Thursday, December 24, 2015
Where has all the new money gone?
A great puzzle for economists is that Obama has issued vast quantities of new money to pay for his administration's extravagance without the expected downside: roaring inflation. All of history tells us that printing more and more money makes prices skyrocket. So how come price rises have mostly been modest?
The answer has to lie with what economists call the velocity of circulation. And that is put forward in the article below. Roughly translated into layman's terms, it says that both companies and individuals are saving more and tending to spend it on big things rather than a lot of little things when they do spend. So that reduces demand, which keeps prices down. The writer below also suggests a major reason why people and companies are keeping their hands in their pockets: Government regulation of almost anything that moves
Velocity is an indicator that buyers and sellers agree on a price, that the price is "right" and not an outlier. That's why you see a stock move on high volume "confirming" the move, because it means the prices wasn't "right" at the previous level, while more people agree the new price is fair.
If prices are allowed to go where they need to without pressure and manipulation, you will always have velocity, as the most buyers and sellers will always agree at some price. Because this is true, low velocity cannot happen in a free market. Which means the only reason for low velocity (in this or the previous Depressions) is that someone has somehow managed to get an edge that prevents them from selling, from liquidating, at the true price, i.e. the one the buyers will agree to.
This has another corollary, that the measure of velocity on the Fed's own chart is the measure of the level of unnatural price manipulation on the market. We can watch this aggregate indicator of their failure in real time, by the Fed's own hand, and we can know the manipulation is ending when it rises.
So yes, the Fed, the governments, the insiders can manipulate to their heart's content, as they've been doing, but that unnatural pressure goes somewhere. And the pressure diverts into velocity.
As we saw in the Great Depression, or the Roman Empire, velocity can stagnate for 10, 20, or 1,000 years until the manipulation ends, property rights are restored, and we have a free market.
History has shown that may be a bargain they're willing to make, but it won't do the rest of us a lot of good."
Why The Donald trumps the opposition
The clueless attacks on Trump have fuelled his campaign
Donald Trump emerged from the pack of Republicans seeking the party’s nomination in June, after gaining notoriety for calling Mexican immigrants ‘rapists’. Pundits largely dismissed Trump as a celebrity blowhard, and his support was deemed a fad – the ‘Summer of Trump’. But, six months later, Trump is still on top of the field. With his call for a ‘total and complete shutdown’ on Muslims entering the US, Democrats and Republicans alike now see something much darker in Trump and routinely refer to him as a fascist. This Nazi, they now fear, has a real chance of going all the way to the White House.
Writing off Trump at first was complacent, and revealed how most commentators had assumed that American politics could never be open to an outsider like Trump – even at a time when trust in politicians is at a low-point. But the latest panicked outbursts over Trump also fail to come to terms with him.
While nearly everyone rushed off to denounce Trump as ‘un-American’ for his anti-Muslim immigration proposal, they didn’t stop to consider just how ridiculous that proposal is. As Trump later explained, his cunning plan amounts to asking would-be immigrants ‘Are you a Muslim?’. It was more ‘Springtime for Hitler’ than Final Solution.
Yet, as foolish as Trump can be, he has shown the capacity to play members of the establishment for even bigger fools. He certainly knows how to get a rise out of them, to his benefit. The timing of his anti-Muslim announcement was not accidental. Just the day before, President Obama had given a lacklustre speech about the terrorist threat, which did little to allay the fears of those who were on-edge following the San Bernardino attack. Trump seized on that disconnect and quickly whipped up a ‘policy’ that he knew would grab headlines. Sure enough, politicos and the media were duly outraged, Trump dominated the news, and his polling numbers got a nice bump upwards.
But it seems the US political establishment is highly selective in who and what it considers worthy of outrage and denunciation. Before Trump’s latest pronouncement, two other Republican candidates – Jeb Bush and Ted Cruz – had said that the US should limit Syrian refugees to those who are Christian. And Obama, in his Oval Office speech, called for tightening visa rules for people wishing to enter from certain countries – ones with predominantly Muslim populations. None of those schemes led to the kind of uproar Trump received for his.
When Trump proclaims that he will act unilaterally (say, to build a wall along the border with Mexico) and not let a ‘pathetically weak’ Congress get in his way, freaked-out onlookers hear a dictator-in-waiting. But I wonder where he got such notions. Could it be from Obama, who, in 2011, said: ‘We can’t wait for an increasingly dysfunctional Congress to do its job. Where they won’t act, I will.’ As Jonathan Turley points out, Obama has expanded presidential authority and has overridden Congress in areas from ‘healthcare to immigration to the environment’. Democrats cheered these moves, but now don’t like the thought of someone like Trump having such powers.
The obsession with Trump, the close monitoring of his every utterance, has reached the point that his political and media foes have – ironically – become important generators of support for him. Every time they tell Trump ‘you can’t say that’, he says it. Every time they demand an apology from Trump, he doubles down on it. Just by defying the strictures of political correctness, and not caving when challenged, Trump can look authoritative and daring.
The bipartisan frenzy over Trump backfires on the political establishment in other ways. As we’ve seen in the backlash to Trump’s suggested ban on Muslim immigration, the response has not been ‘here’s why Trump is wrong’; it has been ‘Trump is unacceptable’, ‘un-American’, a ‘fascist’. Opponents want to banish Trump and his supporters from polite society, rather than tackle the arguments that they raise. It is not unreasonable for Trump’s supporters to express concerns about terrorism and immigration, among other issues. But, too often, establishment figures fail to take these concerns seriously and provide counter-arguments. Worried about Islamic terrorism? You’re an Islamophobe. Worried about immigration? You’re a bigot.
