(Video) Should government bail out the big banks?

June 22, 2015

"It's on"

Remember the financial panic of 2008? That was the time when, with the big investment banks teetering on the brink of bankruptcy and a worldwide credit crisis underway, the federal government stepped in to bail out the banks and restore stability to the system.

But was it the right thing to do? For Prager University, economist Nicole Gelinas of the Manhattan Institute argue the case for “no.” In her view, the practice of saving banks “too big to fail,” something begun under the Reagan administration, buys short term peace at the cost of creating a long-term monster: banks that engage in riskier and riskier practices leading to greater instability, secure in the knowledge that Uncle Sam (read: the taxpayer) will bail them out. Like giving an alcoholic a drink to steady his nerves, bailouts only enable bad behavior, they don’t cure it.

Here’s the video. See what you think:

The right thing to do, in my opinion, is to let wayward banks go bankrupt, but handle as the Savings and Loan crisis of the 1980s was handled: federal regulators take over, shareholders and bondholders are wiped out, management is fired, the bank’s assets are redistributed through the normal bankruptcy process, but individual depositor’s funds are protected. This would provide a brake against ever-riskier behavior, instead of shielding bankers from the consequences of their actions.

Of course, this wasn’t the whole cause of the financial crisis: government intervention in the housing market, in the form of encouraging bad lending practices and selling risky mortgages as government-backed securities played a huge role, too.

Hmmm…. Government intervention causes a problem. I’m detecting a pattern here. smiley idea

PS: A good book on the crisis is “Reckless Endangerment,” by Morgenson and Rosner.


Los Angeles: union hypocrisy on parade #RaiseTheWage

May 27, 2015
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Union economics adviser at work

You have to love the moxie of these racketeers: demand a economically nonsensical minimum wage, $15 per hour, and then, when the city is about to implement it, demand an exception for union members because business owners have threatened to do the logical thing: cut jobs.

From The Los Angeles Times:

Labor leaders, who were among the strongest supporters of the citywide minimum wage increase approved last week by the Los Angeles City Council, are advocating last-minute changes to the law that could create an exemption for companies with unionized workforces.

The push to include an exception to the mandated wage increase for companies that let their employees collectively bargain was the latest unexpected detour as the city nears approval of its landmark legislation to raise the minimum wage to $15 an hour by 2020.

For much of the past eight months, labor activists have argued against special considerations for business owners, such as restaurateurs, who said they would have trouble complying with the mandated pay increase.

But Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.

Let’s review a basic lesson in economics, shall we, from another progressive, heavily unionized city:

Like I’ve said many times before: the laws of economics cannot be repealed by legislative fiat. Raise the cost of labor, and businesses will be faced with a choice from among four options — pass the costs on to the consumer; reduce labor costs by cutting hours or whole jobs; eat the costs and accept lower profits; or cease doing business in that jurisdiction, either by moving or closing shop. Ritu Shah Burnham may have loved her business, or she may have hated it. But, regardless, she’s come to the conclusion it isn’t worth staying in business in Seattle. She isn’t the first, and other small businesses in other progressive cities have made the same choice.

Apparently Rusty Hicks understands economics better than the Los Angeles city council and realizes he stands to lose union (dues-paying) jobs when the minimum wage goes up. So, he wants the freedom to negotiate a lower wage, more in line with economic reality. Fine. He’s pursuing his members’ interests.

How odd that he doesn’t want to allow that same freedom to all workers and business owners.

Afterthought: There is actually a sneaky benefit to this for the unions, besides preserving jobs. If unions can negotiate lower wages, there would then be an incentive for non-union businesses to unionize. That would lead to more union jobs and more dues coming into the union’s coffers. Oh, Rusty. You sly dog, you.

via Michael Strain


Instead of Ending Poverty, Big Government Subsidizes Dependency

May 20, 2015

Phineas Fahrquar:

I wish more people would see this: while begun with the best of intentions, the welfare state only traps people in poverty, providing an anchor that weighs against bettering their own lot.

Originally posted on International Liberty:

President Obama recently took part in a poverty panel at Georgetown University. By D.C. standards, it was ideologically balanced since there were three statists against one conservative (I’ve dealt with that kind of “balance” when dealing with the media, as you can see here and here).

You won’t be surprised to learn that the President basically regurgitated the standard inside-the-beltway argument that caring for the poor means you have to support bigger government and more redistribution.

Many observers were unimpressed. Here’s some of what Bill McGurn wrote for the Wall Street Journal.

The unifying progressive contention here is the assertion that America isn’t “investing” enough in the poor—by which is meant the government isn’t spending enough. …President Obama…went on to declare it will be next to impossible to find “common ground” on poverty until his critics accept his spending argument.

I think this argument is nonsense. We’re spending record…

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The Ticking Fiscal Time Bomb of Social Security

May 11, 2015

Phineas Fahrquar:

If you don’t think the health of Social Security is a big problem, consider this one fact: when adjusted for inflation, the shortfall is $40 trillion, with a “T.” The next president has to deal with this mess, whether he wants to or not. In fact, events may force him (or her) to deal with it. And because we’ve let it go so long, it’s going to hurt.

Originally posted on International Liberty:

America has a giant long-run problem largely caused by poorly designed entitlement programs such as Social Security, Medicare, and Medicaid.

So when I wrote last month about proposals by some Democrats to expand Social Security, I was less than enthusiastic.

…demographic changes and ill-designed programs will combine to dramatically expand the size of the public sector over the next few decades. So it’s really amazing that some politicians, led by the clownish Elizabeth Warren, want to dig the hole deeper. …I’m surprised demagogues such as Elizabeth Warren haven’t rallied behind a plan to simply add a bunch of zeroes to the IOUs already sitting in the so-called Social Security Trust Fund. …If Hillary winds up endorsing Warren’s reckless plan, it will give us another data point for our I-can’t-believe-she-said-that collection.

