Fausta's Blog

Three items on Latin America today highlight the importance of free markets and development:

Monica Showalter at IBD explains how the Pemex Explosion Should Push Mexico To Privatize

The Baker Institute’s 2007 “Empirical Evidence of the Operational Efficiency Of National Oil Companies” study impartially demonstrated that private companies operate better than public enterprises.
The objectively calculated study of more than 80 companies concluded that relative to economically efficient producers, a national oil company is likely to under-invest, over-employ, sell oil products at subsidized prices, and shift extraction of resources from the future to the present.
“Technical inefficiencies,” the paper concluded, “are largely the result of governments exercising control over the distribution of rents.”

In Argentina, the government announced a two-month price freeze on supermarket products Monday in an effort to break spiraling inflation; not content with screwing up the beef imports, now they’re intervening in all groceries:

The government announced the price freeze on the first business day after the International Monetary Fund formally censured Argentina for putting out inaccurate economic data. The IMF has given Argentina until September to bring its statistics up to international standards, or face expulsion from the world body in November.

Cristina Fernandez may end up using the military to hand out meat in the stores, as they are doing in Hugo Chavez’s Venezuela.

When I was in Argentina the neighborhood supermarkets stocked only four kinds of vegetables, plus apples and oranges. Contrast that with what Mr. Bingley found in Brazil, where the government is staying away from regulating food prices,

Government intervention leads to shortages, inflation, and eventually to poverty.

Drudge has the juxtaposition,

Comes to show that when the Fed’s printing money like there’s no tomorrow, the stock market goes up.

And, while you’re at it, IRS: Cheapest Obamacare Plan Will Be $20,000 Per Family
UPDATE:
ObamaCare’s $20,000 Per Family Ticket Price will Wreck the Private Insurance Industry

That figure represents almost half the US median income in 2011, of $50,054. And median income is trending downward, as the laughably dishonestly named Affordable Care Act aka ObamaCare pushes prices up to $20,000 per year.

It’s not difficult to envision how this will play out. The upward pressure of insurance costs — some families can expect 85% increases — and the downward pressure of income will drive many Americans out of insurance altogether. Whey they need care, they can face a fine as high as $2,400. So many will opt out of insurance, knowing that they cannot be denied coverage for any pre-existing conditions under ObamaCare. They’ll pay the fine and get insurance if they have to, otherwise they will end up having their health care picked up by the government.

Before long, government will be the only payer, as private insurance companies go bankrupt.

It’s all part of the plan.

Straight from that arm of the vast right-wing conspiracy,
US economy shrinks 0.1 pct., first time in 3 ½ years; deep cut in defense spending key factor

And it was unexpected!

Economists said the surprise decrease in the nation’s gross domestic product wasn’t as bad as it looked. The weakness was primarily the result of one-time factors. Government spending cuts and slower inventory growth subtracted a total of 2.6 percentage points from growth.

Looking good!

“Frankly, this is the best-looking contraction in U.S. GDP you’ll ever see,” Paul Ashworth, an economist at Capital Economics, said in a note to clients.

Be happy!

Following last week’s looting of supermarkets, and facing currency exchange restrictions and 20% annual inflation, Argentine Firms Get Creative
Many of Argentina’s businesses say the country’s increasingly unorthodox macroeconomic policies are becoming a headache.

So we now have Newsan SA (which makes Sanyo plasma-television screens and JVC video cameras) fishing shrimp and hake, tire maker Pirelli exporting honey, and BMW exporting leather, grape juice, and rice. Why?

Last year, President Cristina Kirchner’s government sought to stem an outflow of dollars, help companies and protect local industry by creating a new trade policy that allows imports of foreign goods only if they are equally matched by exports.

This is vastly inefficient, and increases the cost of doing business in the country. Read the article for details.

Not a way to run an economy, but a way to ruin it.

Cross-posted at Liberty Unyielding.

Economic growth and job creation do not come from government spending:

States that Spend Less, Tax Less—and Grow More
States with an income tax spent 42% more per resident in 2011 than the nine states without an income tax.

Does curtailing spending lead to better private sector growth?

States that allow taxpayers and employers to keep more of their earnings are reaping the benefits. States without an income tax have significantly better growth in private sector GDP (59% versus 42%) over the last 10 years. They increased the number of jobs by 4.9% while jobs in the rest of the states declined by 2.6%. States without an income tax gained population (+5.5%) from domestic migration (U.S. residents moving in and out of states) while all other states as a whole lost 1.3% of population between 2000 and 2009.

The 10 states with the highest rank in the State Business Tax Climate Index also dramatically outperform the rest of the country. They win handily on private-sector GDP growth (61% versus 42%), gained 6.1% private jobs while other states declined by 2.8%, and gained 5.5% from domestic migration at the expense of other states, which lost 1.2% between 2000 and 2009.

As a result, the states with the better business tax environment will continue to outperform the rest of the country.

