Category Archives: political economy

An Additional Angle

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There’s another approach to this problem that also would be highly useful, and in a much more general way. The problem is the apparent debanking of Conservative enterprises and others like Crypto by too many banks. President Donald Trump appears to be setting up an Executive Order that would direct[] bank regulators to investigate whether any financial institutions might have violated the Equal Credit Opportunity Act, antitrust laws or consumer financial protection laws for political reasons.

I would approach this from another direction, a more generic one, in addition to this apparent EO. I would require, via EO (with legislation to adjust and then codify the EO after a year to see how well the EO works) to the relevant regulators, all financial institutions that close an existing account or that reject an application for one—not only debt accounts—to provide the account holder detailed, concrete, measurable reasons for closing the account, those reasons to accompany the closure, and to provide the account applicant with the same kind of detailed, concrete, measurable reasons for denying the application, with that response required to be provided within one calendar week of the application.

In addition to this, I would require the financial institution, since it has already developed its position and underlying…data…to answer all requests for clarity of any of the reasons within 24 hours of the request being transmitted if done electronically or within one calendar week if the request was transmitted in writing: USPS, UPS, Fedex, and the like. In this context, email and fax would count as electronic transmittal.

In Trump’s putative EO, [v]iolators could be subject to monetary penalties, consent decrees or other disciplinary measures. So it would be here, with these clarifications: monetary penalties would apply both to the financial institution and to the relevant managers in the C-Suite and the business’ Directors, since those persons are the ones animating the financial institution. Additionally, disciplinary measures would include termination for cause of those managers and Directors found culpable enough to be fined.

This move is not tailored to political closures or rejections, but would apply to all such, and it would apply to individuals as well as to businesses with accounts or applications for accounts.

One more thing: my move would not require financial institutions to suggest avenues for correcting the reasons for closure or rejection. A properly detailed notice will provide the account holder/applicant with plenty of ways to correct via the explicit reasons contained in the notice.

There’s also this from the banks’ side:

A Bank of America spokesman said the bank welcomed the administration’s efforts to provide regulatory clarity. “We’ve provided detailed proposals and will continue to work with the administration and Congress to improve the regulatory framework,” he said.

If the bank has these detailed proposals already developed, there is no reason why it cannot implement one of them without waiting on Government to tell it what to do. That would be what used to be good old American initiative.

A Brief Thought on AI and Employment

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It seems that newly minted college graduates are having trouble getting those entry level, low-paying jobs that used to be virtual guarantees in most avocations. Employers are discovering that AI can do many of those entry level jobs just fine, so they’re only interested in hiring folks with a few (say 5-ish) years of actual experience into those jobs that need that experience.

The question becomes what to do after those 5-ish years when those relatively experienced employees move on. Having hired few to no inexperienced folks fresh out of college, there now is no pool of somewhat experienced folks from which to hire.

My thought: use AI to train those who are inexperienced, both new graduates and by now 5-ish years post-college and still inexperienced, to do the entry-level and the somewhat experience-needing work. Continue that cycle as AI advances into the work heretothen requiring more experience, using AI to train employees into those yet more experience-needing positions.

Humans are always going to be better than robots at doing work that requires actual thinking, including jobs that don’t require much thinking directly but do require interaction with other humans in teamwork and/or collaboration (which are not the same thing), with supervisors, even with robots. It also takes humans to train that thinking, and robots can be useful tools in that training.

Carlyle, an investment firm, already is doing this sort of thing, but it needs to get more widespread.

The investment firm Carlyle now pitches to prospective hires that they won’t be doing grunt work. Junior hires go through AI training and a program called “AI University” in which employees share best practices and participate in pilot programs, said Lúcia Soares, the firm’s Chief Information Officer.
In the past, she said, junior hires evaluating a deal would find articles on Google, request documents from companies, review that information manually, highlight details, and copy and paste information from one document to another. Now, AI tools can do almost all of that.
“That analyst still has to go in and make sure the analysis is accurate, question it, challenge it,” she said. “The nature of the brain work that needs to go into it is very much the same. It’s just the speed at which these analysts can move.”

TACO Trump?

