Category Archives: culture

Thoughts on European Inflation and Tax Policy

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Michael Heise, Chief Economist at Allianz SE, had some in his op-ed in The Wall Street Journal, but I want to focus on just a couple, for the mindset implied as he—and Europe’s politicians—address inflation and tax policy.

They [tax and ultralow-interest rate policies] encourage risk taking among investors searching for yield, potentially leading to malinvestment. They affect the distribution of income and wealth between the less affluent, who are most affected by low returns on bank deposits, and the wealthier, who tend to benefit most from rising share prices. Finally, perhaps most important, ultralow interest rates discourage savings for retirement and slow down the growth of existing pension assets.

“Ultralow rates encourage risk taking.” Yeah? And? That’s a business decision; no government need be—no government should be—involved in that. A free market will do a far better, far more efficient, with far prompter sanction application job of regulating risk taking businesses.

“Affect the distribution of income and wealth.” Yeah? And? To the extent such distributions can ever be bad, a free market is the best way to raise the prosperity of the least, and if the wealthy get wealthier, so what? The poor still are less poor. No government mandates or regulations can hope to match the prosperity creation that is freedom in the market.

“Ultralow interest rates discourage savings for….” This is true, and the ECB’s decision to artificially depress interest rates is negligently harmful to the poor, the retired, and those trying to save for retirement. Further, ECB and sovereign nation interferences in the market for debt instruments is purely political, and so it’s wholly unpredictable (who can tell when a politician will decide it’s in his interest to do something different?). That unpredictability seriously damages the ability of anyone to save for their future.

Tax policy shouldn’t be used for social engineering; optimally, it should be used only to fund basic government. The free market is a better place—more efficient, and faster acting—than government from which to regulate interest rates and risk. Even in social democrat Europe.

EU Immigration

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British Prime Minister David Cameron may be starting to stand strong on the matter of immigration into Great Britain. It sounds like he’s beginning to agree with German Chancellor Angela Merkel, who said four years ago

We kidded ourselves a while, we said: “They won’t stay, sometime they will be gone”, but this isn’t reality.

And of course, the approach [to build] a multicultural [society] and to live side-by-side and to enjoy each other…has failed, utterly failed.

Cameron announced measures Friday:

[M]igrants from the EU should have to wait at least four years before receiving benefits such as tax credits or access to state-subsidized housing. EU migrants also no longer would be eligible to receive state child welfare payments unless their children have moved with them to Britain, a measure which he said is designed to stop the practice of using handouts to support family in their home countries.

He also said that his proposals would be “an absolute requirement” in any renegotiation of the terms of Britain’s continued EU membership that he’s promised to conduct with the EU if he wins a second term in the elections next spring.

Britain isn’t alone in starting to take such a firm position, either. Apart from Germany, the conservative parties of France (despite President François Hollande’s words to the contrary), the Netherlands, even Sweden, are starting to demur from easy border crossing and easy access to government-funded welfare.

If it gets hard for immigrants to go there, though, where else might they go? What other western nation has notoriously porous borders?

Hmm….

The PRC and Language

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“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”

So says the People’s Republic of China government, too. Here’s the State Administration for Press, Publication, Radio, Film and Television, on banning puns from news media, other programming, even advertising:

Radio and television authorities at all levels must tighten up their regulations and crack down on the irregular and inaccurate use of the Chinese language, especially the misuse of idioms[.]

After all, puns and idioms could lead to “culture and linguistic chaos.” Can’t have that. Order, dammit. Especially the government’s definition of order. The PRC government’s incumbents do clearly understand that language is thought.

Collective Social Action

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A practical lesson from the People’s Republic of China on societal collective action.

When a fabric company called Jiangyin Xueyuan Textile Co collapsed, the troubles soon cascaded through other firms in this mill town.

A machinery maker, paper producer, manufacturer of faux-wood flooring and textile maker had one thing in common. They had promised, in the event of default, to repay the loans taken on by Xueyuan.

