“These prices are ridiculous. It’s hot out, so you need to
lower them. You must stop profiteering off the heat wave.”
"Amerika The Bountiful:
Politicians, Profiteers and Price Gougers"
by David Haggith
"President Trump increasingly runs a communist country as he now regularly socializes major corporations as a condition for granting them the privilege of expanding or making deals. That’s something that has not been a part of America until Trump, except in the case of major corporate bailouts, and it shouldn’t even have happened then. If Chrysler went bankrupt, by historic example,it doesn’t have to mean Chrysler employees all go without work. It means the board of directors and the stockholders all lose a ton of money and have to sell their stocks for dimes on the dollar in order to pay off all creditors; but their loss for stupidity is another person’s gain because someone has to buy those stocks on the other side of those trades, and those people go on to run the company differently. If stock sales cannot even raise enough value to pay off all creditors, it may mean creditors eat some losses, too. That is the risk they should have watched out for.
Those are the risks of doing business. If you cannot take the losses, you shouldn’t be investing in stocks. If you cannot run a company more securely than that because you either take stupid risks, greedy risks (usually the same thing) or just make really dumb business decisions, you’re out. That is what is supposed to happen so that smarter people take control and turn the company back into a going concern.
The government, instead of running bailouts could shepherd those deals in negotiations to make certain they serve the interest of saving jobs for employees who did not make those stupid decisions and likely had little to no say in any of them, except at the top tier. Making sure the sale secures employment as much as possible is also for the sake of keeping the national economy strong. But government should not ever be bailing out the failed barons of industry. Let them flounder in the hot sun like a beached fish.
Of course, government almost always does bail out the big boys, especially where it has favorites, which often means campaign donors. When the government becomes a major stockholder and even takes a position on the board, then the company is guaranteed of being a favorite and will likely get better protections and better opportunities from government contracts as government officials apply pressure on their underlings. Those corporations that have government as a major shareholder will be more likely to get bailouts as the government throws good tax dollars after bad to try to save its investments.
It’s also called Fascist economics because it is how Hitler built his wartime economy with joint ventures between friends in business, corporations and government funds. For decades, it was considered terribly anti-American. Now, it’s considered the Trump business plan. So, we have it happening on a fairly regularly basis these days wherein the US Treasury keeps increasing its holdings in corporations.
It’s not the America I grew up believing in. Capitalism only works properly when it is governed by laws that assure an equal and fair playing field, and government picking winners and losers in major stock purchases is far from an equal and fair playing field. Capitalism also only works when losers are forced to absorb their own losses. The dead wood gets trimmed out and burned. I believe corporate laws should also be rewritten so that they do not protect negligent corporate board members from losing all their possessions in a corporate bankruptcy. Right now they give too much protection. If you cannot stand the risk, stay out of the kitchen. Let employees with less to lose take those positions.
Capitalism is based on survival of the fittest seen in nature, which forces all organisms to compete for their space. Rough as it is, it is also what built a lot of strength into nature. That doesn’t mean it needs to be cage match. It can have rules that everyone has to play by that establish fair play, as any game has, and rules that avoid too many needless injuries as many games have.
For banks, it means, invest your money smartly, or lose it all. Depositors can still be protected over board members and other primary investors in the bank with a different kind of bailout. The FDIC, instead of inputting money into a failing bank to save it, should let bankruptcy do its work and focus on requiring the bank to sell off all shares in a fire sale and award the money from share sales to ALL depositors by shepherding it to new accounts in the new banks that take ownership of the parts and pieces of the failed banks. To the extent that losses born by stockholders on their sale of bank stocks and the sale of other bank assets don't cover all deposits, the FDIC can award its insurance money in the name of the depositors in the new accounts that are created in the banks that buy the parts and pieces to keep the depositors whole. The main stakeholders in the failed bank can all flush down the toilet as they should.
If banks are getting “too big to fail” to where their failure would be catastrophic for the entire economy, that was a failure of government in the first place to ever allow such corporate conglomeration to happen. More competition likely would have been better for depositors and creditors. Big banks should always be disqualified from buying the parts and pieces of the failed dinosaur banks because they are already “too big to fail.” Making them bigger is just plain stupid. To qualify as a bidder in the fire sale, you should have to be a well-run, fully solvent small or midsize bank.
We won’t see the kind of rational government I describe happen, of course, because politicians all love to feed their big, fat friends. They probably have big, fat investments with those friends, especially if they are president of the United States, who’s billions in profits from such investments I covered yesterday in an article titled, “
AMERICAN FAIR: The Country May Not Be Great Yet, but the Grift Is Grand!”
That is another reason the government should not be allowed to buy shares, even in failing enterprises (or especially in failing enterprises) in order to prop them up. Presidents these days have a tendency to buy shares first when the fire sale looks like the best price, and then use government funds to bail out the enterprise by soaking up a lot more existing shares from the bankrupt bankers that are being forced to liquidate as punishment for their sins, which raises the value of all shares like a stock buyback.
Separation of church and state and separation of business and state are equally good ideas. The government should not be taking ownership control in either of those things or picking winners and losers. In the case of businesses, let the greedy pigs fall flat on their faces and die in their wallows. Push the dirt over them, and move on.
Now we see a new communist move emerging this week from the Trump administration. It’s one I said predicted earlier we could likely see coming as an answer to this energy crisis because we saw it in the days of the Arab (OPEC) oil embargo. That commie move is price controls. The president is demanding gas stations lower prices as oil falls. The problem with price controls is that government, especially Trump government, works by decrees and not always by good sense. Kings can be capricious and demand things that are not even doable. “Make my ugly daughter beautiful, or off with your head.”
