The absurdity of environmental regulations without tariffs

By Glen Wallace


There is an out-of-sight-out-of-mind approach to environmental regulations that pervades the lawmaking world in the United States.  The approach is to enact strict regulations for manufactures to follow in the US with the stated goal of protecting the environment while at the same time having no problem with importing items manufactured in foreign lands that have little if any regulations to protect the environment.  It is as though the health of the earth doesn't matter because we don't live there we can't see that land from here.  I think environmental regulation is great, but safeguards should be in place to insure that a net reductions in pollutants reaching the earth and atmosphere is achieved by any such regulation.  Polluting manufactures should be seen as a slippery entity whereby if you clamp down on them from just a couple sides then there is a good chance they will slip out your grasp and just end up somewhere else.  Indeed there may even be a net increase in pollution if a company offshores their manufacturing facilities due to steep regulations here in the US.  That increase in pollution would not necessarily be from the manufacturing itself but also from the power plants in foreign lands with less pollution controls powering the factories.  Additionally, the products now manufactured on foreign soil has to be shipped back over here on freighters each chugging out diesel exhaust equivalent to a dozen or more diesel train engines.   That's a lot of exhaust being spewed out over a long trip over the pacific ocean.  As I understand it, those compact florescent light bulbs that are supposedly so green could never be manufactured in the US due to the environmental regulations here governing their manufacture.  However it seems everyone is encouraging their purchase and use because doing so is so environmentally responsible and shows you care about the earth.  However, nobody seems to be paying any attention to what the manufacture of those lights are doing to the land oversees where there is looser regulations on such matters.

What I propose is that we maintain our strict environmental regulations but enact a system of inverse tariffs whereby the tariffs are highest for goods manufactured in countries with the least environmental regulations such as China and tariffs would be the least for goods manufactured in countries with strict environmental regulations such as Germany.

It seems like a simple and commonsensical plan but the two recent pieces of regulation seemed to completely ignore anything resembling my idea - if anything they went in the opposite direction.  One had to do with the valuation of Chinese currency relative to the dollar and the other was some new free trade agreements that it sounds like will eliminate any existing tariffs with some countries.

But that seems like par for the course when it comes to the people who actually make the laws, when they actually do something, they choose between two non sensible choices that are in the interests of the few (and who probably pre-selected those choices) while never even bringing up for consideration any good ideas that would be in the interest of the many (while hoping that not many people use their own imagination to come up with any novel ideas and solutions and realize that what the congress people put forward is not necessarily the limit to all logical possibilities conceivable as a solution to any given problem). Ya, they want us to think that big brother knows best and that with all their official prestigious titles and respect garnered from the so-called expert talking heads on TV that surely all the solutions have been gone over and they have come up with all the selections that is best for the people. With all that pomp and ceremony showered on them, how could they possibly be wrong!?  After all, isn't that a logical form - modus pompous? /sarcasm

- Glen Wallace

QE Has Only Tightened Main Street While Easing Wall Street

By Glen Wallace

With the recent downturn in the stock market and a slowing of the job growth in the US, there have been increasing calls for third round of quantitative easing by the Federal Reserve.  Quantitative easing, or QE as it is commonly known, is the practice of the Fed purchasing US treasury bonds from a select group of banks.  The Fed pays for those bonds by simply printing, or more accurately, computer generating digits on their balance sheets and calling those digits 'dollars.'  Money is often referred to metaphorically as water and in the case of QE, the Fed is manning the money spigots and is easing up on the valve and thereby letting out an increasing quantity of currency into the stream from which the overall economy dips into.  The goal with QE is to stimulate economic growth by reducing the scarcity of the money businesses require to grow and hire more employees.  However, the Fed has to keep in mind that they have a dual mandate of not just increasing employment but also controlling inflation.  If they ease up to much on the money supply there is the danger that dollars could become too plentiful, causing the prices of goods and services to rise excessively.

