All in Economics

The Transportation Boom Ends

 Less shipping means less buying, selling, and producing. Government interference in the form of low interest rates and the threat of tariffs pulled economic activity forward. However, now the economy is digesting that bubble of activity.

Synthetic Danger, Again

The whole idea of capital relief, as the name would imply, is to lower the amount of equity required and increase leverage.  What’s a banker to do when a pension or hedge fund rep stops by and offers to unlock some of his or her bank’s idle capital?

End This “Expansion” Now Chairman Powell!

The central bank creates expansions and then murders its darlings, to borrow a phrase.  Austrian economists say booms are the problem, with low interest rates breathing life into ill-conceived ventures and, once hatched, keep them from death’s door, wasting capital to the detriment of society.  Recessions and depressions cleanse the economy of these malinvestments, re-aligning production with society’s collective time-preference.

Less Fed, Less Bubble

We often hear that rich are getting richer and everyone else is being left behind.  However, it is only the Austrians who point to the Fed’s policies as creating this great divide in wealth and incomes.  

Tariff Man Breaks Windows

Boehm points out that the 300 hundred jobs came to life after “American companies have paid about $690 million in tariffs to the federal government.”  That works out to $2.3 million per job we know about or $300,000 per possible job.

The Trouble with CoCo

CoCos are similar to trust preferred debt that community banks in the U.S. stuffed balance sheets with in the early 2000s.  While trust preferred was debt, the terms were so liberal, banking regulators allowed banks to count the debt as equity.

Optimism Abounds, Dark Clouds Circle

The economy is great we’re told.  Vote Republican and get more of it. “It” being--winning.  However, the KBW Bank Index hit a 52-week low today.  The index of small bank stocks is getting hammered. The index of European bank stocks continues to be bludgeoned by the market. And, the home builder’s index peaked in January, with big builders Lennar and DR Horton now making 52-week lows.  

The Real Rialto

However, that’s not what Rialto is (or was) at all.  Rialto Capital Advisors conducted  day-to-day management and workout of 3.05 billion in loans the Federal Deposit Insurance Corporation (FDIC) received after it closed down banks during the financial crash.

Dimwit Minimum Wage Logic

If Bernie were paying attention, there is a minimum wage experiment going in real time in Venezuela right now.  Sure, there’s some serious money printing going on there and plenty of socialist schemes to keep the shelves empty.  However, the fact there’s nothing to buy hasn’t kept Venezuelan president Maduro from hiking that country’s minimum wage 24 times since 2013 when he took office.  

Tariffs to Socialism

Trade wars create winners and losers, at home and abroad.  American consumers lose, as the prices are hiked while capital and labor are misallocated. This makes everyone, over time, poorer--even the tier two real estate developer.