Category Archives: markets

Central Banks, Interest Rates, and Fear

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The Fed is looking to start raising its benchmark interest rates “real soon now.” This is expected to inject fear into investors used for so long to being coddled and protected from uncertainty by an interventionist central bank.

Christine Lagarde, head of the IMF,

warned Tuesday that markets could be heading for a repeat of the 2013 “taper tantrum,” in which stocks fell and interest rates rose around the world as the Fed considered winding down its “quantitative easing” bond-buying program.

She went on:

I am afraid this may not be a one-off episode. The timing of interest-rate liftoff and the pace of subsequent rate increase can still surprise markets.

This is just foolishness. In a free market environment, surprise not only is normal, it’s the stuff of profit-making. It’s also how enterprises steal a march on their competitors and how startups successfully break into a heretofore stable market. It’s how consumers benefit from the newly available additional choice, the better product, the new idea, ….

Even the “taper tantrum” concern is foolishness. The only ones hurt by that were the investors throwing their tantrum. The stock market quickly returned to its longer term trend, and the tantrum didn’t last long enough to hurt the actual economy.

Surprise in the markets is not a problem for us investors; it’s only a problem for government bureaucrats so dependent on their precious rules. And for crony capitalists fearful of competition.

ATF and Gun Control

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They’re not capable of letting this go.

The Bureau of Alcohol, Tobacco, Firearms and Explosives on Thursday raised new concerns about surplus military ammo used in popular AR-15 rifles and pistols just days after pulling back on a proposal to ban the ammo because it could threaten police safety.

In a Senate Appropriations Committee hearing, ATF Director B Todd Jones said all types of the 5.56 military-style ammo used by shooters pose a threat to police as more people buy the AR-15-style pistols.

So is the ammunition for any firearm a threat. So are knives. So are hammers.

Since the ATF doesn’t understand government’s role in our lives, or its own role in government, maybe it’s time ATF funding was reduced. A lot.

After all, recall that it was the ATF that sold guns to Mexican drug cartels.

Costs of Obamacare

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The Washington Health Benefit Exchange…has enrolled 160,000 paying customers in ObamaCare exchange health plans but that’s more than 50,000 short of goal, which has led to an extension of the enrollment deadline and a request that the Washington State Legislature fork over $125 million to fund the exchange.

There’s a hint there.

Republicans are angry because they were told the exchange would be self-sufficient by the end of this year.

Leading Democrats were also skeptical. They were expecting a much lower subsidy as the exchange bridges from federal seed money to being able to fund itself through premium taxes and fees paid by insurance companies and customers.

There’s a hint there, too.

And

New York’s governor wants a $69 million tax on non-exchange health insurance policies while Vermont has projected a $20 million shortfall by the end of 2015. There also is a bill in Rhode Island to scrap the state exchange and go with the federal exchange to avoid a $24 million hit to taxpayers.

Wait—is there a pattern emerging?

Off Ramps

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That’s the cool, new buzz phrase. Congressmen John Kline (R, MN), Paul Ryan (R, WI), and Fred Upton (R, MI), Chairmen of the House Education and Workforce Committee, Ways and Means Committee, and Energy and Commerce Committee, respectively, used it Monday in The Wall Street Journal to propose alternatives to Obamacare should the Supreme Court strike down Federal subsidies related to health care coverage plans bought through ObamaMart rather than through the State exchanges that the Obamacare law requires for Federal subsidy eligibility.

In the main, their alternatives are good ones, but there are a couple points with which I wholeheartedly disagree, and it’s disappointing that three men who know better would propose them.

We would allow parents to keep children on their plan until age 26.

That’s fine, but 26-year-olds aren’t children; they’re grown adults. They stopped being children at 18, or 20, or 21 depending on the jurisdiction. They stopped being children when they became eligible to make their own binding decisions on legal documents. Retaining sons and daughters on parents’ plans should be a matter of negotiation between the plan seller and buyer; government shouldn’t be involved in magnanimously granting permission—which carries with it the authority to rescind that permission later.

We would prohibit insurers from imposing lifetime limits on benefits.

This is especially disappointing. This, too, should be a matter of negotiation between the involved parties. Mandating an expense to the company, which this plainly does, forces a cost on the customer. There is a greater cost for paying out over an indefinite lifetime than there is for paying out over a known and fixed interval. Denying the company the option to offer either forces the company to pass on the greater cost to the customer, whether the customer wants that much coverage or not. It’s also an unacceptable denial of market choice to the customer.

[W]e would offer those in the affected states a tax credit to buy insurance.

This comes from the false premise that government should be the default source of welfare, and not the last resort. From that, it jumps the gun: the magnitude of the need is not at all established, especially given the initial fluid market environment that would be created were the competition across state lines part discussed in their op-ed actually passed. Only after private sources of aid have been exhausted, in that stabilized environment of lower basic cost for health plans, should government aid become available. (It’ll also be interesting to see how these guys propose to pay for these tax credits, but perhaps that’s for a later op-ed.)

Non-neutrality of Net “Neutrality”

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The Federal Communications Commission set aside two decades of laissez-faire policy Thursday to assert broad authority over the Internet, voting to regulate broadband providers as public utilities and overruling laws in two states that made it harder for cities to offer their own Web service.

And

The commission pledged to use a light touch….

The FCC’s “rule” violates express Congressional instruction not to do this. With the FCC’s lawlessness made manifest, how can their pledge be believed?