Almost two weeks have passed since Hurricane Irma made landfall in South Florida, yet tens of thousands remain without power. With temperatures regularly eclipsing over 90 degrees, these outages are not only a grave inconvenience for Floridians cleaning up after the storm, but have proved to be deadly. Given the power of Irma, it is not surprising that it has left behind incredible devastation. Unfortunately it is also not surprising that it is a government-protected utility that has done the most to impede recovery. The pain and suffering currently being felt is the direct result of government policy and the perverse incentives of crony capitalism. One of the talked about examples of how bad policy is making things worse for Florida families are a variety of government policies that discourages the use of solar power in the Sunshine State. Government policy dictates that Floridians are required to be connected to the central power grid, even if they have enough solar panels installed to power their entire house. Because of this requirement, a family stuck in areas without power with solar panels installed cannot use them now because doing so could endanger workers trying to restore power for their neighbors. Once again government’s desire for centralized control has unintended consequences. Of course, even without such rules, it’s unlikely that all of Florida would decide to go off the grid. Given that, it’s important to understand how the legal monopoly granted to electric companies not only traps customers into being entirely reliant upon a single company, but actively incentivizes those companies to be reactive – rather than proactive – when it comes to natural disasters and other events that threaten service. After all, companies like Florida Power & Light will respond to Irma as they have done to hurricanes past, by increasing prices on their customers. Unfortunately, the revenue reaped seems to have made little impact in FPL’s preparedness for future storms. While the company has reported that its recovery efforts have moved faster this year than when Hurricane Wilma hit South Florida in 2005, more residents suffered outrages due to Irma – in spite of the fact that Wilma actually had higher sustained winds when it made landfall.
This is the begging-for-the-overthrow-of-a-corrupt-status-quo economy we have thanks to the Federal Reserve giving the J. P. Morgans and Jamie Dimons of the world the means to skim and scam the bottom 95%. Dear Jamie Dimon: quick quiz: which words/phrases are associated with you and your employer, J. P. Morgan? Looting, pillage, rapacious, exploitive, only saved from collapse by massive intervention by the Federal Reserve, the source of rising wealth inequality, crony capitalism, privatized profits-socialized losses, low interest rates = gift from savers to banks, bloviating overpaid C. E. O., propaganda favoring the financial elite, tool of the top .01%, destroyer of democracy, financial fraud goes unpunished, free money for financiers, debt-serfdom, produces nothing of value to society or the bottom 99.5%. Jamie, if you answered “all of them,” you’re correct. The only reason you have a soapbox from which you can bloviate is the central bank (Federal Reserve) saved you and your neofeudal looting machine (bank) from well-deserved oblivion in 2008-09, and the unprecedented, co-ordinated campaign by global central banks to buy trillions of dollars of bonds and stocks.
Why are we fighting over confederate monuments? Because people feel strongly about this issue? Because they are being removed? Because some groups are trying to exploit the situation to get attention? Or is there another reason? While we are fighting over Confederate monuments relating to events almost two centuries ago, we are not focusing on: . The worsening plight of the poor; . The destruction of the middle class ( many middle class people can no longer afford even a new car); . The crony capitalists who make their money from government handouts or connections, and who are getting richer and richer; Government employees who may have signed on for the most sincere reasons, but whose numbers have swelled, who are now making much more than they would in the private sector, who cannot be fired, and whose earnings are often diverted into campaign contributions favoring one party; A government that is unsustainably financing itself through debt and money printing.
Following the recent clashes between the alt-right and the group antifa, some libertarians have debated which group they should support. The answer is simple: neither. The alt-right and its leftist opponents are two sides of the same authoritarian coin. The alt-right elevates racial identity over individual identity. The obsession with race leads them to support massive government interference in the economy in order to benefit members of the favored race. They also favor massive welfare and entitlement spending, as long as it functions as a racial spoils system. Some prominent alt-right leaders even support abortion as a way of limiting the minority population. No one who sincerely supports individual liberty, property rights, or the right to life can have any sympathy for this type of racial collectivism. Antifa, like all Marxists, elevates class identity over individual identity. Antifa supporters believe government must run the economy because otherwise workers will be exploited by greedy capitalists. This faith in central planning ignores economic reality, as well as the reality that in a free market employers and workers voluntarily work together for their mutual benefit. It is only when government intervenes in the economy that crony capitalists have the opportunity to exploit workers, consumers, and taxpayers. Sadly, many on the left confuse the results of the ‘mixed economy’ with free markets.