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Trump Always Chickens Out goes the latest anti-Trump meme of the Left. This graph tells a different story.

All of those latest agreed/imposed tariffs are higher than the original tariffs.

Keep in mind that Trump is, from the beginning, a builder who learned his trade in the blunt-speaking, trash talking New York City environment and a marketer who learned negotiating in that same environment.

The best deals are made by a marketer who begins the negotiations with an already clearly understood price range within which he’s willing to close a deal and outside of which is willing to walk away. The marketer then begins with offers that are extremely low on proffered buys and extremely high on proffered sales and lets himself be talked up/down toward his already determined range in exchange for more things from the prospective seller or buyer.

This is what that graph illustrates.

A Thought on Interest Rates

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William Silber had one on the Wall Street Journal‘s Sunday opinion pages. Naturally, I have one on his.

The core of Silber’s thought is this:

The so-called neutral rate of interest is observed in hindsight—by whether the economy is expanding fast enough to keep unemployment low but not too fast to provoke higher inflation. By that measure, the current target interest rate of 4.25% to 4.50% seems about right. I say “about right” because the unemployment rate is low but the rate of inflation is somewhat elevated. That suggests, if anything, the target interest rate should be higher to push down inflation.

Silber is right on the first part. He’s wrong on the second. The current target interest rate “seems about right” because it historically correlates with the Fed’s inflation target of 2%. Now it’s time for the Fed to sit down and be quiet—and to say in so many words that that’s what it’s going to do. Excursions above and below the inflation target are just the noise of a free market. The time is not yet—if ever in the current market conditions—to make any sort of move on target interest rates.

This, too, Has a Fix

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The lede intimates the problem:

Dual-earning married couples are estimated to face a loss of $18,100 in annual benefits in seven years without the passage of some sort of entitlement reform, according to a new study.

And this:

“At the same time, those retirees might experience reduced access to health care due to an 11% cut in Medicare Hospital Insurance payments. The cuts would grow over time as scheduled benefits continue to outpace dedicated revenues,” the analysis [by the Committee for a Responsible Federal Budget] also read.

Florida Republican Senator Rick Scott has proposed legislation to address this:

…create a “Budget Point of Order” and require a two-thirds vote against any legislation that the Congressional Budget Office (CBO) “determines would create a “Budget Point of Order” and require a two-thirds vote against any legislation that the Congressional Budget Office (CBO) “determines would reduce or cut existing Medicare and Social Security benefits.”

But that would only increase costs to all of us in the form of steadily rising taxes. After all, any tax bill that didn’t raise taxes sufficiently to suit CBO would be claimed by it to reduce or cut those benefits and so would require that supermajority vote.

No, the better solution is to entirely privatize Social Security and to return responsibility for Medicare entirely to the States under their respective Medicaid programs.

Social Security could be privatized entirely for those currently younger than 50 years—or under 40 years if the longer transition period would be more politically palatable. Continue to require folks to pay those Social Security taxes, but the money would go into retirement accounts strictly for the benefit of the taxpayer and his future retirement, instead of being sent right back out for the current benefit of existing retirees. This would give the taxpayer/future retiree skin in his own game, and I guarantee you that this individual would do a lot better job of managing his retirement money than the government has been doing—especially with the government confronted as it is with both a dwindling supply of employed persons paying the taxes to produce current payouts and an increasing post-retirement life span. The transition would be deucedly expensive for the government (all of us taxpayers), but that expense is only going to explode if nothing else is done.

On the other hand, Medicare conversion doesn’t need so long a transition, and it would produce immediate savings for the Federal budget—its real budget, not the fictional one that pretends Social Security and Medicare aren’t part of government expenditures. For this conversion, it’s a simple matter of converting the Medicare transfer to each State to a Year Zero block grant solely to the State’s Medicaid program. Then each year over the next 10, reduce the size of the block grant by 10% of the Year Zero amount and reduce each worker’s Medicare part of his payroll tax and his employer’s contribution to that payroll tax by 10% of that Year Zero tax collection. At the end of those 10 years, the Federal government would be out of the States’ health coverage business, the States would have their responsibility for and control over their own programs wholly restored, and each worker and employer would be out from under that portion of the payroll tax.