croly, just can’t conceive of Americans getting by without a Federal Regulation to tell us what to do. No matter how foolish the Left’s Regulation.

Murder Free Zones?

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Does Portland State University disagree with the concept of murder free zones?

It seems that a couple of students at PSU wanted to “set up a table on campus” to advocate for the school becoming a Murder Free Zone. The school said, “No, probably not.”

The school insisted that the students hosting the table would themselves become targets of violence: their advocacy of murder free-ness would be “triggering,” it would incite overt violence; the school even suggested that if the thing went forward, the students should have campus security be present to quell any violence that might be triggered.

No, PSU doesn’t disagree with being murder free. That school’s administration was simply satirizing the whole question of gun/murder/anything “free zones.”

Weren’t they?

Nuclear Weapons Deal Agreed

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President Barack Obama and his lesser foreign policy wonk, John Kerry, have agreed that Iran can have nuclear weapons and the missile delivery systems to carry them.

This is from Omri Ceren, via Power Line:

The Iranian nuclear program will be placed under international sponsorship for R&D

Sort of: “a major power” will work with Iran to develop next-generation centrifuge technology, ostensibly merely for production of useful isotopes of various elements. Never mind that “isotope production” other than bombarding atoms with neutrons is exactly what is done to enriching uranium.

The sanctions regime will be shredded

Completely. The sanctions to be lifted are limited to sanctions against the Iranian nuclear weapons program. However, this better policy wonk than his policy wonks has agreed that all sanctions currently in place against Iran are to be defined as part of the “anti-nuclear weapons program” sanctions régime. Thus, sanctions on Iran for terrorism, human rights abuses, “conventional” weapons, and ballistic missiles will be lifted. This one is especially well done by Obama.

The US collapsed on anytime-anywhere inspections

Completely. The IAEA gets to ask, “Pretty please,” the Iranians get to say, “No,” and the whole thing goes to arbitration. With Iran as an arbitration panel member. With no deadline, no maximum time frame within which the question must be arbitrated.

Under this deal in our time, Iran gets to traffic in conventional arms, legally, in five years, and it gets to build/acquire ballistic missiles, legally, in eight years.

Iran’s legal path to nuclear weapons is wide open. Actually, that path is a multiplicity of multi-lane highways.

Obama, with a straight face, proclaims his pride in this failure. What a legacy he’s built.

A Misunderstanding

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Or a non sequitur. A recent Wall Street Journal editorial was headlined thusly: Should There Be a Tax on Soda and Other Sugary Drinks? The subhead had this: Supporters say it is an effective way to cut obesity. Critics say the health benefits are far less than claimed.

The piece then proceeded to a debate between Kelly Brownell, Dean and Robert L Flowers Professor of Public Policy at Duke University’s Sanford School of Public Policy, and William Shughart II, J Fish Smith Professor in Public Choice at Utah State University’s Jon M Huntsman School of Business, among other titles.

Both entirely missed fundamental point. The answer to the headline question can only be a resounding “No.” The debate was a waste of bandwidth and of newsprint and ink because it doesn’t matter whether taxing sodas is an effective way of curbing obesity.

As James Madison once said in the Third Congress about a related subject,

Mr Madison wished to relieve the sufferers, but was afraid of establishing a dangerous precedent, which might hereafter be perverted to the countenance of purposes very different from those of charity. He acknowledged, for his own part, that he could not undertake to lay his finger on that article in the Federal Constitution which granted a right of Congress of expending, on objects of benevolence, the money of their constituents.

Charity of one sort, or charity of another sort, or simply the Federal government presuming to pressure us toward government’s definition of society, it’s all the same. And so it is with taxing as well as spending. Our tax code, in no way shape or form, should be used to conduct social engineering. Full stop.