September 21, 2007

Dollars to Pounds

I don't write about the US economic situation too much because, frankly, I don't know or don't follow the macroeconomic stuff very closely. But it's impossible for a person to miss some mention of the things going on today.

- The Fed dropped interest rates by a half percent.
- The dollar is being devalued all over the place (inflation).
- The Canadian dollar just reached a 1:1 exchange rate with our dollars. (It used to be less)
- The British pound is 2:1. (It's been stronger for a long time, but now it's REALLY strong.)
- Gold recently reached a 28-year high.
- Housing prices are falling dramatically.

None of these things are good for the American consumer.

The money guys on teevee the other night were yelling that if you have any savings, you should convert it to a good foreign currency like pounds or euros. They say it's really easy to do that.

Sadly, you can't say no one saw it coming. Even more sadly, there is a lot of varied theories on how to make this stop and reverse course.

Posted by Flibbertigibbet at 07:35 PM | Comments (3) | TrackBack (0)

September 12, 2007

Pet Peeve: People Who Can't Mind Their Own Business

I was looking up who Lewis Black is because he is going to be performing in New York as part of Advertising Week. In his Wikipedia entry, it says:

Black describes his political affiliation as such: "I'm a socialist, so that puts me totally outside any concept ... the Canadians get it. But seriously, most people don't get it. The idea of capping people's income just scares people. 'Oh, you're taking money from the rich.' Ooh, what a horrifying thing. These people really need $200 million".

Yes, I DO really need $200 million. In fact, I really need a whole lot more than that. Just keep sending me money and I will tell you when my need has been fulfilled.

It irritates me when people, socialists, presume to tell me what I do and do not need in my life. The impertinence is galling.

I do not need socialists in my life, that's for damn sure.

Posted by Flibbertigibbet at 02:44 PM | Comments (1) | TrackBack (0)

September 10, 2007

Newsflash: People Hate Working for Tyrants

Mister Bookworm forwarded this article to me this weekend:

BBC: Dental students 'will shun NHS'

Almost one in five dental students plans to shun NHS work completely, a study has suggested.

The results suggest a new contract designed to make NHS work more attractive has had limited success.

The University of Dundee-led study reported in the British Dental Journal found 18% of final-year students planned to stick to private work.

In contrast, of the 141 students questioned, just 3% planned to work solely for the NHS after graduating.

Some 79% of students planned to split their career between the NHS and the private sector, according to the survey.

A similar poll of first-year dental students carried out two years ago also found levels of interest in an NHS-only career were very low.

However, the proportion of respondants who planned to work exclusively in the private sector was just 7.5%.

You've heard me say it before, so no one should be surprised: the government doesn't pay. Ok. I haven't said that before. At least, I haven't said it like that. Usually I say things about how government interference in trade in variably results in higher prices, lower supply, gluts/shortages, inflation/deflation, joblessness/homelessness, and other economic disasters. The only thing the government is really good for is waving guns around and we should concern ourselves with making sure they wave guns at the right people, which is to say criminals and invaders.

When governments nationalize industries, you typically see a phenomenon dubbed "brain drain" where talented people in that particular industry will actually leave the country to practice somewhere less restrictive and more profitable.

What is interesting here is that as Britain has painfully discovered how woefully unsuccessful socialized medicine is, they've been working to re-developed a private sector for the same services. As a result, they've created a sort of artificial border within their own markets. So, now we see an internal "brain drain." That's kind of neat. It's kind of like watching the pathology of a disease as it progresses.

Of course, also in that article is this outrageous statement:

Labour MP Kevin Barron, of the Commons health committee, has said dentists have a "moral obligation" to give the NHS more as it costs 175,000 to train them.

It's just like a communist to attempt to play the morality card to justify slavery. I still haven't managed to stop being shocked when they do so without irony, though.

Posted by Flibbertigibbet at 11:03 AM | Comments (0) | TrackBack (0)

August 21, 2007

Worthless Money

When I hear politicians and politicos defending statist ideas, I always find myself ranting about whether or not these people have ever in their lives opened a history book or a book on basic economics. If not, how do they presume to know anything about how these things work?

Diana has directed readers to an article by the Armstrongs that talks about the conservatives' vapid notion of "choice" and the ridiculous way they confuse choosing between types of tyranny with freedom.

The article quotes a conservative at one point and sends me up to my soapbox:

Food stamps give the poor something else -- buying power. It doesn't change the production or distribution of food.

It's rare to spot so obvious a contradiction in the wild. I'm tempted to sit here quietly lest it become frightened and scamper off into the underbrush of political doublespeak that too often passes for English.

Food stamps aren't redeemable for money.

You can't deposit your food stamps in the bank and accrue interest for your college fund.

Food stamps can't be used to buy a car or a house. They're really only good for buying food at discount rates.

Given all this, an influx of food stamps in the market will result in increased demand for what?

I'll give you a minute to think about it.

tick tock tick tock tick tock tick tock tick tock...

Times up.

Food stamps affect the market demand for FOOD. Surprise!

Further, food stamps are designed to increase the demand for food from the low income segment of the market, which is the same as saying it helps distribute the supply of food over more of the population.

But I thought he said it doesn't affect distribution. How can this be? How? We stayed up all night coming up with this plan! It just has to work!

Well, I will let you in on a little secret: without the "concrete" wealth of goods and services (accounting for the concrete value of whatever money is made of as well) money isn't worth anything. Money, you may be surprised to find out, is actually just the medium of exchange we use.

With money, you can effectively trade goods for goods, goods for services, services for goods, and even services for services.

But without goods and services, money isn't good for anything. (If I were one for going on tangents, I would segue here into a discussion of the ills of abandoning objective monetary valuation standards eg., the gold standard, and I would point to our current inflation as an example.) If there weren't any goods or services to exchange or if money weren't accepted in exchange for goods and services, you couldn't just walk up to someone with a pile of money and expect them to do anything for you. You couldn't even put your pile of money in a bank and draw interest on it.

Money without concrete wealth "behind" it isn't anything. You may, in the interest of mental short-hand, think of money as goods and services. In real world, if you hand someone a pile of money, you are effectively handing them a pile of goods and services. The beauty of money is that it isn't specific to any particular goods and services. The possession of money or some other proxy (food stamps) is the definition of buying power.

Food stamps are effectively money, but they carry with them a limitation: they can only be exchanged for food. Food stamps, therefore, may be considered to be food. Giving out food stamps is the redistribution of wealth in the form of food.

The problem with food stamps is just this: it's a redistribution of wealth. Conservatives generally like to rail against this hallmark of socialism, but they don't seem to be able to spot it when it's in front of them.

