Category Archives: markets

Hindsight

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…and learning from it for better anticipations.

Federal Reserve officials grappling with the legacy of expansive stimulus would find it difficult to return to the central bank’s precrisis role on the sidelines of financial markets, analysts and central-bank watchers say.

Well, NSS.  Frankly, these worthies should have known the outcomes likely from their intervention before they intervened.

Aside from the magnitude of the necessary rollback and its attendant difficulty—the Fed’s balance sheet has expanded four and a half times, from $1 trillion to $4.5 trillion since right before the Panic of 2008—there’s the human engineering aspect of personal political power:

The Fed has become “like an octopus,” said Jeffrey Cleveland, chief economist at Payden & Rygel, a Los Angeles money manager.  “Once you get the power and you are influencing all these markets, do you really want to retreat from all that?”

Well,…

New York Fed President William Dudley told an audience this month the portfolio isn’t likely to return to its precrisis size. Federal Reserve Bank of San Francisco President John Williams said this month the portfolio would be “significantly smaller” than it is today, but likely above $2 trillion in assets.

Still twice the original size of the Fed’s balance sheet.  Oops.

Now the rationalization, summarized in the subheadline of the article at the link:

Pulling out of newest central-bank innovations risks market disruptions

A definite possibility, but there’s not much concern for the underlying economy in that remark.  And the economy is what’s important.

We’ll see whether these guys are worth their taxpayer-funded paychecks by how well they learn from hindsight and their mistake.  It doesn’t look promising.

Yet Another

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…Alinsky-esque distraction by the Ctl-Left.  This one is on the matter of Obamacare subsidies to health coverage providers to compensate them “for reducing out-of-pocket costs for some low-income consumers who sign up for plans on the exchanges.”

The Obama administration paid billions of our tax dollars to these providers, the amount for this year alone looks to be in the neighborhood of $7 billion, with the annual payout looking to rise to $16 billion in 10 years.

The House has sued to block further payments because no funds were appropriated for them, and so they’re illegal.  A number of State AGs are seeking to intervene in the suit.

More than a dozen Democratic state attorneys general took legal action Thursday seeking to preserve billions of dollars in federal subsidy payments….

It’s a fair debate to have in the courts, although, absent appropriation, there’s no money to spend, and so it would seem illegal to spend.

Now comes the cynical distraction.  New York Attorney General Eric Schneiderman said,

Millions of families across the country—including hundreds of thousands right here in New York—rely on these subsidies for their basic health care[.]

As if that’s relevant to the legality of the matter.  The courts should allow the spending independently of the law because tear-jerking.

Schneiderman is demonstrating the intellectual, legal, and moral bankruptcy of the Ctl-Left’s demands.  They’re wholly unable to present a case, and so they stoop to emotionalism.

Medicaid Cuts?

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Some conservative Republican Senators are looking to cut Federal transfers to the States earmarked for those States’ Medicaid programs.  Others are concerned.

[T]he [conservative Senate Republicans’] Medicaid plan could affect many more people and shift significant costs onto hospitals and states.

One State’s Medicaid program, though, should be paid for exclusively by that State and not subsidized by the other 49 through those Federal transfers. Medicaid is, after all, a state program by design, and Medicaid eligibility is determined by each State.  The Federal transfer subsidies are made the more egregious by the fact that each State determines its own citizens’ eligibility for Medicaid, and that eligibility is income-based—with the maximum income for eligibility in most States being a multiple of the Federal Poverty Guidelines.  This means that in those States, a citizen can be eligible for Medicaid funds even though, by definition, that citizen isn’t in poverty.  Other States ought not be required to subsidize, through Federal Medicaid transfers, such eligibilities.  Not only are the States are defining “low income” much too loosely, other States have to pay into those definitions.

If each of those other 49 were able to keep the monies collected by the Feds for transfer, they’d also have more money—of their own—with which to fund their own Medicaid programs, and each of the States, absent attendant Federal strings, would be freer to structure their individual Medicaid programs according to their own citizens’ needs and demands.  As it is, States wanting to structure their programs must waste time and resources pleading to the Feds “Mother, may I?” and then argue the matter.

Such State-initiated restructuring—subject to central government approval—already is beginning to include things like work requirements, drug testing and time limits on coverage, all of which would free up State resources for the State’s truly poor.  Federal cuts to transfers to State Medicaid need not interfere with this; on the contrary, such cuts would encourage needed restructuring, while moving to insulate each State from other States’ decisions.

Of course, such Federal transfer cut would have complex implications and require serious Federal tax code restructure and reform—the taxes the Feds transfer for Medicaid come from a variety of sources: individual and business income taxes, dividend and cap gains taxes, and on and on.

That just puts a premium on getting started.

Expanding their Empire?

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The SEC—the Securities and Exchange Commission—doesn’t have enough power; it wants to convince more private companies, over which it has no jurisdiction, to go public so it can regulate them, too?

To spur more companies to go public, the new head of the Securities and Exchange Commission has turned to a veteran Silicon Valley lawyer whose career has involved some of the biggest deals in history.

SEC Commissioner Jay Clayton seems to be sincere in this effort, but he won’t be around forever, and his predecessor had different regulatory ideas, and so likely will his successors.

Then there’s this:

“The real question is do small-growth companies have access to capital, and they do,” said Robin Graham, Managing Director and Head of Technology, Media and Communications at Oppenheimer & Co Inc. “It’s just in the private markets.”

There’s a hint there.

The USPS and Price Increases

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The United States Postal Service lost more than $560 million in the previous quarter (!), and it wants a pay raise to pay for it, a rise in the price of stamps by a penny.  Now, a penny might not seem like much, especially against the current price for a first class stamp on a 1oz letter, but it is symptomatic of a much larger problem: the USPS, a protected monopoly in the first class mail niche and so lacking actual competition and associated innovative pressures, is a money-losing (to the tune of two and a quarter billion dollars each year) proposition.

Postmaster General Megan Brennan:

America deserves a financially stable postal service that can continue to play a vital role in our economy and society[.]

Yewbetcha.  And the USPS ain’t it.

The postal service has lost money for 10 years in a row. It says the continuing red ink hurts consumers because it can’t make necessary investments to ensure “prompt, efficient and reliable postal services,” such as by updating delivery trucks and equipment.

Once again, the USPS, with its empirical performance, is making the argument for disbanding it and replacing it with competitive private enterprises in a free market economy.  Sort of like the protected monopoly Ma Bell was replaced, the USPS needs—the American people need—that replacement (who pays a dime a minute for a long distance call anymore?  Who needs to pay half a buck to send a letter?).