Canadian Finance Minister boasts about Crony Capitalist Bailout of collapsed mortgage lender. But his assumptions might be wrong. ‘Just like I said, a back door bailout in Exchange for something down the line. Very very dirty,’ tweeted Bay Area short-seller Marc Cohodes in response to Canadian Finance Minister Bill Morneau’s gloating about the government’s role in the bailout of Home Capital Group. Home Capital Group is Canada’s largest alternative mortgage lender. It focuses on new immigrants and subprime borrowers that have been turned down by the banks. It had been melting down ever since revelations of liar loans surfaced in 2015. Liar loans don’t exist in Canada’s clean housing market. They’re a US thing. By April this year, Home Capital was collapsing as a run on its deposits crushed its funding sources. A very onerous and controversial funding package was arranged in all haste to keep it afloat, as the industry – and as we now know, the Canadian government – worried about contagion. The Canadian housing bubble is sitting on needles, and everyone knows it. On June 22, when Warren Buffett’s rescue of Home Capital Group became known, its shares, after having already soared over the prior days, soared another 27% to C$19, having tripled from their crisis low in late April. But since that propitious day, its shares have fallen nearly 30%.
This post was published at Wolf Street on Jul 24, 2017.
The day before the 4th of July, when most Americans were hustling about preparing for family barbecues, the New York Times finally decided to publish an editorial warning about Wall Street’s potential threat to the nation. Unfortunately, it did so with the kind of timidity we see regularly from cowed or compromised Wall Street banking regulators. The editorial writers noted that: ‘It’s entirely possible that the system is more fragile than the Fed’s stress tests indicate,’ and they called for ‘heightened vigilance of derivatives in particular’ without providing any detailed data. A more accurate assessment of the situation would have been this: There is only one industry in the United States that has twice in a period of less than 100 years brought about a devastating economic crisis in the country. Wild speculation coupled with poor regulation of mega Wall Street banks brought about the Great Depression in the 1930s, leading to massive job losses, bank failures, poverty and economic misery for tens of millions of innocent Americans. The precise same combination of wild speculation and crony regulators created the Wall Street crash of 2008, throwing millions of Americans into unemployment and foreclosure while creating obscene bailouts and bonuses for bankers, and leaving the U. S. with such a low economic growth rate to this day that many Americans feel they are still living in the Great Recession.
Noah Smith, writing in Bloomberg, says that middle class America has indeed been fleeced by our national economic policies. We agree. But which policies have been responsible? Smith mentions and immediately dismisses trade, immigration, economic regulation, and welfare policies. The real villain in his view is an alleged turn toward managing the economy on free market lines: ‘Your prosperity was taken by the very people who promised to ensure and enhance it. The decades from 1980 through 2008 were the age of neoliberalism — the ideology of the free market.’ This is a story that we hear more and more. Neoliberals, the favorite new epithet on the left for free market exponents, have ruled the roost for decades ( note how the Obama administration is simply ignored in the preceding quote), and have left the poor and middle class far worse off than they were. The truth is that the Bush-Clinton-Bush-Obama era had much in common, and it was not free market principles. It was an era of unrestrained crony capitalism, in which special interests formed stronger and stronger alliances with government in order to secure economic monopolies and other privileges.
