In a WSJ editorial, Gordon Brown and Nicholas Sarkozy go after people who make significant bets on the future of oil prices. I know that definition applies equally well to oil companies, airlines, bulk shippers, commodity traders, etc., but the dynamic duo are choosing to apply that label only to “speculators” (i.e., those evil traders/hedge funds).
And what is their complaint?
“For two years the price of oil has been dangerously volatile, seemingly defying the accepted rules of economics.”
and
“Those who rely on oil and have no substitutes readily available have been the victims of extreme price fluctuations beyond their control — and apparently beyond reason.”
If we get rid of the adjectives, redundancies, and weasel words, we get:
“For two years the price of oil has been dangerously volatile, seeminglydefying the accepted rules of economicsas often happens in uncertain economies.”
and
“Those who rely on oil and have no substitutes readily available have been the victims ofexperiencedextreme price fluctuations beyond their control — and apparently beyond reason.”
The difference is that absent the adjectives, redundancies, and weasel words like “seemingly” and “apparently,” the clarion loses its force.
The combination of selective labeling of one group of traders as “speculators” based solely on the type of firm that employs them, and using language to blame natural occurences on conspiracies is typical of the cargo cults from which civilization evolved. Such misuse of language should not be acceptable in civilized societies, except that our comfort has far outstripped our collective ability to understand its true source.
In this case, though, I appear to be in good company:
The standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough.
Whenever I see such nonsense, I have to keep reminding myself that the trade theories for which Krugman won his Nobel Prize were explanatory and predictive. Krugman did not win a prize for mechanism design; he could not have predicted E-bay.
The idea of people bidding for stuff they can’t really see from people that they’ve never met is fraught with asymmetrical information. Honest sellers could not hope to compete with liars selling competitive products. Honest bidders could not hope to compete with fraudulent bids that may not be honored. Such a market, failing as it does the test of a “standard competitive market model” could never exist.
The formula accepted by every political leader: Max(societal good) = MM+MP. Here are the terms:
MM = More money
MP = More power
Every government official will tell you, there is no problem they can’t solve if only you grant them MM+MP. As long-time readers know, I have come to facetiously label this formula Hodak’s Law, since it is so commonly, universally invoked by politicians, and credulously reported by the press. Tim Geither is clearly no exception.
One of my dear senators Chuck Schumer, has introduced a “Shareholder Bill of Rights” in his august body. After the reaming investors have gotten from recent government actions, it seems appropriate that the government offers them some relief. So what does this bill promise?
– Say on pay
– Proxy access
– A risk committee
– Separation of CEO and Chairmanship
– Annual election of all directors
If this sounds like an activist wish list without any identifiable link to the current financial problems, you’re right. I defy anyone to point to how any of these items, or all of them in tandem, would have prevented a single liars loan, or the artificial inflation of asset prices that drove so much behavior the wrong way, or would have stopped a single homeowner from taking on a mortgage they couldn’t afford. By insuring directors are elected each year? By providing access to the proxy statement to hedge funds and union chiefs? Aren’t the people arguing that a risk committee could have contained risks the same ones who argued that compensation committees could contain compensation?
“It has become apparent that one of the central causes of the financial and economic crises we face today is the widespread failure of corporate governance,” Schumer, a key member of the Senate Banking Committee, said in a letter to fellow lawmakers.
Like any good lawyer, Schumer selects his facts carefully. If any knowledgeable observer was to rank the central causes of the financial and economic crisis we face today, corporate governance would not possibly make the top ten. It would fall well behind such government induced causes as Fed loose money, federal guarantee of Fannie and Freddie bonds, CRA quotas, failure of regulators to identify fraud at SEC registered funds like Madoff’s…
Corporate governance has been far from perfect. But our current downturn may not have been preventable by any combination of public and private behaviors. Market downturns happen naturally; they create sparks and fires in various parts of economy. This downturn could, however, have been a far less damaging if the government had not thrown gasoline all over our economic structure.
That quote is in reference to Obama’s proposal to enhance the U.S.’s global taxing power over corporations incorporated here.
Here’s how it works now. P&G and Unilever can set up a soap plant in Ireland and sell soap in India. Unilever pays the Irish tax rate of 12.5% on its profits. P&G pays the same, but retains an additional 22.5% tax liability with the United States. P&G will have to cough up that cash as soon as it brings it back to the U.S. Lo and behold, they see an opportunity to build a warehouse in Ukraine, or a call center in Bangalore. They use their foreign profits to do this, paying a net tax that is exactly the same as Unilever’s for all these activities.
Obama says he wants that tax money now. As soon as P&G makes it. On money that never reaches the U.S. In Obama’s rose world, P&G is “shirking its responsibility” to the American people by shielding their profits from among the highest corporate taxes on Earth. Obama’s does not consider that the American government is shirking its responsibility to American companies by charging them among the highest rates on
Earth for the use of the house brand.
There’s actually a funny part to this story: Obama believes that this change in policy will encourage more jobs in the U.S. That’s right, by taking more of P&G’s foreign profits away from them, they will build that warehouse in Utah or that call center in Buffalo.
Only the U.S. has the arrogance to levy taxes on a global basis. This arrogance is born of the liberal hubris that these companies have nowhere else to go (“they wouldn’t dare reincorporate in Bermuda”), or that contemplating it constitutes a sort of treason. It is born of the conviction that a extra few billion in the hands of Congress is better for Americans than having it in the hands of American companies. They really believe that.
