Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts

Tuesday, October 22, 2019

Outrage of Nobel Proportions




If you can believe the Bloomberg Headline

Taxing the Rich to Fund Welfare 

Is the Nobel Winner’s Growth Mantra


You will be enraged by the paradigm of keeping poor people shackled to poverty by keeping poor people shackled to poverty programmes as a pathway to closing the gap.

And I haven't any Nobel Aspirations.  My outrage is a moral one, not a personal one.

And I don't know which is more repugnant.

The economic legerdemain or the linguistic legerdemain.

As the article reads I must focus on two points

1.  Giving tax cuts to the rich to create jobs is a fantasy because the rich have massive funds available and they will only invest the money to make more money.

2.  I never said anything about giving tax cuts to the rich to create jobs.

Years ago I emphasised this.

"Mr. Widget will not hire one additional widget maker until he has an order for one widget more than he can produce when operating at maximum capacity and optimal efficiency."

The Quotations of Slim Fairview © 2019

One of the few things Robert Reich ever said on the topic of economics that I believe makes any sense:

If you want to close the gap, you give tax cuts to the people who spend money.

This was adequately demonstrated by Henry Ford who doubled his employee's wages from $2.50 a day to $5.00 
a day.  And cut the work week to 40 hours.

In so doing, Henry Ford made it possible for his employees:

To buy a Ford
To buy a washing machine
To buy an ice box
To buy a radio
To buy a Sears Roebuck house. Some assembly required.

He, in effect, launched the middle class.

Needless to say, the African American community was left out.  Racism, segregation, and discrimination were operating in full vigor.  And still are.

Robert Reich is also the fellow who extolled the virtues of the 93% tax rate.  He told of how well the country was doing. Peace, employment, factories humming away....

What Reich did not say about the 93% tax rate is another example of economic smoke and mirrors.

When the tax rate was 93%

A Black man earned half of a White man's wage.
Women were kept barefoot and pregnant.
Mexicans and Filipinos were picking lettuce and grape for pennies a day.
There was no EPA and those factories were polluting the environment.
We were rebuilding Europe after WWII.

The 93% tax rate is a celebration of 
Racism
Sexism
Xenophobia
Pollution
Imperialism

Throughout the Obama administration, we heard about creative, innovative, high-tech entrepreneurs.

Richard Nixon had a plan for promoting entrepreneurship within the African American community.  Congress would not fund it.

Not too long ago, a Black civil rights leader said, "When White people die, they leave their homes to their children. This keeps the wealth in the family."

So, too, "When White people retire, they leave their businesses to their children. This keeps the wealth in the family."

A solution to closing the wealth gap is to close the income gap. Help the disenfranchised start their own businesses. Make profits. Grow their businesses, Buy their own homes, and, ultimately, keep the wealth in the family.

You can't leave Public Housing to your children.


Let's now focus on Slim's Paradigm:

Capital Investment + Economic Stimulus =
Economic Development + Growth

When people who spend money buy things
People who make things must make more things.
To make more things, they must hire more people.
They make more money.
At this juncture they can afford to pay hire wages. That or end up subject to competition, regulation, institutional investors dumping their stocks.

This is the paradigm established by Henry Ford.

When China elevated 700 million people from poverty to the middle class, China 
Created a consumer class.
Created an investor class.
Gave the Chinese people a buy-in.  A vested interest in the success of the Chinese Economy.

The alternative would be for big business to continue as it has with stagnant wages and ultimately triggering a backlash. Routinely at the polls. 

However, before you worry, there is little evidence that Congress ever raised taxes on the rich. Or that they will.
The ruling party notwithstanding.  

Conventional Wisdom: The Democrats don't want to tax the rich. They just want to blame it on the Republicans.
~ Slim Fairview

Well, how do we move from here?

If you want to close the gap you redistribute the money.
Henry Ford did not redistribute his wealth.  He redistributed the money.

Wealth is what you have.
Money is what you make.

One idea, which needs some economic modelling, runs like this.

A corporation gives its employees an immediate $5. an hour raise.  In exchange, the corporation takes a $10. write-down for labor costs.

The benefit to this is the multiplier effect.  
The multiplier effect is NOT trickle down economics.

In the illustration on PowerPoint on SlideShare, I created such an illustration.  Caveat: This has nothing to do with an $800. coat.  The $800. coat represents all the small purchases of the middle class, the working class, the working poor, in a one month period to coincide with that $5. an hour raise. 

(40 hours a week x $5. an hour = $200. x 4 weeks = $800.)


There are several other articles on the matter.







