Category Archives: Success

Economic Tomfoolery

Economic ignorance allows us to fall easy prey to political charlatans and demagogues.” ~ Dr. Walter Williams

The world economy is six times larger than it was half a century ago, growing at an annual rate of 4 percent during the period. New technologies have paved the way for more efficient production systems in a wide range of industries and promoted economic growth. From 1965 to 2013, the average annual growth rate of world GDP per capita was about 2 percent, and in more than half of the past 50 years, the world grew faster than this average. As a result, global per capita GDP more than doubled between 1965 and 2013 despite a major increase in population.” ~ IMF

Judged by the huge strides that people all over the world have made in overcoming poverty and want, it is only a slight exaggeration to say that little of economic consequence happened before the last three centuries. Before that, most of the world not only took poverty for granted, but also assumed that little could be done about it. Even the most optimistic early writers could not imagine that more than a few percent of the population would ever be well off; they thought that the best we could do for the masses would be to minimize their suffering on Earth.
~ econlib.org

Poverty and inequality

Money - ResourcesThe world population grew from 3 billion in 1965 to about 7 billion in 2013, but the global economy grew faster than the world population, leading to a better standard of living for the average world citizen.” ~ IMF

Life expectancy grows even though the population growth rate decreased.

The average world citizen is richer than ever thanks to the growth the global economy has enjoyed over the past 50 years. However, the benefits of this growth have not been equally distributed—the result is enduring poverty and inequality.” ~ IMF

When we read about the great civilizations of ancient Egypt and Rome or of the Aztecs and the Incas, we tend to compare them with the empires of Britain or the growth of the United States. This comparison, judged in economic terms, is highly misleading. Although the great civilizations in Egypt and Rome were able to construct big buildings, the vast majority of their citizens, by today’s standards, were dirt poor.” ~ econlib.org

Why is that true? Technology advancements play a big part. Certainly having sufficient energy, clean water, and food supply, along with IMF is governed by and accountable to the 189 countriesa lack of strife, all play important roles. Governments do play a huge role. The most drastic comparison between how governments function are North and South Korea. The basis of economic circumstances for each country are similar however their respective governments are vastly different in the level of control they apply to their population. The short summary is that North Korea is a highly controlled, central managed economy, whereas South Korea allows more individualized control and free markets. Of course embargoes by the west exacerbate North Korea’s problems.

China and Honk Kong

When the United Kingdom’s lease ended on Hong Kong in 1999, China was handed a jewel in that region of the world. Having traveled and transacted business there before the change over, I saw a vibrant overall economy with a significant amount of freedom. Evidently, China found they didn’t want to kill the golden goose, and incorporated many of the free market ideas from this island economy.

The IMF states, more than a billion people, mostly in sub-Saharan Africa and south Asia, are in extreme poverty. What they claim are some of the causes, are more along social-democrat ideology, rather than the obvious. Those who live within the borders of despotic, highly centralized, corrupt governments, suffer the most with inequality and poverty. It’s free market economies and those who have governments with less corruption, less emphasis on large military’s that are the biggest winners.

It’s popular to condemn greed but it’s greed that gets wonderful things done. When I say greed, I don’t mean stealing, fraud, misrepresentation, and other forms of dishonesty. I mean people trying to get as much as they can for themselves. We don’t give second thought to the many wonderful things that others do for us.“ ~ Dr. Walter Williams

People in the education and political establishments pretend they’re not motivated by such “callous” motives as greed and profits. These people “care” about us but which areas of our lives do we derive the greatest pleasures and have the fewest complaints, and which areas do we have the greatest headaches and complaints? We tend to have a high satisfaction level with goods and services like computers, cell phones, movies, clothing and supermarkets. These are areas were the motivation is greed and profits. Our greatest dissatisfaction are in areas of caring and no profit motive such as public education, postal services, and politics.” ~ Dr. Walter Williams

.. economics studies the consequences of decisions that are made about the use of land, labor, capital and other resources that go into producing the volume of output which determines a country’s standard of living. Those decisions and their consequences can be more important than the resources themselves, for there are poor countries with rich natural resources and countries like Japan and Switzerland with relatively few natural resources but high standards of living.” ~ Dr. Thomas Sowell

Economic Equality

Economic equality is firstly a false concept. It ignores market fundamentals as basic as water level & gravity, meaning different inputs are going to produce different outcome. I’ve heard advocates of basic income for all. Their belief is the economy would improve as everyone would at least have enough to sustain themselves and would increase demand for goods and services.

