Category: finance

It takes a pillage

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Among the most guileful, if transparently self-serving, arguments I’ve heard in favor of spreading student debt to every taxpayer – from a youngster whose degree was fully financed by parents – is that wiping the student slate clean would benefit everyone because of the important contributions student debt ‘victims’ could make if they no longer had to worry about the burden of holding up their end of freely signed contracts.

Freedom from the indentured servitude they accepted would enable them to more quickly apply their elite credentials and superior expertise, contributing to the welfare of society. Translated, this means they can get on with their lives: Borrow money to start a business, buy a house, start a family, afford a planet saving electric car, contribute to the most enlightened charities, vote for more spending… The simplest formulation is, “If we get to be looters, we will become better makers quicker than anyone else. And everyone gets a share!” (Apologies to Milo Minderbinder.)

I do not know how Equity of the implied redistribution is assured, and I assume Equity is very important. Maybe a new Federal Department?

This same ingenue has been heard to argue that we needn’t worry about government spending in any case, because we are on the brink of marvelous technological advances which make the at least half trillion dollar cost of spreading student debt to everyone else look like spare change.

This explosive growth of wealth theory is interesting enough for another long post, but I do have some questions to mention here.

In the context of the student loan pillaging, the minimum increase in general wealth would have to be substantially more than half a trillion. For example, we need to account for all the small businesses that wouldn’t be started because some taxpayers won’t be able to afford it; or a down payment on a house. Etc..

So, if the starting point is north of half a trillion dollars, what is the limit to spending we should consider? Is there any? Are we into full MMT? How much debt will be erased by this unprecedented expansion of wealth?

It seems to me we should minimally aspire to eliminating the national debt, and establishing true trust funds for social entitlement programs. Including a contingency fund for things like reparations. Again, what’s the limit on current spending if we assume such miraculous future growth?

This news is so good, and so imminent (arguably it must occur withing the span of a single generation) that I have to wonder why we just don’t wait for it to happen. And THEN pay off the student loans. Or, better, let the people who incurred the debt pay it off with their new found wealth.

OK. I conflated arguments which appear not strictly meant to be taken together. But there is a direct line between freeing the potential of these embryonic John Galts and economic nirvana. Expecting consistency in such ideas isn’t unreasonable. If we’re going to accept “the elite will contribute more than it costs” argument, it’s fair to ask how much faith we can put in the overall economic acumen of the bright young people who are proposing it. Who are preparing to become stewards of the economy.

The bottom line is that looting of taxpayers on behalf of students will damage the economy. Even if you accept the “benefits everyone” argument, those benefits are not immediate. Let’s just let the people who benefited from the loans they took (because they thought they would benefit financially) pay them off. As a bonus, not paying them off via taxation preemptively reduces the national debt by at least half a trillion dollars.

However, perhaps you find economic arguments insufficient. And you consider the question of fairness to those who responsibly discharged their student debt to be irrelevant… Let’s take a look at legal objections and precedent.

A major argument for proponents is that a Presidential executive order is legal under the 2003 HEROES Act. Randi Winegarten certainly doesn’t see any legal barrier:

If you can take the word of a person responsible for closing classrooms that she’s concerned about “our students” you might consider that what she means by “our” is ownership, not stewardship. She does not mean students under care and protection, she means revenue bots.

IAC, she’s wrong, no matter how manic.

Let’s see what Congress intended and examine the law itself (links omitted):
Congressional Records Prove Biden’s Student Loan Cancellations Are Illegal

The HEROES Act of 2003 was sponsored by Republican John Kline of Minnesota, who had served 25 years as a U.S. Marine. When he introduced the bill in the House of Representatives, he declared that it would help “the troops who protect and defend the United States.”

At that time, many college students and recent grads who were members of the National Guard and Reserves were being deployed to carry out Operation Iraqi Freedom and anti-terror operations in response to the slaughter of 2,977 people on 9/11.

Stating that the bill was “simple in its purpose” and “specific in its intent,” Kline explained that it will “assist students who are being called up to active duty or active service” and those who are impacted by “a war, military contingency operation or a national emergency.” He also emphasized that the bill would do this “without affecting the integrity” of student loan programs.

Demonstrating just how simple and specific the bill was, the official legislative record shows that the House of Representatives passed it by a vote of 421–1 with only “forty minutes of debate.” The Senate then passed it “without amendment by unanimous consent.” If all 100 senators were present, this is a margin of 521 to 1.
…
The Penn Wharton Budget Model estimates that Biden’s student loan cancellations and payment reductions will cost $605 billion to more than $1 trillion over the next 10 years. This amounts to an average cost of roughly $4,700 to $7,700 for every household in the United States.
…
The Biden administration claims that the HEROES Acts of 2003 gives them that power, but Congressional records prove just the opposite is true. These include the introduction of the law, the debate of the law, the votes on the law, and the text of the law.