Sincerest regards,

Slim

If you find anything here to be helpful, please don't hesitate to send me a really tricked out Mac Laptop and, in lieu of a Nobel Prize, tuck a few dollars as a gift into the envelope along with the thank you note.  Slim

Bob Asken 
Box 33 
Pen Argyl, PA 18072

Copyright © 2019 Robert Asken
All rights reserved.



Saturday, April 30, 2016

Another Hidden Inflation



The discussion about wages has presented many opinions both for and against.  Inflation being only one of them.  What that means depends on who you talk to.

Nonetheless, any discussion about inflation will invariably motivate someone to talk about hidden inflation.  In short, when you pay the same price for a candy bar but the candy bar is smaller.  And there is the other type of inflation.  The added features inflation.  Here, a product has added features of little value but justify an increase in price.  The small cost of the added feature that drives revenue is called revenue enhancement.  

Then we have the inflationary factor that we ourselves create with little notice and no approbation.


This is an Economics Lesson.  

Focus on the Economics Only!!


For dinner, my wife and I have hamburgers with a side order of french fries.  My wife butys the Ball Park ®  Grilled burgers you can fry or cook  in the microwave but we fry because it tastes better.  She buys a package of buns for a dollar and the cheap fries.

I make a little more money  My wife buys the Martin's Potato Rolls ®.   Or, if you're a Republican, the potatoe rolls.

I make a little more money. My wife buys half a pound of Land O' Lakes ®  American Cheese orange and we have cheeseburgers.

I make a little more money and my wife buys a package of Kunzler's ®  bacon. On sale.  I've already done the test and measured the shrinkage of different bacons and do a unit cost evaluation on the results: how much bacon we have after we cook it.  Kunzler comes out cheaper--oops--more cost effective because I measured less, much less, shrinkage. (Op. cit. my comment on hidden inflation.)

Now we are eating Cheese and Bacon Burgers with the Ore-Ida ®  Fries.

The price of burgers did not rise.
The price of cheese did not rise.
The price of buns did not rise.
The price of bacon did not rise.
The price of the fries did not rise.

Still, the cost of dinner did rise.

This increase in spending is a form of inflation.  

This is not an increase in the price of living.  This in an increase in the expense of living.

Yes, we are getting more. Still, we are spending more.  This holds true when you look at the expense of living over the past, say, fifty years.  More things have become available.  Many of these things are new additions--the window air-conditioner.  Other things are upgrades.  A remote control to operate the window air-conditioner.  Features added to the razor for that morning shave, a timer on a the coffee pot.  

We still have an older 4 cup coffee maker.  The on off switch has a light.  The newer one has an orange sticker. That is a cost savings to the manufacturer without a decline in the quality of the product.  However, that older pot keeps the coffee warmer.  The hot plate is hotter.  

Then, there are gratuitous design features.  To keep coffee warm in an older coffee pot, you remove the plastic insert lid and place a bread and butter plate on the top of the pot.  That top has been replaced with a top that has a lever built into the handle.  Yes, you can remove the coffee pot top.  But the design prohibits you from placing a plate on top of the pot to keep the coffee warmer.  

I often wonder, how much would it add to the cost of the pot to create a hotter hot plate and replace the glass pot with a Pyrex pot?  A simple increase in manufacturing costs with a real consumer benefit at a modest price increase.  Right?  Don't bet on it.

Warmest regards,

Slim.



Copyright (c) 2016 Bob Asken
All rights reserved.

Disclosure: The mention of products by name is for the purposes of accuracy and realism only.  There is no recompense sought, offered, or accepted.  The opinions are my own and reflect real usage in real life and are not necessarily  a commercial product endorsement.

Thursday, December 3, 2015

Economics: Art & Science




To understand that Economics is as much an art as it is a science, I’ve constructed the following metaphor.

In order to be an artist and to paint pictures it is necessary for you to know how to mix paint.  You must know that yellow and blue make green.  However, this does mean you can paint a picture. There is more to know:

Composition
Subject matter
Perspective
The effect of warm v. cool colours
And so on.

Now, many artists will simply fling paint against a canvas and call it art.  And, for the purposes of this discussion, it may very well be art. However, it is not a picture.

Many economists do the same thing.  Many economists fling paint against a canvas and call it economics.  It may very well be art.  However, it is not economics.

To further explain economics, without using equations and math and without an historical dissertation about feudalism or the industrial revolution, I created a metaphor. " A Primer in Economics--by metaphor." After that, I wrote an article “Ascribed Value” or ridiculous consumption. Also, the very metaphorical "Limiting Demand." The links are are contained therein.  These articles are written for those who are not economists.  And for those who are.