The effects of interfering with supply and demand are well-documented and never beneficial in any meaningful sense of the word. Smaller businesses are bankrupted or prevented from even starting. Prices are driven higher which makes it even harder for the low-income consumers to acquire more wealth and get to a point where welfare programs like food stamps aren't necessary. Larger businesses cannot afford to employ as many people as they might like. The list goes on and on.

And yet people never seem to learn.

Posted by Flibbertigibbet at 01:39 PM | Comments (0) | TrackBack (0)

August 17, 2007

You Sold It, You're To Blame

cox-shanghai.gif

Yahoo! News: China lashes 'irresponsible' reaction to safety woes

BEIJING (AFP) - China on Thursday hit out at the foreign press and "irresponsible people" for raising fears about Chinese-made toys and other exports that have been recalled due to safety concerns.

"Some media and irresponsible people take a small problem and make it into a large one," Commerce Ministry spokesman Wang Xinpei told reporters when asked about various recalls, most recently by US toy giant Mattel.

[...]

Senator Dick Durbin called for the inspection of all Chinese toys imported into the United States, following the recall by Mattel of 18 million Chinese-made products worldwide.

"We can't wait any longer for China to crack down on its lax safety standards," Durbin said. "This needs to stop now before more children and more families are put at risk."

I've talked before about how stupid it is of China to be worried about their image in light of the fact that they are actually exporting dangerous products, but now I'd like to point the finger of shame at some Americans.

Of course, I want to shame Congress for, again, trying to pass unnecessary laws which inhibit freedom and fail to effectively address the problem. The laws in question are those calling for regulations over the goods imported through China.

If history is any guide, we can expect some people to try to get around regulations by various means including smuggling and exporting the goods to a less restricted country first before exporting them to the US.

There is a much more effective and proper means of dealing with this issue: hold those who sell the goods in the US responsible. They are, after all, responsible for the goods they sell even if they import them from another country first.

This will place pressure on those companies to ensure that they are selling high-quality goods.

Some argue that the companies are already paying because consumer will be wary of their goods and that is right and proper. It's also possible that these companies do already face a legal liability for the damages -- I don't know.

But if the legal liability -- if it exists -- is sufficient to punish business who sell goods that prove harmful, I find myself questioning the ultimate purpose of regulations. The nicest thing I can say is that it appears to be more of the nanny-state mentality that dominates our political scenery today. The most truthful thing I can say is that it's just more power-mongering by petty bureaucrats, politicians, and their lackeys.

No good can come of Senator Durbin's proposals. It can only serve to employ more petty tyrants.

Cartoon courtesy of Cox & Forkum!

Posted by Flibbertigibbet at 06:26 PM | Comments (0) | TrackBack (0)

August 03, 2007

Repeat After Me

There has never been a situation in which the coerced manipulation of price or demand has resulted in net positive economic results.

Every single attempt has lead to either shortages or gluts of products or services. This means either increases in prices above market or prices below market. Stagnate pricing causes over or under consumption and reduces the pressure, incentive, and resource availability for improved production techniques and technological advances.

Never, ever, ever.

Perhaps more on what inspired this rant another time.

Posted by Flibbertigibbet at 03:37 PM | Comments (1) | TrackBack (0)

July 10, 2007

Capitalism

Venomous Kate of the Damn-Near Perfect Ass blogged:

With television channels moving over to digital broadcast, the 700 MHz spectrum is up for grabs.

[...]

Handset manufacturers in the U.S. have, it turns out, have been stripping Wi-Fi capabilities from mobile phones at the request of the major cellular carriers. Thats not the case in Europe, where cell phone owners can hop on Wi-Fi hot spots to surf the web for free. Here, in the land where capitalism is king, such innovations have been resisted by the communications industry because they would ultimately affect their bottom line.

The FCC is hoping to change all that.

A couple of things about this.

First, free wi-fi sounds wicked cool.

Second, I am terrified by the FCC's involvement in anything, but it may shock you that I actually support the FCC's function of dividing up the airwaves to those who would claim them -- except I don't like their treatment of the airwaves with licenses. The better approach would be to treat them like property much like land in the western US prior to settlements. Therefore, I do not support the FCC's proposal to force the next owner to allow free wi-fi on it.

Third, I want to clear up the implication that it is some sort of flaw in Capitalism that drives mobile phone carriers strip the Wi-Fi capabilities out of phones. That isn't the case. That decision is actually a foolish decision on the part of mobile phone carriers who could attract more users by offering phones with that capability. That they haven't realized the opportunity here reflects poorly on them alone not on Capitalism. It is a free economic system that makes this an opening for potential competitors.

Of course, that bandwidth has to be open for free use first, which although cool should be the prerogative of whoever comes to own it.

Posted by Flibbertigibbet at 12:16 PM | Comments (2) | TrackBack (0)

June 19, 2007

iJibber iJabber

The more I read about the iPhone the more excited I am to actually see it and lay my hands on one.

Thanks to my wonderful readers, I've found out that Apple has extended the battery life and upgraded the surface to make it more durable. It also uses Flash memory so it won't be so susceptible to drops and jostling.

And I've mentioned before how beautiful it is.

My Verizon contract doesn't expire until January and I will probably force myself to wait that long to get it because I will want to buy the fanciest iPhone they have.

But, of course, I'm interested in the doomsayers, too. I did a little googley search and found the following remarks:

Six Problems with the iPhone:

1) It's not rugged enough. (Addressed with rugged glass surface.)
2) Fixed battery. (Addressed with longer battery life.)
3) It's not a phone. (I fail to see how this is actually a problem. The commenter talks about it as a marketing strategy only, which isn't related to the phone itself.)
4) Expensive (Again, this seems like a marketing issue to me AND there are other very expensive smart phones out there)
5) DataSpeed is insufficient. (I dunno about this one. But I've seen rumors that there is a 3G iPhone in the works.)
6) Expectations are too high. (How are expectations both too low -- 'it's a phone!' -- and too high? -- 'It's the iPhone!' ?)

To his credit, this article was written in the early days of the iPhone rumor machine and many design improvements hadn't been announced or incorporated.

So, more recently that skeptic wrote a follow-up post on the same. He added several things to it, but I find his remarks largely unconvincing. Of course, I also can't tell what his purpose is.

Is he discussing this from the context of whether or not to invest in Apple stock? If so, market and marketing considerations are valid.

Is he discussing this from the perspective of a prospective buyer? If so, shouldn't he stick to technology, design, and usability considerations?

In reading the second article, the slant does seem to be toward the former consideration, the business landscape of the iPhone. I don't think his concerns on that front are unwarranted. It IS a very high-end phone-gadget with a price tag to match. That it is being mass marketed isn't a hideous error, though, I think, because it's a highly covetable product. That everyone will want one is part of its sex appeal. It might be more accurate to refer to it as its elitism appeal -- people who buy one will want everyone to know that they have the hottest gadget on the market.