Moreover, the Supreme Court has repeatedly affirmed that unless Congress clearly delegates such powers to the president, these types of actions are illegal.

There’s more. Even Nancy Pelosi knew it would be illegal before she stopped knowing it

A Legal Reckoning on Student-Loan Forgiveness

If the Court cannot stop the president from raiding the Treasury to buy votes and reward friends on the most implausible of legal pretexts, what is it for? A majority of the Court appears to recognize that the HEROES Act does not grant the power in question — a reality that even Nancy Pelosi acknowledged until it became clear that Biden intended to act when he could not get such a plan through Congress.

The statute says that the secretary of education can “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs” when “necessary in connection with a war or other military operation or national emergency.” Chief Justice John Roberts set the tone for the argument by noting that Justice Antonin Scalia once observed that “modified in our view connotes moderate change. He said it might be good English to say that the French Revolution modified the status of the French nobility, but only because there’s a figure of speech called understatement and a literary device known as sarcasm.” Moreover, the chief justice observed that, even if terms such as “waive or modify” could be construed to encompass the outright cancellation of student debt, the Court’s “major question doctrine” requires more — namely, a citation to “clear congressional authorization” of the specific action taken by the administration. No one can plausibly claim that the HEROES Act even anticipated, much less green-lighted, half a trillion dollars in relief to a favored class of debtors without additional congressional input.

The entire idea was a Democrat political ploy prior to the mid-terms.

No, the HEROES Act Doesn’t Let Biden Forgive Student Loans

Biden has justified spending such an incredible amount without first obtaining congressional approval by invoking the HEROES Act, a 9/11-era law designed to allow the federal government to provide student debt relief to soldiers who were forced to withdraw from college to enter active duty. Under the HEROES Act, the Secretary of Education is granted the authority to waive “any statutory or regulatory provision” relating to student loan repayment or assistance programs during a time of “a war or other military operation or national emergency.”
…
The legal ground justifying Biden’s student loan relief plan has always been shaky—and obviously politically motivated. As higher education expert Mark Kantrowitz told CNBC earlier this month, “If it was an emergency, why wait three years to provide the forgiveness? Why present it in a political framework, as fulfilling a campaign promise?”

Finally, let’s not forget who promoted this problem. Student indebtedness owes most of its problematic nature to debt encouraging Federal programs and the use of that easy money to fund the explosion of a diversity/inclusion/equity (DIE. AKA DEI) Administrative cadre in our universities. WE HAVE TO DO SOMETHING is a quintessential example of government causing a problem for which the ‘fix’ is more government intervention.

Damn the law. Full speed ahead.

Update 03/04/20 10am – removed duplicate paragraph

The blockheadchain

Hershblogger2 Comments

You may wonder why the Democrats are so worried about increasing the debt ceiling since they need no GOP votes to do it. Are they embarrassed about their insistence that spending $3.5 trillion is costless?

Who knows?

The Dems do have a Plan B. There are some ifs:
If mining and refining an ounce of platinum doesn’t release so much CO2 that AOC will be brought to tears.
If Ilhan Omar and Rashida Tlaib don’t associate platinum with Joos.
And if Liz Warren isn’t afraid that platinum jewelry competes with Navaho silver workers.

The proposal is to mint a one trillion dollar platinum coin. Here’s an artist’s conception:

You’ll note it’s a bit composition challenged. Making the font smaller and shrinking the eagle would be even worse.

People wouldn’t understand ‘$1012‘.

The coin artists could always make the coin bigger, of course, so even a relative 4 point font would be legible. More on that later.

When I first became aware of this idea (it’s been mooted since the 2011 debt ceiling kerfuffle), I wondered if I should put my plans to acquire majority control of Apple on hold and just get a trillion dollar coin instead.

There turn out to issues with this. Even aside from the fact that Apple’s market cap has gone from $400 billion to $2 trillion since 2011, and that a 2011 trillion dollar coin would now only be worth $880 million after inflation.

Here are some of those other complications:

The US Mint is currently selling a 1 ounce proof platinum coin with a face value of $100 for $1,545; while, as I write, the market price for an ounce of platinum is around $980. That Mint premium is partly because of numismatic value, but arises mostly from the monopoly the Mint holds. What the market will bear.

At that Mint proof to spot price ratio, the trillion collar coin would cost $1.58 trillion.

For comparison, the Mint wants $2,690 for a 1 ounce gold proof coin when today’s spot price is around $1,760. So, a trillion dollars in gold, at market value, would be about $1.52 trillion if purchased from the Mint. This seems a better deal to me, but there’s a problem with that, too. The United States government does not possess a trillion dollars in gold.

