Category Archives: Economics

Miscellaneous economy stuff

“Retail Investor”

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The Left’s new obfuscatory synonym for “dumb Americans.”

US securities regulators, under pressure to demonstrate they have a handle on potential risks in the asset-management industry, are about to crack down on the use of derivatives in certain funds sold to the public, worried that some products are too precarious for retail investors.

Because us dumb Americans are just too ignorant to make our own investment decisions. We need the Progressive Know Betters to tell us how we should make some investments, and to deny us access to other investments.

[U]nder pressure to demonstrate they have a handle on potential risks in the asset-management industry: this is actually the problem. The securities regulators, themselves, have no idea of the risks of derivatives. They showed this risk all through the Panic of 2008, and they’ve done nothing substantive to correct their failure.

If these regulators were serious about the precariousness of (some) derivatives, they’d require the chaining of them and the arithmetic underlying them to be made public so that all investors—institutional and dumb Americans retail alike—could make our own assessments. Without Big Government Know Better interference.

More Government Overreach

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This time, by the Federal Reserve Bank. As most of you already know, the Fed runs “stress tests” to determine whether financial institutions can survive an economic dislocation of the magnitude of the Panic of 2008. Among other things, if the institution fails the stress, the Fed dictates to the institution the dividends it will be allowed to pay until the conditions leading to the alleged failure are corrected.

That’s a serious overreach; it is a government entity presuming to intrude itself into a private enterprise decision, a decision that the free market is fully capable of sanctioning or accepting without Big Government involvement.

It’s worse than that, though. Fed Board of Governors member Daniel Tarullo has exposed the more massive overreach.

Even though we do not publicly release the models, we have put systems in place to ensure oversight and accountability[.]

The Fed uses non-peer reviewed, secret models to make its assessments. Because of that secretiveness, we have no way of assessing the adequacy of the Fed’s “oversight and accountability” of those models. We also have no way of assessing the accuracy—even the legitimacy—of those models.

Tarullo’s excuse?

…disclosing the models could give banks an opportunity to game them….

Because the financial institutions don’t already game the system. Like nobody ever games any system. No, of course we do. It’s what competition does. Gaming—free market competition—is innovation, prosperity production. And, yes, the instability of creative destruction, which leads to breakout innovation and prosperity production.

It’s a disingenuous excuse for a disingenuous practice. The deliberate lack of transparency of this arm of the Big Government is of a piece with the general secretiveness of this Big Government.

It’s necessary secretiveness, however. If the public knew more about these models, knew something of how they work (or fail to work), we might do more than force corrections to them. We might do away with the Fed’s interference in private business decisions altogether, and that would reduce the power of the men in Big Government.

National Sovereignty

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There’s sovereignty, and there’s sovereignty. Michael Graetz, in Thursday’s Wall Street Journal, talked about the European Union’s extra-legal tax crime creation and its retroactive application of its newly minted crime to a number of multinational corporations. Interestingly, the “felonious” multinationals are American, so far.

These companies’ offenses? Tax agreements they entered into with the governments of Luxembourg and the Netherlands (and with Ireland…).

Graetz went into considerable detail about the nature of the so-called crimes in his piece. What’s interesting to me, though, is that these agreements were entered into in good faith on both sides: the multinationals on the one side and supposedly sovereign nations’ governments on the other side. However, the European Commission says it’s sovereign over these nations, and their solemn agreements cannot be allowed to stand.

This is the price of doing business—or trying to do business in good faith—with a fundamentally socialist polity—even if that polity has not the sovereign superiority it purports to arrogate to itself. On the other hand, this is the damage done by erstwhile sovereign nations surrendering even a part of their sovereignty to a supra-national construct.

“Putin to Keep Up Pressure on Turkey Over Shootdown”

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That’s the headline of a Thursday Wall Street Journal piece about Russian President Vladimir Putin continuing his dudgeon over Turkey’s having shot down one of his fighter-bombers for violating Turkish airspace.

For instance, Putin said this in his State of the Nation speech:

If anyone thinks that—after having committing such a heinous war crime of killing one of our people—[the consequences] will be limited to tomatoes or other restrictions in construction and other sectors, they are deeply mistaken[.]

It’s a pressure game I don’t think Putin can win, unless he’s prepared to go to a shooting war with Turkey. Russia isn’t the one who controls the egress route from the Black Sea, for instance. This is the route a significant amount of Russian trade must take to get into the Mediterranean and points beyond. This is the route significant fractions of reinforcements and resupply for Russian forces in Syria and of aid for Bashar al Assad’s rump Syria must take.

Turkey controls that egress route.

Private Property Rights and Asteroid Mining

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The US Commercial Space Launch Competitiveness Act (the Space Act), which President Barack Obama signed shortly before Thanksgiving, acknowledges certain critical things regarding private enterprise and solar system resources. One of those critical things is this:

Any asteroid resources obtained in outer space are the property of the entity that obtained them, which shall be entitled to all property rights to them, consistent with applicable federal law and existing international obligations.

Naturally, others who lack the capacity to reach the asteroids (our own capacity, so far, is limited; the law was enacted in the expectation that our capacity would expand in the reasonably nearby future), demur from our new law: it violates international law, they claim. Sa’id Mosteshar, a Board Member of the London Institute of Space Policy and Law, is one such:

It is my opinion that any US entity obtaining asteroid resources would be in contravention of international law, as would the government for permitting it. The Treaties governing space activities do not give the US that right, and the US government cannot assign to its citizens rights that it does not have.

Indeed, he argues that the asteroids are

not subject to national appropriation.

Mosteshar is right, but he plainly doesn’t understand how wrong that makes him.

It isn’t government enterprise that would be doing the exploration and exploitation governed by the Space Act. It’s private enterprise.

We’ve understood since Locke articulated the concept all that time ago that governments don’t have rights to give or withhold. Already endowed in each individual one of us by dint of our existence is a set of rights. We then grant certain lesser rights, authorities, and privileges to our governments in order that those governments can do what they were created to do: protect those larger rights that are our endowment.

One of those rights is our property in our own bodies and the ownership that gives us—each of us as individuals—in the fruits of our labor. Hence Mosteshar’s correctness, which makes him so wrong. Private property rights are not governments’ to give; of course, the US government cannot assign to its citizens that right: we already have it. Private enterprise exploration and exploitation are not subject to national appropriation because it isn’t national at all: it’s…private. Private exploration and exploitation of off-Earth resources—the asteroids, for instance—in no way establishes a national claim on those resources or the results of their exploitation. It just obligates the nation to move to protect those private property rights, held by its citizens, against interference by others.