Eeek! Exxon-Mobil posted record profits for the quarter! Help! Evil, cruel nasty capitalists are gouging the world's citizens. Congress and some democratic presidents are talking about hitting these firms with special, higher taxes - by the way higher profits always translates to higher tax revenues.
No one is talking about GM's $3.3 billion loss for this quarter. They are, after all, just more evil, nasty capitalists. They must be punished for their proliferation of SUVs and gigantic pickup trucks (not to mention their environment crushing HUMMERS).
The problem, as usual, is that these enterprises are made up of people responding to a very volatile market. We have never had so many "buyers" in the market at once. This is represented by growth trends in India, China, and other parts of the D&E (developing and emerging - the new euphemism for second world) world. When the American public finally gets a grip on basic economic principals, they will stop spending on perishable entertainment and start saving more - especially in the markets.
Wealth begets wealth, or in short, it takes money to make money. Hernando DeSoto has identified the best approach to ensuring success in developing economies is to make certain the people have access to capital. Loosely translated, they need clear title to the things they own or make. This enables them to leverage, trade and work their way from a subsistence existence to self-sustainability. Do a Google search for micro-loans. This is a very successful practice in which small groups or individuals are made reasonable loans in order to support some small business they operate. Often these loans are a few hundred dollars, and the returns have been stunning.
People do not need "fair trade" buying programs - which simply foster a single output economy (see oil). They need the flexibility and resources to adapt to their markets and thrive.
People also need to spend some time and understand the power of the markets - the uninformed tampering with is destined to bring unwanted results.
17 comments:
This is too easy. Current price of oil is not supply-demand driven, but is caused by the extremely low value of the dollar, which increases the value of other commodities such as gold, energy and yes, even rice, corn and wheat. Yes, the current food crisis is also due to low dollar value. Iterest rates are currently so low because the administration is trying to "fix" the slumping housing market. Of coarse isn't working, but try to tell them that. Some banks got burned by lending to people who didn't qualify under normal conditions, and now they are overreacting and not lending to anyone. Also, banks make more money when interest rate are higher, and don't have a profit incentive to lend because... well, interest are too low and the won't make much of a profit. By the way, this is also damaging the student loan market, making those loans harder to come by, just as schools across the country are raising their tuition rates... why, because the housing market is in a slump and the state doesn't have as much money to supplement the schools budget. To fix, follow these instructions.
1. Raise interest rates to increase value of dollar.
There. That was easy!
Oh, by the way, I got Insta-Lanched again yesterday. Twice in three months. I didn't get much of a bump in readership this time, but still....
Dammit! How do you do it? Clever writing? Detailed insights? Naked pictures of Obama?
Noted on the business wires today - currency traders have predicted uptick for the dollar. For a reason to not increase rates - see the debacle of Iceland. Sound currency, stable economy, but linked to too much foreign capital. With inflation out of control, their central bank has had to raise interest to slow devaluation.
For us, it is simply the value of our own currency as a commodity - not to mention our own attractiveness as a capital source and sump.
No! I want to deposit £100 pounds in my USAA account and see it magically change into $200! $150 just doesn't have the same allure! (yes, call me cynical....)
...hee hee...
Dammit! How do you do it? Clever writing? Detailed insights? Naked pictures of Obama?
No, I think he just feels sorry for me....
Not quite as easy as that, however, what is wrong with a weak dollar? We are now in a position to be a net exporter and bring jobs into the U.S.
Anyone know how much a gallon og gas is in Europe? I heard Rolls Royce was going to market a new SUV in the U.S. It was going to be called the "Earth F---er". If you own an SUV you are simply reaping what you have sown. Too bad, so sad.
Don't pine away for the way things were. It wasn't as good as you remember (the gas crisis of the 70s?) Adjust fire and prepare for what is coming.
"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."
Warren Buffett
The 40YO (Well I was...)
Yeah, but we don't have a large enough manufacturing economic base to support the economy, because we long ago drove away or killed off, through high taxes and stiff regulation, most businesses that could support a manufacturing infrastructure. We just aren't making enough stuff here to make much of a difference. This is like getting third degree burns over your whole body except your right foot, and then having the doctor say you're fine because that foot looks really good. Oh, and don't forget, U. S. manufacturers still have make the products, and they have to ship their products to shipping ports, and they have to pay to get the products shipped. And those prices are increasing because of... (drumroll please), ever higher energy costs. We're sacrificing the whole economy trying to jump start the stumbling housing market.
