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.)

The Multiplier Effect -- Illustrated

There are several other articles on the matter.

If you really want to close the Gap

Powell's Testimony to the House Financial Services

Tax Policy to Increase Wages $5. an Hour. Now!

Africa: 100 years after Versailles

African Economic Union

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.

Brexit: Now What?

This morning I received a message.

We are out of the Union.  Now what?

The following is my unedited and unpolished reply.

In "This is Brexit" I suggested the Exit Nations. Britain Greece Italy Portugal Spain.

 I have repeatedly warned that the EuroCrats pursuit of Merkelism would lead to disaster and explained the inherent flaws.

 I called the migrant crisis in Merkel's Big Lies, (I believe it was "lies number 6 and numbers 7). In addition

(In the New York Times, an article about China and the AIIB. Also that Singapore has logged more visits to my blog in 4 months than Germany did in 4 years and that the Most read article of all time, is

Emerging Natiion Economic Union (That is coming) Also, I pointed out that Ashburn Virginia (Amazon) is hawking my ppt presentation Global Management and that France is hawking my ppt presentation "Forming an E 20"

The best move would be for the "Exit Economic Union" to form and to do so quickly.

Now the EuroCrats (Juncker) are sabre rattling. Telling Britain to get out quickly. This is a sad face saving gesture like Cameron attempting to look like a strong leader by scheduling the referendum in the first place.

Nonetheless, I wrote Europe is unraveling and why in two articles

"Gordian's EuroKnot and

Rogoff, Merkel, and China, oh my.

The Exit Nations must unite quickly, and issue the faite-accompli described in This is Brexit. And resist efforts to cause problems.

For example, there is no reason that the British Passport that was valid the day before the election should not be valid the day after the election (metaphorically speaking). The only problems are the ones that will be created by the Commission.

(Their Budget should be cut. Not the working people, but the "leadership and management people", should have their wages cut by 10%.

I pointed out, "The European Commission is a gratuitous organisation that exists wholly and solely to validate its own existence."

The commission exists to justify the existence of the commission.

Too much of what the commission concerns itself with (barging into other countries' business) could be handled by treaty or by sidebar agreements within the framework of "The Union".

Still little chance they will listen to me. I warned of the disaster of Merkelism, the "migrant situation" that Saudi Arabia would act to protect its revenues, China's global economic diplomacy, and the rest.

 "But don't bother listening to me. Everyone always doesn't listen to me."
The Quotations of Slim Fairview (c) 2016.

Thank you again for your interest in what I write and in reading about my views. I am deeply flattered.

Sincerely,

Slim.

Copyright (c) 2016 Bob Asken
All rights reserved.

Heads UP!

@SingaporeNewsSG @govsingapore 

Singapore Top Visitor to my blog month over month really rocked my stats today. 

Reading?

Emerging Nation Economic Union.

http://sidestreetjournal.blogspot.com/2014/02/emerging-nation-economic-union.html






In addition

@CKGSB  is now following my blog.

Thank you all.

In addition,

Where are we going?  Easy.

The Next Challenge is Here.


http://sidestreetjournal.blogspot.com/2015/08/the-next-challenge-is-here.html 

Sincerely, 

Slim.

Future of the G 20 in Good Times and Bad.  Is not for the G 20 Alone Anymore.

http://www.slideshare.net/slimfairview/the-g-20-in-good-times-and-bad-5802178

Forming an E 20

http://www.slideshare.net/slimfairview/forming-an-e-20

Copyright (c) 2016  Bob Asken
All rights reserved.

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.

slimfairview@yahoo.com 

slimviews@gmail.com 

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.

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

.

slimviews@gmail.com

Copyright © 2015 Bob Asken

All rights reserved.

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:

Putin’s Overture in Eurasia Minor

Mr. Putin’s Economic Theatre of Operation

In addition:

China: Not the What the Where.

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

slimfairview@yahoo.com

Copyright © 2014 Robert Asken Slim Fairview

All rights reserved.

Ascribed Value

As a people become more affluent, the influence of the price factor declines.  The supply and demand paradigm loses potency and becomes less valuable as a tool in much of the analysis. This is because market decisions are not based on price.  Or, buying is superseded by spending.

In “The Visible Hand” I wrote that the rich can handle price increases but not supply shortages.  This article deals with price.

Under normal economic models, the law of supply and demand states:  When demand exceeds supply, prices rise. When supply exceeds demand, prices fall.  That, of course is still valid.  However, there is more to it than that. 

Theory + Case Method.

To adjust to the market forces, if prices increase, the demand will taper off as people find prices to high and prices will level off or began to fall.

Case

Avocados sell for $2.00

Consumers do not buy avocados at $2.00

The avocados begin to turn.

The manager of the market cuts the price to 99 cents (when no one wants them).

I’ve seen this failed pricing policy repeated too often over the years.  Now, avocados are priced to sell. 

However, with rising affluence, demand does not abate as prices rise.  In this scenario, people who can afford them, buy the avocados at $2.00. The rich absorb the price increases. Then, to exploit the demand, avocado prices increase artificially to $2.50.  The rich buy them to serve a much more lavish lunch.

Of course, food is perishable and avocados are not a staple. E.g. Bread, milk, mayonnaise, cereal, peanut butter, baloney, tuna fish, and so on.

