Intended Regulatory Rules

New rules intend to give regulators unlimited powers to do what corporate experts themselves have always found difficult to accomplish. Yet, politically-oriented bureaucrats are attempting to undertake the tasks anyway.

A Treasury committee would first determine which financial entities pose systemic risk to our economic system. This, of course, is impossible in the real world, where risk is hard to identify. The target companies would then be subjected to added regulation by the Federal Reserve.

This cannot be easily done in the political world either. Determining potential systemic risk is 100% conjecture. What steps to take, and when to take them, in order to eliminate conjectured problems, is not a practical matter.

Few experts in the business world have had the foresight to make the decisions for past incidents. Rarely do bureaucrats at the Fed or Treasury have the ability or objectivity.

Besides: The Fed and the Treasury already have done a poor job with the past financial meltdown and bailout function up to now.

Why expect any better of them in the future?

Investment Controls and Athlete Income

Hiring, firing and controlling employee wages by government bureaucracy can be a slippery slope, when you also consider how government stimulus affects even entertainers such as sports stars.

Athletes probably get far too much salary for what they do. Considerably more earnings than top-notch CEOs. But they are under the public’s radar. So the media, in its ignorance, let’s them get away with the notoriety executives must suffer.

Example: Ballparks and ball clubs are subsidized by state and local taxpayers. Each time a new ballpark is built, you can be sure some government body has provided long-term assistance in the financing, via cash, tax abatement or bond funding.

Federal stimulus funds have backed local and state entities. So, in effect, funds were made available to fund ball club pockets, so their other pockets could pay athletes.

Always remember: Money is fungible. The payment does not have to be direct. Money can be substituted from one recipient’s pocket to the other, to hide the source of funding. It all adds up to the same total outlay.

The public complains about an executive getting more than a million or so a year of taxpayer money. What about a ball player who operates no business, and hires no one, who makes up to thirty million, and more a year? And may actually be a loser on the field, at that?

Investment Controls and Corporate Wages

For background, note these facts you almost never get from the media on business:

We have already often noted in these reports how the government sets wages of some employees. Or how they fire some employees, as the feds have done with General Motors and Chrysler. Or how the banks are interfered with. All under the guise of being rescued.

This happens with federal government bailouts, and it is one of the problems encountered in such forms of state socialism. Where government is honest enough to describe it as socialism.

If you think I am exaggerating, look up the discussion of state socialism in an encyclopedia. While you are at it, learn history. Review that of Italy under Benito Mussolini in the 1920s and 1930s. It will be an eye-opener for every American today, who worries about the fed controlling or influencing industry.

A Weak or Stronger Dollar?

Most folks don’t care about a weak or a strong dollar. They care about less esoteric or financial matters. About sports scores and athletic statistics.

Too many are also certain beyond doubt about who in government can offer them more goodies. That’s because they are often influenced by media sound bytes when it comes to political news. It’s sports and other circuses that get their attention.

So a weak dollar that concerns whether foreigners or foreign governments buy U.S. Treasury bonds has no importance to them.

But when they have heavy inflation because the government has to literally print money to balance the budget, they will notice. By then they will blame the wrong folks for their financial woes, taking their cue from the same faulty media sound bytes.

Inflation Ahead

With extraordinary government spending and out-of-hand budgetary deficits. It is only a matter of time before we see frightful inflation. It may take two or three years to really show up, and it may happen by the next presidential term, but it will come.

The Federal Reserve’s primary job is not to protect against systemic financial risk, as is being proposed by the Obama administration. It’s primarily to maintain the value of the currency.

Since 1978 the Fed has to help enforce the Full Employment and Balanced Growth Act, also known as Humphrey-Hawkins. That conflicts with the Fed’s prime stated activity. That’s because the Act’s enforcement creates an inflating bias, not one of dollar stability.

So there is always a conflict of interest being overlooked by financial media comment.

Tort Reform Ways For Cheaper Health Care

It may not be too late for future real health care reform.

I have previously noted a way to make health care cheaper, without ruining the entire system with a socialized version.

A way to cut costs sharply would be to reducing provider costs. Physicians and hospitals tell you this could be done if they would be able to curtail defensive practices.

The accounting firm PricewaterhouseCoopers says that about 10% of medical expense is attributable to medical malpractice lawsuits. Only about 2% is caused by direct lawsuit costs.

Add to that about 5% to 9%, due to MDs having to practice defensive medicine. That is, they add tests in case a plaintiff lawyer asks them in court: Questions such as “Why didn’t you do this procedure…?”

Clunker Government Offers

Here is a basic economics lesson not taught in most expensive colleges. It has to do with the Obama administration’s past failed effort to revive the economy by giving new car buyers a $4500 cash allowance for clunkers when buying a certain type of new car.

It was not successful after the fact, and it was not predicted to be successful, when first proposed, by independent observers.

One: The government mixed an economic stimulus concept with an environmental objective so that it confused the public.

Two: The government, as is usually the case, had no concrete administrative plan for carrying out the program to reimburse dealers.

Three: Cars sold in this manner meant that no cars would be sold normally for a couple of years after the program terminated. The public’s appetite was temporarily stimulated but then held off from future buying.

Four: Because of the way clunkers were being disposed, the used car and parts markets were adversely affected.

In addition, If money of this kind is used for clunker cars, what about clunker washing machines, or lawn mowers, and so on? Or government funds for buying old clothes?