As Trump stresses ‘America First’, China plays the world leader

I find it hard to argue with this conclusion, but I didn’t see it coming.

” ‘If anyone were to say China is playing a leadership role in the world I would say it’s not China rushing to the front but rather the front runners have stepped back leaving the place to China,’ said Zhang Jun, director general of the Chinese Foreign Ministry’s international economics department.”

Cry me a river: Louisiana residents without flood insurance face uncertainty

Those residents without flood insurance are eligible for up to $33,000 in FEMA individual disaster assistance funds, although most will likely receive less than that, based on payments following other major disasters.

It’s not clear to me why the government should subsidize home owners who choose not to get flood insurance.  They’re home owners.  What about tax payers who don’t own homes? Why should they subsidize home owners?

I think Jesus said it best.

For everyone who has will be given more, and he will have an abundance. But the one who does not have, even what he has will be taken away from him.”  Matthew 25:29

Source: Louisiana residents without flood insurance face uncertainty

The Puerto Rico crisis, explained – Vox

Here’s a great, timely summary of the financial problems in Puerto Rico.  It looks like things will get pretty messy before the US government steps in to bail-out the Puerto Rican government.  And who will benefit from the bail-out?  The holders of Puerto Rico’s bonds, of course.

Q. Who would be crazy enough to invest in Puerto Rican bonds?

A. “a high-income person living in a high-tax state”

I think the best term for describing this fiasco would be “the Puerto Rican Put”, anomalous to the Greenspan Put that led to the 2008 asset bubble in the U.S.  Investors were assured that Greenspan would keep interest rates low so they could invest in bonds without worrying about rising interest rates.  Another example would be the implicit (but not explicit) backing of FMHA bonds by the US government.   When the security behind the bonds (ie home mortgages) tanked the government bailed out the bond holders (not the home owners).  It’ll happen again in Puerto Rico.

“What’s this business about Puerto Rican bonds and taxes?All municipal bonds are exempt from federal income taxes. In additional, if you buy municipal bonds issued by the place where you live, those bonds are exempt from state and local income taxes as well. Such bonds are known as triple tax exempt, and they’re a big deal for municipal finance and high tax places like New York and California. But Puerto Rico’s bonds are triple tax exempt regardless of where you live.This is not a huge deal for most Americans, but for a high-income person living in a high-tax state it can be a very big deal and it helped fuel a lot of lending to Puerto Rico that wasn’t necessarily thought through in a very serious way.”

via The Puerto Rico crisis, explained – Vox.

Hotel Euro Union – Eric Reguly in the G&M

U-turn of the euro could be an exit threat after Greece – The Globe and Mail.

“Roach Motel”?  I think columnist Reguly meant “Hotel California”:  Call it the Hotel Euro Union.

The beckoning lady with the Mercedes Benz and the pretty boys she calls friends invite the stranger to stay for the night. Such a lovely place. He ignores the voices down the corridor…This could be heaven or this could hell.
You can check-out any time you like, but you can never leave.
What a nice surprise.  Bring your alibis.

Change of heart re: Greece

A couple of weeks I ago I thought the Greeks deserved the catastrophe that is approaching them. After all, they’ve brought it upon themselves through decades of living beyond their means and electing irresponsible leaders.

Now that it’s time to settle the accounts, I think the terms that the Germans and French are demanding are too strict; they’re trying to save the Euro and correct decades of mismanagement (in Greece) with some gut-wrenching strictures.

My main concern is with the human suffering that the strictures or Grexit will impose. The EU, the Brits, the US, and Canada should get read to help Greek civilians get access to food and medicine.  They won’t be able to afford enough of either if they have to pay with drachmas.

My secondary concern is the potential for civil war/military coup. Human suffering will dramatically increase political unrest and encourage the Colonels and the neo-Nazi Golden Dawn party.

My tertiary concern is that if the West doesn’t step in to help the Greeks the Russians will, gladly, in return for cooperation on defense (naval bases) and energy programs (pipelines).

Seniors and the generation wealth gap

This is a great analysis of the big and growing wealth gap between us Baby Boomers and our kids.

Author Tamsin McMahon attributes this generational wealth gap to a combination of “financial discipline, public policy and good timing”. 

  • “Good timing”?  Better to call it luck, as in winning the “ovarian lottery“.
  • “Public policy”? “Turnout among younger voters is notoriously low, so politicians naturally target their campaigns to the seniors who actually show up on election day.”
  • “Financial discipline”?  With good timing and public policy on our side, we Boomers didn’t need no stinkin’ financial discipline.  That was for our parents.

Seniors and the generation spending gap.

Three Cheers for the Lawyers! (I think)

Here’s today’s Press Release from the Ontario Trial Lawyers Association regarding its revelation that Canadian auto insurance companies have been gouging customers for years.  The gist: these companies’ government-regulated rates-of-return have been maintained at 12%.

I gather the Trial Lawyers Association is upset by some of the no-fault regulations that Ontario (and some other provinces) introduced as a means of helping the auto insurance companies meet the (artificially) high ROR ceiling without raising rates.

A major study released today shows the need for immediate reductions in Ontario motorists’ high auto insurance premiums, the Ontario Trial Lawyers Association says.

The study, conducted by York University Schulich School of Business Professors Fred Lazar and Eli Prisman, reveals in 2013 alone, consumers likely overpaid by $840 million.

“Auto insurance companies in Ontario have had a relatively free ride during the past 20 years. It is conceivable that premiums have been too high and as a result, consumers in Ontario have paid too much for auto insurance,” the professors’ report says.

“We estimate that consumers in Ontario may have overpaid for auto insurance by between $3 and $4 billion over the period 2001 to 2013.”

The report says that the profit benchmark set by Ontario’s insurance regulator at 11 per cent return on equity, should be no more than 5.5 per cent given today’s low interest rate environment. Ontario’s insurance regulator recently changed the profit cap, allowing insurers to earn even higher profits.

The Ontario Trial Lawyers Association (OTLA), which commissioned the new study, calls on government to roll back the high rates that Ontario motorists pay, while halting any further reductions to auto insurance benefits. Insurers reduced coverage in 2010, while profits soared even higher.

“It is now up to the government to do the right thing and implement an immediate, orderly reduction in the profit cap and ensure that savings are passed along to consumers,” said Steve Rastin, President of OTLA. “We must also ensure that coverage is not cut further for the thousands of injured car accident victims in Ontario,” he added.

OTLA also recommends that Ontario’s Auditor General conduct a fully independent review of auto insurance in Ontario.

“It’s time for the Auditor General to step in to examine every aspect of auto insurance. For too long, we have not had all the facts and we simply cannot leave it to big insurance and their consulting actuaries,” Rastin said.

“We need a thorough and truly transparent review that gets to the heart of costs in the insurance business. For example, we know that insurers spend millions on assessments just to deny legitimate claimants – about 50 cents for every dollar of treatment. Insurers should not be able to count those assessments as part of the overall claims cost. We need to put an end to that practice and also curb the abuse of accident victims who must endure endless intrusive assessments,” added Maia Bent, President-Elect, OTLA.

Link to the Press Release Ontario Trial Lawyers Association