Category Archives: markets

Global Trade

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Governor and Ambassador, and currently Chairman of the Atlantic Council, Jon Huntsman had some thoughts in a weekend Wall Street Journal.

Expanded exports and open markets were central to our economic-security efforts to reconstruct Europe and Japan and keep lower-income countries free from communism.

Indeed. Such free trade imperatives remain central to freedom, to helping lower-income countries escape despotism generally, and to mutual and widespread prosperity. Huntsman went on:

Whereas today the world economy is replete with far-flung supply chains for manufacturing physical goods, it will be the free flow of designs and ideas that will increasingly constitute the economic linkages of the future.

True enough. The global economy, spurred on by that globalization, is evolving. Actually, the evolution will take a number of unexpected turns and paths, but Huntsman’s guess is as good as any.

But then Huntsman went astray.

….proliferation of empowered megacities and centers of creative innovation will challenge geographic borders, making it hard for capitals to call the shots.

The subhead of Huntsman’s piece emphasizes that basic problem.

Trade will be more important than ever 30 years from now. And a lot more complicated to regulate.

No. It’s not complicated at all to not regulate, and governments don’t need to—shouldn’t—call the shots. It’s not very much more complicated to not regulate very much. A free market doesn’t need very much regulation, and a free market global economy, for all the individual nations’ domestic laws may not be overly free, is the most prosperous global economy. Those who don’t want to play by free market rules when they enter that economy can’t force other nations to trade with them. That’s a free market decision.

Time Warner and Comcast

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The merger has gone bust, harassed into being discarded by the FCC and DoJ. The latter, for instance,

…said it had significant concerns that the merger would make Comcast “an unavoidable gatekeeper for Internet-based services that rely on a broadband connection to reach consumers.”

This is an…ironic…concern, given that DoJ’s partner in the merger’s destruction had only recently arrogated that gatekeeper role to itself with its Net “neutrality” rule recently announced.

Unfortunately, with this FCC and this DoJ, we can’t know whether the cancelation of the merger was a good idea or a bad one. And that’s bad for business and bad for American consumers.

Change We Can Hope For

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A post-World War II-era program that forces raisin producers to give part of their annual crop to the government could soon be a relic of history.

Several Supreme Court justices expressed doubts Wednesday that federal officials can legally take raisins away from farmers without full payment even if the goal is to help boost overall market prices.

An immediately post-war New Deal law allows the Federal government to manipulate the market’s raisin supply by seizing a significant fraction of a raisin farmer’s crop and thereby prop up raisin prices—for the benefit of that farmer, you see.

Raisin farmers, over the specific period at issue (because law suits, quite properly, have to be specific in their allegations), were required to give up 47% (!) of their crop to the Feds. Marvin and Laura Horne were among the farmers so afflicted, and they demurred, refusing to give up their property, their raisins. For their effrontery, the Feds have fined them almost $700,000.

The law in question, though, is a follow-on from the Supreme Court’s earlier Wickard v Filburn case that gutted the Commerce Clause by allowing the Federal government to dictate to farmers how much wheat they could grow—and therewith to manipulate market prices. Wickard made possible all of the subsequent market interferences and farm diktats that the government has inflicted on the nation.

This case, Horne v Department of Agriculture, is an opportunity for the Supremes to begin correcting that original mistake.

Bailouts

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The Inspector General for the Federal Housing Finance Agency (FHFA) recently reported that Fannie Mae and Freddie Mac might need more government bailouts if housing markets decline. The problem: lack of capital reserves to serve as a buffer against future losses.

That lack of capital, says Fannie Mae boss, Tim Mayopoulos,

increases the likelihood that Fannie Mae will need additional capital from Treasury at some point.

William Isaac, FTI Consulting Senior Managing Director (and former FDIC Chairman), and author of the piece at the link, has a solution: Treasury should stop sweeping Fannie’s and Freddie’s profits into the Federal government’s piggy bank. He’s right that this is illegal, but it’s the wrong solution.

The correct answer to the problems with Fannie Mae and Freddie Mac is not to bail them out in any way shape or form. The correct answer is to disband them completely, erase them from government, and replace them with…nothing. Full stop.

All the more Reason

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…to speed reform of the way in which our economy produces medical care services and in which we pay for them.

[A] 66-year-old couple retiring this year with average Social Security benefits can expect medical costs to consume 67% of the Social Security they will receive in retirement.

A 55-year-old couple who plan to retire in 10 years can expect to devote about 90% of their lifetime Social Security benefits to healthcare costs.

There’s more:

Social Security benefits typically grow by approximately 2% a year—the overall rate of inflation. But medical costs in general tend to rise by more, 5% to 7% a year[.]

There’s this graph, too, that illustrate cost change trends since 1960:HealthCostTrends

Since Obamacare was enacted and has started to take effect (since 2010), the then-eight-year-old trend of decreasing costs has been completely stopped. That’s the effect of government intervention into a free market.

If we’re to correct this, if we’re actually to hold down, not just the rise in costs, but the actual costs themselves, we need to get government out of the way and use free market solutions: get rid of the health welfare that is Obamacare, allow insurance companies—which would sell true insurance policies—to charge premiums based on the actual risk transferred from customer to company, and allow insurance policies to be sold across state lines—that is nationwide.

All government intervention succeeds in doing is preventing competition and market forces from reducing and then holding down costs. Which hits hardest the very people these government programs are claimed to help.