But it turns out I may have been too nice in…

View original 886 more words


(Video) In praise of Calvin Coolidge, the “Great Refrainer”

May 4, 2015

Via Prager University, recent years have given me a far greater appreciation of the virtues of our 30th president:

The lecturer, Amity Shlaes, has not only written a well-received biography of Coolidge, but also a revisionist history of the Great Depression that should be must reading.


#RaiseTheWage – Seattle pizzeria to close thanks to economic ignorance

April 29, 2015
"But at least we won the election! Obama!!"

“But at least they raised the wage!!”

To paraphrase Mark 8:36, “For what good does it do a city to raise the wages of it workers, yet forfeit the jobs?” In Seattle, San Francisco’s northern soul-mate, they may well be asking that very question:

It may be one of the first casualties of Seattle’s new minimum wage law. The owner of Z Pizza says she’s being forced to close her doors, because she can’t afford the higher labor costs.

Devin Jeran was happy to get a raise, when Seattle’s minimum wage went up to $11 an hour at the beginning of the month.

“I definitely recognize that having more money is important,” he says, “especially in a city as expensive as this one.”

Unfortunately, he’ll only enjoy that bigger paycheck for a few more months. In August, his boss is shutting down Z Pizza and putting him and his 11 co-workers out of work.

“Fortunately she keeps us in the loop, she didn’t just tell us last minute.”

Ritu Shah Burnham doesn’t want to go out of business, but says she can’t afford the city’s mandated wage hikes.

“I’ve let one person go since April 1, I’ve cut hours since April 1, I’ve taken them myself because I don’t pay myself,” she says. “I’ve also raised my prices a little bit, there’s no other way to do it.”

Like I’ve said many times before: the laws of economics cannot be repealed by legislative fiat. Raise the cost of labor, and businesses will be faced with a choice from among four options — pass the costs on to the consumer; reduce labor costs by cutting hours or whole jobs; eat the costs and accept lower profits; or cease doing business in that jurisdiction, either by moving or closing shop. Ritu Shah Burnham may have loved her business, or she may have hated it. But, regardless, she’s come to the conclusion it isn’t worth staying in business in Seattle. She isn’t the first, and other small businesses in other progressive cities have made the same choice.

And their workers have wound up looking for work.

What’s especially galling about this, aside from the hubris of thinking one can bend economic laws to one’s will, like a financial Lysenko, is that the progressive, social justice warrior-pols passing these laws don’t have to live with the immediate consequences: it’s not their profits that get hurt, not their business that becomes unsustainable, not their job that’s lost. They’re not the kid looking for his or her first job, only to learn the employer has cut back on hiring because he can’t afford as many employees as he used to. But these politicians do it while appealing to the god “Fairness,” assuming that it will all work out in the end with a wave of the hand, or that it will be the next guy’s problem. Whatever. They still get to hug themselves for being such wonderful people.

Their self-righteous arrogance is astounding and infuriating. It’s genuinely harming people


California: SEIU demands increase in minimum wage, jobs be damned

April 16, 2015
"But at least we won the election! Obama!!"

“But at least we raised the minimum wage! Obama!!”

Fresno is fifth-largest city in California, the largest that’s not on the coast, and the largest in the Central Valley, that agricultural cornucopia that’s being destroyed by drought and environmentalist idiocies.

But don’t get me started on that.

Anyway, just by its position and population Fresno is important to the state’s economy, particularly our agricultural sector. (Where do you think your raisins come from?) But, like much of the Central Valley, it’s suffered more than the rest of California from the 2008 recession and the pathetic recovery: unemployment in the Fresno area in 2014 was still over 11%, well above California’s statewide average of 7.1% at the end of that year.

So, when your city is suffering from a lack of jobs, what’s the first thing you think of to increase opportunities for work?

That’s right! You demand an increase to the cost of labor!

On Wednesday, according to the Fresno Bee, over 150 people joined other workers around the country marking Tax Day by marching in rallies organized by unions as they demanded the current federal minimum wage of $7.24 an hour be raised, as well as the California $9 minimum wage.

Standing in front of a McDonald’s, the protesters–comprised of home and child care workers, county and state workers, students and community leaders, but no fast-food workers–chanted, “Hold the burgers, hold the fries. Make our wages super-sized.”

Union members from the Services Employees International (SEIU) helped lead the way; one member, Beau Reynolds with SEIU Local 100, told the Bee, “We’re here to stand up. We’re here to join forces and we are here to demand better. To demand better wages, to demand better benefits and to demand the right and respect that all working families deserve.”

Notice that none of those protesting in front of McD’s actually work there: they’re just there in service of SEIU’s political goal, which is to get a general increase in the minimum wage, which would include the union’s members, leading in turn to higher dues-revenues for the union to spend on politics. (And union bosses’ salaries…)

But the fast-food workers on the inside? The ones inside who didn’t march, the supposed beneficiaries of SEIU’s fight for economic justice? Apparently they know what happens when you raise labor costs too high:

Welcome to the future

Welcome to the future

In other words, when government raises the cost of doing business —and labor is a cost!— business owners have just a few choices: pass the cost to the consumer and risk losing their custom; reduce profits to perhaps unacceptably low levels; reduce labor costs by cutting back hours, letting people go, and not hiring; or just getting out of the business. They’re already learning this in progressive Seattle, and it looks like the Fresno McDonald’s workers understand basic economics, too, unlike SEIU.

Or maybe SEIU just doesn’t care that fast food workers can be replaced with kiosks, as long as they themselves get their cut.

Either way, they’re not helping Fresno county’s unemployment problem.

(Crossposted at Sister Toldjah)


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