Tag Archives: economics

Miami as Financial Center

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Financial firms are starting to figure it out: in addition to a better climate and (much) friendlier tax regime, Miami is the place to be for them. I have a thought on one bit of that maybe-migration, the opening statement:

This city has long pitched itself as an attractive location for finance and tech firms, with its tax advantages, flight connections to New York and cosmopolitan flair. Its efforts appear to be paying off.

I’m not sure that Miami needs to tout New York as being within easy reach. It should begin noting that it’s within easy reach of New York. There’s no need for Wall Street to remain in a city as anti-business, anti-financial success, as badly run generally as New York City, or as badly run and high-tax as is the State of New York.

Miami should encourage all of them to come on down to Brickell. The water’s better than fine.

It Only Took 50 Years

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Maybe. While it took us ignorant colonials only a decade, or so, to figure it out.

The eurozone has always had a fundamental weakness compared with the US when dealing with financial and economic crises: while its 19 countries share a currency and interest-rate policy, they have no common tax-raising or spending power.
In 2020, the European Union took a big step toward correcting that deficiency by starting to issue bonds on behalf of all member countries, known as common bonds. Beginning in 2021, some common bonds will be repaid through taxes raised by the EU itself.

That’s a one-off, but maybe it’s a first step and not a last one.

The lack of central taxing and spending power—and authority—was a Critical Item in the failure of the diplomatic concord that was our 13 States operating under their Articles of Confederation, and it took our Constitution to rectify the failure.

Of course, the EU still lacks the homogeneity of understanding of the role of government and of the purpose of money so necessary to the success of a polity that our original States, even under the Articles, had.

But, hey, baby steps. Maybe in another 50 years….

Investing in the PRC

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For good or ill, the People’s Republic of China has decided change the regulatory rules regarding Alibaba Group Holding Ltd’s banking activities. The company has lost

almost all its stock-market gains this year, just days after [PRC] regulators signaled a major change in their posture toward the e-commerce behemoth and its finance affiliate, Ant Group Co.

Notice that: the regulatory change does not cover the PRC’s banking or finance industries—it’s explicitly targeted at Alibaba’s subordinate, Ant. The PRC’s

central bank released a harshly worded statement Sunday criticizing Ant’s business practices and instructing the financial-technology giant to shift its focus back to its mainstay—and less lucrative—digital-payments business.

Notice that, too: the ruling is not the outcome of any sort of investigation, followed by trial in court to assess whether anything wrong actually was being done, followed by a court ruling based on the presented evidence. No, the order is government diktat.

Investors, unwarned by the existence of an investigation or subsequent existence of a court trial, have lost heavily. The only warning investors had was a Christmas Eve announcement of an investigation—and then came the diktat.

Alibaba’s swift comedown has led investors to reassess the regulatory risks faced by [PRC] internet companies…
The hard part is figuring out “how much of the recent regulatory moves against Ant and Alibaba is politically based, how far it will go, and when it will be over,” said Alex Au, managing director at Alphalex Capital Management, a Hong Kong-based hedge fund.

Yewbetcha.

This is what rule by law does, as compared to rule of law. This is why it’s foolish, potentially to the point of violating fiduciary responsibility, to invest in PRC businesses.

Remember this for the coming year.

Panic

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This is what the Left and their Progressive-Democrat governors are panicking over—actual data that give the lie to their claimed need to exercise control over the doings and businesses of their States’ citizens for those citizens’ own good. An exercise that’s actually for the power of that exercise.

The data don’t support their panic-mongering, though. Via a tweet from Carrie Sheffield, a Just the News anchor:

Getting sick is never fun. However, the mortality rate from the Wuhan Virus has always been very low—and getting very lower—for all ages under 70 years. We’ve learned a lot since the virus outbreak last spring, and the mortality rate for that last age group has gotten quite low, also.

Economic Recovery

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What sort of recovery will we have in 2021 with the Wuhan Virus situation under control and, with the release of two vaccines (I’m betting on the come with Moderna as I write on Friday) and others in the nearby pipeline about to stamp the virus into the mud?

Jon Sindreu, in The Wall Street Journal, provided a couple of clues, although he was writing toward a different purpose. This graph of his is my first clue:

He fleshed that out with this:

Flow-of-funds data recently published by the Federal Reserve shows that companies have accumulated even more cash than debt this year: their liquid assets were up 25% in the third quarter. On a net basis, debt was down 7.9%. Relative to GDP, it remains well below 2007 levels.

Another clue:

Nor are property and asset prices tanking, hitting households’ net worth as they did in 2008. So consumers have kept spending when they could.

There’s more in his article, but the upshot is this: 2021’s recovery (and into the later years) won’t be nearly as weak as some have feared. It’ll be strongly positive, although—because of 2020’s already in-progress recovery—it’s unlikely to be quite as strong as hoped.