Warmest regards,

Slim
.

Copyright © 2015 Bob Asken

All rights reserved.


Wednesday, September 24, 2014

Limiting Demand



In my article “Mr. Putin’s Economic Theatre of Operation, I cited “limiting demand” to explain a Russian Iranian Oil Deal.


For most people, supply and demand is the simple concept of economics:


If more sellers (supply) show up than buyers (demand), the sellers must drop their prices to sell their goods.  They are competing with other sellers.  The more perishable the product, the faster they must sell it, the more willing they are to drop their prices.

If more buyers show up than sellers, the price goes up because buyers to not want to go home empty handing. Specially if the product is in great demand.  That is the premise.


Now on to limiting demand.



Slim’s Paradigm


“Limit supply and drive up prices. Limit demand, bypass the market, stablise the economy.”  ~ Slim Fairview

Look at what is happening from the standpoint of the two articles I wrote on the subject:



In addition:



What is happening? 

Russia and China: Nat Gas Deal

Russia and Iran:  Oil Deal

Russia and Germany: Nat Gas Deal

China and Germany:  Have we forgotten that China and Germany are trading partners?


If Slim’s Paradigm becomes the new normal, all the forecast numbers will have to be recast
.

A few years ago I wrote an article “Energy Independence” (Then What?)  In that article I said that the Middle East must find new customers to protect oil revenue.  China was the obvious choice.

I also wrote, “It is a universal condition. We refuse to accept that all alliances and enmities are transitory.” The Quotations of Slim Fairview © 2014.

The Global Economic Landscape is shifting. Please allow me to present a soupçon of evidence:


NAFTA

OPEC

APEC

EEU

Eurasian Economic Union

And, soon…

A Union of Emerging Nations Economic Unions. 

And, an 

E-20


The world is fragmenting into economic (not military) power zones.  Asia, Middle East, Africa, Europe, Eurasia, Latin America, North America.


One important factor of the new paradigm and the recalculating of the numbers:  it will replace the following, specially regarding China.

“When the numbers are bad, the Wall Street experts gloat.  When the numbers are good, the Wall Street Experts doubt the numbers.” ~ Slim Fairview.


The concept of limiting demand will enable long term economic planning with a reasonable degree of stability by rendering market forces irrelevant.

In addition, we seldom see ourselves as others see us.  Look at us from the perspective of emerging nations.

  • ·       Chinese People have suffered poverty and hunger.
  • ·       Russian People have suffered poverty and hunger.
  • ·       Americans are rolling in dough.



Remember! The perspective of people starving to death in emerging nations.


I will explain what I mean by limiting demand using golf as a metaphor.  

This is a lesson about Economics.  Golf is a metaphor.  The takeaway is: Economics!


Golf Course # 1.

Public (municipal)
Fees: $50, per round in groups of four.
Anyone can play.
The demand exceeds supply.
Many are turned away.


Golf Course # 2.
For Profit.
Anyone can play.
Demand often exceeds supply.
Fees: $50, per round base rate plus extra fees with high demand.
If few people want to play, the fee is $50. As the demand rises, the fees may rise to $100 or $150 per round.  Many can’t afford the higher fees.  Many are turned away.


Golf Course # 3.
Private
Fees: $50, per round.
Demand limited to 500 members.
Not exclusive, not for the rich, not restricted.  Simply Private.
Demand is limited, the fees are always $50, and everyone gets to play.


It should be obvious to all that price increases are more sever among those who can least afford it.  As this applies to food, in many industrialised nations there is a fixed or limited demand and a stable supply, and a marketplace that can blunt the negative impact on the less fortunate.

For our purposes and to understand the metaphor, replace Golf Course with Farm and replace Golf with Food.


In the US and other industrialised nations there is certainly poverty and hunger. 


In Emerging Nations:

·       A Flood
·       A Drought
·       A Crop Failure
·       A Migration of Starving Refugees
·       Widespread Famine
·       Global Food Aid (Marginally helpful)
·       Population Displacement
·       Starvation and Death

People lying on stretchers, skin and bones, unable to stand or even sit up because their bones are too fragile to support their weight, mothers clutching to the bodies of their dead babies, do not care if we've had 5 servings of vegetables, the unfairness of golf, and never want to hear, “Childhood obesity in America is caused by poverty.”


As the world moves into Economic Power Zones, survival will come from “limiting demand”.  This is to insure that economic stability will prevail.



Regards,

Slim


Copyright © 2014 Robert Asken Slim Fairview

All rights reserved.