Now that the flood waters have lowered a bit, I wanted to take a few minutes on this quiet Sunday evening to make the case that Fulton County NOT get aid from the federal government.
While I understand that many are suffering because of recent events, and they certainly should be helped, it is my personal belief that only the State of Georgia, along with any private charities, should be responsible for helping them through this crisis.
The whole point of a monetary system is to assign value to certain items, places, people, services. The whole point is the correct distribution of assets. It should not surprise anyone that there are certain parts of the country where you would not be flooded even if it did rain like that and it probably wouldn't anyways - my childhood home of Seattle, WA immediately comes to mind. In the Seattle Area, there are very strict regulations that prohibit you from building on flood plains. As a result, only a handful of communities built before these regulations were in effect ever get flooded to begin with. What's even better, the floodprone areas are reserved for farming, keeping local agriculture close to the city center and allowing for easy expansion of railways and classification yards if made necessary by industrial growth.
In addition, as Fargo, North Dakota demonstrated earlier this year, the elbow grease and hardwork of the townspeople, or local government, can be a far more powerful protector and rebuilder then anything that dispassionoate, hardhearted FEMA could ever muster. They saved their town completely, the floodwaters never breached their sandbags.
If Georgia is not willing to regulate its' building, it should either pay the cost of repair work and humanitarian aid like a gentleman, pursue the grace of voluntary donors, or improve the land to handle future flooding, while also picking up its' current bill. Preferably, it should do all three.
When states pay for their own disasters, the natural disadvantages of living in that state are fairly, justly, and correctly measured against the citizens, driving out business to safer states and places, and making states responsible for their own maintenance. What's even better, as states are more responsible for their own maintenance, federal government will have both less mandate and less ability to interfere in their governance. States Rights and States Responsibilities go hand and hand.
Showing posts with label Bailout. Show all posts
Showing posts with label Bailout. Show all posts
Sunday, September 27, 2009
Monday, September 14, 2009
Whither the Stock Market?
One of the principle arguments for the ill-fated bank bailout was that without banks, there would be no investment in our economy as companies could not borrow. It is true that companies would not be able to borrow as easily, but this does not mean they could not find financing.
In our economy, investment occurs in two primary ways. One is, of course, banks, and the primary source of funding for large and established businesses, but with large businesses unable to compete, and so much pent up demand not being met, another time honored way of generating investment capital (selling stock in an Initial Public Offering) could've seen a resurgence.
With IPO's investors buy stock with the promise that 1) when dividends are offered they will receive their share and 2) if they manage to acquire more then 50% of the stock, and have money to buy the other 50%, they can force the other 50 to sell and acquire the company in a hostile takeover. Normally, IPO's sell stock for only around a quarter or half a dollar a share, but with a tightly constricted credit market, prices could easilly soar to five dollars a share, and growth rates beyond that. This would help the stock market, and the larger economy, as the big businesses and investment banks could also balance their portfolios with IPO's.
An IPO economy would be an economy built on small investors and small firms, where big firms expand by purchasing small firms or small firms purchasing each other. It would be dynamic and compartmentalized, so if a handful of firms fail, no significant effect on the economy will be recorded, and the chances that the workers involved could find new work quickly, without a Keynesian demand shockwave but instead a mere bumping down of asset prices encouraging supply growth, would be much greater, as firms going under would only encourage existing firms to expand.
But back to liquidity. Lack of liquidity means that asset prices sink. But lower asset prices means that what small business needs to operate (centrally located real estate, machinery, current businesses and production facilities, raw materials and, of course, labor) becomes much less expensive, encouraging further growth. Maybe instead of forcing banks to live, we should allow IPO's to carry our growth for a little while and the growth in their stock to rebuild our bank accounts, which will in turn build NEW banks, perhaps started out of IPO's.
Yes, you lose a little money in the short run, but without all those ineffective banks congesting and polluting a crucial economic sector, this short-term easing of pain will cost our country dearly in the future. We will go from being among the preeminent financial centers to being the sickman of finance, with London, Hamburg and Shanghai doing much of the business that NYC, CHA-town and ATL do today.
In our economy, investment occurs in two primary ways. One is, of course, banks, and the primary source of funding for large and established businesses, but with large businesses unable to compete, and so much pent up demand not being met, another time honored way of generating investment capital (selling stock in an Initial Public Offering) could've seen a resurgence.
With IPO's investors buy stock with the promise that 1) when dividends are offered they will receive their share and 2) if they manage to acquire more then 50% of the stock, and have money to buy the other 50%, they can force the other 50 to sell and acquire the company in a hostile takeover. Normally, IPO's sell stock for only around a quarter or half a dollar a share, but with a tightly constricted credit market, prices could easilly soar to five dollars a share, and growth rates beyond that. This would help the stock market, and the larger economy, as the big businesses and investment banks could also balance their portfolios with IPO's.
An IPO economy would be an economy built on small investors and small firms, where big firms expand by purchasing small firms or small firms purchasing each other. It would be dynamic and compartmentalized, so if a handful of firms fail, no significant effect on the economy will be recorded, and the chances that the workers involved could find new work quickly, without a Keynesian demand shockwave but instead a mere bumping down of asset prices encouraging supply growth, would be much greater, as firms going under would only encourage existing firms to expand.
But back to liquidity. Lack of liquidity means that asset prices sink. But lower asset prices means that what small business needs to operate (centrally located real estate, machinery, current businesses and production facilities, raw materials and, of course, labor) becomes much less expensive, encouraging further growth. Maybe instead of forcing banks to live, we should allow IPO's to carry our growth for a little while and the growth in their stock to rebuild our bank accounts, which will in turn build NEW banks, perhaps started out of IPO's.
Yes, you lose a little money in the short run, but without all those ineffective banks congesting and polluting a crucial economic sector, this short-term easing of pain will cost our country dearly in the future. We will go from being among the preeminent financial centers to being the sickman of finance, with London, Hamburg and Shanghai doing much of the business that NYC, CHA-town and ATL do today.
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