Category Archives: markets

Who’s Actually Repaying Federal Loans?

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Here’s one example.

Under the 2008 Farm Bill, the United States Department of Agriculture is required to buy sugars like refined beet sugar and sell it to ethanol producers if the sugar producers are, in the opinion of the USDA, likely to default on certain Federal loans (this requirement is unchanged by the current Farm Bill modifications wending their way through Congress).

You read that right: the Feds loan sugar producers money, then the Feds buy the producers’ output so the producers can repay the loans.  Federal money—which is to say, our money sent to the Feds as taxes—is loaned to sugar producers in support of an ethanol program that no one wants.  Then, when repaying those loans becomes inconvenient, or even impossible, more of our (tax) money is used to buy the borrowers’ output, providing them with the funds with which to pay up.  The borrowers, courtesy of…Uncle Sugar…use (our) purchase money to pay us back.  We’re screwed two times in one deal.

But wait—there’s more.  In one illustrative case,

[t]he USDA paid about $3.6 million for the sugar, which it purchased from Western Sugar Cooperative, a sugar-beet processor based in Denver, according to a notice posted on the agency’s website Friday.  Front Range Energy LLC, a Windsor, CO-based ethanol maker, paid $900,000 for the sugar, according to the USDA notice.

We’re screwed a third time.

And that’s the purpose:

By buying the sugar, the USDA aims to boost prices to a level where sugar processors will be able to repay $298 million in outstanding federal loans that come due at the end of August and September.

It really is just this barefaced.

I Wonder

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…whether this might be doable in the US.  An English gentleman has a solution to those annoying cold calls from someone, or some robot, wanting to pitch you this or collect your personal information for that.

A man annoyed by cold callers has turned the tables by setting up his own premium rate number which earns him money.

Lee Beaumont said he paid £10 plus VAT to set up his personal 0871 line in November 2011 and has made £300 from calls he has received since.

It certainly has had a useful effect from my perspective:

…fewer calls, falling from up to 30 per month last year to 16 so far this month.

Hmm….

Economic Disinformation

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President Barack Obama actually said this out loud to The New York Times:

T]hat [Keystone XL pipeline] oil is going to be piped down to the Gulf to be sold on the world oil markets, so it does not bring down gas prices here in the United States.

Because increased supplies don’t actually decrease prices.  Sure.

Actually, that distorting claim is of a piece with Obama’s steady drumbeat of distortions concerning the effects of his economic policy.

Here are the latest employment statistics, which Obama insists demonstrate that effectiveness and why he should be able to spend and tax even more.

Total nonfarm payroll employment increased by 162,000 in July, and the unemployment rate edged down to 7.4%….

That’s against ADP’s mid-week claim of 200,000 new jobs.  And what’s behind that apparent improvement to “only” 7.4% unemployment?

…long-term unemployed (those jobless for 27 weeks or more) was little changed at 4.2 million.  These individuals accounted for 37.0% of the unemployed.
…
The number of persons employed part time…was essentially unchanged at 8.2 million in July.

Additionally, the labor force participation rate (the per cent of our adult population actually trying to find work) dropped last month to 63.4%, approaching a 30-year low, as some 240,000 Americans gave up trying to find work in this stagnated-at-lousy economy.  That drop underlies the seeming drop in the headline unemployment rate.

That’s not all.  We see from The Wall Street Journal that actual economic expansion—the GDP growth rate—while still positive, is falling and has done so for some time.

Because Obama’s Keynesian politics have been so effective, and his claims about the wisdom of them have been so accurate.  Never mind that downward trend over the last 7 quarters.

The Dallas branch of the Fed has some interesting charts, also.  This one compares current unemployment duration with the length of unemployment in past recessions.  Careful readers will recognize the recession of ’74-’75 at the end of Jimmy Carter’s term, and the ’81-’82 recession at the start of Ronald Reagan’s terms.

This next graph shows…graphically…the effectiveness of Obama’s economic policy.  No matter who’s estimating, we just don’t catch up.

