Category Archives: Economics

Miscellaneous economy stuff

A New Form of Government Subsidy

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And so a new form of market distortion by government.

Consumer-goods giant Unilever NV was set to raise money in bond markets Monday that will cost them almost nothing, in the latest sign of how the European Central Bank’s stimulus measures are slashing funding costs across the continent.

On the other hand, there’s this example of an impediment to private enterprise borrowing:

In one tranche of a €1.5 billion ($1.68 billion) deal, the Anglo-Dutch company was set to sell €300 million of debt maturing in 2020 with a coupon of 0%, potentially offering investors a yield of just 0.06%, according to deal guidance released Monday by underwriting banks.

Investors have other places in which to invest besides bonds, though.  Stock markets come to mind as one such.  Except there’s that fee the EU charges for every stock buy and every stock sell transaction (a fee, by the way, that investors moving through the facilities of financial institutions domiciled in London would be able to avoid were Great Britain to succeed in severing its ties to the EU).  The two moves, free money for lending/borrowing courtesy of the ECB and making stock trading artificially more expensive with those transaction fees, weren’t set up deliberately to dovetail, certainly, but they do line up nicely in their realization.

Withal, such borrowing subsidies, aside from their economically unsound market distortions also come perilously close to WTO violations in the form of government support for domestic companies at the expense of foreign ones.  Just not quite a violation, since foreign enterprises can, nominally, borrow via the same bond-letting in the EU.

Minimum Wage Revisited

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Kevin Williamson, at National Review, had a thought that’s only now percolating to the surface of thinking Americans and that still is avoided by the American Left.

Properly understood, raising the minimum wage—and having a minimum wage at all—is camouflage, something to talk about and fight about while we’re not talking about and fighting about the more important underlying issue.  Declaring that all American workers shall be paid at least $15 an hour is not the same as ensuring that all American workers produce $15 an hour worth of value, and, eventually, the disconnect between those two considerations must make itself felt.

That part is well understood, and that’s a part that is deliberately ignored by the Left.  But there’s this, too.

Krugman, Clinton, Sanders, et al., have a backward and primitive view of government.  For them and for their fellow Hobbesians, the Middle Ages never really ended, and the role of the sovereign is to distribute benefices and issue decrees.  Unhappy with your wages?  Petition the prince to decree that they shall be otherwise, and dare any gimlet-eyed economist to point out that the imperial tailor is skimping on the ermine.

Yeah.  Minimum wage mandates are just an excuse for governing by fiat, for substituting rule by law for rule of law.

Williamson took a more gentle position on that; he suggested that it’s a lack of understanding by minimum wage proponents of the facts of economics and of human complexity.

I don’t think the leadership of the Left is that ignorant, or that naïve.  They know full well the facts of economics and of human complexity.  That’s why they carefully elide those things enroute to their rule by (Left’s) law: minimum wage mandates are a tool, not a goal.

Saviors

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Don Boudreaux, at Cafe Hayek, had some thoughts on this sort of folk.  Here’s one:

Saviors need victims who need saving.  And if such victims are not real and readily available, the saviors conjure them up by convincing themselves that this or that group of people are helpless victims eager to be raised from the muck of their misfortunes by the saviors.  Sometimes the saviors convince even the groups they seek to save that they—the members of these groups—are indeed mired in a muck from which they can be extracted only by the saviors.

This much is true, but I think Boudreaux missed a couple of other characteristics of these saviors.

One is that these become addicted to their saviorism: the addiction of needing victims is the saviors‘ desperate need for the ego rush of their helping, whether that help is real or a figment of the pseudo-benefactor’s imagination.  This sort of savior cannot get along without the dependency of others on their own largesse.

The other missed characteristic is pure, raw power.  That dependency of other on these ones’ handouts is, for these, nothing more than an enhancement of their own personal power, whether political, economic, or social.  The dependent ones represent votes, or tools for gathering donations from third parties (a significant fraction of which goes to “overhead”), or prestige among peers and credulous acquaintances and strangers.

One way by which we readily can discriminate such saviors from legitimate benefactors is the nature of the benefaction.  The latter offers hands up, temporary aid, means by which the beneficiary can get back on his own feet and become/resume independence and personal responsibility.  The former gives handouts, which serve only to maintain the “beneficiary’s” dependency on his savior.

Another Intrusive Government Regulation

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US regulators proposed requiring the nation’s largest banks and financial firms to hold back executives’ bonus pay for four years, extending by a year the common industry practice on Wall Street incentive payouts.

The plan would also require a minimum period of seven years for the biggest firms to “claw back” bonuses if it turns out an executive’s actions hurt the institution.

In a free market economy—that is to say, a healthy economy—this would be a business decision, validated or rejected by that business’ owners and its marketplace customers.  However, in this Progressive-Democrat Party administration, this is a Government Decision, made by Government Know Betters, because those actually participating in an economy, with their own money on the line, can’t possibly understand the situation.

Another hint of a Government with too many employees and too little work: this…rule…was developed by no less than six agencies.

More Veterans Administration…Misbehavior

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Department of Veterans Affairs investigators conducted spot checks at 10 veterans benefits offices around the country and came to a disturbing conclusion: the VA has been systemically shredding documents related to veterans’ claims—some potentially affecting their benefits.

The VA Office of Inspector General conducted the surprise audit at 10 regional offices on July 20, 2015, after an investigation into inappropriate shredding in Los Angeles found that staff there was destroying veterans’ mail related to claims….

And

Of 155 claims-related documents [in the to-be-shredded bins], 69 were found to have been incorrectly placed in shred bins at six of the regional offices: Atlanta, Chicago, Houston, New Orleans, Philadelphia and Reno[.]

For the math challenged senior VA employees, that’s a 44% rate.  That rate is not consistent with mere carelessness.

This is part of a venerable history of misbehaviors that is just too widespread and too long-lasting to be accidental.  Especially against the backdrop of VA management’s refusal to terminate, for cause or for any reason, those at any level who are misbehaving.

It might seem nice that it’s the VA’s own IG facility is the one that’s finding these failures to perform, but maybe that IG is doing so secure in the knowledge that there will be no consequences to the findings.  The VA’s IG, after all, works directly for the VA’s Secretary.

Veteranos Administratio delende est.