Category — free markets

First Big Oil loomed in the sights of Congress. Cheating and gouging, not pumping or selling overseas cried Chuckie Boy Schumer and Socialist Bernie Sanders, two of the Senate’s peltless conspiracy hunters. When this failed to deflect the voting public’s unrest, wild finger pointing commenced, searching out “speculators” and oil cheats.

A huge dilemma occurred with that game drive; it bagged the voters’ 401(k)’s, IRA’s, stocks and mutual funds, yes, their retirement accounts.

Needless to say, that model didn’t get out of the showroom.

The following we have this from people who know, unlike those clowns in congress that put us in this position to start.

Onions have no futures market, yet their recent price volatility makes the swings in oil and corn look tame.

(Fortune Magazine) — Before the U.S. Commodity Futures Trading Commission starts scrutinizing the role that speculators may have played in driving up fuel and food prices, investigators may want to take a look at price swings in a commodity not in today’s news: onions.

The bulbous root is the only commodity for which futures trading is banned. Back in 1958, onion growers convinced themselves that futures traders (and not the new farms sprouting up in Wisconsin) were responsible for falling onion prices, so they lobbied an up-and-coming Michigan Congressman named Gerald Ford to push through a law banning all futures trading in onions. The law still stands.

And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics’ belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April. [snip]

I assume you have seen this in the papers and in all the nightly news reports.

Remember, the government gave us OSHA, that organization which spent a great sum of your money ordering auto manufacturers to make hood ornaments that folded out of the way. All to protect you from cuts by said ornament when you are struck by a vehicle resulting in your passing over the hood.

Ask yourself a couple of questions. What does Congress know about making shoes? How about airplanes? Canoes? Trains? (Amtrak anyone) Interstate trucking?

Given this, why is Congress involved in controlling and regulating any of these businesses? Government interference costs us untold dollars through added costs to businesses which are passed on to the consumer.

Introducing the following ideas will reduce costs mostly by getting the government out of business.

In a previous post, I mentioned deregulation is good; no regulation is a fiasco. Safety is the primary consideration. Beyond that, let companies use equipment they like and pay prevailing wages. Return On Investment (ROI) to the shareholders determines size and scope of operations.

Markets scrutinize themselves with a Darwinian progression that cleans the bones of the weakest.

One item that goes with deregulation is ending all subsidies. Make it or fall down. Someone will step over the corpus and fill the slot.

Regulate Public interstate transportation for safety. All security devolves on the corporations with failures of the aforementioned piercing the corporate veil, putting all management’s, junior through top level, personal wealth as well as personal freedom in jeopardy.

No regulation of fares, let them charge what they want; let the public travel as they wish. Those that cannot control their bottom line soon are food for the bottom feeders.

Regulate utilities the same way, with the public able to buy from the cheapest company regardless of where they are. Only charges that one company may bill another for line usage come to scrutiny.

Sell insurance (Life, Health, Casualty) across state lines. Today, the Feds as well as the states regulate the financial strength of companies as well as policy wording for coverage. Surprised you’ll be at the rate differentials when one buys a basic policy and add the coverage one needs. Requirements like acupuncture and aromatherapy added to the policy as perqs for constituents, drive up premiums for all. Most persons need a Major Medical policy to cover catastrophic costs, a $10,000 deductible keeps premiums reasonable.

International companies comply with the regulations or shut them out of the market, no exports period. MFN trading status is a powerful club to get conformation with national trading conventions.

Bear Sterns collapse has sparked a lot of discussion about executive pay. Liberals, ever eager to stoke the class warfare fire, seize on the latest headline to bemoan excessive executive payouts. Sadly, in many cases, they do have a point. You’d be hard pressed to find a bigger capitalist and believer in free markets than yours truly. But how can you justify CEO James Cayne and his top brass leaving with $917.2 million in compensation while stockholders and employees are left holding the bag?

Executives shouldn’t be walking away from companies with 100s of millions win, lose, or draw. The market rewards performance, and that’s how an executive should be rewarded too. But few executive compensation committees, some might argue the board in general, are fulfilling their fiduciary responsibilities to the shareholders. Instead, most boards focus on overall compensation, a keep up with the Jones philosophy, with little thought for providing incentives and rewards to encourage executive performance.

If the regulations and taxes come, the executives and boards have nobody to blame but themselves. They need to start designing compensation systems that more closely link company performance with executive pay. A good way to snare CEOs like James Cayne would be vesting his pay in 1 year increments over a 5 year period after he retired based on Bears’ performance. That’d provide a large incentive for executives to keep an eye on the future as well as today.