Nate Silver publishes a daily number that represents Barack Obama’s chances of being re-elected. As I write this on October 27, Silver’s magic number is 74%.
Sometimes the folks at Business Insider get fairly simple ideas ass backwards. Take their Winners and Losers story on the Supreme Court’s Obamacare decision. It’s dead wrong about Millennials (born after 1982):
Young people can also count themselves winners in the Supreme Court's decision to uphold the Affordable Care Act, which allows children to stay on their parents' insurance plan until their 26th birthday. Read more: http://www.businessinsider.com/winners-losers-affordable-care-act-supreme-court-obamacare-ruling-2012-6?op=1#ixzz1zP2AiaCO
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Here’s why: the massive tax increase that the Supreme Court upheld hits Millennials almost exclusively. In fact, the tendency of young workers to skip health insurance and pocket the case is a major reason for the individual mandate. According to Forbes:
Obamacare forces insurers to charge their eldest beneficiaries no more than 3 times what they charge their youngest ones: a policy known as “community rating.” This, despite the fact that these older beneficiaries typically have six times the health expenditures that younger people face. The net effect of this “community rating” provision is the redistribution of insurance costs from the old to the young.
And up to now, young people have paid very little for insurance—without a court-sanctioned penalty tax:
The young are just entering the work force, and therefore typically have below-average incomes. In addition, the young are healthy, and have much less use for expensive health insurance.
The BI writer erroneously assumes that all parents will keep their 21-26 year olds on their plan. But many will not. Many don’t.
That means that Obama’s massive crap sandwich tax increase will land on the backs of Millennials, who are already drowning in college debt and debt-end, low paying jobs.
Even with slow economic improvement in the past two years, these so-called “Millennials” remain unemployed and underemployed at the highest rates of any group.
Yet these Millennials famously worked their butts off to get Obama elected. They still favor Obamacare. And irresponsible journalists like the one at Business Insider continue to tell them they won something in the Obamacare case. Washington Times writer, Patrice Hill, documents a young man with a Master’s in graphic design, four years out of grad school, working the photo counter at a drug store for $9 an hour. Now, he’s forced to add health insurance to his expenses.
Millennials won, alright. They won a crap sandwich from Uncle Obama.
The problem is, like many economists, Florida’s understanding of home ownership is 180 degrees ass-backwards. Florida thinks that home ownership is supposed to cause economic growth.
Instead of leading to economic development, higher rates of homeownership today are associated with lower levels of it.
No, professor. Home ownership is the reward for economic growth in healthy systems. In the 1990s and 2000s, however, government mandates more or less forced people to buy homes and forced banks to lend to anyone. That drove up the home ownership percentage without the organic economic growth to justify it.
Once we unwind from 20 years of bad Washington policy, home ownership will once again signal a health economy and stable neighborhoods.
Now if you’d help us get government and crony big bankers out of the way, we’ll restore housing equilibrium and a vibrant economy in no time.
How else to explain his emotional outburst on Business Insider? Why else would he jump to the conclusion that our bankrupt federal government understands finances better than billionaires?
Wall Street can't be trusted to manage—or even correctly assess—its own risks.
This is in part because, time and again, Wall Street has demonstrated that it doesn't even KNOW what risks it is taking.
In short, Wall Street bankers are just a bunch of kids playing with dynamite.
There are two reasons for this, neither of which boil down to the "stupidity" that most people generally assume is involved. The bankers who place these bets are anything but stupid.
Granted, Blodget makes some good points, too. Derivatives are risky, and mixing commercial with investment banking might not be the greatest idea on earth.
The problem is that Blodget thinks government can fix man’s eternal optimism by protecting him from his own failures. Here’s the toxic third point of Henry’s three-part “solution”:
Lay out a plan, in advance, to manage the failure of even the largest financial institutions—by stepping in, seizing the bank, firing management, zeroing out shareholders, haircutting bondholders, and then injecting new SENIOR capital (fully protected) and re-floating or selling off the firm. This will allow the entity to keep operating, and it will stick the losses where they belong—with the idiots who bought the bank's stock or loaned it money. Meanwhile, the systemic threat will be eliminated.
Read more: http://www.businessinsider.com/and-now-we-know-the-truth-about-wall-street-its-kids-playing-with-dynamite-2012-5#ixzz1ugkexSL7
The answer is: LET THE DAMN BANK FAIL!
As long as investors know that the non-investors will pay for their gambling losses, they will continue to gambling. Firing managers who’ve been stashing away chunks of their $12 million incomes won’t deter them from big gambles.
Only the free market, which is bigger than the banks and bigger than government (for now), can restrain recklessness. In extreme cases, the market does this by letting the weak die. Culling the herd.
I’m not proposing complete lack of control—I’m proposing removing the government safety net for billionaires. This puts the burden of risk assessment on the broader market in advance, not after-the-failure through government seizure.
Finally, I’ll close with this question to Mr. Blodget. You say that the bankers who place these bets are anything but stupid. You even call Mr. Dimon of JP Morgan “brilliant.” So if these brilliant experts who’ve created massively complex derivatives are unable to manage them, do you really think government can?