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free trade & free markets ideological culture national politics & policies

Old Woke, Not New

Last week’s collapse of the Silicon Valley Bank gets more interesting with each revelation. But one of them is probably not that it was “woke.”

Contrary to rumor, I see no real evidence that SVB gave millions to Black Lives Matter. The bank did pledge $50 million towards an internal program dubbed “Access to Innovation.” This, we are told, “sought to connect women, Black people, and Latinos with startup funding, networking, and leadership development in the venture capitalist ecosystem.” 

Sounds great in a press release, though what it has to do with making profits is a bit hard to determine. 

Very feel-​good, not very bottom-line.

And that’s where the bank failed, on the bottom line. 

Its clientele was concentrated in one industry, which has been hit by rising interest rates. Thus stressed, it was exceptionally prone to “bank run” pressures. Its core asset class was long-​term Treasury Bonds, whose value decreased with rising interest rates — and these were not hedged. 

As Forbes put it, “Whether it was fully or semi-​deliberate, Silicon Valley Bank was betting heavily on interest rates not rising.”

An extremely bad bet.

But you can see why the bankers would make it, right? Why wouldn’t they expect the giveaway mentality of Zero Interest Rates Forever?

Their hopes dashed, they nevertheless turned to their friends … in power. The Biden Administration that failed to keep interest rates down then pledged to cover SVB’s clients — the super-​rich corporations that true progressive Democrats pretend to hate for all their “profits” and “under-​taxed” income — well above the FDIC-​insured levels.* 

We may learn real data about the banks’ wokeness levels, rather than mere rumor, but the bedrock truth reveals itself as all-​too-​familiar: it’s all about monetary policy. 

That is, the “woke” ideas of a century ago, when the Progressives’ beloved Federal Reserve was created.

This is Common Sense. I’m Paul Jacob.


* Like Signature Bank, which was closed on Sunday, the overwhelming bulk of SVB’s deposits were uninsured by FDIC

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national politics & policies responsibility

The Accelerators

“We can do $10 trillion,” declared Rep. Alexandria Ocasio-​Cortez (D‑NY) last week.

“I know that may be an eye-​popping figure for some people,” explained the photogenic pop-​eyed pol, “but we need to understand that we are in a devastating economic moment, millions of people in the Unites States are unemployed, we have a truly crippled health-​care system and a planetary crisis on our hands, and we’re the wealthiest nation in the history of the world.”

In other words, the sky is falling … and we still have checks.

The Bronx congresswoman, described as “one of the most influential members” by MSNBC’s Rachel Maddow, trumpeted that tidy sum in response to last week’s “go big” proposal by President Joe Biden to spend a special new $2.2 trillion under the loose label of infrastructure, which AOC argued “is not nearly enough.”

This new two-​tril spending bill is “a follow-​up to the $1.9 trillion stimulus approved in March.” And just Part 1 of a two-​package infrastructure and other stuff Biden plan. 

“The White House is reportedly willing to spend $4 trillion across the two packages,” Business Insider reports, “a sum that would bring recovery spending under his term to nearly $6 trillion.”

Biden’s term has been only 76 days.

A couple trillion here, a couple trillion there and pretty soon you’re talking real money … except under Modern Monetary Theory, which Ocasio-​Cortez embraces. The idea being: government can print as much money as politicians want to spend

While this road to bankruptcy has been paved with the partisan political intentions of big spending politicians of both major parties, right now it is the Democrats hitting the gas.

This is Common Sense. I’m Paul Jacob.


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Accountability Common Sense government transparency national politics & policies porkbarrel politics tax policy too much government

The Spenders’ Eternal Excuse

Most modern welfare states have a huge problem: their politicians promise more than government revenue covers. So they borrow and borrow until they can borrow no more.

And then they go down. Like Greece has gone down. Banks are closed there, and the people suffer.

The problem is over-​spending and over-​promising (the latter being merely committing to future over-​spending, so let’s just call it all over-​spending). But when you confront a partisan of such extravagance — whether that person be a politician or a constituency beneficiary or an ideological socialist or social democrat — the most common defense is: THEY WOULDN’T LET US TAX ENOUGH.

The “they” in such defenses could be an opposition party, or a constituency, or … “the evil rich.”

But anyone with something other than a lump of coal for a brain knows the real truth: responsible people don’t make such defenses. If a political difficulty gets in the way of the extra revenue needed for something promised, it’s practically the same as an economic difficulty, so the excuse falls apart.

Say again?

If you cannot get enough revenue for your favorite program, it doesn’t matter whether the people who are the source of your “needed” revenue are broke — have nothing to give — or they simply balk at giving. The point is, you don’t have the revenue. The responsible reaction would be: cut back on spending.

