…in one tweet:
What sense is it to price loans with radically different risks at the same interest rate?
Note the deafening silence from his Democratic Party primary contenders. This is the level of economics understanding any of them would inflict on us, were they elected.
Fannie Mae and Freddie Mac are now preparing to sell bonds that supposedly indemnify us taxpayers from the results of another mortgage market melt-down.
Called Connecticut Avenue Securities by Fannie Mae and Structured Agency Credit Risk by Freddie Mac, the securities are essentially bonds whose performance is tied to that of a pool of mortgages. If the mortgages default, investors in the bonds could lose some or all of their principal.
That’s the claim. There are a number of fallacies to this. One is that Fannie and Freddie still are government controlled. Another is that the government, through the Fannie-Freddie regulator, the Federal Housing Finance Agency, has already demonstrated that it will manipulate regulations and pass along actual money to “protect” these agencies from failure.
The largest fallacy, though, is exposed by Lewis Ranieri, who co-invented mortgage-backed securities in his own assessment of this nascent Federal scam:
There’s still a question of whether [the securities sales] can be expanded to really provide the goal of making the government the guarantor of last resort.
Government as guarantor of last resort means us taxpayers aren’t protected from anything that Fannie or Freddie might take a notion to try our luck at.
In the end, though, why should government—which is to say, you and I—be the guarantor of anything in a free market other than that it is, in fact, free, with all transactions freely entered into and with each of the participants in any exchange—and no one else—owning every bit of their part of that exchange?
Following Japan’s apology to the Republic of Korea over “comfort women,” the People’s Republic of China is demanding the same for itself.
The problem is this. When one nation repeatedly and incessantly demands an apology from another, the apology-demander can never take the apology as anything other than the result of an exercise of power over the apology-giver, no matter the sincerity of the apology. This is especially true in the present case, with the PRC cavalierly dismissing the Japanese apology to the RoK as American puppetry.
The apology-demander can never view the apology as anything other than a lie, square filler that it is. That renders the apology less than a waste of time for the apology-giver; the apology is reduced to a surrender of sovereignty (even if a small amount)—an act of puppetry—to the apology-demander.
Japan would do well to ignore the PRC’s incessant demands and only after the matter has died down for some considerable time make an apology, unbidden. If one is warranted.
In a Fox Business piece concerning the impact of future Federal Reserve Bank interest rate hikes on the stock market, this remark stands out for me.
[C]onventional wisdom holds that the more skillful Fed officials are at telegraphing their upcoming rate hikes, the less volatile markets will be once those hikes are announced.
That’s true enough as far as it goes, but the interesting bit is that the more skillful Fed officials are at telegraphing phrase.
Ordinarily, there’s no skill at all involved in making a simple, straightforward statement. One such could be we’ll raise interest rates by these increments, according to this schedule. Those milestones will be adjusted in this way by these factors that we will observe in real time.
That sort of clear, direct statement only takes skill when the speaker is a member of an organization which has institutionalized obfuscation.
Lots of folks say Bernie Sanders, Democratic Presidential candidate and Socialist Senator from Vermont, wants the American economy to look like social democrat Europe.
Wrong. Look closer to home for the logical outcome of Sanders’ economic policies. Here’s Puerto Rico‘s “economy:”
Government debt has increased by two thirds since 2006…and exceeds 100% of gross national product. … The sales tax increased to 11.5% this year from 7% and next year will turn into a value-added tax. Since 2013 the tax on petroleum—the island’s primary fuel for generating electricity—has quintupled to $15.50 per barrel.
And
Employment laws, such as mandatory 15 days of paid vacation, and stringent job protections provide disincentives to hire. Generous welfare, housing, food stamp and health benefits discourage work. Nearly half of island residents are on Medicaid. A household can rake in 50% more in government assistance than the take-home monthly minimum wage.
The island’s 12.5% unemployment rate is misleading, coming as it does against a labor force participation rate of 40% [sic].
There’s more—lots more—but this is where President Bernie Sanders will take us, and it’s far enough.