Yesterday the NFL granted Mark Davis his request to move the Raiders from Oakland to Las Vegas. The move creates multiple losers: Las Vegas hotel customers who will see room taxes rise to pay for the $750 million in subsidies for the new stadium, the city of Oakland who still carries debt from the Raiders old venue, and the infamous fans that made up the Raiders’ iconic ‘Black Hole’ who are losing their football team just after witnessing their first playoff performance in almost 15 years. Beyond the blatant crony capitalism of government-financed stadiums, there are many reasons to doubt the wisdom of the team’s decision. After all, unlike the Rams and Chargers move to Los Angeles, Las Vegas has no history of supporting professional football. The most significant attempt, the Las Vegas Outlaws of the XFL, only averaged 22,619 fans, ranking 5th out of the league’s 8 teams. Other attempts, including multiple Arena League teams and the short lived UFL, were financial flops. Of course, none of these products have the power of the National Football League, so perhaps this time will be different. At league meetings, a key part to selling relocation was the idea that fans of other teams would travel to Las Vegas to enjoy the city’s attractions along with the game. Of course, if the market had faith in this business model, investment wouldn’t have needed politicians to find investment. It is worth noting that the new Las Vegas NHL team will be playing at a facility backed entirely by private investment. Maxing out at 20,000 seats, it has one-third of the capacity of the Raiders venue – but cost less than a quarter of the projected costs of the Raiders’ future facility.
The Republicans have a problem. Healthcare prices are so swollen by government imposed monopolies that most people cannot possibly afford to pay the crazy bills without subsidies. What to do? Example: my son recently went to an out-of-state emergency room for food poisoning. The bill came in at over $8,000. And how is this for fairness: our insurance company knocked it down to about $4,000. An uninsured person would have been liable for the full amount. Might even have faced bankruptcy for failure to pay it. I personally lobbied for a provision in Obamacare preventing hospitals for charging the uninsured more than the insured. Obama said no. Why? Because the idea upset the hospitals. They wanted to be able to continue to exploit the uninsured. Whew. What does that tell us about Obama? Under these circumstances, average people cannot possibly pay their medical bills unassisted. Yet if you repeal Obamacare by imposing new price controls and subsidies, in other words, pour old, spoiled wine into new bottles, you just perpetuate the problem. So what to do? Prices can never be reduced by price controls, much less by price controls on government imposed monopoly prices. Most people do not realize that the government, through Medicare, has fixed medical prices for half a century and the results speak for themselves. At the same time, government has fed price increases by protecting monopolies set up by the drug companies and the American Medical Association. This is what government always does, and it wrecks any sector of the economy where this crony capitalist system is applied.
Reminder to media: this is 2nd time Flynn's shenanigans have compromised the credibility of @VP. Won't be a 3rd.— Philippe Reines (@PhilippeReines) February 13, 2017
Is it sweet revenge, or just desserts? Gen. Michael Flynn resigned suddenly from Trump’s cabinet after it came to light that the National Security Advisor had not told the Vice President or President about his conversations with Russia regarding sanctions. A scandal has since unfolded, and will continue in the media; Gen. Flynn has fallen on his sword. Via the Guardian: General Michael Flynn has resigned as Donald Trump’s national security adviser after weeks of speculation over his links to Russia turned into days of reporting on the contents of his calls with the Russian ambassador and a day of intense pressure over whether the president could continue to back his pick. But is there more to the inner-workings and behind stage schemes that led to his demise? The reaction from one of Hillary Clinton’s closest advisors, and a retweet from the would-be queen herself, suggests that there may have been some Machiavellian intrigue at work.
This post was published at shtfplan on February 14th, 2017.
Neocolonial “capitalist paradise” or crony “socialist paradise”: the net result is the same: expropriation and impoverishment. Yesterday I noted that not all assets will make it through the inevitable financial re-set. ( Which Assets Are Most Likely to Survive the Inevitable “System Re-Set”?) Those that are easy to expropriate will be expropriated, and those assets vulnerable to soaring taxes, inflation and currency devaluation will also be hollowed out. There are two real-time examples of these dynamics we can profitably study: “capitalist” Greece and “socialist” Venezuela. Both nations have impoverished their citizenry to preserve an oligarchy and its cronies. I hope it won’t be too great a shock that crony-capitalism and crony-socialism function in much the same fashion and generate the same result: the wealth of the nation is funneled (or expropriated) into the ruling Elites, impoverishing the non-elites.
