Not enough cynicism
Markets essentially flat on Friday. Too many office parties. Too many distractions. Too many investors with no clue. “Is the news good or bad?” they asked themselves. “If so, is that good or bad for asset prices?” Having no good answer in front of them, they let the week pass without showing much conviction one way or another. So let’s move on.
The problem with most people is that they aren’t cynical enough. A little more distrust – or at least suspicion, combined with sneering contempt – would help them understand how things actually work.
We say that after reading the latest arguments about Obamacare, for example.
Errors continue to plague health site, was the top story in the Wall Street Journal on Friday. In the newspapers and all across the world wide web people are grousing and sniping at Obama’s new healthcare programme. They don’t understand how it could be so mismanaged, so complicated, and so, apparently, incoherent.
But what did they expect? Like any government programme, it is not really designed to help anyone live longer or to lower the cost of healthcare. You may care about those things. But the people who run the government have their own motives and incentives. And they are not the same as yours. Instead, they aim to satisfy a more basic desire of government – to control people and transfer wealth.
The failures of the Obamacare may not make much sense to the earnest world-improver. But the cynic sees it more clearly. He knows that the real purpose of Obamacare is merely to take wealth and power from one group – the public – and give it to the lobbyists who wrote the legislation, the politicians and professionals who will manage it, and the crony capitalists who will benefit from it most.
In other words, cynicism helps you connect the dots.
Why would Congress exempt itself from the programme? Because it knows it’s a bum plan.
Why would the law take more than 2,000 pages to explain? Because there are so many boondoggles and giveaways hidden in it.
Why isn’t there more resistance from insurance companies, drug manufacturers, and the medical industry? Because they’re all in on it.
Why is the implementation so sloppy and incompetent? Ah, glad you asked. Apparently, a website that was meant to service one sixth of the entire US GDP was set up without any significant testing. It was almost as if they didn’t want it to work. And maybe they didn’t. Why? Maybe they are aiming for something more. The Daily Beast explains:
Could anger at the Obamacare rollout make Americans more receptive to a kind of Medicare-for-all system? That’s what activists are hoping—and they’re plotting a state-by-state fight. As the rollout of Obamacare clunks forward, activists who opposed the law from the beginning say it is time to seize the moment, to tear down the current health-care edifice and start anew, especially now as frustration with the law’s implementation is reaching a peak.
On Monday, Sen. Bernie Sanders (I-VT) introduced the American Health Security Act, which would require each state to set up a single-payer health-care system and would undo the exchanges that have plagued Obamacare. Meanwhile, various state-led efforts are under way that advocates hope will sweep the country statehouse by statehouse, as soon as lawmakers see the advantage of a single-payer system.
Single payer system? Who would be the single payer? The federales. Wouldn’t that put them in direct control of 17% of US GDP? Yes, it would. Are they intentionally mucking up Obamacare so they will end up with more of what they want? Maybe.
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While we are on the subject – the subject being a severe lack of cynicism – we turn to a man who should know better. It’s Bill Gross we are talking about.
Mr Gross is grousing too. But his beef is not with Obamacare. It’s with the unequal distribution of wealth. Doing so, he joins a long list of luminaries, beginning with Pope Francis (who was named Time’s ‘Man of the Year’ partly as a result) and including Barack Obama to Warren Buffett and many others.
Search the list as closely as you want. You won’t find our name. It’s none of our business how much wealth other people have. We let the chips fall where they may. We’ll take what we can get without complaint. On the other hand, it bugs us when other people think they have the right to decide how many chips we get.
Are you still with us, dear reader? Mr Gross wants the same US Congress that imposed Obamacare on us to also impose a higher tax rate. Why? The higher taxes on capital gains will help solve the problem of unequal wealth.
Nobody knows for sure why the rich have gotten so much richer. Several reasons have been suggested. Tyler Cowen, for example, says the US economy has become a “hyper-meritocracy” that – like professional baseball – rewards a few star pitchers and treats everyone else like dime-a-dozen batboys.
Maybe he’s right, but instead of theorising let’s just follow the money. We will see that a big part of the reason why the rich are so rich is that the feds made them that way. Rather than let the chips fall where they may, the government put the chips where it wanted them – in the pockets of their rich neighbours, supporters and grateful future employers.
Here’s how it worked: the Fed has jacked up the stock market with quantitative easing (QE) and zero interest-rate policy (Zirp). The total value of that jack-up – from a low below 7,000 on the Dow to a high over 15,000 – was about $8trn. And that’s just the stock market. In the bond market, too, it’s been Christmas almost every day for the last 30 years!
Who got the money? The poor? Oh, dear reader, you make us laugh.
Mr Gross could use a cynicism supplement. The poor naïf thinks that the same folks who pushed the chips where they wanted them will now push them to where he thinks they ought to be – using the tax code to redress the perverse effects of their other policies.
Or else he’s much more cynical that even we can imagine. He runs Pimco, the largest bond fund in the world. Perhaps he has done the maths. The feds boost asset prices by, say, $10trn (including bonds and real estate). Then, maybe the capital gains rate goes up. Say it goes up 20 percentage points! Maybe that would get the Pope off their backs. And they’d still be ahead $6.5trn.
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