Economic Decision-Making

I may have always misunderstood the genius of Ronald Gallatin, but the auction rate market seems to be failing, as I expected it would. Here is a market dependent upon the appearance of buyers who have Parking Cash, buying high-Risk securities at low Interest rates, in the hope of penalty Interest rates being imposed; all based upon guarantees published by unreliable Bond holders. The entire market is based upon Parking Cash–excess funds without other short-term Investment opportunities–which disappears rapidly upon the appearance of safer and more lucrative Investment than the poor auction Interest rates. The securities possess high incidence of Term fulfillment failure, and Bond-holders show instability under failure conditions. I have never been a financial specialist, but there would seem to be too many loss-points, with very inadequate Return rates.

Mike Moffit brings Us an excellent Post on the Tax impact of Carbon taxes. It explains the shift of marginal efficiency Costs (MEC) of the tax impact, transferring from a high MEC to a lower one, while maintaining a revenue-neutral taxation. The trouble I have with this type of Reasoning lies in the position of maintaining a lower MEC and revenue-neutrality in the first place. The goal of Carbon taxation is a reduction of Carbon emissions. Both revenue-neutrality and a lower MEC work to insure a constant level of Consumption can be held. It is hoped that Business will devote the saved potential to Carbon conservation efforts, but it smells amazingly like the Stimulus Package passed by Our Government; Everyone knows how the funds will be spent, though they wish Consumers would chose otherwise.

Fears truly traumatize American markets, an excellent Case in Point being the Oil market. We have run up to a $100/barrel Oil each of the last 3 months. Each movement was based upon fears of human reaction, this time being other refineries could not make up the loss from the refinery explosion in Texas (which provides an insignificant percentage of the Refining capacity), the Nigerian rebellion which has been with Us for years, and a distrust of OPEC reaction to the World economic downturn. Horse Hockey!! Alternative Refining capacity will increase if there is a market for more Fuel, neither Nigerian Government or Rebels will seriously interfere with Oil exportation (which funds both), and OPEC will not destabilize the market for their Product. Fund Speculation is the real danger to the American Consumer. lgl