Category Archives: Econ & Money

Florida’s Evil Policies Become More Visible

I hate to quote Politico, which I tend to think is both biased and given to the worst horse-race journalism, but when they’re right they’re right: ‘It’s a sh– sandwich’: Republicans rage as Florida becomes a nightmare for Trump:

Already anxious about Trump’s chances in the nation’s biggest swing state, Republicans now are dealing with thousands of unemployed workers unable to navigate the Florida system to apply for help. And the blowback is directed straight at Trump’s top allies in the state, Gov. Ron DeSantis and Sen. Rick Scott.

Privately, Republicans admit that the $77.9 million system that is now failing Florida workers is doing exactly what Scott designed it to do — lower the state’s reported number of jobless claims after the great recession.

“It’s a sh– sandwich, and it was designed that way by Scott,” said one DeSantis advisor. “It wasn’t about saving money. It was about making it harder for people to get benefits or keep benefits so that the unemployment numbers were low to give the governor something to brag about.”

Republican Party of Florida chairman Joe Gruters was more succinct: “$77 million? Someone should go to jail over that.”

With hundreds of thousands of Floridians out of work, the state’s overwhelmed system is making it nearly impossible for many people to even get in line for benefits.

The new online system was part of a series of changes designed to limit benefits. The ultimate goal — which it delivered on — was to lower unemployment taxes paid by Florida businesses. A 2011 analysis done by the Florida Legislature estimated that the changes pushed by Scott would save businesses more than $2.3 billion between 2011 and 2020.

Now, as thousands of people try to get help, the system crashes or denies them access. Nearly 400,000 people have managed to file claims in the last two and half weeks. It’s not known how many have tried and failed.

Most of those who do submit applications won’t qualify for aid, and the benefits that are paid out are among the most meager in the country — a maximum of $275 a week.

Posted in Econ & Money, Florida | 2 Comments

Strange Stuff Indeed

In a post entitled Strange Stuff on Wall Street: Big Job Cuts, Fed Bailout, Record Markets at Wall Street on Parade, authors Pam Martens and Russ Martens conclude,

…in a rational world, big Wall Street job cuts and the need for massive bailout money from the Fed would not correlate with a stock market regularly setting new highs. But Wall Street no longer exists in a rational universe. It exists in an alternative universe where Wall Street banks are allowed to put out a buy recommendation on a company and then trade its stock in their own Dark Pools; where trillions of dollars of risky stock derivatives are held by the country’s largest federally-insured bank; where initial public offerings of deeply indebted companies that have never made a dime of profits are hustled for listing on the nation’s stock exchanges; and where Wall Street is allowed by the U.S. Supreme Court to run a private justice system which draws an opaque curtain around the kinds of charges aggrieved investors are making against these Wall Street banks.

As we have stated previously, this is not so much a stock market as it is an institutionalized wealth transfer system moving money from the pockets of the 99 percent to the 1 percent who have concocted this market structure.

Millions of Americans are grappling with how to put food on their table while paying their 17 percent interest rate on their credit cards from these same Wall Street banks that are being provided loans from the New York Fed daily at 1.60 percent.

I started reading their blog because it seemed the most concerned by the strange doings in the repo market. The authors come off as a bit shrill, but there seems a lot to be shrill about — and even more to be deeply puzzled about, as this chart from Alhambra Investments shows:

If you go back to early September 2019, the US government was buying no repos at all; it stepped in when the market liquidity vanished suddenly for still-unexplained reasons. And, at last, the Fed beginning, maybe, to extricate itself from being the repo market lender of first as well as last resort, so maybe this will just be another squall before the storm. Then, again, that dark part of the line to the right in the graph is people who wanted the fed to buy their repos (at a great price) but were unsatisfied. So extrication may not be easy unless those sellers can find a market-clearing price on the private exchanges.

Posted in Econ & Money | Leave a comment

BBVA Compass Bank Behaving VERY Badly

I confess to a learned bias against commercial banks.  (Don’t get me started on investment banks…) I have never found a good brick and mortar bank here in Miami, although I have had more luck with an online bank.

That said, this incident, BBVA Compass Branch Manager Retaliates Against Elderly Customer Via Trying to Have State Agency Deem Her Incompetent on Fabricated Grounds, is several orders of magnitude worse than anything I ever heard of.

Posted in Econ & Money, Law: Everything Else | Leave a comment

This Explains a Lot: Why Minimum Wage Increases Haven’t Reduced Employment

Source: https://www.flickr.com/photos/arcticpenguin/3366454549One of the striking features of the US economy is how much concentration we’ve allowed in major industries: national monopolies, regional monopolies (e.g. cable), oligopolies. Now come economists tying that trend to why raising the minimum wage doesn’t cause the job losses that micro-economics might predict: one of the things that makes market concentration profitable is that it allows firms to underpay workers (that is, pay them below their marginal productivity). So long as the raise in minimum wage doesn’t rise to a level exceeding the value of the work, businesses rationally decide to hold on to the workers.

José Azar, Emiliano Huet-Vaughn, Ioana Marinescu, Bledi Taska, and Till von Wachter: Minimum Wage Employment Effects and Labor Market Concentration:

Why is the employment effect of the minimum wage frequently found to be close to zero? Theory tells us that when wages are below marginal productivity, as with monopsony, employers are able to increase wages without laying off workers, but systematic evidence directly supporting this explanation is lacking. In this paper, we provide empirical support for the monopsony explanation by studying a key low-wage retail sector and using data on labor market concentration that covers the entirety of the United States with fine spatial variation at the occupation-level. We find that more concentrated labor markets–where wages are more likely to be below marginal productivity–experience significantly more positive employment effects from the minimum wage. While increases in the minimum wage are found to significantly decrease employment of workers in low concentration markets, minimum wage-induced employment changes become less negative as labor concentration increases, and are even estimated to be positive in the most highly concentrated markets. Our findings provide direct empirical evidence supporting the monopsony model as an explanation for the near-zero minimum wage employment effect documented in prior work. They suggest the aggregate minimum wage employment effects estimated thus far in the literature may mask heterogeneity across different levels of labor market concentration.

Spotted via Brad DeLong.

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Fiat Currency vs. Bitcoin Rap

This rap video featuring ‘Alexander Hamilton’ vs. ‘Satoshi Nakamoto’ over the merits of centralized, government-fiat currency, versus decentralized cryptocurrencies.is surprisingly good; actually it’s very good:

Posted in Cryptography, Econ & Money | 2 Comments

Student Debt Growing Quickly

I never used to worry about the morality of teaching in a private law school. But as the debt burden grew on students, I began to worry, and charts like this one from Naked Capitalism make me worry even more.

Unfortunately, many public law schools now charge comparable tuition (but some still don’t).

In any case, student debt of this magnitude is not sustainable, and even if it were the drag on people’s futures and life choices seems excessive. I think the first part of the answer is to bring down the cost of public college: we should return to the era, not so long ago, where you could pretty much finance your college education from a summer job.

Law school prices may still be too high even in that scenario, but at least the overall consequences for students wouldn’t be as bad.

What we do with the debt overhang, meanwhile, is a wicked problem. To simply forgive the debt would be a windfall for the debtors. As a taxpayer, I could live with that; the problem that bugs me is that it seems so unfair to the people who didn’t borrow or who paid down their debt, and those who made sacrifices to finance education or chose less-expensive and perhaps lesser alternatives…or who chose to forgo education entirely.

Posted in Econ & Money, Law School | 3 Comments