Tag Archives: political economy

America’s Problem

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…according to Walter Russell Mead, in his Monday Wall Street Journal op-ed. He suggested that the world will only wait out the Trump administration, and that the next administration, Trump’s or Biden’s, will face a world grown unresponsive to American leadership, not believing that American society is capable of the role any further.

He closed his piece with this:

Whatever happens in the election, the US administration next year will face a problem even more daunting than the intellectual challenge of crafting a national strategy for an increasingly dangerous time. It will have to convince the world that this time, America really means what its president says.

This overstates the case, and it perpetuates a myth that has suffused too many administrations for far too long.

We don’t have to convince the world of anything, nor should we be defining ourselves in terms of other nations’ approval/disapproval of us. We have only to do what’s best for the United States—which will include ad hoc purpose-designed coalitions, but very few hard treaties.

Putting our nation first—which is not putting our nation alone, as a mendacious press and today’s crop of Progressive-Democrats claim—simplifies Mr Mead’s problem.

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.

A Murder of a Black Man

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Dave Patrick Underwood was a black man in front of the Ronald V Dellums Federal Building and US Courthouse in Oakland, CA. He was murdered in a drive-by shooting as part of the larger rioting and looting that’s going on throughout California under cover of “protesting” the murder of George Floyd, another black man, 2,000 miles away in Minneapolis, MN.

Underwood was employed by the DHS’ Federal Protective Service, he was on duty guarding the building, and he was in uniform.

California’s Progressive-Democratic Governor Gavin Newsom,

who speaks of the protests that followed Floyd’s death as an example of people “rightfully outraged at how systemic racism is allowed to persist,” said of Underwood’s murder that “no one should rush to conflate this heinous act with the protests.”

Apparently, Dave Patrick Underwood wasn’t black enough to suit Newsom.

Disgusting.

Heads Up

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Be very heads up, this fall.

The coronavirus pandemic shook the US economy. It hasn’t shaken Democrats’ fervor for trillions of dollars in tax increases, and significant income redistribution is still likely as soon as 2021 if Joe Biden wins the White House and Democrats control Congress.

Senator Ron Wyden (D, OR):

It’s all the more important to protect the retirement and security of working [people] and make sure the wealthy pay their fair share. We’ll be ready to go in January of 2021.

The Progressive-Democrats ignore the simple, basic concept of economics that if you raise the price of a good, you’ll get less of it bought, and ultimately, less of it produced. Raising taxes on Americans will reduce the amount of money they have with which to buy goods and services, and it will reduce the amount of labor they’ll be willing to provide.

Wealthy pay their fair share? Wyden and his Progressive-Democrat fellows continue to refuse to say what that fair share is. That refusal leads us to the only logical conclusion: “fair” means “more and more and more.”

This is their demand to inflict their socialist ideology on Americans.

The European Union and its Wuhan Virus Situation

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In an article about the European Union governance authorities’ effort to use its Wuhan Virus situation to fundamentally transform the bloc, Laurence Norman wrote that the European Commission

set out a $2 trillion coronavirus response plan, including a massive pooling of national financial resources that, if approved, would deepen the bloc’s economic union in a way that even the eurozone debt crisis failed to achieve.
Wednesday’s proposal, composed of a €750 billion ($824 billion) recovery plan and €1.1 trillion budget over the next seven years, aims to lift the region from its economic slump, but must overcome infighting dividing the bloc.
If backed by all 27 member states, the plan would represent a historic step in knitting together national finances across the bloc. The proposal from the European Commission, the EU’s executive arm, follows a similar Franco-German plan set out last week and would establish significant new transfers of wealth among members, funded by commonly issued debt.

In justification of this recasting of European society, German Finance Minister Olaf Scholz was cited by Norman as saying

the proposed assumption of debts across EU borders to Alexander Hamilton’s move in 1790 for the new US government to assume states’ debts from the Revolutionary War. But unlike the US under the Constitution, the EU remains a club of sovereign states, many of which oppose sharing financial burdens.

Missed here is the Critical Item that, before our “new US government,” the US under the Articles of Confederation also was just such a conclave of nations.

Missed by Scholz is the fact that the American States also were, and still are, far more homogeneous—in culture, ideology, views of the purpose of money, views of the role of government in the lives of men collectively and individually—than Europe ever has been or is now.

That homogeneity of political and economic principles is absolutely critical to holding together any sort of polity.