He does bring up some technical and usability to concerns though.

Ruggedness - I understand this concern and I do think the iPhone will be less durable than my Nokia phone (with flashlight) which, I think, could stop bullets. But I am far less convinced by this argument than I was before reading more about the phone; I think it will be durable enough to withstand moderate wear and tear.

Battery life - Again, this article was written before yesterday's announcement. We now know that you can watch 7 hours of video on the iPhone. Yeah, so you can't watch movies on it all the way to Europe, but guess what. I can't do that on my laptop either.

Multi-touch - This is a reference to the input method, meaning you can touch the screen with more than one finger at a time. I *think* the writer thinks it will be difficult to handle the phone in this way.

No physical keys - This one does concern me. I hate touch screen ATMs. They don't seem to read my touches. Will the iPhone be able to handle my gigantic fingers? I did read in another review somewhere that it is somewhat slow-going while trying to type on the iPhone.

The last item, the crowded cell phone market, returns to the business considerations of the product. I agree that confidence in the iPhone is high right now, which means some people are undoubtedly overshooting the mark with their projections on sales and Apple stock.

I don't suggest that iPhone will flop, although I am skeptical about its long-term prospects compared to the current inflated expectations. But I do mean to throw a little cold water on the Kool-Aid drinkers and wake them up from their dream state.

But, I'll be honest. I started my cursory look into the iPhone hype and hate on the hater side. It looked too expensive, too fragile, and too flimsy (in battery life) for my needs and preferences. Now I find myself thinking things like, "It's an iPod PLUS a smart phone," "They upgraded the glass and made it tougher," "The battery life is sick compared to other complex handsets."

Basically, I'm sold. I will wait until after Christmas. It'd be nice if the Second Generation iPhone were available by that time.

Posted by Flibbertigibbet at 11:01 AM | Comments (3) | TrackBack (0)

June 18, 2007

Freedom Makes You... Unfree?

I was just over at MySpace where an ad for a book caught my eye. I read the review and it sounds utterly ridiculous:

Consumed: How Markets Corrupt Children, Infantilize Adults, and Swallow Citizens Whole
by Benjamin R. Barber

In Consumed, political theorist Benjamin R. Barber argues that where free-market capitalism once bolstered our democracy, it is now in danger of destroying it. According to Barber, big business traditionally produced goods (like oil, grain, and steel) that met peoples actual needs, a business model that allowed companies to make money and help others. Now the businesses with the biggest profits are those that manufacture a relatively useless cornucopia of games, gadgets, and myriad consumer goods for which there is no discernable need market other than the one created by capitalisms own frantic need to sell. In order to sell, and sell some more, capitalisms frantic marketers encourage children to grow up prematurely [....] and turn adults into overgrown kids who seek the instant gratification of unchallenging, endlessly replaceable consumer goods.

[...]

Unfortunately, when Barber offers solutions to get our off-the-rails democracy back on track, their inadequacy is almost as depressing as the problem itself. Still, if Barber cant solve our problemsor avoid making some minor factual mistakeshe skillfully makes an important point: the freedom to buy what we want is making us less free, and that is a problem for anyone who values democracy.

This is book is guaranteed to be trash.

"The freedom to buy what we want is making us less free, and that is a problem for anyone who values democracy." That's the theme? Allow me to restate this in paraphrase. "Being free makes us less free and people who think it's important for people to be able to express their individuality will see freedom as a problem."

It's gibberish even in the review. The book itself can't be any better; I'm sure it's worse.

I find this bit of the review to be particularly egregious:

According to Barber, big business traditionally produced goods (like oil, grain, and steel) that met peoples actual needs, a business model that allowed companies to make money and help others. Now the businesses with the biggest profits are those that manufacture a relatively useless cornucopia of games, gadgets, and myriad consumer goods for which there is no discernable need market other than the one created by capitalisms own frantic need to sell.

Who defines "actual need?" How is it possible to distinguish between an actual and an imaginary need?

It would seem that if I had a sandwich for lunch, then I don't actually need another sandwich, but how do you know? If I were a farm laborer, I might actually need the extra calories. If I am a coma patient, then I probably don't need the calories.

Truly, people COULD survive as hunter-gatherers or living in caves, throwing rocks, so we should question whether or not any of this farming or steel production is an "actual need."

The reality is that it's none of your damn business what I need. That's the beauty of market systems. "Need" is defined by my willingness to pay. The more I'm willing to pay, the more you must assume that I need whatever it is I'm buying.

Further, everyone should be insulted by the presumption this man has to declare anything we purchase as useless.

The author of this book hates human beings. If he didn't, why would he dare imply that people have no business having a quality of life above basic subsistence?

Posted by Flibbertigibbet at 02:20 PM | Comments (3) | TrackBack (0)

June 15, 2007

Life on Welfare

I am VERY excited to see how The Serious Food Economy Challenge turns out.

Basically, Ari Armstrong and his wife are going to live off of $3 each per day for food for six months. !!!

* Any advocate of spending more tax dollars on food stamps may promise money to help fund the challenge. The minimum promise per contributor is $100; a maximum at or above that amount should be specified by the contributor. The Armstrongs will accept the challenge once a minimum total of $2,000 in promised contributions has been received. All promises of contributions must be received on or by July 10, 2007. Promissory notes should be mailed to Ari Armstrong, 9975 Wadsworth Pkwy. #K2-111, Westminster, CO 80021.

* Following the six-month period, if the Armstrongs have spent less than $1,080 on food, those who agreed to fund the challenge must contribute $10 to the nonprofit of the Armstrongs' choice for every $1 that the Armstrongs have saved out of the total budget. If more than that amount has been promised, the total contribution will be split among all those who have promised a contribution, in proportion to the maximum contributions specified. The contributors must then send a check directly to the nonprofit specified no later than February 29, 2008.

Hat Tip: Noodlefood

As I commented over on Diana's site, I just did some quick calculations from my Fresh Direct purchase history and found that I spend about $10 a day on food excluding any eating out I do. (I eat out perhaps once a week or so.) And that $10 covers a lot of pre-packaged/processed food and the Fresh Direct mark-up.

So, I think $3 a day is an attainable goal, although I think I would have to work very hard to maintain it.

So, anyway, I'm excited to see how it turns out.

Posted by Flibbertigibbet at 02:30 PM | Comments (0) | TrackBack (0)

A Question About Unions

I was just reading about how prison guards in Papua New Guinnea walked of the job for a few hours in protest over low pay. And everyone has heard about people walking off the job or going on strike over pay, but this is very confusing to me.

If you're willing to strike or walk off, why not just quit and go get a new job?

If you feel like you aren't being paid enough, ask for a raise. If they say 'no' just go somewhere else.

There are few things as economically devastating to a business as not being able to acquire supplies, be it labor or materials.

