The stock market sold off hard today, supposedly because of economic turmoil and devaluations in developing countries. Perhaps this is so, though I usually discount the snap analysis in the media about what drives the daily moves of the overall market, as opposed to individual sectors where industry slumps or disruptions (housing and banking anyone?) are more comprehensible. I wonder whether the market may be sliding because of the downgrades of health insurers, and the handwriting on the wall for the broader economic disruption the inevitable collapse of Obamacare might cause. In any case, I’ve been expecting a selloff for a while now, and my guess is that we’ve got a ways to go. But this is just my guess, no better than any of the other Wall Street dart-throwers.
But maybe the headline account is correct. Yet if our markets can be roiled by wobbles of the Turkish lira and the Argentinian peso, what might happen if China’s bubble economy pops? Matthew O’Brien’s look at China’s financial structure, especially it’s “shadow banks,” at The Atlantic is sobering:
What happens if the shadow-bank boom turns to bust? Bad, bad things. . .
The good news is the rest of the world isn’t exposed to China’s financial system the way they were to ours. But the bad news is the rest of the world is exposed to China’s economy. A “hard landing” there would also mean a hard landing in the countries that sell China the raw materials it needs for its construction boom. It wouldn’t be a 2008-style crash, but it would knee-cap global growth just when things look like they might be taking off.
Meanwhile. . .
Over-Regulation: It’s Not Just for Stupid Rich Democracies Any More
The World Bank concluded in a study last fall that excessive regulation was hampering economic growth. Here’s the Wall Street Journal’s summary of the report:
Many emerging markets have dramatically improved their business climates in the last year, but a tangle of onerous regulations the world over is curbing much-needed growth from the private sector, the World Bank said in a new report published late Monday.
That’s particularly important as pessimism on global growth widens amid deteriorating emerging market prospects.
“We’re still paying the price associated with the existence with business regulations, procedures and laws that put a heavy burden on the business community,” said Augusto Lopez-Claros, head of the World Bank’s global indicators and analysis division.
Those bottlenecks are “a burden on economic growth, a burden on job creation and a burden on productivity and competitiveness,” he said.
I mention this World Bank study from last fall because they have a new one out this week that finds the U.S. ranks behind . . . well, what the heck, let me just give you the Washington Examiner’s lede for the full shock value:
A new study by the World Bank and the International Finance Corp. found that the U.S. ranks well behind countries like Rwanda, Belarus and Azerbaijan in terms of how easy it is for an entrepreneur to start a new business. The U.S. did narrowly beat Uzbekistan, though. . .
[The U.S. came in 20th in the rankings.] In addition to being beaten out by Rwanda (9), Azerbaijan (10), and Belarus (15), the U.S. lost out to Malaysia (16); Taiwan (17); Puerto Rico, which is a U.S. territory (18); and Mauritius (19).
I’m guessing Puerto Rico might be rethinking that whole statehood thing.
Which reminds me of this Economist article from a couple years back:
AMERICANS love to laugh at ridiculous regulations. A Florida law requires vending-machine labels to urge the public to file a report if the label is not there. The Federal Railroad Administration insists that all trains must be painted with an “F” at the front, so you can tell which end is which. Bureaucratic busybodies in Bethesda, Maryland, have shut down children’s lemonade stands because the enterprising young moppets did not have trading licences. The list goes hilariously on.
But red tape in America is no laughing matter. The problem is not the rules that are self-evidently absurd. It is the ones that sound reasonable on their own but impose a huge burden collectively. America is meant to be the home of laissez-faire. Unlike Europeans, whose lives have long been circumscribed by meddling governments and diktats from Brussels, Americans are supposed to be free to choose, for better or for worse. Yet for some time America has been straying from this ideal.