The United States holds 261,498,926 ounces of gold, which it values at $42.222 per ounce (Go figure. They value trans pronouns higher than that.), or a little over $11 billion ($11,041,059,957).

To buy the entirety of US gold reserves at today’s spot (market) price would set you back almost $460 billion ($459,976,611,258). And even marking it up at the Mint’s level, say 150% assuming a volume discount, you only get to $690 billion. (As an aside, can you think of people who could leverage 51% of this? Bezos? Zuckerberg? Soros?)

Anyway, as the Dems figure these things, the United States could sell all its gold reserves and make up the other 30% phantom borrowing in increased taxes… at zero cost. All we have to do is convince the rest of the world we have a ‘trillion dollar’ coin.

One advantage of the trillion dollar proof platinum coin over the equivalent in bullion is that it would be much easier to store. But there’s still a $310 million premium over gold unless you count having to also buy Fort Knox to store the gold.

Counting against the platinum coin is that it probably would not retain its uniqueness for long. I think they won’t be able to stop with just one.

Also, we’ve had platinum coins for a long time and I don’t think they are glamorous enough to command such a premium. I do think some more exotic metal would help the price for the proposed coin. Palladium is out because the Mint already does that.

What about Iridium? The novelty would add value. And it’s in the $5,000 an ounce range. Still, maybe not enough.

For real novelty, something like roentgenium might do. Like platinum, it’s expected to be solid at room temperature. We’ve never had enough atoms to be sure. This would make minting a trillion dollar roentgenium coin as difficult as making change for it.

And… the US Mint personnel might raise an OSHA complaint. Roentgenium decays through spontaneous fission, and its most stable isotope, roentgenium-281, has a half-life of about 26 seconds. I’m not saying that the short half-life doesn’t have some advantage. Any coin that clips itself is a boon to the rate of inflation needed to ‘pay off’ our debt.

So, maybe some transuranium element that’s less deadly and with a longer duration – but still takes a lot of power to produce. For transuranium elements that power usage is “proof of work” (the Bitcoin value proposition) – on the order of millions of dollars per milligram. But opposite to Bitcoin, massive inflation would be built in.

A coin made from fermium-257 would have a half-life of less than 102 days. Mendelevium-256? 77 minutes. The material used would depend on the Fed need to inflate the national debt away.

Maybe the Treasury should create a trillion dollar Non-Fungible Token. A unique picture of the decay of a few roentgenium atoms in the cyclotron. The non-fungible bit might be a problem, however. Money has to be fungible, or it isn’t money.

Since the Dems don’t have my imagination, back to buying one of the trillion dollar coins. Again, I wonder, why stop at $1 trillion?

I think the paper solution is out because the Treasury is prohibited from emulating Zimbabwe. That’s what the debt ceiling means. For a discussion of why the Modern Monetary Theorists are saying the Mint should do it, see here. It discusses why the MMT theorists insist a $1 trillion coin would have to be a proof coin, not bullion. It’s still not legal, but it makes practical sense: Beyond the legal issues, platinum bullion coin(s) would cost a trillion dollars to mint, and would present a bigger storage problem than gold.

I’m thinking the US platinum trillion dollar coin is worth twice the current $985 spot price for a 1 Troy oz platinum ingot. It’s gotta be proof quality and it’s certainly a collectors item, so that adds 50%. And round up to the nearest thousand.

That would still be a smaller percentage premium (some number divided by zero) than I paid for my Zimbabwe $100 trillion dollar bill, and there supposedly is going to be actual platinum in the coin the Democrats are toying with. There’s been inflation since Zimbabwe’s effort, and my bill might be worth nominally more than I paid. I could hope that happens with the US effort.

A trillion dollar bullion platinum coin should sell at a steep discount for storage difficulties. That new coin would weigh around twice as much as all the US gold reserves, claimed to be around 8,000 tons.

A platinum bullion coin could be like several dozen of the largest Yap Island Rai stones. The Yap money has collectible value, here’s a small (40 pounder) for $14,000. That’s about $22 an ounce. The largest Rai stone weighs about 4.5 tons and is around 12 feet in diameter.

A trillion dollar bullion platinum coin would weigh… a lot more.

Maybe I should stick with the plan to acquire Apple.

Seeing like a State

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From our friends at the International Monetary Fund comes this innovation.

“Credit scoring using so-called hard information (income, employment time, assets and debts) is nothing new. Typically, the more data is available, the more accurate is the assessment. But this method has two problems. First, hard information tends to be “procyclical”: it boosts credit expansion in good times but exacerbates contraction during downturns.

The second and most complex problem is that certain kinds of people, like new entrepreneurs, innovators and many informal workers might not have enough hard data available…

Fintech resolves the dilemma by tapping various nonfinancial data: the type of browser and hardware used to access the internet, the history of online searches and purchases. Recent research documents that, once powered by artificial intelligence and machine learning, these alternative data sources are often superior than [sic] traditional credit assessment methods, and can advance financial inclusion, by, for example, enabling more credit to informal workers and households and firms in rural areas.”

