To ensure that imports of a particular good are substantially reduced, a government or regulatory authority ( such as the World Bank), a government may insist on imposing a “quota”. This quota will permit only a certain specified quantity of imported good to be allowed over a given time period. The quota may be “global” or “allocated”. The former merely inducates what aggreagate quantity may be imported into a country, without specifying how much comes from any one or particular country of origin. It could be from China, Vietnam , the E.U. , England or Germany it does not matter. An “allocated” quota on the other hand , authorizes a particular quantity of imports from each exporting country.
Sphere: Related Content“Tariff quotas” are commonly imposed under which a specified volume of foreign goods may be imported at a low rate of duty, while imports in excess of this figure are subject to a higher rate and percentage. “Mixing quotas” imposed by some countries require that a certain percentage of home produced goods must always be sold along with imported goods of a similar type.
A tariff may not reduce imports to the degre hoped for by those who introduced it. The foreign exporters or the domestic importers, or both , may absorb most of the duties and foreign exchange costs. Because the foreign goods are offered to consumers at a little more than the former price and prices , the volume of sales may decline only slightly. Or even if the full price of the duty is added to the selling price , consumers may still buy practically as much as before. In either case domestic producers of similar goods do not derive much benefit or benefits from the tariff. Foreign goods may be selling in virtually the same quanities as before, the share of the market held by domestic producers will be little changed, if at all. Because of the possible consequenes , a tariff imposed as a means if conserving foreign exchange , may similarily fail to produce the desired result or result, With the volume of imports down only slightly, if at all the expenditure of foreign exhange and forex currencies will the same as before or down just a small amount or percentage.
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Sphere: Related ContentThe Bush years will be remembered for the cruel triumph of realism over illusion.
One of the era’s great illusions was spun by President Bush — that the force of freedom was so irresistible, it would prevail in a place like Iraq even in the absence of law and order. Bush himself eventually realized his mistake. The second illusion — fed by anyone who possibly could get rich from it — is bursting now.
Wall Street is experiencing one of its most wrenching periods since traders began gathering around a tree there in the 1790s, beset by a terrible reckoning: No, interest rates can’t be held at unsustainably low rates — 1 percent in 2003 — without stoking wasteful investments; no, housing prices won’t always go up; no, home loans can’t be extended to people with shaky credit histories on scandalously easy terms (no money down!) with the expectation that they’ll be paid back; no, fancy financial instruments and computer models can’t eliminate risk; no, firms can’t exist on massive debt — now-bankrupt Lehman Brothers had debts 35 times its capital — without courting disaster.
It’s a sign of how fragile the entire financial edifice had become that a decline in housing prices of about 20 percent could precipitate the current near-meltdown. It’s easy to blame greed, as John McCain is doing at every opportunity, since it’s a given. Greed is endemic to the human condition, even if it is most visible on Wall Street. Lehman Brothers CEO Dick Fuld made $22 million last year, leading his firm toward the abyss, while Wall Street doled out $23.9 billion in bonuses in 2006. But everyone else joined in the wide-ranging bonanza.
As financial guru Ric Edelman writes, “The insurers got rich selling policies with fat premiums, brokerages got rich selling new securities, lenders got rich selling more loans than ever, builders, real estate agents, title settlement companies, appraisers, inspectors — everyone got rich from the ensuing real estate boom.”
He could have included the politicians who enabled the irresponsible lending of Fannie Mae and Freddie Mac because they knew these “government-sponsored enterprises” — since bailed out by the government at a potential cost of $200 billion to taxpayers — would line their campaign coffers. Fannie and Freddie were the “patient zero” of the financial contagion, encouraging and blessing the “subprime” loans that were a toxin spread throughout the financial system. Many Republicans, including McCain, wanted Fannie and Freddie reformed. As a largely Democratic cash cow, it was protected by Democrats, enamored of its mission of extending homeownership to those who — it turns out — couldn’t afford homes.
With the financial system teetering on collapse, the federal government has become the backstop. “Raw capitalism is dead,” Treasury Secretary Hank Paulson has said. With Paulson and Fed Chairman Ben Bernanke deciding case by case which companies the federal government will save or not, he’s not kidding. After letting Lehman die, they essentially took over $1 trillion insurance giant AIG, making the taxpayers instant stakeholders in its far-flung businesses from life insurance to aircraft leasing and a ski resort.
