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Too big to fail (Part II)

7/29/2013

3 Comments

 

By Tim Fullerton

Last time I wrote about companies (even industries) should not be considered too big to fail.  The next logical progression: small companies or industries too “important” to fail.

We all know about “Green” jobs.  Those new technologies designed to provide a clean, natural way of generating energy.  I was amused as I read a special edition of US News & World Report a few months back that highlighted all the green industries that are going to save our planet from us.  Each and every industry or company profiled by the magazine: ethanol, wind, solar, and a host of others, all had one thing in common.  They all were either getting or wanted to get some federal subsidy.  Cash from you and me to get their product to market at an affordable price (or just get it out of the testing lab).

In my mind, this makes all of these simply, “Too costly to Succeed!”

If these industries cannot provide a safe, effective, efficient, necessary product, what are they doing in business in the first place?  Just to suck up our tax dollars?  

Again, the government is picking winners and losers.

Take ethanol (drinking alcohol, usually made from corn), for example.  Did you know that Methanol (so called wood alcohol) has fewer of those nasty carbon atoms everyone is so concerned about?  That it is less costly to produce?  And has more energy than ethanol?  But the government has determined that only ethanol is worthy of pursuing.  Why?  I don't know, but it might have something to do with Iowa corn farmers.  Ethanol has to be heavily subsidized since it costs more to make a gallon of ethanol than it can be sold for (they want its price to be comparable with gasoline).  

Your tax dollars at work.


3 Comments

Why is inflation such a threat right now?

7/26/2013

3 Comments

 


I see separate long-term policies converging:

1. Gold Standard.  Under a gold standard, the country can only have as many dollars in circulation as it has solid assets.  The currency represents those assets.
FDR took our country off the gold standard (for internal purposes) in the 1930's so he wouldn't be constrained in his effort to spend our way out of the great depression.

Nixon took us off the gold standard for international trading in the 1970's.  So he could fund LBJ's war on poverty, the brand new EPA, and the Viet Nam war all at the same time.

Since then, our money has been backed by nothing except the "Full faith and credit of the United States."  Faith?  That means our money is now physically not even worth the paper it's printed on.

2. Related to #1.  Quantitative Easing.  Since even before the recession or crash or whatever it was back in September of 2008, the Federal Reserve has been printing money at an extraordinary rate.  Like any asset, the more rare something is, the more valuable it is.

Simple law of supply and demand; if the supply of something grows and the demand stays the same or drops, the price (inherent value) must fall.

3. Related to #2.  The American dollar is the "global reserve currency." 
This means, that when Brazil wants to buy something from South Korea, the Brazilians must convert the purchase funds into dollars to make the purchase.  Then the South Koreans convert those dollars into whatever their money is called.  This is supposed to keep all international transactions fair (level the playing field).

Lately, Russia, China and the International Monetary Fund (IMF) have all called for a switch from the dollar for international trading.  If this happens, the worldwide demand for dollars will go down by a LOT.  (I read one estimate of a 25% drop).  This may cause havoc here -- since this demand is what has been propping our (paper only) dollar up for so long.

4. American government debt.  (You knew this one was coming, didn't you?)  There's been some talk that the government actually wants to inflate the dollar so they can pay off foreign bond holders with worthless money.  That's the Full Faith and Credit of the United States?!??!

How is this advantageous?  I recall that during the inflationary 1970's, this same strategy was employed by average citizens; they bought everything (and I mean EVERYTHING) on their credit cards assuming the money sent to pay off the cards would be worth less than “today's” dollars.  Admittedly, I'm no math wiz, but I fail to see any advantage here; you still have to pay off your debts and the accumulated interest besides.

I foresee a convergence of these policies into a PERFECT STORM.  Savings accounts: worthless.  Paychecks: worthless. Prices rising faster than the money can depreciate.  $100,000 bills becoming commonplace – one of them might cover a single month's worth of electricity.

3 Comments

Too big to fail

7/23/2013

3 Comments

 


By Tim Fullerton

How many times have we heard this phrase in the past couple of year?  The insurance company, AIG was too big to fail.  General Motors and Chrysler were too big to fail.  An untold number of banks were too big to fail.  It started in the Bush Administration and continues to this day.

The free market economy is all about winners and losers.  The cycles of boom and bust are despised by socialists and communists, whose entire purpose is to even out the economy so no one can win big and no one can lose big.  But these cycles are the natural way for the economy to “refresh” itself.  As new technologies, for example, reach the market, older technologies must either change or fail.  

Should the age of the personal computer been halted because the typewriter manufacturers were too big to fail?  Deny automobile companies the right to make cars because it would put the harness and buggy-whip makers out of business?

It's not the job of the federal government to decide which companies deserve bailing out and which ones can quietly go bankrupt.  Should “too big” companies such as these be allowed to continue making buggy-whips blithely knowing the government will prop them up any time it looks like they might be in some kind of financial trouble?  What does this accomplish in the big scheme of things?  

