Tag Archives: political economy

Desperation

Posted on by
Reply

With his legacy mostly erased, and more of it on the way after the current temporary interruption—an outcome ex-President Barack Obama (D) will thank us for in the fullness of time and his clearer understanding—Obama is desperate to preserve such of it as he can with his revisionist history.

Former President Barack Obama on Tuesday took credit for the boom in US oil and gas production, saying, “That was me, people.”

Of course, it was.  His sequestration of Federal lands and offshore fields from oil and gas exploration with his slow-walking of the necessary permits were instrumental in triggering the boom.

You wouldn’t always know it, but it went up every year I was president. That whole—suddenly America’s like the biggest oil producer and the biggest gas….

Never mind that those year-on-year increases—small as they were—were driven by exploration and exploitation of those fields on private and other non-Federal lands.  The increases didn’t get serious until Obama and his administration were out of the way, but we’ll not mention that.

Another bit of history that the revisionist Obama carefully elided was provided by ex-Shell Oil Company President John Hofmeister:

…he tried to remake the power generation industry without involving Congress, and the Paris accords—again without involving Congress.

That remake was his threat—which he tried most enthusiastically to carry out—to eliminate our carbon-based (mostly coal, but oil and gas, also) electricity production industry, along with the wholesale destruction to our overall economy that acting on his Paris Accord would have wreaked.

The extent of Obama’s desperation is sad.

Paying for Groceries

Posted on by
Reply

A farm bill is wending its way through Congress, finally, as the House and Senate have agreed to a common version.  What’s in this version?  Good question.

Lawmakers for months have been deeply divided over the farm bill, which funds crop insurance and farm subsidies, as well as programs to help low-income people pay for groceries.

But these…lawmakers…won’t talk publicly about the details of their compromise.

There are a couple of things here, though, that are clear despite the lack of transparency.  One is the inconsistency of having farm price supports—farm subsidies—along with funding programs to help the poor pay for that artificially costly food.  The other is the premise that Government belongs in the insurance business.  One would have thought Obamacare would have driven home the utter foolishness of that, even as it concerns such long-standing involvements like crop insurance.  Silly me.

No.  It’s long past high time for price supports to be eliminated and to let competition drive food prices to their naturally lower levels.  It’s also long past high time to get Government out of the crop insurance business (all insurance business, come to that), and let free market-competing private enterprises sell the relevant policies—and relieve tax payers of the burden.

As for the poor who still wouldn’t be able to afford those free market lower prices, the Senate-passed version that went to House-Senate committee (and about which outcome we’re told nothing) had no work requirement as a criterion for eligibility for welfare support/food stamps: the Progressive-Democrats won’t hear of any requirement to take steps to earn one’s way off welfare.  That work requirement needs to be a part of the bill that goes to the President for signing; those folks should have the opportunity to escape the Progressive-Democrats’ welfare cage.

“We Need to Decide”

Posted on by
Reply

So says President Xi Jinping of the People’s Republic of China.

Speaking in Spain while enroute to the G-20 conference in Argentina, Xi said

I think we are at a crossroads. In economic terms we need to decide if we are going to follow the economic globalization and free market or if we are going to choose unilateralism and protectionism.

“Crossroads” may be a bit much.  Certainly, we’re at cross purposes on international trade matters, but I think “crossroads” overstates the case.  The current budding crisis will fade before it breaks, or we’ll recover after it breaks.  In either case, the situation is not at all irrecoverable.  Irrecoverability was a serious risk in WWII.  Irrecoverability was a serious risk during the global depression of the 1930s due to all the government interventions—interferences—into their domestic economies, which badly slowed those recoveries.  We’re not near that today.

The larger question, though, is the falseness of Xi’s remark about globalization vs unilateralism, free market vs protectionism.

We do need to follow free market tenets along with free trade principles and the degree of globalization that will ensue from those freedoms.  It would be good if the PRC followed those tenets and principles, too.  Instead, Xi’s government engages in theft of proprietary material, theft of intellectual property, extortion of those things as a price of doing business inside the PRC.  It requires government backdoors into the software used by companies doing business inside the PRC.

Xi’s government sets trade barriers including requirements to take on a PRC company as equal or majority partner as a condition of doing business inside the PRC (Xi talks of waiving that requirement in a couple of cases; neither of those waivers actually have occurred), heavily subsidizes domestic businesses, blocks economically useful mergers between international companies headquartered in other nations—other continents—for noneconomic reasons, routinely intervenes in its domestic stock “markets,” manipulating its currency value, and on and on.

Xi’s government tried to abuse its monopoly power in rare earth elements by limiting its exports to other nations below economic, free market demand levels.  Its occupation of the South China Sea and the islands—owned by other nations—is for the purpose of controlling the resources on/below the sea bed and the food supplies in the waters.

Xi’s government exports substandard—even dangerous—products like poisoned pet food, plywood sheets laced with formaldehyde, baby formula spiked with melamine powder.  The list goes on.

It would be good if the PRC did join the consensus for free and open trade.  To do that, though, the PRC would have to move away from its current business model, a model of theft and coercion rather than a model of honest markets and freely done international trade.

Volatility in the Market

Posted on by
Reply

Some folks worry about the return of turbulence—their term—to stock market pricing.

Market turbulence is leading some investors to call on the Federal Reserve to halt its campaign of interest rate increases….

No need.  The Fed needs to get its benchmark rates back to levels historically consistent with its goal of 2% inflation instead of its heretofore artificially suppressed rates.  It’s getting close, but the Fed isn’t there yet—it has a couple-three more rate increases yet to go.

Those investors need to understand a couple of things about volatility—or turbulence—in the market.  For short-term traders, volatility presents buying opportunities.  For long-term investors, volatility is just noise in the system, well worth ignoring.  For yield chasers, volatility represents opportunities to go broke in short order, culling the herd for the benefit of the rest of the trading/investing population.

Nevertheless, we get guys like Stanley Druckenmiller, who once ran a George Soros hedge fund and has hectored the Fed to raise rates from those artificial lows, saying

I would pause and see if the market knows something we don’t[.]

It’s almost always the case, though, that the market knows something we don’t.  And I include my august self in that “we.”

The Fed needs to stay the course, or if a change in pace is warranted, the Fed needs to get quickly to those historically consistent levels.  In either case, the Fed then would need to sit down, be quiet, and let the market do what it knows more about than the rest of us.

EU Counterproductive Meddling

Posted on by
Reply

Italy is standing tall on its budget for the next fiscal year, despite the European Union’s disapproval of it.

The EU Commission has again rejected Italy’s proposed budget on Wednesday, paving the way for financial sanctions to be applied in the next few months.

The specific bone of contention centers, mostly, on projected budget deficits as a per cent of GDP.  The Italian budget deficit works out to 2.4% of GDP, the Italians say, which is well within the 3.0% EU limit; however, the EU Knows Better: the Commission claims the deficit will exceed 3.0% by 2020.  Whom to believe….

One indication of integrity is this.  Italy’s debt-to-GDP ratio currently stands at 130% of GDP, which is well above the EU-recommended upper bound of 60%.  In the Commission’s view, though, that recommendation is an EU mandate, and it’s demanding that Italy also act to reduce its debt-to-GDP ratio.

Or there will be consequences.

 [I]f Italy still fails to comply [on the budget deficit matter], the Commission can apply financial sanctions, which can include fines up to 0.2% of GDP….

Another indication. The EU thinks the Italian government is spending too much, so it will punish the nation by making the Italian government spend even more.

Other member nations need to take notice as they contemplate their own future in the EU.