In this environment, it’s hard to resist calls for more regulation. But it has to be intelligent and measured, an extremely difficult task when the market is constantly adapting and the next excess will come in a new form. A basically solvent company, AIG was rendered illiquid by so-called mark-to-market accounting rules that say assets must be marked down to their value in the current market, even if they are ultimately worth more. This was a reform adopted in response to the Enron scandal that has worsened the current crisis.
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http://jewishworldreview.com/cols/jonah091908.php3John McCain insists that the financial crisis is the direct result of Wall Street’s “unbridled corruption and greed.” Sarah Palin says likewise. Senator Obama, for the most part, has merely echoed what Treasury Secretary Henry Paulson has already said. Obama has an excuse though: He hasn’t finished conducting his seminar on what’s going on; he’ll get back to us after a rousing multivariate analysis of the value of “decisiveness.” Joe Biden says the Wall Street crisis is the result of George W. Bush’s tax cuts, which makes as much sense as blaming the rising price of fairy dust. But as a wise man once asked, Who gives a rat’s patoot what Joe Biden thinks?
Nonetheless, blame is settling on those old standby scapegoats, Wall Street fat cats.
So, I ask again: Who should go to jail? And the answer, as far as I can tell, is: no one — at least no one on Wall Street. That may turn out to be wrong. But even if there’s a bad penny or two in the pile, nobody will say this CEO or that banker is responsible for the mess. And so far, despite a flood of coverage and speeches and finger-pointing, nobody’s aimed their bony finger of condemnation at any Wall Street fat cat who did anything criminal.
Criminal stupidity is another issue entirely. But the beautiful thing about our economic system is that bad decisions are punished in the marketplace.
The starting line for the parade of falling dominoes doesn’t begin on Wall Street. Nor, alas, will the parade end there. But if you want to know where it really begins, look to the Capitol steps.
The self-proclaimed angels in Washington will tell you they’ve been working tirelessly to expand the American dream of homeownership by making mortgages available to people unable to plunk down 20 percent on a house. Franklin Raines, the Clinton-appointed former head of Fannie Mae from 1998 to 2004, made it his top priority to make mortgages easier to get for people with poor credit, few assets and little money for a down payment.
The fine print to this noble intent was an ill-conceived loosening of standards. For instance, the Clinton administration reinterpreted the Jimmy Carter-era Community Reinvestment Act to politicize lending practices. Under the CRA, the government forced banks to prove they weren’t “redlining” — i.e., discriminating against minorities — by approving loans to minorities and various left-wing “community group” shakedown artists whether they were bad risks or not. (A young Barack Obama got his start with exactly these sorts of groups.) Sen. Phil Gramm called it a vast extortion scheme against America’s banks. Still, the banks were perfectly happy to pass the risky loans to Raines’ Fannie Mae, which was happy to buy them up.
That’s because Raines was transforming Fannie Mae from a boring but stable financial institution dedicated to making homes more affordable into a risky venture that abused its special status as a “Government Sponsored Enterprise” (GSE) for Raines’ personal profit. Fannie bought the bad loans and bundled them together with good ones. Wall Street was glad to buy up these mortgage securities because Fannie Mae was deemed a government-insured behemoth “too big to fail.” And others followed Fannie’s lead.
The current financial crisis stems in large part from the fact that people who shouldn’t have been buying a home, or who bought more home than they could afford, now can’t pay their bills. Their bad mortgages are mixed up with the good mortgages. And thanks in part to new accounting rules set up after Enron, the bad mortgages have contaminated the whole pile, reducing the value of even stable mortgages.
Of course, there are other important factors at work here, having to do with changing technology among other things. And even if the bad mortgages weren’t in the system, we’d still have the hangover from the end of the housing boom. But the financial system could have handled that with the usual corrections. The biggest dose of poison entered the financial bloodstream through Washington. And some people warned us. In 2005, Fannie Mae revealed it overstated earnings by $10.6 billion and that it didn’t really know what was going on. The Bush administration pushed for reforms, but those efforts were rebuffed by Congress, with Democrats Barney Frank and Christopher Dodd taking point, because Fannie and Freddie have spent millions in campaign contributions.
In 2005, McCain sponsored legislation to thwart what he later called “the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”
Obama, the Senate’s second-greatest recipient of donations from Fannie and Freddie after Dodd, did nothing.
Meanwhile, Raines, the head of a government-supported institution, made $52 million of his $90 million compensation package thanks in part to fraudulent earnings statements.
But, ah yes, the greedy criminals responsible for this mess must be somewhere on Wall Street.