I guess maybe people don't understand that they do not get to set market prices.

Hmmm... I wonder: has anyone ever filed an anti-trust suit against a labor union for price fixing, collusion or some other unfair business practices?

Posted by Flibbertigibbet at 09:32 AM | Comments (2) | TrackBack (0)

November 18, 2005

Worst Advertising Slogan

I was listening to the radio this morning on my way to work and a commercial for a Chevy dealership came on and the guys said, "Buy American. Not because you ought to but because there's no reason not to."

Ok. So I understand this to mean, "I have no good reason to buy American but at the same time I have no good reason not to buy American."

hmm... Are there any worthwhile products anywhere?

If it weren't for all the fabulous goods and services I've purchased with origins all over the planet, I might seriously start to question the virtue of shopping altogether.

Posted by Flibbertigibbet at 08:43 AM | Comments (0) | TrackBack (0)

November 15, 2004

Also on Property

You know how you can buy little candy bars in a big bag and each candy bar has written on the lable "not for individual sale?"

Um.

How d'y'figure?

I mean, it's mine. If I want to sell it, it's my business.

I am suspecting now that those warnings are a ruse and I just might open up my own little individual candybar sales business.

Posted by Flibbertigibbet at 09:55 PM | Comments (1)

"Bend Over, Little Homeowner," Thus Sayeth the County and City

I got my city and county property tax bills recently.

Um. Yeeaaaahh... I need a 'do-over.'

I'm always complaining about property taxes but this is the first time I've actually had to pay it and it's FAR worse than I thought.

Doesn't it strike anyone else as odd that this little element of state-driven slavery effectively eliminates your ability to establish yourself as a self-sustaining entity on your property?

You don't actually OWN your property this way. You're renting it from the state. What happens if you don't pay your property tax? They take your property; you are evicted.

Here I am paying for schools that I do not use. Paying for streets, 99.999% of which I do not use. Sewer systems - I don't use them. Fire departments - I don't use them.

I use exceedingly few government services. Most of the 'services' I use are actually hoops imposed by the state that I jump through for the sake of living an otherwise peaceful life. I jump through them at the moment anyway.

To make matters worse, my escrow account is shy about $1,300. You'd think P. Diddy stayed here with me for all that.

This is utterly ridiculous.

Posted by Flibbertigibbet at 09:50 PM | Comments (3)

November 14, 2004

One Last Thing

I have been so preoccupied with economics (as you can see) that I have gotten none of my studying done and I have a final on Tuesday.

What a mess!

In the meantimes, I want to direct you over to a post at The Binary Circumstance about how online gambling made the best predictions regarding the presidential election.

(I watched Tradesports.com on November 2 and assured everyone that Bush was going to win.)

I'll write more about EMH, tradesports.com, and the election a little later.

I really do have to run 10 miles today. I'm meeting Sibby in 25 minutes.

Posted by Flibbertigibbet at 03:05 PM | Comments (0)

Failure in Capitalistic Societies

Specific Failure
As heartless and cruel as I am, I really prefer to see people just slip and fall rather than go homeless or die. Slipping and falling is a comedic staple, but the Three Stooges would not have been as successful if it had turned to gore.

But failure is another corollary aspect to the fundamentals of Capitalism.

If I own some particular thing, you cannot own it. You might be able to go get one just like it, but you cannot have mine so long as I will not give up ownership of it. If I own the only one in the whole world, I could have quite a money-maker on my hands so long as others are willing to pay for what I have.

Let’s say I have the only Sparkle-Widget in the whole world and you want it. You can have it, you know, for a gazillion dollars. What’s that? You don’t have a gazillion dollars to spend on my Sparkle-Widget? Well, guess who isn’t getting a Sparkle-Widget, then? If you guessed the city of Losertown, population you, you guessed right!

Now, let’s pretend like I am the owner of the only Sparkle-Widget in the world and no one wants it. Sparkle-Widgets are soooo last season and even then only in Jersey… SOUTH Jersey.

Hi! Anyone want a Sparkle-widget for a gazillion dollars now? I don’t think so.

What if I was a Sparkle-widget factory? I would be unemployed! Poor! Oh no!

Do you suppose that’s unfair?

If you do, then why won’t you buy my Sparkle-Widgets? Why don’t you get your friends to buy them so that I don’t go into the poor house? What else do you want me to do?

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens. -- Adam Smith

Personally, I do not have the tendency to romanticize the life of a beggar. I tend to advise those in obsolete industries to get jobs elsewhere when this happens and most people listen.

It may surprise you, but LOTS of people do expect just what I described. They do expect people to buy things just to do a solid for those who make them. Doubt me?

Think: Farm Subsidies.

Food is so readily available and inexpensive that there is actually excess production of food here in the United States. Our government buys (Translation: Steals my money to pay for things I am clearly telling them I don’t want.) extra food from farmers so they don’t go to the poorhouse.

Farmers of America: YOU ARE NOT STUPID! YOU ARE NOT INEPT! YOU CAN DO SOMETHING OTHER THAN FARM! STOP FARMING RIGHT NOW!

They won’t listen. They never do.

To make matters worse, the impact of perfectly capable Americans farming all over the place is causing some REALLY poor people in Africa and India and places to be poor. I’m not kidding.

If you think our poor people are poor you have not seen pictures of India or Africa. I refuse to go to India, actually, largely due to all the poor people there. And King Cobras. Mostly because of the poor people, though, because I wouldn’t mind seeing a King Cobra as long as it doesn’t spit in my eyes.

Nevertheless, I would pay an Indian like $6 a day to farm for me. Rather than pay some American farmer like $500 a day to do it. I have no idea what farmers get paid, but I would bet the rent that there are some Indians out there who would pick up a hoe this minute for $6 a day. (Not a street Ho. A hoe hoe. Merry Christmas!)

If America were truly a Capitalist system, many farmers would not be farmers today. Many automaker employees would not be making autos. Many miners would not be mining. Instead, those jobs would go the way of the fire-starters and dinosaur clubbers.

I imagine that the animal fat lantern makers of America were really pissed about electricity. Just like most of the horse-drawn carriage manufacturers were pissed about the automobile.

But these “failures” are necessary for the continued growth and progress of the system and society as a whole.

I’m not denying that it is unfortunate and sad when someone loses their job or cannot make enough money to get Tiny Tim a new wooden leg. I’m saying that if those things happen, it’s probably time to pursue a higher paying job. If you literally cannot get a higher-paying job (and I really believe you haven’t been trying), then you need to cut costs. Teach Tiny Tim to write software or something and bring home some bacon.

General Failure
True, Laissez-faire Capitalism cannot fail. Not really. It’s sort of like a perpetual motion machine.

