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Economics and commerce, all built from scratch.

This Time Really is Different

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The year was 1930.  The greatest depression in US history closed around the nation like a dark shadow.  Congress was desperate to do something that put the nation to work again.  What could do it?  Rep. Willis Hawley (R-OR) and Sen. Reed Smoot (R-UT) had a plan – close down imports and make Americans buy products made in America.  Their plan, the Smoot-Hawley Tariff, raised import taxes on over 20,000 items to about the highest level they had ever been.  Nations around the world responded with their own tariffs, starting with Canada, slashing all trade in and out of the US in half.  Nearly everyone agrees that this made the Great Depression much worse everywhere.

Flash forward to 2013.  Japan returns the Liberal Democratic Party to power on the promise to put the nation to work again.  Their plan?  Not to shut down trade, but to increase it – goosing exports by lowering the value of their currency and making their stuff cheaper.

The situations and the plans are very similar, but the underlying assumption is completely different.  The world has passed from Nationalism to Globalism as the basic driving force.  And that difference is worth thinking through.

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You Were Worried About China?

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The best way to destroy the capitalist system is to debauch the currency.
– Vladimir Lenin

Barataria was a bit skeptical about Japan’s “Abenomics” back in January.  The first results are in, and they are amazing.  Their economy grew by a developed-world-leading 3.5% in the first quarter, and the stock market is up 28% in 2013.  It’s been called a “wealth shock”, and it’s very welcome in a nation that has been flat for two decades.   What could possibly go wrong?  Just about everything – and it’s likely to affect us here in the US.  Ready for really cheap electronic gadgets?  How about stagnating employment?

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What if Obamacare Works?

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If you listen carefully in Washington, you can hear the tiny whooshing sound that dice make when they are up in the air.  The difference is that when politicians throw them you hear a lot more bluster and babbling.

Sen Mitch McConnell (R-KY) is up for re-election in 2014, and he knows just how the next 18 months are going to go for his re-election plans.  It’s a steady diet of scandals and a call to repeal “Obamacare”. He told the Washington Post, “I was in favor of repealing Obamacare long before the IRS scandal,” he said. “It’s the single worst piece of legislation in a long time.”  McConnell added that the health-care law “has an overwhelming likelihood of being the most important issue of fall of 2014 campaign.”

We’ve already discussed how ridiculous the scandal-mongering is, but what if Obamacare actually works?  That’s not an idle question, either, because there is considerable evidence that it will work – for very conservative, Republican reasons.  And at least one key Republican has admitted as much.

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Bank Regulation That Makes Sense

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“Too Big To Fail” (TBTF) is the standard for socialized risk and privatized profits.  The biggest banks enjoy an implied bailout under Dodd-Frank regulations that give them a tremendous advantage over smaller banks.  The complex weave of financial innovations that are their signature is impossible for anyone to understand, making the risk we have taken on as taxpayers almost impossible to quantify.

What can be done about it?  Try TBTF – the “Terminating Bailouts for Taxpayer Fairness” Act of 2013.

This legislation, introduced by Sherrod Brown, an Ohio Democrat, and David Vitter, a Louisiana Republican, cuts through the complexity, levels the playing field among banks, and ends “Too Big To Fail” once and for all.  What chance does it have?  Actually, a very good one because of some terrific politics.

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May You Live in Interesting Times

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There is an awful lot going on in the world right now.  It’s hard to find any one thing that is worth writing about, given all of the news.  So let’s run down everything all at once.

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