Maybe I should start selling T-shirts with the logo: “Too Big to Fail.”  And sell them in only XL and 2XL sizes.  If my company doesn't succeed, we can always get a bailout, right?



3 Comments

Certain unalienable rights...

7/20/2013

2 Comments

 
By Tim Fu

One sentence in the Declaration of Independence seems to sum up all that makes the United States what it is or what it is supposed to be.  Not surprisingly, it's the most famous and repeated sentence:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

We hold these truths.
Not we hold these opinions.  Not we hold this consensus.  Not we hold these suggestions.  Truths.

To be self-evident.
Truths so obvious that no matter where you come from, your background, your religion, you know (KNOW, not think or feel) that it is the truth.  

That all men are created equal.
Not equal in height, strength, speed, wealth, or intelligence.  But equal under a just set of laws.  The laws of nature, for example.

That they are endowed by their creator.
Whether you refer to the creator as God, Allah, Jehovah, Yahweh, evolution, biology, or The Force, we are all born with certain birthrights.  They are natural.  They take effect the moment you do.

With certain unalienable rights.
Rights granted to you from a higher power and any effort by mere men to remove or repeal them is null and void.  These rights are not granted by law, or governments.  So governments and laws have no power over them.

That among these.
A short list.  There is not enough parchment or ink to list them all, so just the basics.

Life.
Once born, you have the unalienable right to continue living.  That may mean, there are times you will have to defend yourself.

Liberty.
Once living, you have the unalienable right to freedom of thought and action.

And the pursuit of happiness.
Another way of saying, liberty.  This is usually associated with a vocation.  You have an unalienable right to pursue the job, the way of life, that will create the most happiness for you.

It should be noted here, that  “pursuit of happiness” was originally “property,” in the earliest drafts.  But some of the northern delegates to the continental congress objected to the word property since the southern colonies insisted that one man could legally own another.  But the ability to 1. acquire, 2. own, and 3. dispose of property is still considered your unalienable right.

Notice that none of these rights is something you can purchase.  Not something that can be owned – bought or sold.  If unalienable rights included things like a house, a car, or healthcare, then you would have been born with them.  

The idea of unalienable rights carried over to the Bill of Rights (15 years later).  The phrase, “the right of the people,” is used repeatedly.  Also, the government is recurrently restricted by wording such as: not abridge, shall not be infringed, and shall not be violated.  

Of course, if your actions violate the creator-endowed rights of other people, then you are in forfeit of those rights for yourself.  

2 Comments

The Laws of nature and nature's God

7/19/2013

0 Comments

 
By TimFullerton

Where are listed the laws of nature?  How will we know what they are?  Nature writes no books, she is too natural for that.  Can we simply look around us at nature and determine what the laws are?

The natural world seems divided into two groups: predator and prey.  Survival of the fittest.  Cull the herd; eliminate the weak and the sick.  Predators in the wild show no mercy.  Their very survival depends on it.  As you work your way up the food chain, how many predators are also prey?  The great circle of life.  

Some species of prey have but one defense, herding together. Sheep, zebras, and wildebeests cannot defend themselves from lions or leopards or wolves; all they can do is try to save the herd, not individuals.  The weak and sick will be sacrificed for the good of the herd.  Herd members do not get to vote on who the next sacrificial victim will be.  Herds don't have any leadership that I can detect.  Except, possibly certain migratory birds.  Geese fly in a V formation – one leader.

Like herds but more complex; some animals form communities.  Bees and ants have a leader.  It does seem like an honorary role since we know of very few queen bee edicts (executive orders) sent to the drones from the throne.  Members have specific, assigned duties to perform.  They must perform them well, with no complaints, since there are no beehive prisons or ant hill jailhouses that I know of.  Do ants and bees have little suburbs they can go to at night when it's Miller time?

All in all, the laws of nature don't seem very inviting.  If we had to live under nature's laws only, life wouldn't be very pleasant;  we would be ruled by the biggest, toughest, meanest bullies around.  You could call nothing your own.  At any time, someone bigger or more ruthless than you could take it all away.

At first, mankind gathered themselves into herds (tribes, villages etc.) to protect from both predators and predatory humans.  Some of these herds had rulers;  usually a self-appointed bully or a democratically elected chief.  Sometimes that worked out well, sometimes not.

What was lacking: A set of laws designed for all people regardless of which tribe they belonged to.  A universal set of laws for rulers as well as the ruled.  

Generally accepted as the laws of nature's God, might be the 10 commandments.  I prefer Matthew's (7:12) condensing of (at least 6 of those commandments) into one sentence, the golden rule.  If you do what you say you'll do, and if you don't harm another person or his property, you can pretty much do anything you want.

Any law written by men must follow this basic formula to be valid, and good.

So, in conclusion, the laws of nature are cruel and heartless, while the laws of nature's God offer almost limitless freedom.  This seemingly impossible paradox yields the perfect fulcrum to keep all life on earth in balance.  The laws of man should strive to fortify this delicate balance; tipping neither one way nor the other.



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