Cross-posted at Liberty Unyielding.

UPDATE,
Linked by Pirate’s Cove. Thank you!

@BillWhittle explains lucidly the morality of producing value to society:

Bill Whittle for POTUS!

(Via Instapundit.)

UPDATE,
As it turns out, a (female) friend also had emailed me this, with the subject line “I want to have his babies”.

China’s been buying raw materials big-time in Latin America. Brazilian company Vale made a deal for Chinese-built ships, and, bam! now the world’s biggest iron ore ship is not allowed to dock in China:

Beijing Wields Big Stick Against Megaships
How China Closed Its Ports to Brazilian Miner Vale’s Huge Iron-Ore Vessels

Last December the first vessel, the Valemax Berge Everest, docked in the northeastern Chinese port of Dalian, where it discharged 350,000 tons of iron ore in 55 hours—a world record. The head of China’s steel industry association said the ships would help lower costs.

But a month later China’s Transport Ministry, citing concerns about Chinese ports ability to handle such ships safely, issued a circular that effectively banned them. The Chinese Shipowners’ Association had denounced the Valemax ships as “a matter of monopoly and unfair competition, which not only harms the shipping interest of mainland China, but also that of South Korea, Japan and Taiwan area.” The association declined to comment for this article. The Transport Ministry didn’t respond to requests for comment.

The appearance of a 60-centimeter crack on the hull of a Valemax ship in Brazil last December bolstered the ministry’s concern. But engineers specializing in ship safety said the incident was isolated and insufficient to cast serious doubt on the safety of Valemax ships. Valemax vessels have docked at ports in such places as Japan, Italy, the Netherlands and the Philippines.

The chairman of the shipowners’ association is Wei Jiafu, who also is chairman of state-controlled shipping line China Ocean Shipping (Group) Co., the country’s largest shipping line by capacity. Captain Wei, as he is often called, is a rare colorful executive in China’s staid business sphere and once was captured by pirates. The Cosco chairman also is a senior member of the Communist Party and a member of the powerful CPC Central Committee for Discipline Inspection, an internal discipline watchdog.

Mr. Wei has been critical of shipping-industry overcapacity and at a September conference decried “vicious competition” from new entrants into the sector. The company’s China Cosco unit posted a 10.5 billion yuan ($1.69 billion) loss last year, hobbled by a sector glut, slowing global trade and the company’s own shipbuilding binge. The unit, which is publicly traded, is on track to declare a sizable loss this year.

Industry watchers said Cosco’s opposition represented the biggest barrier to Valemaxes docking in China. “Cosco had the most to lose from Vale’s plan,” said Macquarie Securities analyst Janet Lewis, who described Mr. Wei as the “most vocal” proponent of banning Valemax ships.

Vale’s representatives are waiting to meet with the Transport Ministry; Dilma Rousseff pressed for a joint task force with China’s top economic planning agency, the National Development and Reform Commission; China’s leadership is in transition.

The only thing you can count on is that nothing’s going to happen until the powers-that-be in China’s new leadership get to profit from all of this.

In case you are under the impression that China has a capitalist economy, here’s the dictionary definition of mercantilism.

As od the writing of this post,

Argentinian newspaper 2001 reports that international high-end retailers, such as Escada and stores owned by LVMH, are vacating their shops in Buenos Aires’s Alvear avenue due to the latest currency restrictions.

Most prominently, shops can no longer accept payment in US dollars, but the article also mentions that “numerous business restrictions” impede doing business.

Additionally, other retailers like The Gap and Apple are opening shop in Santiago, Chile, which has a much more welcoming business environment. The Santiago Apple store will be Latin America’s third, after Mexico and Brazil. This nearly amounts to an indictment of the Argentinian government’s business policy, since Argentina’s economy is South America’s third-largest. However, Chile’s competitiveness and economic index surpassed Argentina’s years ago.

Luis Vuitton, a favorite brand of president Cristina Fernández, is gone, but, fear not, she’ll always have Paris.

This morning’s news (and keep in mind that the Senate Democrats last passed a budget on April 9, 2009):

Report: Welfare government’s single largest budget item in FY 2011 at approx. $1.03 trillion

According to the CRS report, which focused solely on federal spending for federal welfare programs, spending on federal welfare programs increased $563.413 billion in fiscal year 2008 to $745.84 billion in fiscal year 2011 — a 32 percent increase.

Further, spending on the 10 largest federal welfare programs has doubled as a share of the federal budget in the last 30 years: In inflation-adjusted dollars, according to Republican staff on the Senate Budget Committee, the amount spent on these programs has increased 378 percent in that 30 year time frame.

The $1.3 trillion does not include Social Security ($725 billion) or Medicare ($480 billion).

“Under Obama, the federal government has acquired $6.846 trillion in tax revenues and other receipts, and it has spent $10.711 trillion — 56 percent more than it has had available to spend.”

Read the Congressional Research Service here,
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