Tag Archives: regulation

People’s Republic of China’s Stock Market Drop

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The PRC’s Shanghai Composite Index, which is an index of the stocks that trade on that country’s major stock exchange, the Shanghai Stock Exchange, has fallen by some 28% in the last week. This is the second time since 2007 that this index has fallen this far (in 2007 it dropped by roughly 2/3 over the course of 13 months beginning in October 2007). In response, the PRC has decided to close the market to IPOs until the central planners in Beijing decide conditions are suitable for IPOs.

This central planning foolishness got me wondering. How big a deal is the Shanghai Stock Exchange for the PRC’s economy?

The total value of the PRC’s stock market was around $4.2 trillion in 2014, per Bloomberg Business. The PRC’s Purchasing Power Parity GDP for 2014 was around $19 trillion. Thus, the value traded in its markets was roughly 22% of GDP.

In contrast, the dollar volume on the New York Stock Exchange last Thursday (2 Jul) was some $63.5 million. Expanding that (very naively) to a trading year of 220 days during which stocks are traded out of a 365-day year (weekends and holidays, after all), the annual dollar volume for the NYSE runs to a skosh under $14 trillion. The US PPP GDP for 2014 was $17.7 trillion. The value of the NYSE’s stock trading was a bit under 80% of our GDP.

It’s certainly true that 22% of GDP or the raw value of $4.2 trillion are hefty numbers. But at only 22%, the central planners, in addition to chasing chimeras with their assumption they actually can control in any significant degree any economy, are chasing a relatively minor chimera with their IPO moves. But, then, like central planners everywhere, they think they Know Better than mere investors. Even when the Know Betters are monstrously wrong.

A Thought on Iron Curtains

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Shortly after World War II, Winston Churchill spoke of an Iron Curtain descended across Europe. The curtain was made concrete with the erection by the Soviets of the Berlin Wall in 1961. The purpose of that wall was more than simply to divide the USSR and its occupied territories from the rest of Europe; it was to keep the people inside that wall—inside the USSR or those occupied territories—from leaving for a better place, for a place where freedom and individual choice could be had.

Shortly after our Revolutionary War, our Founders wrote, and We the People ratified, our Constitution and its attendant Bill of Rights, which include the 10th Amendment:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

So was born a Federation and ultimately 50 laboratories of democracy, particularly as described by Supreme Court Justice Louis Brandeis in New State Ice Co v Liebmann when he wrote in his dissent how a:

state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.

Now keep in mind the concern of John Jay who, while the Constitution was being drafted in those fateful summer days, considered that, in contrast to the failing Articles of Confederation, the States should be reduced to the same relationship to the proposed central government as counties then had relative to their States (although, in the event, he strongly advocated ratification of the Constitution itself):

merely as districts to facilitate the purposes of domestic order and good government.

Next, consider these activities of our Federal government:

  • it terminated the democratic discussion in progress among and within the several states concerning abortion and when it might be appropriate or inappropriate, nationalizing the thing in Roe.
  • it terminated the discussion in progress among and within the several states concerning the nature of marriage, nationalizing the thing in Obergefell.
  • it terminated the democratic discussion in progress among and within the several states concerning the provision of health care and of health insurance, nationalizing the thing with the Affordable Care Act.
  • it terminated the democratic discussion in progress among and within the several states concerning the market behavior of private enterprise, nationalizing the thing with Dodd-Frank.
  • it removed from all possibility of local discussion the relationship between private enterprise and private citizens with the creation of the wholly unaccountable Consumer Financial Protection Bureau.

The list goes on.

The USSR’s physical iron curtain was designed to keep people from leaving in an era when they had a place to go to. There is another kind of iron curtain, though.

Our government is no longer requiring—as the Constitution above it does in Article IV, Section 1—that every state honor the decisions of every other state. Rather, it’s demanding that every state behave the same as every other state.

With the reduction of our 50 laboratories of democracy to mere districts to facilitate the purposes of the Federal government, this government is erecting a legalist iron curtain by deprecating the 10th Amendment, and so denying Americans a place to go to, denying us any place more compatible with our individual views, needs, moral imperatives.

Obamacare….

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…again. The claimed purpose of Obamacare is to get every American covered by a health plan.

Prior to the passage of the Affordable Care Act, with its mandate that all Americans purchase insurance and requirement for businesses to offer employees insurance plans, many small companies provided coverage by directly reimbursing medical costs or for the cost of private insurance plans. Businesses do it because that’s a less complicated process than dealing with an official health insurance plan….

An IRS Rule (remember these guys and their rules?) that took effect on 1 Jul punishes those businesses for helping their employees.

…those reimbursements…are “considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing.”

“Such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code[.]

No. The true purpose of Obamacare is to get every American covered by a government-approved health plan. Choice be damned. An employer actually helping his employees be damned.

Rents and Rental Ownership

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New York City is going to do it, again.

Mayor Bill de Blasio appears poised to deliver on a campaign promise to freeze rents for more than one million tenants protected by New York City’s rent-stabilization laws.

Both landlord and tenants leaders said they expect the Rent Guidelines Board to approve the freeze, affecting one-year apartment leases beginning on or after Oct 1, on Monday….

Never mind that

…an annual report showed that landlord operating costs only rose 0.5% due to falling fuel prices. Excluding volatile fuel costs, overall costs rose 3.6%.

Why would anyone want to rent in this environment? How are landlords supposed to afford maintenance—cosmetic or needed—if they’re not allowed to raise rents to cover costs? Never mind that they’ll be held to account in open court if they don’t do the maintenance.

How are landlords supposed to afford to advertise or otherwise attract tenants if they’re not allowed to cover costs?

How are landlords supposed to earn a living if they’re not allowed to earn a profit for their efforts?

Another Reason We Need Regime Change in DC

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Senate Judiciary Committee Chairman Chuck Grassley and Ranking Member Patrick Leahy sent their third letter since June calling on the DOJ to reveal its questionable cell phone surveillance policies, after yet another whistleblower allegation of abuse.

Keep doing this, absolutely. But don’t expect any answers for another several months.

We’ll need an administration from the other party before the Eric Holder/Loretta Lynch DoJ can be expected to deliver. And with that change, extended to DoJ, the present DoJ incumbents need to be haled into court and sanctioned for their willful obstruction of these investigations.