At the dawn, each member of a society is wholly self-sufficient or at least potentially self-sufficient. One can raise one’s own food and build one’s own shelter. Things are easier, true, when others help out, but it’s at least theoretically possible for each person to be self-sustaining to an extent.

As things progress, however, people get more specialized. Some people are good at raising food. Others make clothes. Some build houses. Gradually the division of labor is very broad and each individual trades with another his services for theirs. Trade starts as barter but then a monetary unit is introduced and things go on swimmingly.

Today, work is highly specialized and most people are not self-sustaining. Sure, I could grow corn, but my flour-making abilities remain untested.

Historically, people like to cite the Great Depression has a failure of Capitalism. The reality is that the Great Depression is one of Capitalism’s successes, but few people are willing to talk about widespread devaluation of financial markets and rampant unemployment as a good thing.

The Great Depression was the effect of a bubble market bursting. Various kinds of work across several sectors were over-valued. Money itself was overvalued in that there was not enough wealth behind the money to support the growth the market experienced. Basically, everyone in the market was kiting checks and the Great Depression started when people started trying to cash in.

We tend to think of economic bubbles in terms of the dot-com bubble or the tulip bubble, but the Great Depression was a bubble in the financial market, the act of overvaluing the potential for wealth-creating capacity throughout the system without regard to the fact that the amount of gold, which

In the late 90’s we saw similar market crashes around the world and the fundamentals of those situations in Mexico, Japan, and the rest were the same and even exacerbated by the lack of the gold standard which leaves the value of money completely fluid and subjective.

But the thing to note is that in all of these cases, there was no such thing as a complete crash. People did not suddenly revert back to agrarian societies and bartering. No, the market simply reverted back to what it was a little before the bubble started and got back on track.

The really, really scary part about all this is that there is not an economy out there today, that I’m aware of, that has a monetary unit based on any objective connection to actual wealth. In essence, we have been living in a bubble since we divorced ourselves from the gold standard and because of that it is entirely possible that markets will collapse all the way down to the point where barter is the only feasible method of trade. Again, I would cite post-WWII Germany.

World leaders today look around keen to catch bubbles before they get too big or before they burst. They’re engaged in a juggling act because they want their cake and eat it, too. They want the boom and apparent wealth of the bubble, but they do not want the crash.

I do not mean to turn this into a diatribe about the fundamental weakness of monetary systems that lack an objective connection to actual capital, but that is core to why Capitalist markets have appeared to go through periodic failures over time.

It’s not that bubble markets are not possible in Capitalist systems. Bubbles are absolutely possible and even so likely as to be considered inevitable in Capitalist systems. But they are not a necessary aspect of Capitalist systems such as specific failures are.

If everyone lived in cages, there would be no risk that anyone would steal another’s property. But who wants to live in a cage? So, we live free and someone just might steal something someday and all we can do is address that when it happens. It does not mean we should live in cages.

The same is true about Capitalist systems. Bubbles might happen and they will burst, but who wants to live in a system where bubbles can’t happen? That would have to be a non-monetary, non-Capitalist system and who wants that?

Bursting bubbles are just the market correcting itself. They are specifically tragic events because people lose so much, but generally a very good and healthy thing for the system to go through.

We should actually be more afraid of the fact that our leaders are doing so much to prevent bubbles from bursting because the longer the market goes without resetting, the bigger the bubble gets and the more tenuous it becomes and the more catastrophic the failure will be when it does.

Posted by Flibbertigibbet at 02:05 PM | Comments (0)

Distribution of Wealth in Capitalist Societies

One of the biggest, most pervasive complaints about Capitalism is that it results in an uneven distribution of wealth.

While the claim is certainly borne out by the facts, it is not something worthy of complaint any more than we should complain that the gravitational constant is just so naggingly constant.

Fact of Reality Number 1: Not all men are created equal.
When our good friend Tommy Jefferson said that all men are created equal he didn’t mean it the way that I mean it. He meant it on a very basic, fundamental level and I mean it on a very specific, individual level. He and I are in profound agreement that all men are men and in that way they are equal. I have no doubt that he would agree that not all men are the same.

So, face it: Not everyone is just like everyone else. We’re individuals! And that’s a good thing.

Some people can do some things that other people cannot. Some people are smarter than others. Some people are stronger than others. And even then some people are smarter in some things than some other people and some people are stronger in some way than others.

Fact of Reality Number 2: Context is Ever-Important
Do you know what ‘gleeting’ is? Some people call it ‘snaking.’ It’s when you pool saliva under your tongue and then compress it with your tongue and direct the resulting pressure toward the front of your mouth. The result is a fine spray of saliva.

I have a cousin who was really good at it. He could hit with roughly 75% accuracy targets over 6 feet away. I watched him do this a lot on the bus ride home from school and was even the victim of these attacks on occasion.

Sadly, while I can gleet, I do not possess his skill in this.

Sadly for him, this is not a marketable skill and my cousin, to my knowledge, does not possess many highly-marketable skills.

If you consider my cousin and I without context, you would probably judge him as the superior individual. He is stronger and faster. He is well-muscled and of good humor. I, on the other hand, have a small, wiry frame and am often contentious in conversation.

But we are not without context. I am smarter than he is and though my muscles cannot provide me with direct protection from the elements, liberal application of my mental faculties has benefited me far more greatly than his strong arms have him.

Further, in the context of a market economy, my brain-power is far more profitable than a strong back. The same may not be said in a communist system. (I may have been left in the hills as an infant in ancient Sparta, actually. My mom seriously thought I was retarded, but as it turned out I just refused to touch cold floors with my bare skin.)

Fact of Reality Number 3: The amount of matter and energy in the Universe is limited
This is getting outside of my area of expertise, but the Law of Conservation of Matter and the Law of Conservation of Energy are indirectly important to economics but economists call it ‘scarcity.’

Not everyone can have the same number of BMWs. There just aren’t enough of them. Not everyone can have a money bin to swim around in like Scrooge McDuck because there’s just not that much money, land, or money bins.

Anything you can name, there really isn’t enough of it to go around equally.

If there are more Widgets than Sparkle-widgets then plain Widgets will be cheaper because they’re not so rare and more people can have them. This is the simple premise behind supply-side pricing.

This is how limited resources plays on the economy, too.

There are not unlimited hours in the day to work. Not everyone has the same great ideas or is even capable of coming up with the same great ideas in those limited hours in the day.

Conclusion: (Differences in individuals + Context of existence) * Scarcity = Inequality of Wealth
So, let’s take ten cave men. Each of them have 10 clams and they’re all sitting around trying to come up with ways to get more clams. There are only 100 clams out there and each one thinks that it would be ideal if they had all 100 of them.

