Tag Archives: markets

A Question

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With all the hyped up fears of a coming crash in the stock market and in the economy overall—some pundits are claiming the coming crash will make the Panic of 2008 look like a little burble (e.g., the Federal government will have to make a choice between letting banks and other financial institutions fail en masse or firing up its printing presses)—more and more folks are pushing buying gold and silver or bragging about the gold and silver they already hold.

So my question: what’s the value of all that gold and silver in such a catastrophe? Do these folks really think they’ll be able to exchange their gold or silver for their rent/mortgage payments? Their grocery and utility bills? Their gasoline down at the filling station? Or get those things with markers for their gold and silver held in brokerage accounts rather than in their closets in physical form? What if their broker is one of those financial institutions that went bust? Those holdings, if not lost forever, will be inaccessible for weeks or months while the broker’s assets wend their way through bankruptcy courts and the innumerable legal fights over distribution.

And: how will the holders sell their gold or silver, whether held in physical form or in brokerage accounts? Who will be willing to spend their cash on hand to get those metals?

Who Can Afford Obamacare?

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The lede:

Rates for many Affordable Care Act plans rose by double digits this year. Insurers want to do the same next year.

It’s especially bad in Progressive-Democrat-run States. For instance:

In Washington state, Centene is asking for a 28% hike, after boosting rates by 35% in 2026. Blue Cross & Blue Shield of Illinois wants 15%—on top of a 28% increase this year.

Who can afford Obamacare? Nobody. Not the individual, not the nation at large. That’s what those unconscionable Federal subsidies, only recently cut back, kept hidden for so long, at the Progressive-Democratic Party government dependency pushers’ behest. Dependency is votes, as they’ve long known.

It’s time the Republican Party stopped dithering and cowering. The party needs to get rid of Obamacare and replace it with an interstate commerce-centric, lightly regulated (which would entail rescinding a double potful of regulations) free market for health insurance, one in which insurers could offer plans that customers actually want, and at competition-driven prices and deductibles, and coverages. Especially that last would drive costs down. Plans that don’t try to cover everything, unless that’s what enough customers want to make a market, plans that cover only a few things, that cover only catastrophic medical events, and every coverage level in between—whatever the customers want in sufficient aggregate to make a market.

How Expensive is Obamacare?

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It’s hugely expensive, but Progressive-Democratic Party politicians have been covering that up since Obamacare’s inception, when they pulled off in a purely party-line enactment, aided at the time by Party’s filibuster-proof Senate majority and then-Progressive-Democrat President Barack Obama’s naked purchase of a Congressman’s vote in House.

The Department of Health and Human Services released figures Friday that offered the first definitive view of enrollment after the withdrawal of enhanced government support for ACA plans, which ended at the start of this year. The shift boosted many ACA policyholders’ premium bills, in some cases by 100% or more.

Note: the premiums themselves didn’t increase by a penny. All that happened was that policy holders found themselves having to pay those premiums themselves, instead of getting taxpayer handouts in the form of those subsidies.

That’s how expensive Obamacare is and always has been. “If you like your plan, you can keep your plan.” A classic Obama lie. He even lied about how wonderful his Obamacare was, and Progressive-Democratic Party politicians have been lying about that ever since.

You can’t even keep your Obamacare plan without other Americans paying for it with you.

I Wonder

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The ECB raised its baseline interest rate earlier this week, doing so, it said, in response to the jump in energy prices, which has driven inflation above 3% in the eurozone. Inflation in the rest of the economy—and it’s the same in the US and in the rest of the OECD-esque economies—remains largely muted and under control except to the extent energy costs percolate through them, impacting personal and commercial transportation and shipping, food production, manufacturing, and so on. It’s energy inflation that’s at the core of inflation in today’s overall economy, not a broad excess demand or supply deficiency.

So, I wonder.

When a central bank raises its baseline interest rate, it’s using, if not a cudgel, at least a two-handed sword to address a problem. That’s appropriate, when the problem is broad. But if the problem is narrow, a dagger would seem more appropriate (to continue the metaphor, or perhaps a scalpel, to soften the imagery a little).