Back to the Paradigm

As supply falls and demand does not abate as the rich absorb the price increases, the increases place a greater hardship on those who fall between rich and poor.  Example: gasoline prices rising from $3.39 a gallon to $3.89 a gallon.

The poor buy less, or buy something else, or—as with petrol—stay home.  As this happens, one or two of two things will happen.

The absorption of price increases and the increase in purchasing and demand shifting will lessen the demand for that which is in greater supply (or less demand) forcing prices down and sellers revenues along with them.

The rich will buy (at an attractive price) what is out of demand favour either for the purposes of conspicuous consumption or speculation. This will further hurt the poor. 

At this juncture, conspicuous consumption becomes a misnomer because what is being purchased is not being consumed as needed and or as wanted. Ergo: Gratuitous Consumption. Or, in some cases, Ridiculous Consumption.

There is a variation on gratuitous consumption. To explain this, I will create a metaphor.  This is a metaphor!

A $35,000 handbag

A   $1,000 handbag

People are employed to make handbags.

I can hire one person to make a $35,000 handbag.

I can hire 35 people to make one handbag each to sell at $1,000 each.

If I hire one person to make a $35,000 handbag, and pay him $1,000, I have a $34,000 profit.  I cannot pay 35 people $1,000 each to make one handbag each, to sell for $1,000 each.  On a percentage basis, I pay 35 people $28 each and make a $34,020 profit on the enterprise. 

With rising affluence, I can cater to the rich or I can cater to the less affluent. This requires cutting costs (wages) and outsourcing or off-shoring my labour.

NB:  We are not discussing the affluent.

We are discussing rising affluence.  We are discussing a new paradigm.  And, rising affluence for the purposes of this discussion refers not to those who have more, but rather to those who spend more.  (Low key displays of wealth still exist. But you don’t see as much of it anymore.  Then again, you wouldn’t.)

Remember that $1,000 handbag?  That handbag now has a designer inscription and a $2,000 price tag.  What happened?

To understand this, we go to the question, “What makes that $35,000 handbag worth $35,000.  This is a question often asked in the media.  I will tell you.  That handbag tells people you can afford to spend $35,000 on a handbag.

This differs from numismatic value.

The last “antique pocketbook” at auction may sell for $35,000 because people collect them.  They are dwindling in number and availability. And, People believe that they will increase in value, hence increase in price—there will always be a market for them.  Picasso, Monet, Faberge Eggs, Harley Davidson motorcycles, coins, stamps and so on, fall into this category.  For our purposes, antique pocketbooks.

There is a downside to this and this downside is not new.  Holland experienced this in the 1600s when a Tulip bulb sold for the price of a house.  Things did not turn out well.

Now we come to what I call Ascribed Value.  There is no numismatic or speculative (future price + ROI) value, or significant increase in quality that precipitates or necessitates the increase in price.  Rather, speaking  metaphorically or literally, the increase in prices is based on what is written on the handbag—the designer’s logo and the high class price tag appended to the handle.  What causes the price to rise is the imputed value.

DISCLAIMER:   

This is not to suggest that a $35,000 handbag is not a piece of quality merchandise.  It is a piece of quality merchandise.  It has

• An attractive design

• Quality materials

• Skilled craftsmanship.

In addition, there is a big difference between a designer handbag and a handbag with a designer label.

Back to Economics

A higher price was a valid factor when I paid $100 for a pair of Florsheim® shoes rather than $25 for a pair of shoes from the other store.  The Florsheims lasted and lasted and lasted. They were good quality, well made, and stylish.  (I suspect that the Energizer Bunny® wears Florsheim Shoes.

Elois Papillon, a character in the novel St. Lawrence Blues (Un Joualonais sa Joualonie) by the brilliant and highly esteemed French Canadian author Marie Claire Blais, declaimed, “Credit is the poor man’s illusion of wealth.”  Here, too, we move to a new paradigm, a new social class.

With many of the consumer goods sold lately, the market imputes quality based on price and a new social class is creates.  Not the rich, but those who enable the rich to get richer bases solely on the fabricated price of their products.  And the richer they get, the greater the value imputed to their products.

Remember that $1,000 handbag that sold for $2,000?  It now sells for $3,000.  Why?  Because the designer is richer.  That extra $2,000 is “Fabricated Pricing" based on “Imputed Value.”

Quality or Value?  That handbag is worth the extra $2,000 because it costs an extra $2,000 because the designer is now a wealthier ergo a more successful ergo a much better designer.

In short:  The value of the merchandise lies in the price of the merchandise.  The handbag is worth $3,000 because the handbag costs $3,000.

“Then, the label spoke to the quality of the merchandise, now the labels speaks to the price of the merchandise.”  ~ Slim Fairview. 

From, The Quotations of Slim Fairview © 2014 
Robert Asken as Slim Fairview. All rights reserved.

Warmest regards,

Slim

slimfairview@yahoo.com

PS  I was thinking about economics over the past week and something occurred to me. Perhaps, this is nothing new. Perhaps there have been many theses written about the above. It may even be a much studied paradigm.  If it is, please let me know, I would love to read about it. Sincerely, Slim.

If you find anything here to be helpful, please don't hesitate to send me a really tricked out Mac Book and to tuck a few dollars into the envelope along with the thank you note. Slim.

Robert Asken
Box 33
Pen Argyle, PA 18072

Copyright © 2014 Robert Asken as Slim Fairview

All rights reserved.