Failure of Salina: Don't test the Markets

A salinas car company was being subsidized by the city of Salinas, periodically giving batches of taxpayer money equivalent consistently over $100,000. Mike Ryan, the President and Co-Founder has said that the money is all gone and that the company has lost its investors. In other words, the project in making some fo the most eco friendly cars completely failed. Though the likes of Ryan should be applauded by tackling this problem head on, it should be no surprise that the real loser in this experiment was the tax payer.

The markets appear to not have convinced the investors that this new eco friendly car would be as prosperous as they thought. The foolhardy investments of the city clearly demonstrates that the city does not know what is best for its inhabitants and that instead they should be given the opportunity to invest where they think is proper instead of letting city officials do what they want without bearing any consequences. If this is not a clear example of the broken window fallacy in practice, i have no idea what is. To backtrack, this philosophical tenet basically states that despite the fact that a job is created when a window is destroyed thus employing someone, it does not validate the action of breaking the window because wealth was destroyed and even more wealth is needed to restore it instead of being used elsewhere where which society can continually benefit. In this case, the city used up money that could have been used in creating more jobs in a dangerous recession. Unfortunately, that particualr money and opportunity is lost to history.

Crony DC Medallion System

According to Reason TV, D.C. is considering establishing a Medallion system in its taxi business in order to reduce corruption. The D.C taxi businesses that benefit are the ones with close political ties to the legislature. The losers in this decision are the cabbies that do not meet the requirements to receive a medallion in the first place.

Reportly, only 4,000 medallions will be given out, and the cabbies that meet the requirements will have priority access to the aforementioned medallions. The eligibility standards are primarily based on whose been driving in DC the longest. This measure is highly anti free market. The livelihood of thousands of immigrants will turn into ashes all for the sake of the few cabbies to have more profits? excuse me, not even the cabbies will reap the majority of the profits; the owners of the vehicles and the companies themselves will take home the majority of the profits.

This is a classic example of an oligopoly. That is to say that only a few companies remain in the system AND it makes it more difficult for other cabbies to enter the system due to the high costs of doing so. in this case, you are only protecting the interests of the few and ignoring those of the majority.

Of course there may be corruption, of which the only complaints i have heard of was manipulation of rates in relation to the zones already in place in the city. To counter this argument, one could point out that more access to the information highlighting the specific rates in the city could ultimately avoid such scenarios.

All in all, politicians and big business cab companies are getting there way and it is a sad thing to watch innocent cab drivers being driven out of a business which one could argue could in fact pave the way for future economic opportunities for these low tier owners.

QE and the road to nowhere

Greenspan has recently noted that besides weaking the value of the dollar which in turn helped the expansion of imports, there really has'nt been any revolutionary consequences from the influx of money into the market. He even goes as far as to say that QE3 would not do any good but weaken the dollar.

What is QE? Basically QE is priming of more dollars into the market by the federal Reserve. The Economist Thomas Sowell in the last couple of months has noted that getting credit is extremely easy and banks are basically hording the green in their reserves, so one might ask why we are essentially still in a recession? The main answer to that question is that the environment to do buisiness has not imporved. Government is still borrowing more than it can be hold accountable and regulations keep making their in bills enacted by politicians who believe that government has the duty to keep a more vigilant eye in the affairs of buisiness. These regulations also include artificial rises in health costs due to mandates, zone laws, restrictions on permit uses, rising costs in some states through taxes due to their obligations to balance the budget, and recless spending projects which only bring about short term growth and political points.

Though Allen Greenspan is to blame for lowering the interest rates at the begginign og the decade, it was the policies that went hand in hand with these adjustments that cumalited ultimatelty in the housing crisis of 08. Now politicians are afraid of losing their seats in power and influence if they don't look like they are doing anything. In many cases, politicians doing something is exactly what continues to hurt the economy even more.

The late Senator Robert Byrd was a champion for stimulating the economy of West Virignia by engaging in audacious road projects. Over the last several years, people have began to critize his highway contruction projects precisely because they lead to nowhere. Lanes upon extra lanes were made in the name to bring more business to the state, however it became simply a project to appease his voting base by promising over 20 million in subsidies over the last 40 years to continue financing such projects. If Byrd was able to get away with this scandal, how well is the rest of our taxpayer money being spent over the country. This is just one state mind you.

By continueing involvement of this adminstration into the economy and elaborating on Quantitative Easing, Washington is indeed paving a road for America, however, this road leads to nowhere.