Many gas stations are not owned by Big Oil. They are smaller businesses that run convenience stores, even mom-and-pop business that run a single station. If they loaded up their storage tanks when prices were high, they cannot lower prices until they have sold all the fuel they put into those tanks at the higher prices without actually LOSING money.
Granted, there is probably some room here for government to regulate price gouging, but a lot of the price gouging happened when crude oil went up. Many gas stations seized the opportunity to immediately raise prices the next day, even though they did not buy any fuel for their storage tanks. Then they use the argument that they have to wait to lower prices until they buy fuel at the lower prices. That means, until they need to resupply, the reap a windfall.
I’m not sure what the right answer is for curbing opportunistic price gouging, but price controls usually result in poor business. You see it with rent controls where they guarantee slums as owners try to figure out how to keep a profit when costs rise but governments don't allow rents to rise enough to match. Government prices may even be arbitrary wish lists by politicians, like this one by President Trump: "In a Truth Social post, the president called on retailers to reduce prices and urged them to target roughly $2.50 per gallon.
Obviously, he doesn’t drive his own car, or he would know there are few if any parts of the country where that price was a reality even back when oil was $60/bbl. It’s a fantasy price, intended to make him look like a national hero. If he’s talking the base price before gasoline taxes, it might be doable in some areas, but presidents should not be making those decisions because they are often wrong and, as result, force more business losses down the road."
In his typical Iran-style negotiation, Trump also warned that there would be “no gouging,” calling the practice illegal, and suggested that retailers refusing to lower prices could face “big problems.” He might have to annihilate them by totally decimating their gas stations, etc.
Another problem with picking and choosing winners and losers: The president also singled out California, arguing that the state’s high gasoline taxes are artificially driving up prices for consumers. The president hates hyperblue California because he has a lot of political enemies and critics there, such as
Senator Adam “Pencil Neck” Schiff, a.k.a. “Shiffty.” “California should stop charging such heavy Taxes on their Gasoline. Soon the Tax will be higher than the Product itself, and the United States will not stand for it, nor will the People of California, who are being abused by these ridiculous Taxes, and by their own Government,” Trump wrote.
The United States under King Trump will not stand for states setting their own taxes. Many things about California government are stupid, but it is their right to be stupid and suffer the consequences of setting up their own socialist government that used high fuel taxes to regulate behavior, supposed to aid in fighting global warming. Won’t that be fun in other states, however, such as when the Democrats are in charge of the White House and decide they won’t stand for Washington State, which has long resisted an income tax at the ballot box, not having a good, sturdy Democratic income tax? The Constitution envisioned it is better to let states set their own taxes, so that taxation is decided closer to the people.
Trump has repeatedly argued that reducing energy costs is central to lowering inflation and easing financial pressure on working families, making cheaper gasoline a key part of his broader economic agenda heading into the fall legislative session.
So is reducing tariffs, which, like those gasoline taxes, get added right into the price of the products. So, maybe he should start by eliminating his own excessive taxes. The consumers don’t get to see the excise tax they are paying on each purchase of goods or services due to tariffs just like consumers of gasoline don’t see the tax on each purchase because it doesn’t show up at the gas pump as a separate readout of what they paid in fuel tax; but they sure get to pay all of those taxes. Trump has tried to bully businesses into not passing the tariffs along just as he is trying to bully states into helping him lower fuel prices from the rise that his war brought about by ditching their taxes. He doesn’t want to own the problems he is creating. Such is endless business and economic control by decree of the central planners.
With all the communist/fascist economic manipulation that is happening in the Trump administration as it picks winners for government money investments, sells crypto to the Treasury for currency assets, awards major mineral contracts to mining companies owned by Trump & Sons, it’s no wonder that the economy keeps grinding down more sluggishly to where the the ADP jobs report came in today, again below 100,000 net new jobs, well below the recession threshold. At 98,000 for June, it was well below the last dismal number of 120,000 for May. When the economy is running healthy, we are usually well over 200,000 net new jobs each month.
As we move more and more into communist/fascist economics, I expect the economy will perform less and less efficiently. That has historically been the failure of centrally planned economies. To the degree China has started doing better, it is because it has started allowing more capitalism. The US, under Trump, is now moving in the opposite direction. One of the reasons America built a strong economy was that we largely resisted too much government involvement, though we’ve increasingly inched away from a market-based economy for a long time. However, we are no longer inching. We are practically running downhill with our arms flailing.
Ask yourself if it is starting to feel like the “golden era” we were promised yet. We’re almost a year-and-a-half into making America great. Is it starting to feel greater or just more centrally controlled and maybe a touch more imperial and hostile under the profiteering president who, surely, would never pick corporate winners and losers based on where his own bets are placed?
The problem with all these things, including Federal Reserve steering of the economy (a power that should also be stripped away from it by ending the Fed’s maximum-employment mandate and forcing it to just regulate the currency for 0% inflation) is that you have to second-guess all your own investments based on what you think the Fed will do and what the government will do, instead of purely on what seems like a good business idea and a well-run business. We are now lightyears away from buying shares in a business just because it is a good business. It’s all a casino now that bets on government bailouts and Fed moves and now government investments because that is where the bulk of the money comes from. Investors follow the money."
