Tag Archives: political economy

Minimum Wage Laws

Posted on by
Reply

Some empirical data are starting to accumulate. The following graphs are from AEIdeas. The first one shows the apparent impact of Seattle’s minimum wage law, which hiked the minimum to $15/hr, with the first increment to $11/hr taking effect last April. The graph shows restaurant employment in the Seattle Metropolitan Statistical Area and Washington other than the Seattle MSA from 2010 through Sept 2015.RestaurantJobs

There are a couple of things of interest here. One is the headline comparison: Restaurant jobs went up nearly 6% since January (5,800 jobs added to an original value of 87,000 jobs), while the city’s restaurant employment fell those 700 jobs (a drop a skosh under 1%). The other is the trend. Since January, restaurant jobs have risen at a high month-month rate, while Seattle’s restaurant job growth rate has been flat.

There’s another tale in this graph.RestaurantJobsRecessions

The shaded area are recessions. Only one other time since 1990 has Seattle’s restaurant employment fallen outside of a recession. That was in the year leading into the dot-com bust, with Seattle being nearly as techy as California’s Silicon Valley.

Hmm….

Stimulus

Posted on by
Reply

European Central Bank President Mario Draghi has indicated that he intends to expand the EU’s version of quantitative easing as economic stimulus: he’s looking to increase the ECB’s bond-buying program and cut even further the ECB’s already negative deposit rate.

His rationale for this is to boost economic growth in the EU, a growth that has been stunted since the global Panic of 2008.

No, Mr Draghi, adding to a failed program won’t convert it to a success, it’ll compound the failure and make digging out from under it the more expensive.

What you need to do is jawbone the EU governance bodies to do what they need to do: jawbone the sovereign (more or less) EU member nations to do what they need to do. What those governments need to do is to get out of the way of their national economies by cutting government spending and commensurately reducing taxing.

Leaving the people’s money in their hands will let them apply their money to their purposes, not government’s, and they’ll do that with far greater skill than even a well-meaning government can hope to do. Reducing government competition for goods and services by cutting government spending will further expand the reach of that private money left in those private hands.

Now, there’s a stimulus worth applying.

There’s Sovereignty

Posted on by
Reply

…and there’s sovereignty.

The European Union said it will require Starbucks Corp and Fiat Chrysler Automobiles to pay tens of millions of euros in back taxes after ruling that tax deals they negotiated with two European governments were illegal….

Notice that. Supposedly sovereign governments negotiated contracts with businesses, and the European Union has said that those governments don’t have the authority—the national capacity—to make their own arrangements. In the particular case, tax contracts solemnly negotiated by Luxembourg and those two corporations are illegal because they don’t comport with the supra-national EU’s desire.

This is the Europe that the Progressive Democratic Party, the party of President Barack Obama; of Democratic Party Presidential candidate Hillary Clinton; of Democratic Party, and self-identified Democrat Socialist, Presidential candidate Bernie Sanders want us to be like.

Mixed View

Posted on by
Reply

European oil companies are engaged in a fierce competition for the best oil and gas fields in Iran when Western sanctions are lifted, while American energy firms watch from the sidelines.

Much of what’s holding American energy firms back are the still in place American sanctions that block US companies from such business. Nevertheless, American firms of any industry shouldn’t be doing business with Iran, even if it might become strictly legal. We shouldn’t be helping a terrorist nation-state that has as its sworn goal the extermination of Israel. Neither should anybody in the West, including those European oil companies.

On the other hand, such business by the Europeans can go a long way, if done right, toward reducing or eliminating European dependency on Russian oil and gas—and so to eliminating Russia’s ability to extort Europe.

That’s not all bad.

Unintended Consequence?

Posted on by
Reply

Or was it intended? Big banks, banks the Warren/Obama regulations deem systemic risks—too big to fail—are driving away cash deposits. Never mind that those deposits are loanable funds (oh—regulations, again, discouraging lending while Progressives contradictorily jawbone and pressure financial institutions to make risky loans to poor credit rating borrowers, because—regulations again—those credit ratings are somehow racist).

For instance,

State Street Corp, the Boston bank that manages assets for institutional investors, for the first time has begun charging some customers for large dollar deposits, people familiar with the matter said. JP Morgan Chase & Co, the nation’s largest bank by assets, has cut unwanted deposits by more than $150 billion this year, in part by charging fees.

Because:

The banks’ actions are driven by profit-crunching low interest rates and regulations adopted since the financial crisis to gird banks against funding disruptions.

The latest fees center on large sums deemed risky by regulators, sometimes dubbed hot-money* deposits thought likely to flee during times of crises.

Because honest Americans wanting to earn money off their cash mustn’t be allowed to do that. And banks can’t be trusted to know what they’re doing with hot deposits; Progressive Know Betters are the only ones equipped to dispose of OPM.

Or: this is a tacit recognition that Progressive policies over the last seven years have been utter failures, and all that stored cash has to be flushed back into the economy, and the latest regulations have nothing to do with risk, systemic or otherwise, regardless of the surrounding Obamatalk.

It harkens back to FDR’s assault on business by demanding they disgorge themselves of cash—retained earnings—because they were “hoarding” or on a “capital strike.” Hoarding, “striking” because business had no viable place to invest its cash, due to FDR’s economic policies.

 

*Note: Banks usually attract “hot money” by offering relatively short-term certificates of deposit that have above-average interest rates. As soon as the institution reduces interest rates or another institution offers higher rates, investors with “hot money” withdraw their funds and move them to another institution with higher rates.