Last one.  This graph shows how the Obama Recovery compares with our history of economic recoveries.

But Obama says everything is Jake, and those Evil Republicans should get out of his way, so he can do even more of this.

An Outcome of Free Trade

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Since NAFTA was ratified, here are some of the results, as outlined by George Schultz, former Secretary of Labor, Treasury, and State; former OMB Director; currently Distinguished Fellow at Stanford University’s Hoover Institution—a guy who might know little about his subject matter.  As of 2010,

  • the three countries [the US, Canada, and Mexico] constitute around one-fourth of global GDP
  • they have become each other’s largest trading partners.

Moreover, the trade is tightly integrated:

  • 24.7% of imports from Canada were US value-added
  • 39.8% of US imports from Mexico were US value-added

The (legal) movement of people among the three of us has burgeoned, also, together with the economic benefits of such mobility.  Tourism:

  • Canadians made 21.3 million trips to the US in 2011 and spent $23.9 billion
  • US visitors made 11.6 million trips to Canada and spent $7.7 billion
  • Mexican visitors made 13.5 million trips to the US and spent $9.2 billion
  • US visitors made 20.1 million trips to Mexico and spent $9.3 billion.

Border-crossing truck shipping:

  • 10.7 million [border crossings] between the US and Canada
  • 9.5 million between the US and Mexico.

And so on.  There’s more concerning energy and energy independence both for NAFTA and for the three of us individually.

Of course some object to the loss of jobs.  But outside the results of the Panic of 2008*, the job losses were temporary for those truly interested in working.  They simply rotated into new jobs generated by the new opportunities flowing from the burgeoning (free) trade.  The increased trade, over all, led to a net increase in employment in each of the three of us.

 

*The results of the Panic, including the loss of job mobility, have naught to do with free trade or specific free trade agreements.  These outcomes stem directly from subsequent Federal policies aimed explicitly at the Panic and not at anything systemic in our economy.

Continued Government Interference in our Markets

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…most recently in our financial markets.  Now the Feds are expanding their hectoring of our financial institutions over their fees.  The Federal government already has chosen to prevent them from making money the old fashion way—through lending—with its artificially suppressed interest rates.  It’s already inveighed against them over one set of fees which they charge as a means of earning a profit for their owners—our fellow Americans.

Now the government is going after another set of fees, with their objection centered on the fact that these Know Betters just don’t like the fees.

The Consumer Financial Protection Bureau, a creature of Dodd-Frank that is responsible and responsive to no one, has begun the process of obstructing the collection of overdraft fees—the fees charged when folks write checks with insufficient funds to cover them, so the bank covers the bad checks or transfers funds from the check-writers’ savings accounts (with the check writers’ prior permission) to cover the bad checks.

Usually, such bad checks result from a moment of carelessness.  More than occasionally, though, those bad checks are written by serial offenders, who rely on those overdraft processes to make their bad checks good.

Of course, the CFPB has said

it has no immediate plans to issue or recommend new overdraft-fee rules.

This is disingenuous, though: the criticism by a government agency has its own intimidative effect.  For instance,

In 2011, Bank of America Corp, the second-largest US bank by assets, quickly abandoned plans for a monthly debit-card charge of $5 after it was denounced by lawmakers….

Nevertheless, the CFPB is bellyaching that

heavy users of overdraft coverage pay about $900 a year more than consumers who don’t incur overdraft fees.

This is bad how, exactly?  Why should responsible customers have to subsidize the careless ones for their carelessness?  After all, the costs of making good on those bad checks have to be covered somehow—if not through fees paid by the bad check writers, then by spreading those costs across all the bank’s customers, responsible and…careless…alike.

The best way to hold down the annual costs of writing bad checks is for government to stay out of the market place and for the writers to stop writing bad checks.

The Jack Daniel Employees’ Credit Union charges $10 when a customer overdraws on an account.  Pam Case, manager of the Lynchburg, TN, credit union, said keeping the fee low helps lure customers.  “They like that we don’t have a lot of fees,” she said.

Which demonstrates how well the competition of a free market regulates fees.