Meanwhile... A good chunk of that cost is due to the weak dollar.
Frog, yuo are in error about manufacturing. We have what matters - heavy industry, tech, food, aerospace and innovation. The secondary manufacturing, base equipment (appliances, consumer goods, etc.) do not help our economy as much as the core few.
Heavy industries - we do OK. Tech? We innovate as well as anyone, but most tech manufacturing is in Taiwan or China. The weak dollar is driving food prices sky high. Aerospace? How much do we export? Innovation? That's great... until you get sued for some ridiculously bogus IP infringement claim.
I will admit my analogy was a bit overstated, but I stand on firm economic ground. Our economy, as it stands now, does not have a large enough manufacturing sector to make up for the effects of an ultra weak dollar Strengthen the dollar, and you strengthen the economy.
Must go to bed now.
PS. Looks like the Democratic race may be drawing to a close.
Such an exciting AM here in the UK. News all over the place that Hillary has "cancelled all of her public appearances for the rest of the week", except for a meeting with the superdelegates today.
Meanwhile, over on DataLounge, whiny gay Hillary supporters are stomping their feet in disgust and saying "Well, since you did't choose Hillary for prom queen now, we are voting for McCain now! That will show them!" What a great way to lose an election. Thanks, fellow dems, for being spoiled little brats.....
Meanwhile, here in the UK on Thursday, the Conservatives won the majority of council seats in almost everyj uridiction(except, of course, in Colchester, which went Lib Dem and Green) with even the dreaded BNP (aka "nazi's") picking up a couple of seats. Things don't look good for our Hero, Gordon Brown. Could this be a taste of things to come?
Oh, yes, and for those interested, petrol is now £1.11 a litre. And they said I was stupid to buy a Smartcar.
Or, according to Frog, beef up manufacturing� But don�t get too wrapped around the axle about making stuff, the economy is much more convoluted that that. BTW, you never said how we could raise interest rates, or indeed; which rates.
I'm driving a Prius. I'll be happy when gas prices are $6 a gallon. Nothing like cost as an appetite suppressant. Did you know most European countries don�t have fuel effiency regulations? They don�t need them, do they CPT Jack? I'm a little nagged out that I spent a year on AD so Mr. & Mrs. America can cruise around in their RVs this summer, and I never did find out how our oil got underneath their sand...
The 40YO
hell, no they don't need them. Most people a) walk b) take public transport(though the train to London can be a bit dear thanks to Dame Maggie's privatization of National Rail),ride bikes, or take cabs. A lot of that has to do with the very strict rules for even getting a drivers license, and of course, the very, very, and did I say very strict drinking and driving rules. More than two glasses of wine? Don't even think about it. Walk or call a cab, and leave your car at the pub, mate. There is also the hefty commuter toll into London, which rightly discourages people from driving into the city.
Or, according to Frog, beef up manufacturing
No, I'm not saying that at all. That ship has sailed. It would take decades to rebuild our manufacturing base to anything close to it's peak. We couldn't do it anyway because our $$$$ for labor is too high, and we have (in the eyes of the manufacturing sector anyway) too much regulation. All I'm saying is that Ben Bernanke simply needs to start raising the prime lending rate, and we will start to see a positive change in economic outcomes. I know everone focuses on the Reagan tax cuts, but part of the economic policy that was more effective was his increase of interest rate to stop tha stagftion of the 70's.
Well I still disagree about your asessment of the impact of a rate change because the FOMC can only change the Fed funds rate, not the prime rate; and when they tried to regulate it in the past the banks have gotten around the regulations (that is where we got "points" for home buyers from). That said, the chief can impact rates through the discount rate, open market ops, and the reserve requirements. You will still have issues if fiscal policy is ad odds with monetary policy, a la Volcker.
How is this for a radical idea, if you want Americans to save, make it worth their while and eliminate taxes on interest. I honestly have no idea what the second order effects of that would be...
But all that aside, I was getting at the idea that it is fine to expect our leaders to do this or that, but in every situation lay an opportunity, all we have to do is identify and exploit it.
Greed is good.
Gordon Gecko
Good comments all. I have to think a bit prior to submitting a response. Perhaps it will be a comprehensive post.
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