Category Archives: markets

Government’s Gotta Regulate What A Man’s Gotta Do

Posted on by
Reply

It is taking home buyers longer to get a mortgage, which some in the real-estate industry say is the result of new federal rules meant to make mortgage terms easier to understand.

It wasn’t broke, and mortgages were moving as much apace as this Obama Recovery permitted, but it also wasn’t regulated. Government abhors a control vacuum.

Mortgages took an average of 49 days to close in November…the longest closing time since February 2013….

That’s only a three day increase over October, but it’s an entirely unnecessary and a completely government caused delay.

The rules…require lenders to give borrowers final terms of a loan at least three business days before closing to ensure they have time to understand the agreement.

Never mind that consumers already can walk away from any purchase contract, including mortgage contracts, within three days after signing—the “cooling off” period.

Advocates for the changes say they are a common-sense response to the housing crisis, during which it became apparent that many borrowers didn’t understand the ramifications of terms such as teaser rates or growing principal balances.

Of course a Liberal will say it’s common sense to regulate. It couldn’t possibly be common sense to educate instead.

The outcome of this demand to regulate anything and everything is more than just a delay in closing. Sales of existing homes have fallen sharply, 10.5% in November, the first month these wonderful new regulations have been in place, compared to October.

Who Doesn’t Trust the PRC Government?

Posted on by
Reply

Recall late last summer when the People’s Republic of China’s stock market melted down over the PRC government’s interference in currency exchange rates and its subsequent failures to handle the stock market result of that. In a Wall Street Journal article centered on a different matter was this little tidbit [emphasis added].

While China’s main stock index is up 20% since August, it is still down 33% from its June peak. About 15% of Chinese stocks remain suspended from trading, and trading volumes are at one-third of their June levels.

Hmm….

What’s He Afraid Of?

Posted on by
1

Chinese President Xi Jinping called for individual countries to have broad authority to regulate the Internet at home, outlining a digital future in which governments could set online standards and challenge the free flow of information and content across borders.

Why is the leadership of the PRC so terrified of the free flow of information, of free speech?

Oh, wait.

Negative Interest Rates?

Posted on by
Reply

University of Michigan Professor of Economics and Research Professor of Survey Research Miles Kimball had an interesting remark the other day in The Wall Street Journal. The article itself was a discussion of the EU’s Central Bank use of negative interest rates on deposits, of national Central Bank use of negative interest rates on deposits, even of some commercial banks such use.

In the context of an additional discussion of whether the US Fed should go that route amid concerns about whether rates are already so low in the US that there’s nothing the Fed could do to influence a future recession (assuming it’s a good idea at all for the government to interfere intervene with the market), Kimball said this:

It’s wrong to say central banks have run out of ammunition. Negative rates can be on tap before the next recession. There’s no limit to how deep we can go.

In an environment of negative interest rates—where depositors are paying the banks to store their money—why would depositors put their money into a bank, or any other financial institution, come to that, as mere deposits? These deposits are the source of funds from which banks and other lenders draw in order to make loans. Where else will such institutions get the funds to lend? If the lenders lend even less than they are now, with interest rates near zero but positive, from where will the capital come to support business factory maintenance, production expansion, short-term payroll needs, supporting credit card borrowing by consumers?

Now magnify this by the fractional reserve requirement imposed on lending institutions: a bank must keep a certain per centage of its loans outstanding as cash held in the bank, whether directly or as deposits in the Fed.

Hmm….

Government Interference

Posted on by
Reply

General Electric Co has pulled the plug on the agreed $3.3 billion sale of its appliance business to Sweden’s Electrolux AB, bowing to pressure from the US Justice Department which wanted to block the transaction on antitrust grounds.

DoJ’s sham beef was that the deal would likely—notice that: not definitely would—lead to

less competition, higher prices and fewer options for millions of Americans who buy major cooking appliances each year.

Let’s leave aside the fact that GE’s appliance business, like appliance businesses generally, is a low margin, slow growing enterprise and that these characteristics don’t lend themselves overmuch to monopolies or to declining competition. Indeed, competition must heat up even more for such enterprises to survive.

No, the important thing is that monopoly power, in and of itself, is not against the law, it does not violate antitrust law. Only the abuse of that power is illegal.

Might the sale have led to abuse? Sure. But that’s speculative. Under American law, speculation isn’t grounds for interference, only the actual commission of a law-breaking act can be sanctioned.

DoJ’s interference in this deal, this private enterprises’ voluntarily entered into exchange, to the point that it successfully blew up the pending agreement, is Big Government overreach. It’s prior restraint, and it stinks.