Suddenly, Caveman 1 has a brilliant idea and he invents fire by rubbing two sticks together. So, he sets up his business where he will start fires for people for 10 clams. No one in their right mind is going to give up all of their clams for a fire, so he winds up lowering his price to 1 clam and he gets some business from some of the other cavemen. He now has 12 clams and two of them have 9 and the rest of 10. Already inequality is surfacing.

Then, Caveman 2 invents the cigarette lighter. He won’t start the fire for you, but he’ll sell you a cigarette lighter for a clam. Eight of the other cavemen buy one. Now, Caveman 2 has 18 clams, one of them has 12, one of them has 8 and seven only have 9.

Rounds of invention go on and on and on and the distribution winds up looking something like this:

1 caveman has 51 clams
1 caveman has 10 clams
2 cavemen have 7 clams
3 cavemen have 6 clams
2 cavemen have 3 clams
1 caveman has 1 clam

Already you can hear the Marxists howling and we’ve only just become Cro-Magnon. 10% of the population is in possession of 51% of the wealth! 80% of the population is in possession of just 39% of the clams out there! “This is an outrage!” they say.

Now, let’s pretend that one of them finds a way to get more clam shells, namely he digs them out of the sand at the beach.

Suddenly the wealth distribution looks like this:

1 caveman has 51 clams
1 caveman has 10 clams
2 cavemen have 7 clams
3 cavemen have 6 clams
2 cavemen have 3 clams
1 caveman has 901 clam shells

Outrage! Outrage! Outrage!

But rather than call for an uprising of the proletariat just yet, we let our market experiment continue. Overnight, the amount of wealth in the system has increased by ten-fold.

I’m not even going to get into the macroeconomic impact of what would happen if you multiplied the amount of money in the system by 10 in the span of a day, but I think you can observe post-WWI Germany to get an idea. In our example this is not a multiplication of money, but a multiplication of the actual wealth, or capital, in the system.

See, money in itself is worthless, particularly for those of us unfortunate enough to live in a system that has abandoned objective medium of exchange.

Money is just a tool for exchange. A dollar corresponds to a unit of work and it’s not particular about what kind of work, either. It could be that you got a dollar for lifting a heavy rock or for coming up with a great idea for making fire. In our example, we use clam shells.

So, one particular caveman, Og, has 901 clam shells. What will he do with them? He’s not terribly bright, but he did get all these shells and now he can spend them any way that he wants.

He buys a Kristin-Dor (They’ve only invented two vowels and no diphthongs at this point in history.) grass skirt for his honey with 20 of his clams. He pays two other cavemen to make an addition onto his cave for 500 clams. And so things go.

As trading continues, quickly the wealth distribution winds up looking like this:

1 caveman has 490 clams
1 caveman has 120 clams
2 cavemen have 75 clams
2 cavemen have 70 clams
1 caveman has 35 clams
2 cavemen have 25 clams
1 caveman has 15 clam

What’s the problem here? Well, not only is the distribution of wealth pretty much as uneven has it was before, the difference between the wealthiest and the poorest cavemen is even greater! Before the richest caveman only had 50 clams more than the poorest. Now, he has 475 clams more!

When there were only 100 clams to be had, we might have said that anyone with less than 4 clams is poor; 4 clams is the poverty level and at that time, 30% of the population was living under the poverty level.

Now that the number of clam shells has increased we naturally change our standards for poverty because no one has less than 4 clams! It would be ridiculous to measure poverty like that! So, we say that anyone with less than 40 clams is poor. If wealth increased by tenfold, then it makes sense to just multiply the poverty level by ten, right? So, now 40% of the population lives under the poverty level.

Oh my goodness there is so much outrage by the champions of the little guy that I can’t even begin to describe it except by saying outrage more times. Outrage! Outrage! Outrage! Outrage! Outrage! Outrage! OUTRAAAAAAGE!!

This is where people start making the claim that the “rich keep getting richer and the poor keep getting poorer.”

That’s patently untrue. The poor actually got richer. The poorest caveman actually got richer by 150%, too. Can you imagine getting a 150% raise over the span of a year? Or four years? Can you imagine getting a 150% raise over the span of even 20 years without having to do any more work at all; just by showing up and meeting the minimum qualifications of your job?

That is unheard of. And yet folks protest it.

Another not-so-widely published fact about this is that I did not say that the caveman with the fewest clams at the beginning was the caveman with the fewest clams at the end. Reality also illustrates that mobility in Capitalist systems is a fast-moving, two-way street.

In our example, the poorest 10% was given a HUGE booster shot of wealth. He was the wealthiest 10% for a time. In reality, the chances are that he didn’t fall all the way back down the ladder either. He certainly could not maintain his growth in wealth because the way he obtained it was not sustainable, but there’s a chance that someone talked to him about sound investing and he was able to hang on to a bit of it and get a return that would keep him out of the lowest 10% bracket.

The reality of Capitalist systems is certainly that wealth gets concentrated in the hands of a relative few in the system, but that’s not a bad thing. It’s neither good nor bad; it’s just a fact of how things work.

History bears out the fundamentals of the example I painted for you, too. What’s more history also shows us that attempts to ‘even the playing field’ and ‘redistribute the wealth’ fail consistently.

Posted by Flibbertigibbet at 12:59 PM | Comments (0)

Capitalism

It's very strange to me that the definition of Capitalism is one of the one of the most contended among political philosophers and economists. It seems to me that there are plenty of words and adjectives to describe most everything we conceive of today and the various systems of economics are no different.

It's a truth that no concept can be properly applied until it is named and it cannot be named until it is defined by what it subsumes and how it is distinct from all others. I think the general hubbub around what Capitalism really IS is a sign of why pure, free-market Capitalism is so rare, why it doesn't exist today on a grand scale, and why it is not part of common political discourse.

The fact is that the concept "Capitalism" has not been well-defined for many even by those who claim to be its proponents.

Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can violated only by means of force. In a capitalist society, no man or group many initiate the use of physical force against others. The only function of government, in such a society, is the task of protecting man's rights, i.e., the task of protecting him from physical force; the government acts as the agent of man's right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control.

Ayn Rand, "What is Capitalism" Capitalism: the Unknown Ideal, p. 19.

The fundamental right of any free society is actually the right to property. The right to your life, person, and liberty precede it philosophically, but in practice people tend to start by looking after what they call “mine” and from there come to realize that they may not own anything if they do not first own themselves.

Rather than get into the metaphysics of human beings and how we derive the fundamental basis of any successful society, freedom, from that, let’s simply note the only characteristic worthy of note in order to define Capitalism is that all property is privately owned.

That means that there is no such thing as “public property” in a Capitalist system. Any system that contains some notion of public property cannot be rightly named “Capitalist.”

Private ownership of property also means that there is no rightful claim by any other entity against property. Any system, government, society, or economy, which tolerates non-owners to make claims against the property of another, cannot be rightly described as Capitalist. Taxes are such a claim.

