Tag Archives: economics

Constitutionally Mandated Federal Funding

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House Progressive-Democrats have unveiled their “police reform” bill, a proposal crafted explicitly without Republican input. That last is neither here nor there for this post’s purpose. What matters is this claim in Eliza Collins’ Wall Street Journal article describing that bill and its alleged purpose:

The bill doesn’t provide any new federal funds for police departments, except where constitutionally mandated for data collection, according to Democratic aides.

This is an amazing claim. Maybe those Progressive-Democratic aides—or even Reporter Collins—would like to point to that clause in our Constitution that mandates Federal funds to police departments for any purpose, let alone “data collection.”

A Misunderstanding

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In an article centered on reports that President Donald Trump is planning to withdraw 9,500 troops from Germany—relocating at least some of them to Poland—Bernd Riegert had the following:

[T]he US personnel [to be removed from Germany] essentially work within the framework of NATO for the Pentagon’s European and Africa Commands. They operate the Ramstein airbase, a military hospital and a military training facility. They are important pillars of NATO infrastructure, but they do not, strictly speaking, contribute much to Germany’s national defense.

Wow.

At least some of those reassigned soldiers would be sent to Poland. Shoring up Polish defenses, militarily and politically (as that reallocation also would signal), against Russian aggressions doesn’t contribute to Germany’s defense? Again, wow.

If the troops allegedly to be removed work in important pillars of NATO infrastructure, but they’re not supporting Germany’s national defense, if those important pillars—Ramstein AB, European Command, Africa Command, training, hospitals—don’t contribute to Germany’s national defense, then in what way does NATO contribute to Germany’s national defense?

It’s already clear that Germany has chosen to not fulfill its obligations to NATO and therewith to not support the (mutual) defense of the other member nations. If Germany does not believe that NATO contributes to Germany’s defense, then what’s the point of any NATO forces in Germany?

It’s Time

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The People’s Republic of China has begun welching on its trade agreement with the US. Government-controlled companies buying American farm products have begun canceling their orders to American farmers, orders made under that agreement. So far, the canceled orders amount to chump change.

However.

“A handful of shipments of livestock feed, corn, pork, cotton and some meat imports are pushed back,” said a senior Chinese shipping executive involved in China farm imports who asked not to be identified and who has been briefed on Beijing’s move.
“Private Chinese exporters are not part of this, but it could escalate, depending on how the relationship between the US and China goes forward,” this executive said.

The threat is clear.

It’s time to find, and redirect our farm products to, other markets and stop selling them to the PRC. The PRC is simply too unreliable a trading partner—which should be expected, given that the nation has placed itself as an enemy of us rather than as a competitor.

Works for Me

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The baby sister and de facto chief of staff to northern Korea’s MFWIC, Baby Kim, Kim Yo Jong doesn’t like that citizens of the Republic of Korea keep sending anti-northern Korea missives into the DMZ and on across into the gangland.

[Kim Yo Jong] warned that it would end a 2018 inter-Korean military agreement if the South fails to stop defectors and activists from sending anti-Pyongyang leaflets into the demilitarized zone (DMZ) separating the two countries.
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Kim Yo Jong also said the North could permanently shut a liaison office with the South and an inter-Korean industrial park in the border town of Kaesong….

She also says that the agreement was hardly of any value.

She’s right on that last. It is a useless, virtue-signaling setup that the RoK, in retrospect mistakenly, agreed.

The dissolution of the agreement would create no loss at all for the people of the RoK; Baby Kim’s Baby Sister ought not let the door hit her in the fannie on the way out.

Chasing Yield

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Chasing yield is the tactic of going for the highest-yielding investment available at the expense of other considerations. One of those considerations that gets disregarded in the chase is whether the yield being…offered…is radically higher than that of other investment vehicles on the market. If it’s much higher, that yield likely is too good to be true.

Another consideration that gets lost in the chase is the underlying soundness of the issuer. Checking the level of soundness is hard work, often tedious and boring. It’s necessary, though, and it’s equally necessary to avoid the flip side of that: the laziness of just jumping onto a handy get-rich-quick scheme, which is what so much of yield-chasing is.

Hence a cautionary tale offered by The Wall Street Journal.

Exchange Traded Notes are “fund” instruments that pedal other people’s debts aggregated into exchange traded fund-like instruments. They’re centered on

options-based strategies and certificates of deposits whose returns are tied to stocks or currencies.

That last is important. When the stock—or stock indexes—or the currency—or currency indexes—fall, the ETN’s instruments fall in value. And whey those instruments fall below a threshold, the issuer can take them off the market.

The issuer is not the ETN—that’s the bit about not owning the asset. However, when the issuer takes its instrument off the market, the ETN is still stuck, and its value falls, and it falls catastrophically if it’s a leveraged ETN.

And that’s what happened during the current sharp market drop. Before the nascent—and still fragile because it’s built on future expectations, not current economy performance—recovery began, one bank alone was forced to take 15 of its ETNs off the market entirely, wiping those investors’ investments. Folks old enough to know better—retirees—but who were trying to double up to catch up from the Panic of 2008 losses, lost hundreds of thousands of dollars in hard cash money and money they could have had had they been willing to collect profits along the way instead of letting it all right on their roulette/faro/baccarat bets.

Don’t understand what I’ve written above regarding ETN structure (I’ve been deliberately very high level in my description)? That’s a hint. If you’re not clear on the nature of the investment you’re contemplating, walk away from it.

 

RTWT.