Indeed, they had all guaranteed each other’s loans, promising to pay the lender should one of them fail. Yet in the PRC’s current economy, they’re all having trouble making their own payments, and some have, as a result, refused to honor their guarantees of the others’.

Xueyuan’s court-appointed bankruptcy administrator, Zhang Fuliang, had this to say on the general practice:

[T]he big problem among private firms is that you owe me, I owe you, and in the end, if something goes wrong, then everyone gets tangled up together[.]

A policy outcome likely will look like this one: The People’s Bank of China, the PRC’s central bank, has lowered its benchmark lending rates, in the expectation that “private” and “commercial” banks will lower theirs commensurately and thereby stimulate the PRC’s economy. However,

banks likely will hesitate to lower the cost of loans for fear of hurting their profits.

Those profits aren’t only tied to the spread between the banks’ deposit interest paid and loan interest collected. They’re also tied to the likelihood the loans will be repaid at all. When an individual firm fails, the loan is lost, but the loss is limited to the single firm. When an individual firm fails, and the network of fellow firm guarantors default on their guaranty, the single loan still is lost, but now the bank must worry about the credit worthiness of each member of that network of guarantors. That’s going to hold up interest rates for the entire network as a hedge against the loan’s default—and as a hedge against default on more of the loans the network is guaranteeing for each other. And as a hedge against the loans made to other networks. And….

Hmm….

Happy Thanksgiving

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I first posted this in 2011. I think it bears repeating today.

Today I thought I’d share some thoughts on the matter offered by other folks who are a bit more articulate than I. In the meantime, be thankful for who we are and where we are: whatever straits we in which we find ourselves, we’re orders of magnitude better off than most everyone else in the world.

Now therefore I do recommend and assign Thursday the 26th day of November next to be devoted by the People of these States to the service of that great and glorious Being, who is the beneficent Author of all the good that was, that is, or that will be — That we may then all unite in rendering unto him our sincere and humble thanks — for his kind care and protection of the People of this country previous to their becoming a Nation — for the signal and manifold mercies, and the favorable interpositions of his providence, which we experienced in the course and conclusion of the late war — for the great degree of tranquility, union, and plenty, which we have since enjoyed — for the peaceable and rational manner in which we have been enabled to establish constitutions of government for our safety and happiness, and particularly the national One now lately instituted, for the civil and religious liberty with which we are blessed, and the means we have of acquiring and diffusing useful knowledge; and in general for all the great and various favors which he hath been pleased to confer upon us.
-George Washington, 3 October 1789

The year that is drawing toward its close has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, others have been added which are of so extraordinary a nature that they cannot fail to penetrate and soften even the heart which is habitually insensible to the ever-watchful providence of Almighty God. … No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy.
-Abraham Lincoln, 3 October 1863

We are profoundly grateful for the blessings bestowed upon us: the preservation of our freedom, so dearly bought and so highly prized; our opportunities for human welfare and happiness, so limitless in their scope; our material prosperity, so far surpassing that of earlier years; and our private spiritual blessings, so deeply cherished by all. For these we offer fervent thanks to God.
-Harry S Truman, 22 November 1950

Perhaps no custom reveals our character as a Nation so clearly as our celebration of Thanksgiving Day. Rooted deeply in our Judeo-Christian heritage, the practice of offering thanksgiving underscores our unshakable belief in God as the foundation of our Nation and our firm reliance upon Him from Whom all blessings flow.
-Ronald W Reagan, 27 November 1986

This Thanksgiving, as we enjoy the company of family and friends, let us gratefully turn our hearts to God, the loving Source of all Life and Liberty. Let us seek His forgiveness for our shortcomings and transgressions and renew our determination to remain a people worthy of His continued favor and protection. Acknowledging our dependence on the Almighty, obeying His Commandments, and reaching out to help those who do not share fully in this Nation’s bounty is the most heartfelt and meaningful answer we can give to the timeless appeal of the Psalmist: ‘O give thanks to the Lord for He is good: for his steadfast love endures forever.’
-George H W Bush, 14 November 1990

And then enjoy yourselves; have plain, raw fun. That’s not just allowed, it’s a Good in its own right.