“[C]an advance financial inclusion…” By definition, then, it can advance credit exclusion.

Websites, Twitter accounts, YouTube videos, hosting platforms, and credit card processing are all already being cancelled, shadowbanned, disappeared and denied for political reasons. Now they propose to use your computer model, search history, and the sites you visit to determine your credit score.

If you visit the Southern Poverty Law Center too often, or QAnon more frequently than you “should” according to some algorithm; if you search for “All Lives Matter” or “Green Nude Eel;” if you use a Chromebook or an obscure brand tablet – then your credit score may suffer. That could turn out to be the least of your problems.

I can’t count the number of times people have told me they aren’t worried about such corporate espionage when I point out what Facebook really is, or tell them why to use Duck-Duck-Go instead of Google search. “I’m not doing anything wrong and have nothing to hide.” The problem, I explain, is that they aren’t the ones who decide that.

“The old cliché is often mocked though basically true: there’s no reason to worry about surveillance if you have nothing to hide. That mindset creates the incentive to be as compliant and inconspicuous as possible: those who think that way decide it’s in their best interests to provide authorities with as little reason as possible to care about them. That’s accomplished by never stepping out of line. Those willing to live their lives that way will be indifferent to the loss of privacy because they feel that they lose nothing from it. Above all else, that’s what a Surveillance State does: it breeds fear of doing anything out of the ordinary by creating a class of meek citizens who know they are being constantly watched.”

~ Glenn Greenwald

Mau-mauing the swamp dwellers

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Facebook and YouTube continue to bury, or outright ban, well founded commentary on CCP virus public policy and the myriad election irregularities of which the Uniparty disapproves.

They aren’t alone. Amazon has banned books. Twitter banned all mention of Hunter Biden’s laptop, including suspending the New York Post‘s account.

That ban arguably lasted long enough to affect the election, and now that we know Hunter Biden has been under Federal criminal investigation since 2019 for his foreign business dealings, it seems like Twitter, et. al., should have some accountability.

The article slice below is behind a paywall. I think Glenn Greenwald is worth the less than a buck a week as an honest liberal entrepreneur. You pay as much for the CNN/MSNBC/CBS/PBS/ABC/NBC channels on your cable.

Some of what he writes is public. A link appears in TOC’s blogroll under Glenn Greenwald.

Greenwald left The Intercept (he was a founder) because they spiked an article he wrote about Hunter Biden before the election. That’s when I checked out his independent gig on Substack.

Greenwald (this one is paywalled) provides a gimlet eyed view:

The revelation that Hunter Biden is being criminally investigated for his business activities in China came on Monday from the investigative target himself, and he predictably and self-servingly depicted it as just a narrow probe about his “tax affairs” by the U.S. Attorney for Delaware. As I wrote last night, that by itself would be significant enough — the documents published in the weeks before the election by The New York Post contained ample information about exactly that matter, yet were widely repressed by a union of mainstream news outlets, the intelligence community and Silicon Valley based on propaganda and lies. But new reporting suggest the investigation has been far broader.

“The federal investigation into President-elect Joe Biden’s son Hunter has been more extensive than a statement from Hunter Biden indicates,” Politico reported Monday night. Specifically, “the securities fraud unit in the Southern District of New York also scrutinized Hunter Biden’s finances”; “investigators in Delaware and Washington were also probing potential money laundering and Hunter Biden’s foreign ties”; and “federal authorities in the Western District of Pennsylvania are conducting a criminal investigation of a hospital business in which Joe Biden’s brother James was involved.” CNN’s Shimon Prokupecz added that “at least one of the matters investigators have examined is a 2017 gift of a 2.8-carat diamond that Hunter Biden received from CEFC [China Energy’]’s founder and former chairman Ye Jianming after a Miami business meeting.”

We’re slipping into fascism backwards. One normally thinks of the formal government (Mussolini comes to mind) as the instigator of fascism*, but in the current case it’s most certainly rent-seeking large corporations leading the charge. And that goes far beyond our cybernetic overlords. It’s also Maim Scream Media™, academiots, and corporate whores mau-mauing the swamp dwellers.

Of course, Antifa and the present cadre of BLM have raised mau-mauing to an actually dangerous level with arson, looting, assault, and murder. They would be the brownshirts.

Then, there’s this:
Hunter Biden Email Reportedly Names Kamala Harris, Others as Key Contacts for ‘Joint Venture’ With China Energy Co

Perhaps Eric Swalwell could do with a serious “debriefing.”

*That definition is fatally flawed because it includes a mention of capitalism, but the misunderstanding is pervasive. Free markets are required under capitalism. Fascism precludes free markets.