Consumer Product Safety "Improvement"

Walter Olson for Forbes, on the CPSIA and its "unintended" consequences.  Consider how fervently the large companies (Hasbro, target, others) and the "consumer advocate" organizations supported CPSIA, and draw your own conclusions as to how "unintended" some of these are.

Hailed almost universally on its passage last year — it passed the Senate 89 to three and the House by 424 to one, with Ron Paul the lone dissenter — CPSIA is now shaping up as a calamity for businesses and an epic failure of regulation, threatening to wipe out tens of thousands of small makers of children's items from coast to coast, and taking a particular toll on the handcrafted and creative, the small-production-run and sideline at-home business, not to mention struggling retailers.

If I were a nasty, suspicious person, I might suggest that large manufacturers and retailers have finally found a way to legally force small "artisan" producers and used-goods thrift stores out of business.

[Makers] must put a sample item from each lot of goods through testing after complete assembly, and the testing must be applied to each component.  For a given hand-knitted sweater, for example, one might have to pay not just, say, $150 for the first test, but added-on charges for each component beyond the first: a button or snap, yarn of a second color, a care label, maybe a ribbon or stitching — with each color of stitching thread having to be tested separately.

Suddenly the bill is more like $1,000 — and that's just to test the one style and size.  The same sweater in a larger size, or with a different button or clasp, would need a new round of tests — not just on the button or clasp, but on the whole garment.  The maker of a kids' telescope (with no suspected problems) was quoted a $24,000 testing estimate, on a product with only $32,000 in annual sales.

Under the CPSIA's provisions, thrift stores would not technically be required to have every donation that comes in tested.  But they would be liable if they sold an item later determined to be in violation.  So what are they to do?  They can't afford to have everything tested, and they potentially don't dare risk NOT having everything tested.

The economic news just keeps on getting worse

Both in the US:

As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

[...]

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the "2008 Financial Report of the United States Government" as released by the U.S. Department of Treasury.

And in Europe:

Stephen Jen, currency chief at Morgan Stanley, said Eastern Europe has borrowed $1.7 trillion abroad, much on short-term maturities.  It must repay – or roll over – $400bn this year, equal to a third of the region's GDP.  Good luck.  The credit window has slammed shut.

Not even Russia can easily cover the $500bn dollar debts of its oligarchs while oil remains near $33 a barrel.  The budget is based on Urals crude at $95.  Russia has bled 36pc of its foreign reserves since August defending the rouble.

"This is the largest run on a currency in history," said Mr Jen.

In Poland, 60% of mortgages are in Swiss francs.  The zloty has just halved against the franc.  Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story.  As an act of collective folly – by lenders and borrowers – it matches America's sub-prime debacle.  There is a crucial difference, however.  European banks are on the hook for both. US banks are not.

Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks.  En plus, Europeans account for an astonishing 74% of the entire $4.9 trillion portfolio of loans to emerging markets.

They are five times more exposed to this latest bust than American or Japanese banks, and they are 50% more leveraged (IMF data).

Spain is up to its neck in Latin America, which has belatedly joined the slump (Mexico's car output fell 51% in January, and Brazil lost 650,000 jobs in one month).  Britain and Switzerland are up to their necks in Asia.

According to the first article, the US has little choice but to monetize its debt — which is a euphemism for "start printing money with nothing to back it" — and according to the second, the IMF is in the same boat.

So this got me thinking (again).  What do we all do, if the entire global economy implodes?  If all the banks fail or stop doing anything but collect money, and the world's governments all start printing money trying to inflate themselves back to paper solvency, and their currencies start chasing the Zimbabwe dollar?