Responsible people budget; irresponsible people blame others for not having the wherewithal to spend and spend and spend.

This is Common Sense. I’m Paul Jacob.


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Gluttony

 

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media and media people too much government

Detroit Ironies

Detroit, Michigan, is a failed city. In recognition of this, its government went to court yesterday to beg for bankruptcy status, and the protection that implies — mainly, the legal ability to force the re-​prioritization of its $18 billion debt:

In his opening statement, attorney Bruce Bennett said he “could stand here for hours” to describe the “mountain of evidence” that shows Detroit is insolvent. Without relief, he added, 65 cents of every dollar … residents pay in taxes could be needed to address the problem, leaving little for everyday services for 700,000 residents.

There’s hardly anything hopeful about this story.

Recently, libertarians have noted that the people of the city have begun to band together, solving voluntarily and through community and market activity the deficit in services coming from city government. Fine, fine, but enough for a solution?

Still, for real drollery, consider the witless comment by MSNBC’s most witless socialist, Melissa Harris-​Perry, that Detroit’s troubles are the result of what happens when government becomes “small enough to drown in a bathtub” (a witticism of my friend Grover Norquist). Hilarious, in that Detroit’s corrupt and spendthrift pols are anything but libertarian, and Detroit government anything but small.

The fact that Detroit can no longer competently enforce some of its own laws only shows the ultimate result of the policy of over-governance.

Despite what socialists and (perhaps) some libertarians may say, liberty is not “no government.” It’s the right amount of good government, defending rights and property from vandals, con men, thieves.

In Detroit, the vandals have been the government.

And a bankruptcy ruling would simply confirm that.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies

Twinkies in Zombieland?

Hostess is dead. The bakery company stopped production in November, and has been trying to sell off its divisions since. Lucky for folks like Twinkie-​obsessed Tallahassee, played by Woody Harrelson in Zombieland (2009), the much-​beloved synthetic pastries may again appear in stores this summer.

And not as a zombie product, but as the real, edible confection we’ve known all our lives.

How? Not through any demented reanimation or infection process. This has nothing to do with zombies.

Instead, it has everything to do with the normal workings of capitalism:

In a joint bid, Metropoulos & Co and Apollo Global Management are paying $410m (£275m) for the bankrupt company.

The offer had originally been planned to set the floor for an auction, which Hostess boss Greg Rayburn had predicted would be “wild and woolly.”

In fact, a court filing showed that no other offers were submitted.

In America, today, it’s still possible for bankrupt companies to sell off their productive capacity — including names, recipes, logos and the like — to meet the debts prioritized by the courts.

The latter is entirely natural, not Zombieland-horrific.

Much of the hysteria over “too big to fail” comes from misunderstanding the nature of the deaths of once-​successful businesses. Laid-​off workers can and do find new work as more efficient companies step in, and the capital goods of a bankrupt company can still have value, and can be bought and re-​employed more efficiently in other companies.

Indeed, keeping inefficient firms going by subsidy and special favor puts them into a zombielike existence — not the Zombieland re-​animated dead kind, but pre-​Romero, old-​fashioned voodoo zombies. These sluggards serve slowly and creepily.

Better acclimate ourselves to capitalism’s “circle of life” than the horrorshow that is “too big to fail” in the United States of Zombiel… Bailouts.

This is Common Sense. I’m Paul Jacob.

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national politics & policies responsibility

Bankruptcy, Not Bailouts

America’s bailout economy started many administrations ago, but really went Big Time under President George W. Bush … and then went Enormity Time with President Barack Obama.

The Washington Post provides the latest in bailout news by noting an inter-​departmental squabble:

The Special Inspector General for the Troubled Asset Relief Program said Treasury approved all 18 requests it received last year to raise pay for executives at American International Group Inc., General Motors Corp. and Ally Financial Inc. Of those requests, 14 were for $100,000 or more; the largest raise was $1 million.

Though this is all quite scandalous, don’t expect policies to change or heads to roll — barring a joint Tea Party/​Occupy uprising. The nature of the modern “regulatory” state is clear: government bureaus are quickly captured by the industries they aim to regulate. It’s an old story. The revolving door between business and bureaucracy is as well-​established as between journalism and politics.

So why do we have bailouts?

  1. They show that politicians are “doing something”;
  2. They mimic the welfare state logic of “helping the poor” (if, with caustic irony, by stuffing the wallets of the rich);
  3. They aggrandize the showy machinations of the legislative and executive branches at the expense of the branch of government designed to handle massive business failure, the courts.

Perhaps Americans shouldn’t have voted in either an MBA grad (Bush) or a constitutional lawyer (Obama). Maybe what the country needs is a bankruptcy lawyer in the White House.

This is Common Sense. I’m Paul Jacob.