Tag Archives: economics

The Coercive Power of the State

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This is the Progressive Democratic Party of Hillary Clinton and Barack Obama, as articulated by California Governor Jerry Brown (D). At the just concluded Paris “Climate” Summit.

Tom, you used the phrase “policy.” Good policy. But I want to unpack that term a little bit. Inside the policy, you need a law. You need a rule. You need the coercive power of government to say, “Do this.” Now, you have to be wise and don’t say something stupid or order something stupid but the fact is, the regulations supported by the laws drive innovation.

And

You do have to have, at the end of the day, a regulation, a law. Progress comes from well-designed regulatory objectives that business then follows.

You can be sure California is going to keep innovating, keep regulating. And, shall I say, keep taxing.

All for the very best of causes. This complements the Left’s drive to take our weapons.  All for the very best of causes.  All for political power.  And, we mustn’t neglect Mao Tse-tung’s position:

Political power grows out of the barrel of a gun.

French Regional Elections

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The Sunday before last, France held the first of two rounds of Regional elections, elections which would determine who sits in the Regional governments and so will have considerable influence in France’s national elections in 2017 (French Departments, sections of Regions, have more legislative authority and more influence on national elections and the national government). Marine Le Pen’s National Front led strongly at the end of that first round. The National Front is ultra-rightist, ultra-nationalist, anti-immigration, anti-Semitic, and anti-free market; it’s the quintessential Government is the solution and the Only Option party in France.

Last Sunday, after some…arrangements…between Nicolas Sarkozy’s center right/right Les Republicains and François Hollande’s French Socialist Party wherein the Socialists withdrew their candidates in a number of Regions so as to allow the Republicains’ candidate to collect more votes, the National Front was nearly completely shut out: the Socialists appear to have won five of the Regional elections, the Republicains seven or eight, and the National Front may have won in Corsica.

However.

The following table shows each major party’s performance by region. The bolded candidates received the most votes, and were thus elected president of their respective regions. The Union of the Right is, essentially, Nicolas Sarkozy’s group, the Union of the Left is, essentially, François Hollande’s, the National Front is Marine Le Pen’s, and Regionalists are regional local candidates.

Region Union of the Right Union of the Left National Front Regionalists
Alsace-Champagne-Ardenne-Lorraine Philippe Richert
1,060,029 (48.4%)		 Jean-Pierre Masseret
339,749 (15.51%)		 Florian Philippot
790,141 (36.08%)
Aquitaine-Limousin-Poitou-Charentes Virginie Calmels
798,142 (34.06%)		 Alain Rousset
1,037,330 (44.27%)		 Jacques Colombier
507,660 (21.67%)
Auvergne-Rhône-Alpes Laurent Wauquiez
1,201,528 (40.61%)		 Jean-Jack Queyranne
1,089,791 (36.84%)		 Christophe Boudot
667,084 (22.55%)
Bourgogne-Franche-Comté François Sauvadet
382,177 (32.89%)		 Marie-Guite Dufay
402,941 (34.68%)		 Sophie Montel
376,902 (32.44%)
Brittany Marc Le Fur
387.836 (29.72%)		 Jean-Yves Le Drian
670,754 (51.41%)		 Gilles Pennelle
246,177 (18.87%)
Centre-Val de Loire Philippe Vigier
355,475 (34.58%)		 François Bonneau
364,211 (35.43%)		 Philippe Loiseau
308,422 (30.0%)
Corsica José Rossi
40,480 (27.07%)		 Paul Giacobbi
42,607 (28.09%)		 Christophe Canioni
13,599 (9.09%)		 Gilles Simeoni
52,839 (35.34%)
French Guiana Rodolphe Alexandre
21,163 (54.55%)		 Alain Tien-Liong
17,361 (45.45)
Guadeloupe Victorin Lurel
72,721 (42.48)		 Ary Chalus[7]
98,464 (57.42%)
Île-de-France Valérie Pécresse
1,629,249 (43.8%)		 Claude Bartolone
1,569,093 (42.18%)		 Wallerand de Saint-Just
521,383 (14.02%)
Languedoc-Roussillon-Midi-Pyrénées Dominique Reynié
520,011 (21.32%)		 Carole Delga
1,092,969 (48.81%)		 Louis Aliot
826,023 (33.87%)
La Réunion Didier Robert
173,592 (52.69%)		 Huguette Bello
155,896 (47.31%)
Martinique Serge Letchimy
70,776 (45.86%)		 Alfred Marie-Jeanne
83,541 (54.14%)
Nord-Pas-de-Calais-Picardy Xavier Bertrand
1,389,316 (57.7%)		 Withdrew Marine Le Pen
1,015,649 (42.23%)
Normandy Hervé Morin
495,591 (36.43%)		 Nicolas Mayer-Rossignol
490,840 (36.08%)		 Nicolas Bay
374,089 (27.5%)
Pays de la Loire Bruno Retailleau
620,245 (42.7%)		 Christophe Clergeau
545,637 (37.56%)		 Pascal Gannat
286,723 (19.74%)
Provence-Alpes-Côte d’Azur Christian Estrosi
1,073,485 (54.78%)		 Withdrew Marion Maréchal-Le Pen
886,147 (45.22%)

France can take a measure of satisfaction at having beaten back the National Front of Marine Le Pen. The French economy, much less its foreign policy, would have been badly damaged by the National Front’s policies.