The really funny thing is that Obama believes the people telling him that he will actually see all those taxes rolling in. If history is any guide, some of those companies will, in fact, reincorporate in Bermuda, or Ireland, or Holland. It doesn’t cost much for even a fairly large, global company, certainly less than 20+ percent of their foreign profits per year. The ones that don’t re-incorporate outside of the U.S. will, instead, spin off their international divisions to their shareholders. Others will use any of dozens of other loopholes, presumably more expensive measures than they must use today, to keep from getting raped by Congress. Under no circumstances do I believe that Unilever or Arcelor or Nestle or any of the other challengers to our major businesses will reincorporate in Delaware and move their headquarters to New York. The few businesses that suck it up for whatever reason will simply have to adapt to becoming uncompetitive in a hungry world, resulting in less profits here to tax.
And we will not see a significant increase in tax revenue from our multinationals.
The American Republic will endure, until politicians realize they can bribe the people with their own money.
– Alexis de Toqueville
We have seen how effective it is for people running for office to promise goodies to “the people” while pretending that it would be paid for by other people. This fakery works perfectly well with one layer of democracy. How much better can this corrupting mechanism work when you add a second layer of democracy?
Well, for the first time, the biggest source of state tax revenue is…federal tax dollars. Here is how it works: After the state has taxed your sales, income, and property, and spent that money on police, schools, and medicaid fraud, they still have a huge gap to fill. The federal government, financed largely by your income taxes, steps in to fill it. Yes, the tax dollars that you sent to Washington, D.C. gets rerouted via some incomprehensibly complicated, and very costly bureaucratic maze to your state capital, to be spent on whatever your (relatively) local politicians say is good for you.
It’s one thing to accept your local politicians telling you that you can’t figure out for yourself what your money should be spent on, that you can’t be expected to act as responsibly or charitably as your assemblyman or senator. It’s quite another thing for the federal government to say, in essence, that your state is not taxing and spending enough of your money, and so they (the feds) will tax you more and give your state more to spend.
Of course, the federal government is in fact shifting tax dollars from one state to another. The responsible (and largely Republican) citizens of Montana and Texas are paying for the profligacy of (largely Democratic) California and New York. Because that is the new American Way!
How would you finish that sentence? I would perhaps say something like, “but if someone were to physically threaten by wife or child, watch out for my stick or gun.” Someone else might say, “but if I catch that guy abusing his dog again, I swear I’ll sock him.” What would you say?
"My job! Down with property!"
Well, in France, this rationale seems perfectly acceptable among at least 45 percent of the people:
“I’m against violence but if these things keep happening it’s because there is an underlying despair,” said Socialist legislator Jean-Marc Ayrault
“These things” refers to the French phenomenon of ‘bossnappings’–the forcible detention of top management by workers in response to the threat of layoffs. That’s right, getting laid off from your job is an excuse for violence in France.
In the U.S., few people would condone getting laid off as an excuse for violence. It’s not a coincidence that the closest thing we have to a company run on French attitudes is also the source of the phrase “going postal.”
Socialists, however, believe that one person hiring another is an immoral act, yet also claim that being fired warrants a violent response. Inconsistent, I know, but I’m not making this up.
“This sort of thing (bossnappings) will inevitably happen again,” said Bruno Lemerle of the CGT union in the Peugeot car plant in Sochaux, France’s biggest factory.
“Those who sow misery reap fury. The violence is done by those who cut jobs, not by those who try to defend them,” he said.
Of course, the defining aspect of socialism is that they believe that worker violence is is OK, while employer attempts to thwart it are evil.
Here is the top legislator highlighting the difference between her interest as a citizen versus her interest as a legislator:
“I certainly don’t want my taxes raised but one thing I do recognize is that we are in the middle of a financial meltdown,” California Assembly Speaker Karen Bass, a Democrat, told Reuters in an interview.
“We have a constitutional obligation to balance the budget so we had no choice” but to raise taxes, Bass said.
Here is the basic equation she is hoping her sheeple will ignore:
State tax revenues – State expenditures = State income (deficit)
In other words, from her perch, the **only way** to prevent a deficit is to increase taxes. She would, in principle, have a point if state expenditures had already been cut to the bone. Here is how BOTH haves of that equation look:
Both halves of the equation
As you can see from this graph (which is impossible to find on the California’s Dept. of Finance site), declining tax revenues are clearly the driving force behind California’s budget problems. Not.
On the other hand, regarding the title of this post, they might be right.
Fair share: What I think you should spend on stuff that I want
Example: Massachusetts experiment in universal health care, dubbed RomneyCare by some, is…guess what…costing more than anticipated. This was one of those public-private partnerships where the state makes a deal with private firms in order to get them to accept a big, hairy policy change. The state then sees that the changes they forced on everyone cost more and did less than originally advertised, then goes back to change the deal with the private firms to their detriment.
In Massachusetts, a consumer group called Health Care for All (don’t you love how these self-styled groups get labeled as such by the uncritical press?) says, through a spokesman:
Increasingly employers are getting tremendous benefits under health reform. The question is not whether employers are doing their fair share for the employees they are covering, it’s whether they are doing their fair share for their employees the state is covering.
The translation is, “The state needs the money. These private companies should be providing it, because that is how I figure it.” How this group or the state figures things, of course, is less important than that they’re doing the figuring.
Read the First Comment 