Today’s inflationary problem seems narrow, for all its broad effect. It’s energy that’s causing the overall inflation. If raising interest rates is the way to combat inflation, what if a central bank were to raise interest rates only on basic energy production—oil, natural gas, and coal at their input stage, and solar and wind facilities at their component manufacture stage—while leaving its otherwise baseline interest rate unchanged for the rest of the economy?

Clearly that would take some restructuring of its baseline interest control, separating out energy from the rest of an economy. That might demand legislative support. But there’s no reason a farmer should have to pay a higher interest to borrow to get his seed for next year, when it’s core energy that is impacting the cost of his money and not a shortage of seed or a flood of farmers into the market for that seed. It’s the same for folks borrowing to buy a house or car and for those building houses and factories. It’s underlying energy, not a shortage of labor or a spike in buyers, that’s inflating the cost of their money.

On the other hand, raising interest rates on basic energy production would reduce the amount of energy produced. That would lead to reductions in the supply of all the things to which energy is central in their production. The demand for energy is pretty inelastic in a modern economy—it’s going to be produced, within broad limits, regardless of price, and that price increase still is going to percolate through an economy.

So I wonder (still I wonder). It seems to me that targeting the inputs to energy production—crude oil, natural gas coming out of the well, coal leaving the mine, metals arriving at the solar panel or windmill factory while leaving rates on the rest of an economy alone would reduce inflation growth in the rest of the economy while limiting supply deficiencies more than does raising interest rates all across an economy.

The Cost of Ethanol-laced Gasoline

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A number of corn State Senators, Chuck Grassley (R, IA), Joni Ernst (R, IA), Deb Fischer (R, NE), Pete Ricketts (R, NE) and Roger Marshall (R, KS), have written about the financial benefits of ethanol in our gasoline.

Expanding E15 availability lowers gas prices by 20 to 40 cents per gallon on average.

Compared to what, though? See below.

And

E15 is a net positive. We know E15 will lower prices at the pump….

Again, compared to what?

I won’t go into the production costs of cars whose fuel-related seals must be designed to handle the corrosive nature of ethanol, nor will I address the maintenance costs of cars burning ethanol-laced fuels, even with those corrosion-resistant (but only resistant) seals, nor why the percentage of ethanol in gasoline tops out at 15% before ethanol’s corrosive nature overwhelms even these toughened up seals.

I won’t mention, either, the increase in the cost of food, including meat, from the diversion of corn away from the grocery store or the production of animal feed toward the production of ethanol. I’m only going to mention the immediate fiscal costs to the consumer of ethanol-laced gasoline, taking corn-based ethanol, corn being the primary source today for ethanol production, as my illustration.

It costs $1.74 in 2001 currencyto produce a gallon of ethanol from corn, and it costs 95 cents to produce a gallon of gasoline.

A gallon of E15 gasoline consists of 85% gasoline, and 15% ethanol. According to my 3rd grade arithmetic, the costs embodied in that gallon are 85% of $0.95 plus 15% of $1.74, or a skosh under $0.81 plus a skosh over $0.26. That’s $1.07 per gallon of the hybrid fuel. Using my 3rd grade arithmetic again, that’s $0.12 per gallon more than for unadulterated, and much easier on the car, gasoline.

That’s not cheaper fuel for our cars; it’s much more expensive. Those Senators bragged that

Expanding E15 availability lowers gas prices by 20 to 40 cents per gallon on average. That could mean around $400 per year in savings for a US household—precious dollars that could be spent on other needs.

The irony in that isn’t lost on me, even if it seems lost on those Senators. Instead of those 30 cents per gallon (to take the middle of their range) in ethanol-laced gasoline, not having to spend that baseline of 12 cents extra per gallon at all, all year long, would save roughly $160 per US household—precious dollars that could be spent on other needs, like food, including meat, made cheaper by no longer diverting corn to making alcohol. (OK, a little mention.)