View From Afar

I'm nowhere near the United States as I write this.  There is hero work to be done everywhere.

As a result, I have been out of touch with the political scene back home.  Not surprisingly, no one in Europe really cares about our details.  They like Obama and as long as he is in charge, they feel like the Americans will behave in a more civilized and rational manner.  I've been here when Bush was on the mound.  When he was in charge, the world saw us a bully.

On to China.

Europe is currently at war with this Asia behemoth.  The Chinese are invading economically and its much more frightening that if they had tanks.  They are using their typical practice of providing poor quality at such a low price that no one can resist.  The scariest part is that they are taking over the telecommunication industry.  This is a country that routinely monitors the internet habits of its own citizens.  They shut down cell coverage areas when protests start up and blame "temporary" problems with equipment.

Here is an example.  The "Jasmine" uprising is a what is being called the latest attempt of the people of China to protest against their government.  Several marches were planned with the intent of meeting at a certain point in a large city.  As the marchers approached from all directions, they found the streets "conveniently" blocked off for maintenance.

Cisco recently proved China had pirated some of their software.  The Chinese government strongly denied the allegation until Cisco showed hidden code embedded in the software that showed the birth date of a Cisco developer's wife.  Seems China had a hard time explaining that.

If you buy something made by China; if you use a service provided by China, you are funding the overthrow of the free market and democracy everywhere.

Remember, you heard it here first.

Microsoft continues to implode.  After the failure of the latest Office Suites, they now have a phone that no one wants to sell.  The Windows based Phone7 has been rejected by all of the major service providers.  By the way, Apple will soon follow for the same reason: protectionism.  Google makes stuff just as good or better and gives it away from free.  Apply makes great products but when Jobs goes, the company is history.

Products that I am waiting to replace: GoDaddy and Norton Antivirus.  Both of these companies provide the best service in their field, but they are not overly impressive.  I've had run-ins with both over the last week and it feels like I am their very first customer and they are still trying to figure out how to provide the service they are selling.

The Sand Countries continue to revolt.   I think it's great.

I watched as a Libyan man mourns the loss of a loved one.  Men around him tried to offer comfort.  When I saw this, something very important struck me...they are just like everyone else.

They are like you and me.

They want families and love and play and freedom.

So many in the States will tell you to be afraid of everyone that doesn't live across the street from you.  How many opportunities  have passed us by as we cling to fear of others rather than embrace them as members of humanity.

Maddoff has been speaking out from his Life in Prison soapbox.  The latest is that he called the entire government a Ponzi scheme.  He is referring to government in general.  The more I think about it, the more I think he may be on to something.

Sooner or later, I will have to return home.  It's hard to save a world overseas when my outfit has no place to hold my passport.

Up, up and away...

Jim

Lack of Grey Matter

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To Have and to Hold – The GOP’s plan for the rich

We all remember the extension of the Budget-Busting tax break at the end of last year.  The GOP insisted that this was good for the economy. 

This idea gives credence to what a board of intellectuals concluded last week.  They basically said our elected officials are not smart enough to make effective economic decisions.

I agree.

My intent with this blog is to give three easy-to-understand reasons why the Republicans are wrong.

Reason #1 that the GOP is wrong is the concept of Monetary Multipliers.  If you put a dollar into the economy, it gets passed around.  Every time it gets passed around, people gain products, services and savings.  The government also gets its cut.  So let’s look at - A Tale of Two Dollars.

Dollar #1 is given to a wealthy person who invests it in the stock market where it sits.  Now assume a generous return of 20% and a tax rate of 15% (capital gains rate).  At the end of a year, the dollar is worth$1.20 minus the 15% tax on the 20 cents.  So, the government got $.03 and the rich person got $.17.

Dollar #2 is given to a poor person. This person buys a loaf of bread ten minutes later.  The store pays the baker who buys gas and so on and so forth.  This dollar is really moving.  Every time it moves, someone gains a dollar and then pays income tax at 30%.  Let’s assume the dollar changes hands once a day.  In a year, that single dollar would have resulted in $365 of economic value and the government would have collected about $121 in taxes.

In one case, the dollar generated a dollar of activity and $.03 in taxes.  In the other, it generated $365 in activity and generated $123 in taxes.

So, if you wanted to generate economic activity, where would you put your dollar.

I realize these are two extremes.  The rich buy gas and the poor sometimes save.  However, it really comes down to a concept called The Marginal Propensity to Save.  This is a measure of how much you save if you were given an additional dollar.   If someone saves, 25% of that dollar, that gives them a MPS of .25.  The higher the savings rate, the higher the MPS and the slower the money moves through the economy.  The poor have a MPS near zero which means they save almost nothing and thus, the money given to them flows freely into the economy.  The rich have an MPS of near one which means they pull money out of the economy because the dollar had no impact on their spending patterns.

Reason #2 that GOP is wrong is due to Push or Pull manufacturing.

It used to be that all manufacturing was “Push”.  This means products were created with the hope that someone would buy them.  Take a book store for example.  They buy books and stock the shelves hoping someone will buy them.  This type of way of doing business is long gone.  Take a look at Borders Books. They are going bankrupt for just this very type of strategy.

In today’s competitive market, companies don’t build stuff hoping you will buy it.  Instead, they are very good at making it as quickly as you buy it.  Take Amazon.com for example.  The book you order today may not even exist at the time you order it.  When you place your order, that causes a book to be printed and shipped.  This is called “Pull” manufacturing.  It is vastly more efficient.  Companies don’t have to carry huge inventories and never over produce.

The Republican idea of giving tax breaks to the rich it the same as “Push” manufacturing.  They are saying the rich will use the money to build stuff.  When they build it, they will pay wages to people who will turn around and buy other stuff. 

This may have worked 30 years ago, but not today.

Today, give company money and they will hold onto it until someone buys something.  Then they make it.  No wages are paid until an order is placed and no order is placed because no buyers have money.

Today’s economy and manufacturing dictate that you must have the buyers first.  Let me say that again…There must be buyers first.  Giving money to the rich creates the capacity to build with nothing actually being made.

You need to create buyers first.  (This statement alone should get me the Nobel Prize for economics but alas…as a superhero, I am not eligible.)

Reason #3: It didn’t work the last time they tried it.

So there you have it.  Every economist in the world will agree with me (except those paid by Fox News to disagree).

So, the GOP wants to cut spending but they want tax breaks for the rich but they want to buy jet engines that no one wants because they are built in the Speaker’s home state, but they want to lower the debt. 

Not a very well constructed sentence, I know,   I just wanted to see what it looked like - the GOP policy all in one statement.

I can only shake my head.

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(note: the dotted lines indicate where you can cut and paste this when you send this to all your friends)

Some of you know that I like to write.  There is a difference between reality and fiction.  Fiction has to make sense.  Reality…not so much.

Alas…

Sometimes it can be hard to save a world bent on killing itself.

And yet, I still feel compelled to try.  As a superhero, I took an oath to do just that.

Up, up and away…

jim