Indeed, the denigration of Trump supporters is one of the ugliest aspects of the anti-Trump hysteria. As it became known that a core part of Trump’s support comes from those without a college education, some began to use that fact to dismiss his voters as ‘uneducated’, ‘low-information’ or just moronic. Trump fans are portrayed as excessively anxious about terrorism, irrationally so, and thus susceptible to being duped by a demagogue like Trump. But who is more fearful: Trump supporters or those who are freaking out over the possibility that more people will jump on Trump’s bandwagon?
Those core Trump supporters who are disparaged as the ‘uneducated’ are what we used to call the working class. Sections of the working class have been alienated from the political process in recent years. In the 2012 election, many white workers without a college education abstained rather than voting for Obama or Mitt Romney. Now that it appears that Trump has them engaged in politics, the establishment parties have only themselves to blame for ignoring them for so long.
Trump's broadsides against political correctness and his emphasis on national security are clearly in response to Obama and the Democrats. And his complaints about weak, ineffectual and dishonest politicians are levelled against both parties. Trump has been on the offensive against the entire political establishment, slowly tearing down the old order. He has exposed a cross-party political elite whose instinct is to try to crush him, rather than make its own positive case for the future.
Senator Marco Rubio Largely Responsible For Obamacare “Death Blow”
If you have been paying attention to the news about Obamacare recently you know that things aren’t going well. In fact, the entire program is on the verge of total collapse as the poorly crafted “Affordable Care Act” has entered into what many are calling a “death spiral”.
There are many reasons why Obamacare is failing and many could see this tragic end coming the moment that the Democrats rammed the bill through Congress without any Republican support and without even reading it themselves.
It appears now that one of the primary reasons that many state exchanges are going bankrupt is that a Republican senator added a provision in the bill that made it extremeley difficult for the government to ask for more taxpayer money once they blew through what they had.
That senator? 2016 GOP presidential candidate, Marco Rubio. From Hot Air via The Hill:
"Two years ago, Marco Rubio won a fight during the budget battles to include a requirement for HHS to maintain budget neutrality in its risk-corridor programs. Rubio had pushed back against this program for months, claiming — as it happens, accurately — that it was a back-door bailout of the insurance companies that had cooperated in the effort to pass ObamaCare. Instead of allowing HHS to dip into general funds for risk-corridor payments, Rubio’s rider restricted those payouts to funds collected from taxes on insurers.
The move forced HHS to cut expected risk corridor payments to pennies on the dollar, and prompted the closure of more than half of the co-ops launched by HHS to provide supposedly low-cost coverage. Now that United Healthcare has signaled that it may cut its losses and get out of the ObamaCare market, The Hill credits Rubio with starting the death spiral many predicted when Democrats first passed ObamaCare in March 2010:
The risk corridors program was designed to be a temporary stopgap against high insurance claims during the first three years of the new federal program.
If an insurer had more expenses than it planned, the federal government would cover the remaining balance using cash collected from companies that paid out fewer claims than expected.
The program was almost certain to need extra money in the first few years, when there were fewer healthier customers signing up. But Rubio’s provision in 2014 severely limited any new spending by requiring the program to become budget neutral.
The damaging effects of the budget-neutral requirement became clear in October. The Obama administration disclosed it could only afford to pay 13 cents of every dollar owed to the insurance companies — after insurers had already locked in their rates for the upcoming year. …
Within weeks, about a dozen start-up insurers known as CO-OPs announced they’d be shutting their doors, in most cases because they lacked the cash flow to stay solvent. And at least two other insurers — WinHealth Partners in Wyoming and Moda Health in Washington — pulled out of the exchanges.
This news is being reported at a perfect time for Marco Rubio who will surely gain some extra popularity for this move especially from some conservatives who identify him as a big government Republican.
As expected, Obamacare quickly ran out of money, and instead of having a blank check like they usually do, the process started to fall apart. The Democrats put us in this precarious position by pushing through a disastrous bill and now we are all going to be left picking up the pieces. Thanks to Marco, it looks like Republicans were able to make a positive difference in moving away from this debacle and on to a healthcare system that actually makes sense."
Sounds like a solid small government move to me. Good for Marco.
How Much Would Obamacare Repeal Save Americans?
Repealing Obamacare isn't just good for consumers, but it could save the taxpayers a big chunk of change. As Townhall reports:
While liberals mock Republicans for their several failed attempts to repeal the Affordable Care Act, they overlook the fact that these conservatives may actually be doing so out of hopes of fixing our economy. The Senate’s latest anti-Obamacare bill for instance, the Restoring Americans’ Healthcare Freedom Reconciliation Act, which passed on December 3, would help take a big chunk out of our deficit, the Congressional Budget Office reports.
According to the CBO, repealing ObamaCare's subsidies and Medicaid expansion would cut federal spending by almost $1.4 trillion over the next 10 years. And getting rid of its myriad tax hikes would reduce tax revenues by $1.1 trillion, resulting in $281 billion decrease in projected deficits over the next decade.
In total, the deficit reduction has the potential to rise to $474 billion, mainly because the economic growth would boost revenue, Investor's Business Daily explains.
Hm. Maybe those Republicans aren’t so crazy after all?
Obamacare is a disaster that's been so overshadowed by a slew of other disasters that professional pollsters have forgotten about it. But as many have pointed out, it could be the dark horse that sinks Hillary Clinton. The American people should hope so.
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Posted by JR at 1:17 AM