While QE could work in theory, as it has been practiced with QE1 and QE2, it has largely failed because of its reliance on trickle-down economics.  Trickle-down economics is a theory that whenever the the higher rungs of economic ladder prosper, that prosperity trickles down, like water, to those on the lower rungs, thereby quenching their thirst and boosting their energy to climb higher as well.  But when looking at reality, history has shown that trickle-down economics does not work.  If anything, there tends to be an opposite effect, leading to the adage of 'while the rich get richer, the poor get poorer.'  And yet despite the refutation of trickle-down economics, the Fed has insisted on exclusively showering prosperous banks with the billions in QE cash.  Its not as though the Fed has hired teams of asset purchasing crews to fan across the country and stop by garage sales to buy piles of second-hand clothes, or go to small family businesses on main street ringing their cash registers by buying their wares.  Rather the Fed has merely hoped that its exclusive clientele of large banks, now flush with QE money, would willingly begin providing more loans to businesses across the country.  Once the business got their new loans, they could expand and hire more employees and the trickle-down from the big banks to the little business on main street would be complete.  Only it hasn't exactly worked out that way.  Throughout QE1 and QE2, business loaning has remained tight, wages have been stagnant, and real job growth has been slow to non-existent.

So where has all that increased money supply gone?  Well, from the standpoint of the ordinary citizen observor, it is rather hard to tell.  Even though it is the ordinary citizens that are the most vulnerable and who are the ones that QE is designed to ultimately benefit, all we can do is make a deduction based on the observable market factors.  And those market factors tend to indicate that QE1 and QE2 has boosted the prices in stocks and commodities.  While an increase in stock prices has benefited 401k retirement accounts, the increase in commodity prices has been burdensome on the individuals and small businesses that rely on those commodities for day to day living.  While the cost to fill up the gas tank or fill the grocery basket increases, peoples income from working has not. Likewise, small businesses have seen the cost of the supplies they need to run their business driven up by the inflationary effects QE has on the commodities markets. But since the wages of the consumer have not risen with the costs of doing business, it becomes difficult for businesses to raise prices for the now tapped out consumer.  As a result, the bottom line for the business is hurt and it becomes difficult or impossible to grow and hire more workers.  Consequently, the opposite effect that was intended by quantitative easing has occurred. Instead of flushing main street with cash, a tightening of the money supply on main street America has occurred as more and more dollars go out into the international commodity markets while fewer dollars are returning.  But that should have been expected as the fulfillment of the known failure of the trickle-down economics theory.

What did the Fed think would happen when it threw money at the large banks in this high flying era of market speculation by banks?  Did the Fed think that the banks would forgo the prospect of astronomical returns in the markets and instead provide loans to small businesses with a return of a few percent and a
good chance of default?  Given that they can always count on the government to bail them out, why wouldn't the banks play the market casino with their new-found QE cash?            

Don't call a financial rescue a bailout, call it a suppression.

By Glen Wallace

I think the term 'bail out' derives from historical practice of scooping water out of sinking ship to keep it from sinking.

Perhaps here, that is part of the problem, where people can't get it out of there heads that this bailing out of countries has some fundamental differences from bailing out a sinking ship. When one is trying to save a sinking ship you simply keep shoving a bucket into the water and heave it over the side until there is no more water on board.

But here dealing with nations 'under water', a better analogy would be to think of the countries as being on fire with only a limited amount of water available to, not remove from their deck, but rather to put onto them in hopes of putting out their inferno.

Maybe if nation bailouts were thought of in this respect, it might actually occur to the EU that one of these times when they turn around to fill up their buckets they'll find the well is dry and now the fire is going to get out of control and spread to their country next.

Deep Thinking in 19th Century America

By Glen Wallace

While there may currently be a dearth of broad deep thinking intellectualism amongst our citizenry, I don't think it has always been this way even within the breadth of America's short history. I'm basing this belief based on the public's reaction to the 19th century novel 'St. Elmo' by Augusta Jane Evans. I picked up a tattered copy of this book at an estate sale some years ago just because with a publication date of 1866 it would become the oldest book in my library. But I got started reading it and found it rather profound; constantly addressing many deep concepts. Reportedly this book reached a very fervent widespread degree of mainstream popularity to such a degree that many streets and children were named after the books heroine Edna Earl. This was no mere cult classic like 'Zen and the Art of Motorcycle Maintenance' and yet 'St. Elmo' is at least as deep and maybe even a more difficult read.  In order for such a book to reach such mainstream popularity I've concluded that a very different mainstream social intellectual milieu existed at the time of its publication in terms of how people thought of deep concepts and their discussion and contemplation.