When aspiring entrepreneurs are brought into the TV reality show, Shark Tank, they present their product or service, then asked a series of questions. The “Sharks” are successful entrepreneurs in their own right. Their goal is to get a return on their investment and own a piece of the next big business idea. Three things should be obvious to the casual observer.

  • You need to be prepared with a good idea with market research.
  • Capital will flow to you from those with greater wealth.
  • The government doesn’t create wealth.

There’s an ongoing effort to counter marketplace realities with explanations and statistics stating “trickle down economics” doesn’t benefit anyone. A simple catch phrase or populist econo-babble doesn’t negate the basics behind economic success.

  • a market with less barriers and cost will be more successful.
  • products & services must be sufficiently desirable for people to want to engage in trade.
  • in order to launch and maintain a product or service in the marketplace startup and working capital must be obtained.

If you want to place a coined phrase on this process, trickle down is sometimes used, because like water, capital flows from places of sufficiency or even excess to those who have skills, products, or services that are sought after. Despite the efforts of the IMF to post their claims to the contrary, they owe their existence to the wealth produced by prosperous nations, primarily the United States.

What is the IMF?

The IMF was created in 1945, with the goals of fostering global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. the IMF is governed by and accountable to the 189 countries that make up its near-global membership.foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

The IMF has had two recent disgraced leaders, Dominique Strauss-Kahn was charged with allegedly brutally attacking a New York hotel maid, Nafissatou Diallo on 14 May 2011. The charges were dismissed at the request of the prosecution which described serious doubts in Diallo’s credibility and inconclusive physical evidence. The physical evidence indicated a sexual encounter but did not prove use of force or non-consent. Strauss-Kahn admitted his liaison with Diallo was a moral fault and described it as “inappropriate” but that it did not involve violence, constraint or aggression. He said that Diallo had lied and that he had no intention of negotiating with her over a civil suit she had filed against him. The suit was later settled for an undisclosed amount, but subsequently reported to have been $1.5 million.
In his defense, Diallo had previously fabricated a detailed story of being gang raped by soldiers in Guinea, which was later found to be untrue.

The next Managing director of the IMF, Christine Lagarde, was found guilty of criminal charges on 19 December 2016. She was linked to the misuse of public funds dating to her time as France’s finance minister. She didn’t serve jail time or have to pay a fine. She maintained her innocence throughout the trial, calling the charges politically motivated. The IMF has stood by her, and her IMF biographical page doesn’t mention this case or conviction.

References

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The Details Matter

What advances a society? Seriously, can you answer that question? I believe many people will answer those questions with answers that are more subjective rather than objective. Furthermore there a lot of people, who curiously refer to themselves as liberal or progressive, who want anyone with a different opinion to sit down, be quiet, or in some expressed extremist view point, simply die.

I’ve watched a few videos lately from Dave Rubin. A man that describes himself as liberal, homosexual (gay if you prefer), but feeling left behind in the rapidly changing quick sand of social values. He deliberately invites guests on his podcasts who he knows are outspoken and often not normally someone from the left would share many opinions.

Rather than trying to bring his guests on, give them a few minutes to answer loaded questions, then spend most of the time talking over them with language implying his own moral superiority, he gives them a platform, asks them to clarify what they think about current topics, and never spends wasted moments bashing their ideas. In fact, he does what I think are some of the primary keys to advancing a society; respect the other person, listen to their ideas, learn more about the topic, and enhance what you think you might know. His fresh approach isn’t about proving who’s the smartest person in the room, and never shouting the other person down.

What I’ve witnessed through social media is mostly unproductive, and at times, worse than if the medium never existed. Choosing to interact, but demanding yours is the only way to think, is a form of narcissism.

Loneliness expressed by conservative students on college campuses.

A False Economy of Minimums

stack of money

Value of money

I saw another post on raising the minimum wage, and thought, I could either ignore it or take the time to explain what it means in a larger sense. (see the background article thru this link)

I think it’s necessary for each of us take a moment, if this topic is of interest, and understand some common ground.

Generally speaking, there are some things which we may find in agreement.

