The Intersection of Business and Government

A little over a month ago in this section, I wrote about two subjects: China’s control over rare earth minerals and how banks, by lending to high leveraged businesses, may be creating another financial bubble. I follow-up on these matters as the Wall Street Journal and Washington Post have set off their own alarms on these matters in recent articles in their publications.

Rare Earth Minerals Move Front and Center in U.S.-China Trade Negotiations
In the past, I have pointed out the Trump administration did not appear interested in addressing China’s global control of what are called rare earth minerals. As a response to the U.S trade threats, China slapped on a 40% export quota on them aimed at the U.S. These minerals are essential for producing most of our consumer electronics and even military missiles.

An American chemical company and an Australian mining firm recently announced their intent to construct the first rare earth minerals separation plant in the U.S. in years. As American technology manufacturers who use of rare earth minerals grow increasingly concerned about the possible breakdown of the China-U.S. trade negotiations. this joint venture may be a viable alternative to China’s supply while also possibly serving as a negotiating bargaining chip for the U.S. Adding more incentive for a U.S. plant is a June 1 tariff of 25% being placed by China on any ore mined in the U.S. and shipped to China for processing.

With China now making rare earths a major issue in trade negotiations, this new venture will begin to tilt the outcome of this matter away from China and towards the U.S. That will be good not only for our economy but for our national security as well.

Washington Post Headline: “A new credit bubble gets ready to burst”
In the June 2nd Sunday Business Section of the Post, respected business columnist Steven Pearlstein raises some of the same concerns I expressed on leverage loans to businesses. He reminds us that “if regulators wait to act until they can say with certainty that a credit bubble is about to burst, they’ve waited too long.” He calls out the “shadow banks” that make these loans much as they previously did for home mortgages and other consumer debt that led to the great recession. He points out that these unregulated credit funds have access to more than $1 trillion in lines of credit from regulated banks. He warns that this might be a replay of 2008. He sees government regulators as overly confident that financial firms will self regulate and self correct any problems that may arise.

Stephen Moore Withdraws From FED Consideration
A strong message was delivered to President Trump that he should vet his appointments to prominent positions before nominating or leaking names to the media before their official nomination. In my April 9th op-ed in the Daily Caller, I pointed out that Moore was a third-rate political hack who had no business being put on the Federal Reserve Board to determine our nation’s monetary policy. I was pleased that other writers followed with similar opinions. It’s not only sloppy work by this administration to float names for government positions but a debasement of the process that overlooks good people to fill important positions. Sending up trial balloons for possible nomination without any idea of their background or qualifications is just another example of how the Trump presidency has lowered the bar of governing.