There are just two examples, public property and taxes, why America cannot claim to be a purely capitalist state and I think that’s why there is so much contention over the word “Capitalism.” No one of serious intellectual merit doubts that Capitalism is the virtue to any manner of statism’s vice, but few of that same group want to admit that they live in a state that isn’t capitalistic or that they support statist economic systems.

We have come to describe states like America as ‘mixed economies.’ That means that most of the property is privately owned, but there is some that is controlled by the government or ‘publicly owned.’ (I won’t get into why there is no such thing as public ownership here, but suffice it to say that it doesn’t exist.)

To layer befuddlement upon confusion, those who would describe Capitalists like me often say ‘Laissez-faire Capitalist.’ That term was clearly generated by the Department of Redundancy Department.

I have said all of this because a mastery of the concept of Capitalism and its constituent concepts including property, rights, and ownership, are requisite for discussing economics effectively.

One final note before I close: Fredrich Hayek once wrote:

Man has been able to develop that division of labor on which our civilization is based because he happened to stumble upon a method which made it possible. Had he not done so, he might still have developed some other, altogether difference, type of civilization, something like the “state” of the termite ants, or some other altogether unimaginable type.

Those two sentences illustrate perfectly why there is not a single Capitalistic society in existence today and why most of those who claim to support Capitalism will continue to fall short of the goal of instituting a Capitalist society. Capitalism is no mere accident; it is the only system of interactions appropriate for human beings as human beings. There is no other system that is both moral and sustainable. All others, including mixed economies, will eventually suffer from wholesale, catastrophic failures.

Next up: Distribution of Wealth in Capitalist Societies

Posted by Flibbertigibbet at 11:30 AM | Comments (0)

The Commanding Heights

On the recommendation of my favorite Starbuck's Barista, I ordered a series of videos by PBS from Netflix. The series is called Commanding Heights and there are three parts, The Battle for Ideas, New Rules of the Game, and The Agony of Reform.

Each part is two hours long and I've watched the first two.

The Battle for Ideas
This is a pretty good introduction to the history behind Austrian, or free market, economics. It doesn't get into details about what free market economics IS exactly, but it tells you who the major players were. It also pits free-market Capitalism (as if there is another kind) whose major proponent of the time was Frederich Hayek, and planned-market Capitalism as expounded by Maynard Keynes.

The fun part about the movie is that it gives us the historical evidence for the power and prosperity of free market systems.

For all intents and purposes the movie dismisses, rightly so, Communism/Socialism/Fascism as absurd, contradictory economic systems found for failure. Again, it never gets into what these systems really are or why they fail exactly.

Keynesian and Austrian Free-market economics are distinct from one another in that the former is a proponent of planned market economies, while the other advocates a full separation of economy and state. (I have no doubt that apologists and so-called 'centrists' exist in either camp.)

The Depression was a classic market bubble. To try to fix it, FDR stepped in and poured salt on the wound. (Un)fortunately, WWII started up and everyone was distracted for a little bit and the government spending in the economy for the production of weapons (and it's encouragement of inflation) helped everything along.

After the war the economy continued it's upward arc but started its inevitable slow-down which it continued until the "stagflation" of 70's and the economic crisis of the 80's. We thank pretty much every president between FDR and Jimmy Carter for that whole mess. Over in England, they look to the Labour Party for the idiotic economic policies that lead to state-run industries like coal.

I especially like dissing Jimmy Carter because he's an addled, old fool. I also like dissing the Labour Party because, as I understand it, they're socialists.

Anyway, Ronald Regan came along and adopted a more free market stance and the economy boomed. Meanwhile, over in England Margaret Thatcher, whom I think I would like quite a bit, was doing the same and everything was lots of fun. Well, not everything and I'll get to that in a minute.

Then, there was Bush I and Clinton x2 and Bush II. Both discs basically talk about how Clinton was a liar about his position on NAFTA. (Clinton? Lie? NO!) It also talks about how Clinton's first term was all about the budget and his second term was all about trade and starting a recession.

This first disc was a VERY high-level introduction to the history of free-market economics and I would recommend it to those who don't really care to learn much about economics, but want to know what the fuss is about.

It's major weakness is the fact that it does not identify the principles behind each market theory. I know the movie is 2 hours long as it stands, but more detail is needed for those with a true interest in economics.

The New Rules of the Game
The second disc is about globalism -- kind of. This disc focuses very much on recent history, starting with the end of Bush I's term and focuses heavily on the economy under Clinton. There isn't a lot of information on Bush II's United States of 'Merica, probably because it's still so new and steamy.

This second part is both the natural progression of thinking from the first and an apology for any support the series seemed to give for advocating free markets.

I give Part I four stars and Part II two stars and with that I will close. The next post I’ll write is about Capitalism, Failure, and Mixed Economies.

While I would recommend Part I to people with some interest in these issues, I would not recommend the second part to anyone but practiced thinkers in the fields of economics, political philosophy, and history. The second part contains a dangerous mix of contradictory ideas and premises none of which are stated very explicitly.

Posted by Flibbertigibbet at 10:26 AM | Comments (0)

November 08, 2004

CEO Available

So, I would like to take the job of CEO for a tiny, distressed, little company and fix it.

I almost have an MBA and I require relatively little money for the task. (Other terms and conditions apply.)

Let me know.

Posted by Flibbertigibbet at 11:35 PM | Comments (3)

October 24, 2004

Sam Walton Did Not Sell His Soul to the Devil

Someone recently remarked to me that they were scared of Wal-mart because it has grown so fast. They told me that Wal-mart is the fastest growing company in the world right now. They said they were scared because if it gets too big it will have too much pull in our government.

First of all, the growth item. The person I was talking to is no expert in business and I have not done any financial analysis on Wal-mart, but I have to question that assertion. A start up business may have one customer. If they get 5 customers, they've grown in that aspect 500%. Small businesses have a much higher growth rate in proportion to businesses like Wal-mart. If we're talking about net earnings or something that that, then I can see how that's possible. But that's not how growth is typically measured.

I didn't want to talk about that though.

I want to talk about this idea that businesses should be kept small because they may gain too much clout in government. My rebuttal to this person was, "That is a problem of government, not one of business." But he would treat it like it's a problem of business. As if Wal-mart has no need to be so big.

Ummm... Hi. It's business. Not charity. It's not some enterprise in altruism. It's a business. It operates by trade.

That people actually fear big business because of its influence on government is a sign that people do not understand their rights, our government, or business.

The Constitution was written to restrict the powers of the government and assure the citizenry of its rights. If business can some how buy our rights away from us, it can be safely said that the people running our government are not observing the Constitution.

Obviously, I can understand the outrage there.

