The Shanghai Composite Index closed [Wednesday] 1.2% higher, having earlier fallen as much as 5%. The turnaround came after a number of companies disclosed that state-backed companies were among their top shareholders….
Of course.
Still want to “invest” in the PRC?
Many observers have called for the FOMC to tighten monetary policy by raising interest rates in the near term. But such a course would create profound economic risks for the US economy. Why would a near-term tightening of monetary policy be so problematic? Because given the prevailing economic conditions, higher interest rates would push the economy away from the FOMC’s economic goals, not toward them.
On the contrary. If the Fed’s target inflation rate for satisfying its statutorily imposed mandate of price stability is 2%, inflation rate is and has been since the Panic of 2008 substantially lower, and Fed-suppressed interest rates are artificially low—in the zero-to-not-much-more range—and have been over substantially the same time frame and longer, then the thing to do is to raise interest rates allow interest rates to float to levels historically consistent with an inflation rate of 2%.
After all, rising interest rates is intrinsically inflationary, and the Fed has (quite properly IMNSHO) said 2% inflation is the stable price inflation, not substantially less than 2%.
Continued interference in the free market, whether by the elected government or by the Federal Reserve Bank, is not just ineffective, it’s actively counterproductive.
As economic managers, Chinese leaders have been in a league of their own for the past quarter century.
They’re the product of a bureaucratic system that, at its best, weeds out underperformers, rewards achievement and prizes experience. By the time they reach the very top, most leaders have run provinces the size of whole countries. Their image of competence has been reassuring at home—and acknowledged abroad—at times of crisis. And they’ve delivered success: China’s economy grew faster, and for longer, than any in history.
That’s how Andrew Browne opened his recent piece in The Wall Street Journal. Then he added,
Now, as growth slows sharply and markets fear more bad news, the stewards of the world’s second-largest economy appear to be losing some of their golden touch.
No. There are some misapprehensions here. One is tacitly acknowledged, apparently without recognition, by Browne:
According to international economists who have been briefed at a high level in Beijing, it became clear that regulators didn’t have a clear picture of huge money flows from the banking system to the stock market that were inflating a bubble.
That’s just it: central planners never have a clear picture of huge money flows, whether from the banking system to the stock market (which is puny, in any event, relative to the PRC’s economy when it’s compared with, say, the DAX, or FTSE, or NYSE, or…), or to any place else, or from any place else. Central planners have no clear picture of any aspect of the economy they’re pleased to mess with regulate.
The PRC’s economy, though, grew faster and longer than any in history? It grew from very deep depths, a bottomed-out baseline that featured frequent famines and mass starvations, backyard iron mills, and the like. And it grew on the largest population in history. Against that basement-level baseline and that population on which to erect an economy, a high schooler learning to spell economics could have “regulated” the thing in that kind of growth.
The PRC’s economy, though, grew faster and longer than any in history? It grew from those depths in an era of unprecedented free trade and globalized and entangled economies. The PRC’s cheap labor, coupled with easy shipping and already developed manufacturing techniques coming in from outside the PRC potentiated the growth.
That bureaucratic system that has weeded out underperformers and rewarded achievement and experience—brought to the top guys who’ve run provinces the size of whole countries? Define “achievement” and “experience.” These guys have achieved a lot in the political game, in the game of rising to the top of economies, and of doing so where the cost of money—actual budgeting—has never been a factor. These guys have not achieved overmuch in business, much less in economics; their experience here is…low.
No, as any poker player can recognize, the PRC was just the guy at the table who got to play a hot hand. Now the PRC’s economy has grown up a lot, the stakes have gotten larger and more complex, and the Chinese central planners, like all central planners, have gotten in over their heads, and their lucky streak has played out.
Senator Elizabeth Warren has discovered a bit of financial activity that she can’t regulate, and she wants to regulate it.
Senator Elizabeth Warren (D, MA) on Monday sent letters to six financial regulators saying she is troubled that the big banks and other financial firms backing Symphony Communications Services LLC may use the new tool to skirt regulatory and legal requirements, as well as escape enforcement action by the Consumer Financial Protection Bureau and other regulators.
Symphony’s sin? Their words on their publicly accessible Web page.
Symphony is designed to meet the cyber-security and compliance needs of financial firms.
They also tout their ability to guard against government spying.
Never mind that Symphony also says,
The use of Symphony does not change regulators’ ability to obtain messages from our clients. Symphony delivers messages to its clients to download, decrypt, and archive, and they are able to provide those messages to regulators just as they would with other compliant messaging systems.
Symphony is plainly acknowledging that message handling is the sole responsibility of the correspondents, and not at all that of the pipeline.
Senator Warren (and FBI Director James Comey) are prime examples of the need of private citizens and our enterprises for protection from government spying—even domestic spying. They’re already having some success, too, in browbeating Symphony:
Symphony’s current website doesn’t appear to contain the language Ms Warren raises in her letter.
What’s in that message? Inquiring Progressive minds want to know.
The Federal Trade Commission in its 100-year history has never agreed on formal principles for policing companies engaged in “unfair” competition. That looks set to change.
Members of the FTC are close to a bipartisan agreement to lay out for the first time how the commission views its authority to bring cases against businesses it believes compete unfairly, according to people familiar with the deliberations.
An accord would be a breakthrough for Democrat and Republican commissioners who have clashed over when and how the FTC should deploy the century-old Section 5 of the FTC Act in enforcement matters. The provision declares “unfair methods of competition in or affecting commerce” to be unlawful. But the agency has faced criticism that with no formal guidelines or parameters, it is hard for anyone—businesses as well as regulators—to know what may be considered unfair.
“Unfair” in this context is a purely legal definition, and there already are laws on the books governing what is and is not permissible in our commerce. We have anti-trust laws that govern abuse of monopoly power. We have truth-in-advertising laws that govern how businesses can market their products. We have contract laws that sanction dishonesty in contract negotiations and that define liability when mistaken, but fundamentally honest, statements are made in those negotiations.
That’s all that we need, that’s all the FTC needs, and the FTC has had that for well over 100 years, dating at least to the Sherman Antitrust Act. This new “accord” will be just another bureaucratic nightmare, adding layers of compliance requirements and determinations to any FTC action—and so elevating costs for any business the FTC contemplates violating in some way.
Underlying all of that is all of this: Americans don’t need a rule, or a “guideline,” to govern every aspect of every action in their lives.