Back in August, we reported of a fascinating case of crony capitalism, whereby Aetna gave the DOJ a not too subtle ultimatum which boiled down to the following: “If the Humana deal is blocked, we exit Obamacare.” Well, be careful what you wish for, because six months later, and with Obamacare well on its way out, moments ago a US federal judge blocked Aetna’s $37 billion deal to buy rival insurer Humana, thwarting one of two large mergers that would reshape the U. S. health-care landscape. The judge’s ruling, which was filed in Federal court in Washington, said the deal would be “anticompetitive”adding that the deal would have hurt competition among insurers.
This post was published at Zero Hedge on Jan 23, 2017.
While President Trump chose not to attend the elite extravaganza in Davos last week, choosing instead to lambast the great-est and good-est of the world’s executives in their crony capitalist safe space, the cognitively dissonant CEOs reassured each other by saying ‘ignore the tweets’, confident that “if [Trump] knows the facts, he’ll respond according to the facts.” It depends whose ‘facts’ those are, of course. As Bloomberg so eloquently noted, executives gathered in the Swiss resort for the World Economic Forum this week keep repeating, like a soothing mantra, that Donald Trump is at heart a pragmatist who will avoid trade wars and regulations that make it harder to do business. Everywhere you looked, and everything you were told confirmed that nothing has changed in the minds of the world’s elite community organizers… (as Bloomberg summarizes)
This post was published at Zero Hedge on Jan 22, 2017.
The Senate began working through President-elect Trump’s cabinet appointments this week, as Washington prepares for next week’s inauguration (which will cost taxpayers over $100 million.) One of the pressing concerns worrying libertarians is Senator Jeff Session’s view on the war on drugs, which has been one of the most successful areas for states’ rights in recent years. Obamacare has also been in the news, as the Republican Congress has begun taking steps to ‘repeal and replace.’ Unfortunately, as Per Bylund notes: In the present debate on Obamacare, all possible alternatives are simply a move from one interventionist economy to another, and this only distracts us from the real alternative: a radical rolling back of the state. Of course this approach of less politics, more markets is the approach needed in all facets of America today. On Mises Weekends this week, Jeff talks about crony capitalism with Nick Sorrentino, proprietor of AgainstCronyCapitalism.org. Jeff and Nick discuss how huge public companies – think defense giants like Lockheed Martin and Boeing – engage in an obvious form of fiscal cronyism, while Wall Street funds and investment banks engage in what we might call monetary cronyism. And they also discuss how average people reap undue benefits in a million small ways, from selling their homes in artificially overheated markets to making money from small businesses made possible only by bubbles. Is that tech startup really “worth” a $50 million payout to the founders? Thanks to the endless distortions of crony capitalism, we may never know.
In my last post, I made light of British columnist George Monbiot’s absurd charge that today’s free market economists and libertarians are part of an establishment crony capitalist system. A “progressive” friend of mine responded by asking: “Doesn’t big business wrap itself in the mantle of free markets? If so, aren’t exponents of free markets supporting crony capitalism? Aren’t they therefore responsible for the crony capitalist practices that beset us today? The short answer to this question is that free market economists and libertarians are no more responsible for the willful distortion and misuse of their doctrines than Jesus is responsible for the bloody wars of religion of 16th and 17th century Europe. Adam Smith pointed out two-hundred-and-fifty years ago that business owners, especially big business owners, are not generally supporters of free markets, whatever they may claim. They find its disciplines too onerous; they try to escape them through one means or another, and subverting government through crony capitalist techniques is the tried and true way to do it. Nor is it correct to think that crony capitalism is a particular phenomenon of our own day. Yes, it has grown by leaps and bounds in recent decades, thanks to ample financing provided by world central banks. But it has always been with us. As I pointed out to my friend, crony capitalism is as old as the human race. It is the economic system embedded in tribalism and as such has been the dominant system for all of human history. Through the ages, powerful cronies latch onto political and economic philosophies and distort them in the process, but this is just window dressing.