But it’s only a temporary setback, as those numbers for Regional President indicate. Those nationalist, anti-Semitic, and anti-free market folks didn’t lose very many races by a large margin. They’re still a threat for the 2017 national elections.

Wealth, and Wealth

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The Federal Reserve recently estimated total household net worth in the US to be about $80 trillion, including real estate and financial assets. And data from the Fed’s Survey of Consumer Finances imply that the top 10% of households by net worth hold about 75%—or $60 trillion—of this total. The bottom 90% of households therefore have a net worth of about $20 trillion.

A very large fraction of that net worth is phycisal assets, too: the house folks live in, the car(s) they drive, the physical plant a business owner—Mom and Pop, anyone?—owns. These are not liquid assets; they cannot be turned into tonight’s—or even next week’s dinner, or mortgage payment, or….

[T]he true picture is hardly as stark as critics of inequality claim, because it leaves out the large amount of wealth held in the form of future retirement benefits from Social Security and Medicare.

Liquid assets: those checks are cash that can be spent immediately on anything of need or wish—the Social Security check—or that goes immediately toward health care costs—the Medicare check. Disproportionately, that money goes to the bottom 90% rather than the top 10%.

Separately from the actual misconception about wealth inequality, but an important factor in perpetuating the inequality in opportunity that does exist, is this:

[T]he public’s traditional financial wealth is depressed because the current entitlement programs lower people’s real incomes and deny them the higher returns available through investment-based retirement savings like IRAs or 401(k)s.

That’s the welfare cliff about which so much has been written—and ignored by the Left.

Hmm….

A Weapon in an Economic War?

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A growing number of Central Bankers around the world are considering ways to develop and issue digital versions of national currencies, in response to and somewhat analogous to Bitcoin.

This raises a question in my paranoid pea-brain.

Many electronically delivered items, most ubiquitously music and books, but software programs, also, are delivered with DRM—Digital Rights Management—software embedded in them. These DRM thingies are used to limit, for instance, subsequent redistribution of the items without prior permission from the original seller.

Many electronically delivered items, primarily images here, although the concept need not be limited in practice, also have embedded in them malware, encrypted messages, and the like. This is what steganography is all about.

So: what’s to keep a nation’s Central Bank from embedding DRM and/or steganographic files in each unit of its digital currency? A couple of uses come to mind.

One use is simply to track the currency unit’s—a dollar, maybe—movement around the globe from the time of its initial issue. The economic information from such gloriously detailed information boggles the mind. The economic information made available to intelligence agencies about the inner workings of another country’s economy and government handling of that economy is equally boggling.

But think of a country with a large holding of a foreign currency as a reserve—the way the PRC’s renminbi, the US’ dollar, the EU’s euro, Great Britain’s pound, and Japan’s yen are used. Think further of a country whose foreign exchange holdings represent a significant fraction of that nation’s cash on hand.

Now think of the outcome if a file embedded in the particular units held were triggered, and all those units of the targeted digital currency were simple erased and ceased to exist as if they never were.

The mind reels.

Negative Interest Rates?

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University of Michigan Professor of Economics and Research Professor of Survey Research Miles Kimball had an interesting remark the other day in The Wall Street Journal. The article itself was a discussion of the EU’s Central Bank use of negative interest rates on deposits, of national Central Bank use of negative interest rates on deposits, even of some commercial banks such use.

In the context of an additional discussion of whether the US Fed should go that route amid concerns about whether rates are already so low in the US that there’s nothing the Fed could do to influence a future recession (assuming it’s a good idea at all for the government to interfere intervene with the market), Kimball said this:

It’s wrong to say central banks have run out of ammunition. Negative rates can be on tap before the next recession. There’s no limit to how deep we can go.

In an environment of negative interest rates—where depositors are paying the banks to store their money—why would depositors put their money into a bank, or any other financial institution, come to that, as mere deposits? These deposits are the source of funds from which banks and other lenders draw in order to make loans. Where else will such institutions get the funds to lend? If the lenders lend even less than they are now, with interest rates near zero but positive, from where will the capital come to support business factory maintenance, production expansion, short-term payroll needs, supporting credit card borrowing by consumers?

Now magnify this by the fractional reserve requirement imposed on lending institutions: a bank must keep a certain per centage of its loans outstanding as cash held in the bank, whether directly or as deposits in the Fed.

Hmm….