Category Archives: Economics

Miscellaneous economy stuff

More Spending, More Foolishness

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It’s a two-fer that only President Barack Obama could propose with a straight face.

The Obama administration is proposing to extend a financial sweetener the federal government offers states that expand their Medicaid programs, in a bid to persuade more to do so before the president leaves office.
White House officials said President Barack Obama will ask Congress to include three years of full federal funding of expansion for any state that extends eligibility for the program to most low-income residents. Officials said the proposal will be made in Mr Obama’s fiscal 2017 budget, to be released Feb 9.

More Federal spending. Billions of dollars of spending to persuade States to expand their Medicaid programs, an addictive “offer”—addiction to Federal dollars.

And that’s the foolishness. Obama is promising to do this for three more years. Three years in which to get the suckered States hooked on the Federal government’s street corner product.

This move of his hasn’t anything at all to do with low-income citizens. It has everything to do with vote pandering.

In an election year.

Oil, the Saudis, and Iran

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As global oil prices plunge to levels not seen in more than a decade—and Saudi Arabia and Iran threaten to further flood the market with cheap crude as part of their ongoing feud—the possibility of rock-bottom fuel prices appears to be a blessing for consumers.

What’s the downside of that? With our own restriction on exporting oil lifted, we’re also in a position to keep producing and keep selling. The low prices are good for American consumers; they’re an opportunity to expand our own market (the Saudis’ logic in maintaining production rates in the face of falling prices is sound), and thereby wean Europe off dependence on Russian oil exports; and low prices hurts…whom?

Low prices hurts our own oil producers, but an advantage of free market competition is that it leaves producers generally, including in particular oil producers, well positioned and well experienced in dealing with pricing vagaries. We’ll do fine in the price-competitive markets. The Saudis will survive the competition; their pricing needs against their population demands are rather small.

On the other hand, both Russia and Iran need $100+ oil (against last week’s close below $35, and a more stable $40-$50) to fund their adventures.

Keep the oil flooding. Throw us into that tar patch.

The Feds getting out of the way of natural gas exporting would pay similar, and similarly large, economic and political dividends.

“China Loses Its Grip on the Yuan”

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That’s the title of a Wednesday Wall Street Journal article at the time I write this, and I’m not sure it’s far wrong. This is the currency, too, that the IMF decided belonged in its basket of reserve currencies.

The yuan is having quite a number of troubles, courtesy of the PRC’s efforts to retain its (non-market) control. Two of these include

“People are losing confidence [in the yuan],” said Cynthia Wong, head of emerging Asia trading in Hong Kong and Singapore at Société Générale. “Positive hopes diminished with the stock-market crash at the beginning of the year…. She described the flow in the currency market as “one-way,” with investors betting on a weaker yuan.

Here’s another:YuanGap

What’s that devaluing currency going to do to the PRC’s economy as raw materials for its stagnating production base get more expensive? As imported goods for its (now stagnating) consumer sector get more expensive?

What opportunities for mischief accrue from the wide and increasing spread between the controlled yuan’s domestic value and the freely moving value as the yuan is traded (mostly sold) in the Hong Kong currency market? Arbitrage, for one. More and less trackable capital flight for another.

Hmm….

Greed and Freedom

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Greed is not good. And, here is a New Year’s Resolution that we will keep: if you do not end your greed, we will end it for you.

That’s Democratic Party Presidential candidate and Senator Bernie Sanders (D, VT) claims.

Either he’s never read Adam Smith, never heard of the invisible hand, or he finds free markets and the individual freedom engendered by them anathema to his socialism.

When two men come together to make on exchange of goods—labor for money, for instance, or bread for money, or software coding for bread—each of those two men are acting strictly and solely for his own, personal benefit. Each of those two men is acting on his own greed. Yet, as a result of their voluntary exchange—the one’s money for the other’s item, or the exchange of goods—both men are made better off: both men have something of value to them that neither had before the exchange.

It’s this free market, it’s this basic freedom, that Bernie Sanders wants to destroy.

He uses his line as an excuse to break up entities (banks and insurance companies in his spiel) that he says are too big to fail. It’s certainly true that “too big to fail” is an unacceptable risk to us citizen-taxpayers. But the right answer is not to bail “too big to fail” enterprises out (the risk) or to force onto them a Big Government mandated business decision (the attack on freely agreed exchanges), but to let them fail, with no government—no citizen funded—bailout. Our existing bankruptcy laws are sufficient, and they work well within our free market economy.

We don’t need a Progressive, Know Better Government dictating answers to us, interfering with our own market choices.

Health Insurance and Regulation

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Faith-based organizations that share the costs of health care among their members are a tiny part of the health care coverage industry. They’re also not regulated by government.

[Faith-based] ministry officials say they aren’t offering insurance, don’t guarantee claims will be paid, and don’t need to be regulated.

Naturally, regulators object.

But now, some insurance commissioners are concerned that the ministries could put consumers at risk if bills aren’t paid.

This is the consumer’s choice to risk, though, not government’s authority to command not to. At least in a free society.

And more tellingly:

State regulators also say health ministries disrupt the insurance market because they tend to attract healthier consumers, siphoning them from commercial plans that can be left with sicker or older customers.

What these government regulators carefully omit to mention, though, is that the only “market” liable to disruption is their precious regulated “market.” In a free market economy, such competition is healthy, if disruptive, leading as it does to improving products and lowering costs.

Unfortunately, the number of faith-based health cost sharing entities that are exempt from Obamacare is carefully and deliberately circumscribed by Obamacare. That needs to change.