But that's not a problem with business. From a political perspective, the size of a business it irrelevant. It's simply not important how rich people are just so long as no one tries to deny them their riches by force or fraud.

But for some reason this young Conservative (Yes. He describes himself as 'VERY right-wing' and a Republican) sees it as a problem with the business.

I hope his way of thinking does not catch on.

Posted by Flibbertigibbet at 05:13 PM | Comments (4)

October 23, 2004

Allow me to Clarify

Although I was greatly impressed with a certain CEO who came to speak to one of my classes, he passed out a copy of his annual report which incorporated a theme of "Survival of the Fittest." The report was decorated with pictures of Darwin.

"And while the law (of competition) may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department"

Ummmmm...

That is a quotation by Andrew Carnegie. Chuck Darwin didn't push the idea of survival of the fittest. Carnegie probably isn't as well known as Darwin... umm... in that particular context, I guess, but we're all educated folk. It would not hurt us to be historically accurate and not say that Darwin posed the notion of survival of the fittest.

Oh, and Carnegie was talking about business, not evolution, but he was a fan of Darmin's theory. It seems to me that not only is it more accurate to put Carnegie on the report, it's more appropriate.

Posted by Flibbertigibbet at 01:16 PM | Comments (0)

October 19, 2004

Be a CEO: Step 1

Throughout my MBA program CO's and executive level businesspeople have come to talk to my classes and there is one quality that all of them have shared. The more successful they are, the more they show it in spades.

What is it?

They are articulate.

Each and every one of them was able to speak extemporaneously with ease. I deal with so many people who misuse words and expressions that this quality impresses me greatly.

So, step 1 in becoming a CEO is to learn to speak clearly and effectively.

Posted by Flibbertigibbet at 11:29 PM | Comments (3)

October 11, 2004

Market Capitalization: What's That?

This is awful to admit, but I am less than three months away from graduating with a Masters in Business Administration and I found out just this morning what Market Capitalization is.

It's one of those concepts that has been thrown around in my classes since Day One, let there be light, but no one has really stopped to talk much about it.

Anyway, I have a midterm today in my Financial Analysis class and I though it important to learn what Market Cap is.

Behold the power of Wikipedia:

Market capitalization, often abbreviated to market cap or mkt. cap, or referred to as just capitalization, is a business term that refers to the overall value of a company's stock. In essence, it is the price one must pay to buy an entire company. That is, if one multiplies the number of shares of the company by the current price of those shares, the result is the market cap.

The total market capitalization of all the companies listed on the New York Stock Exchange is greater than the amount of money in the United States.

Market cap is an important measure of the performance of a company's stock, as opposed to the company itself. It is not uncommon for a company's market cap to greatly exceed the book value of the company itself due to stock market oddities. For instance, in the late 1990s the shares of internet-related companies was highly valued by the market, and tiny companies with almost no sales had market caps of billions of dollars.

One reason for high market caps is that the price of a stock is determined by trade (supply and demand) on the market. However, the amount of shares outstanding (i.e. available to outsiders for trading) is less than the total number of shares, and many shares will be owned by large institutional investors who don't trade often. As a result, on any given trading day only a tiny percentage of shares is actually traded. If all available stock became available on the open market all at once, the price would plummet.

In large corporate takeovers, the buying company usually either buys a controlling interest from institutional investors or venture capitalists at a discount (in cash), or, more commonly, pays for the shares of the second company in kind; i.e. in shares in itself. This allows the former owners (who now own stock in the controlling company) to sell off the shares bit-by-bit, so as to not ruin the price by dumping.

The opposite case, the book value of the company being more than the market cap, is typically more rare (selling shares is a method of raising money, after all). However, periodic dips in the market and other effects can result in such inversions of the market cap, making the company in question a target for the corporate raider.

And now we know.

Posted by Flibbertigibbet at 10:44 AM | Comments (0)

October 06, 2004

Economic Pet Peeve

I was listening to the radio on the way home this evening. Specifically, I was listening to the Communist Broadcasting Network AKA NPR.

They were playing the BBC and talking about Howard Stern leaving so-called commercial radio and signing up with Syrius, a satellite radio company.

The announcer ended the show by saying that the BBC radio is "free."

BBC radio isn't free. SOMEONE is paying for it. And guess what: anyone who pays income taxes here in the US and the the UK are paying for it, which is just about everyone.

US taxes pay for NPR. NPR pays BBC radio to broadcast their show. etc.

It's not free.

There's no such thing as a free lunch, y'all. I'm serious and I really want people to stop saying there is.

Posted by Flibbertigibbet at 10:01 PM | Comments (0)

August 26, 2004

Almost the Worst Idea in the World

There was a Braves game playing on my favorite AM radio station when I drove home from work today, so I wound up listening to the news on NPR. "News."

I hate how on these "news programs" they present opinion pieces as if they are facts. They don't warn you that what you're about to hear is some misguided fool's blathering at all.

Today, some nut job got on there and read a quick essay about how oil prices soared up in recent history (and have consequently started tumbling downward) and how presidents hold exclusive control of our country's strategic oil reserves.

The whole 'strategic oil reserve' controlled by the federal government is a bad idea in the first place. Without regard to who controls it or what is done with it, a reserve of any resource in the hands of the government is like giving ginsu knives to babies. It places considerable economic potential in the hands of a single politician.

What would happen if a sitting president recieved considerable contributions from oil companies and had an interest in driving prices up to return the favor to his campaign contributors? Right or wrong, what if? Bush? Cheney? Any thoughts?

Or, what if the opposite and he had incentive to open those reserves and drive oil prices down? Clinton did it and some speculate that it was to help Gore's campaign.

If you're invested in oil at all, this must feel something like the Sword of Damocles.

The commentor on NPR pointed out the considerable political pressure on sitting presidents to act one way or another with regard to these oil reserves. To solve the problem, the commentor proposed -- guess what!

To dissipate the strategic oil reserves in the market, end federal subsidies, and progressively return all markets including the petroleum industry to a free market system? Of course not. I was listening to NPR, remember?

He proposed that we create something like a Federal Oil Reserve board similar to the Federal Reserve that controls interest rates.

Even Alan Greenspan thinks the Federal Reserve is a bad idea, or at least he did at one time. No matter how well the FED does it someone is always hurt because interests rates are not controlled on the market. If they are even a smidge too high for a moment too long, then small lenders can't gain more clients. If they are even a fraction too low for a moment too long, then small lenders can't make money. The real losses are against larger lenders, though, who miss out on millions when a fraction of a point is spread out across all of their customers.

So, this guy thinks that an Oil Reserve Board to controll oil prices in the US is a good idea? Has he lost his mind? There is no possible way that THAT is a good idea. None.

And NPR treats is like news.

Posted by Flibbertigibbet at 02:00 AM | Comments (0)