1 – Minimum wage isn’t a comfortable wage. It means living without a lot of things we’ve come to expect, such as a comfortable, safe place to live, decent food, heat, lights, transportation. A person can eek out a living, maybe better if shared with other family members or reliable wage earning roommates, but it’s still a constant challenge to live on a minimum wage.

2 – Minimum wage shouldn’t be something permanent. It’s usually considered a starting point for entry-level jobs requiring a minimum of skill. For some, it means just showing up and doing the minimum to keep the job. That’s the problem though, if a worker does only the minimum so they don’t get fired, but doesn’t take on added tasks which enhance their abilities / skills, they may end up staying at that level for most of their working life. A government may change it, but it’s always a poor income.

Ancient Egyptian literature - Horus

Money = trade substitute

Basic concepts of money

Money is merely a modern form of trade. In the past people would trade commodities which they valued against something the needed or wanted. The simple examples; you trapped fur-bearing animals for a living, you would trade their pelts for something you thought was valuable, like wheat, sugar or tobacco. Now don’t get lost on the morality of trapping animals, it’s merely a discussion point.

As societies developed, the need to find a useful substitute for trade spawned the need for coins and later currency. Instead of trading sacks of flour, animals, or pelts, people began to equate a specified amount of currency for each item. If you didn’t make, grow, or trap something, but provided a service / labor, currency became an easier way of setting a value for that time.

Here’s where people, who desire things to be altered to their way of thinking, misunderstand the concept of a minimum wage. Minimum wage is just as arbitrary of a concept as the value of a large polished diamond. We can say, a diamond shouldn’t cost that much, and a minimum wage should be a lot more. In the end, setting a price through a government law, doesn’t really alter it. Diamonds will still cost a lot, and minimum skills will earn a minimum wage. It’s a perceived value of each commodity.

If you raise the minimum wage through federal law, everything will start to adjust based on the perceived value. Review the history of the minimum wage from 1955 – 2015.

Let’s look at these items in 1950
The average family income: $3,300
The average car cost: $1,510
The median home price: $7,354
A standard American car could be purchased within a range of $1,339 to $2,262 depending on the model.

1950
Home price / income = 2.2
Car cost / income = .45

Fast forward to 2014
The average family income: $51,017
The average car cost: $31,252
The median home price: $188,900

2014
Home price / income = 3.7
Car cost / income = .61

Without trying to accommodate all the tuition ranges for an elite college, lets take a look at the University of Pennsylvania for undergraduate programs comparing 1950 to 2013-2014

In 1950, the annual tuition was ~ $600
In 2014 it was > $40,000 per year.

1950 Tuition / income = .18
2014 Tuition / income = .79

This upward trend was due to people demanding more for the same things. I’ve read many articles describing how much better the minimum wage was in 1950 or ‘60 vs. its earning power today, but all of these editorialized explanations fail to understand consumer fundamentals, we want more income & lower prices for goods & services. Inflation has increased the cost but our arbitrary demands haven’t changed economic realities. We pushed for cheaper goods at our local retailer, which was answered with offshore manufacturing. We want higher minimum wage, but the market adjusts, and everything costs more, while fewer people are in the work force.

An attorney may charge $350 to $1000 per hour. You or I didn’t set that price, however people are paying it. A server at a fast food restaurant may get minimum wage, but we we don’t want to pay $10 to $12 for an order of fries. Things will adjust based on how much we’re willing to pay, but in the end, it’s not that we’re really getting more, it’s all adjustable prices associated with commodities or services.

No matter what people pay for minimum wage, all other prices adjust, too. Inflationary costs rise disproportionately, as a result the low wage earner is back to the same problem, inadequate income for the cost of living. Worse still, retirees are really hurt because their fixed incomes and savings don’t adjust, and they become even more impoverished with rising prices.

What’s the solution? The solution for many is the same formula that I and millions of other discovered decades ago, minimum wage isn’t enough. You must learn skills that place you in a higher income bracket. Even many college graduates learned the hard way, a bachelor’s degree in history, art, or social science, may cost about the same as engineering or business, but the income ranges are quite different.

gold bullion

Our value is in what we do

The best choice, and the one that provides greater value to any person who wants to earn more, don’t wait on the government to provide a better standard of living. The marketplace will automatically change prices with a rise in minimums. Choose your options which provide a higher income. This is something you can control, not the government.