Saturday, August 6, 2011

Inflation and Deflation

Inflation is too much currency chasing to few goods, deflation is too little currency chasing too many goods.  Both are monetary phenomenon, the result of an act by monetary authorities. If they print too much, prices go up, if they print too little, prices go down.  

With inflation, people who owe money benefit, because they get to pay old debts with newer, less valuable money.  This is normally the super rich who have vast holdings built on debt.  I can also the poor, since they too have debts, but the poor get hammered by another facet of the same event.

When the newly printed money is released into the banking system, the early receivers, that is banks, huge business and wall street, pay off their old debts with this newer cheaper money.  Prices rise al along the production and distribution channel, over time rising before, finally, wages rises lastly.  Larry Lunchbucket pays the difference, in consumption, hundreds of millions of people making daily purchases, having less as the people at the top have already gained more.

With deflation, the people who lend money benefit, because when the money is returned it buys more than when it was lent out. This can benefit the poor since their paycheck goes farther week by week.   those who make things and lend money cannot have that.  That is why deflation is considered so terrible.

One aspect is inflation and deflation can be asset class specific:  house prices rise, but not energy prices.

The solution to inflation and deflation is the powers-that-be print none at all.  Leave currency in the hands of private banks.  Let them live and die by sound money and currency.   Free people never trust a government with money, or like-money.

Prices rise and fall for other reasons as well, chiefly supply and demand.  If there is too little of something, the price will rise, signalling the market to produce more.  It the price is lowering, it signal the market to make less.

Prices may lower and still signal “more!” if the costs drop faster than the price, allowing better profits even at lower price.  Cell phones keep falling in cost to make, faster than the price at retail. There is a spread to arbitrage. The makers are ever more profitable, although prices are falling.

Prices may rise and signal "more!" when the new combination of materials and processes yield ever more attractive benefits and features, and attract even more buyers.  Apple's cheapest laptop is about $1000, when a Dell is about $400. 

Prices are falling when your get more at the same price.  The computer is still $1000, but last year it had 1 gig ram, this year 2 gig ram.  Prices are rising when the gallon of ice cream was $5.00 last week, and this week it is 4/5ths a gallon, for $5.00.  You did not notice the package is smaller.  You did not notice the price went up 25%.

Force or fraud or both can change prices as well. 

Prices rising due to force:  Marijuana is a weed, but its price is quite high given the violent interdiction in support of the law against its use and distribution.

Prices rising due to fraud:  Educational cost is rising not due to the cost of what occurs in the classroom, but what occurs in the administration building.  The cost of administration is presented as necessary to education, but this is untrue, a fraud.

Prices lowering due to force:  In USA, prisoners are forced to work for roughly ten cents an hours.

Prices lowering due to fraud:  Food in USA is relatively cheap due to adulteration.  

This can go on, given human nature, for astonishingly long periods. And this often leads to violence in reaction when misallocation and malinvestment lead to tipping-point anger.

A problem is as observers see prices rises and lowering, most authorities and their advising economists only seeing prices going up or down.  Or even if they do understand, they see an opportunity to declare a crisis and advance on the populace with force or fraud, or both.

The only school of economics that can readily discern the differences is the Austrian school.  No other have the theoretical basis to make a rational determination.  Another place to study is here.

In a free market economy, these two events, prices rising and falling are critical.  Innovation and entrepreneurship, and conservatives and commoditization, what I describe in my book and classes, and where beneficial, free of force and fraud, is where the beneficial economy occurs.  In a free market, the new is called forth from the entrepreneur by the experience of lack;  each iteration of the good or service leads to wider acceptance, until finally it is commoditized by the conservator, at a price virtually the entire populace can afford.

Rising and falling prices can be good, or bad.  It depends on what is behind it.  We need to know the difference.


Thursday, August 4, 2011

All Hail Iceland's Default

Freedom, peace and prosperity are not possible in a large country or an empire.  This is why USA was started as a federation, a republic of 13 small countries.  We still call these states, but we now say THE United State instead of THESE United States, as we said for the first 100 years or so.

Iceland is one such country, and it is defaulting, and enjoying quick turn-around.  Defaulting would be wonderful for about 348 million of the 350 million USA citizens.  But it won't happen, because a democracy is easily captured by the few.

The Iceland story is a neat, clear version of what happened in USA, read here... a quote:

Iceland’s new banking elite were intent on expanding their ownership of the economy, competing and cooperating with each other. Using their shares as collateral, some took out large loans from their own banks, and bought more shares in the same banks, inflating share prices. It worked like this: Bank A lent to shareholders in Bank B, who bought more shares in B using shares as collateral, raising B’s share price. Bank B returned the favour. The share prices of both banks rose, without new money coming in. The banks not only grew bigger, they grew more and more interconnected. Several dealings of this kind are now under criminal investigation by the special prosecutor, as cases of market manipulation.


But Icelanders are not safe yet, the big countries do not want people to know default is a happy event.  It breaks the bad guys, and ushers in peace, freedom and prosperity.

Here is the last line from the article:

Meanwhile Oddsson was appointed in September 2009 as editor-in-chief atMorgunblaðið, the leading Iceland daily, and orchestrated coverage of the crisis. A commentator said that was like appointing Nixon editor of The Washington Post after Watergate. Iceland’s elite looks after its own.


Wednesday, August 3, 2011

Radiation News

So it seems the kids would not return to the village in Japan, in spite of the government assurances all were well.  So mom bought a geiger counter to prove to her kids all was well.  Geiger counter contradicted what government said.


All of the reactor talk convinced a fellow in Sweden he should build one in his apartment...  and he blogged his experience, including the core meltdown.  Police were called.   Check out the other youtubes on kids building reactors... especially the eagle scout, who has radiation burns on his face.

Anthony notices this article:

"Nothing is mentioned on the geiger counter yahoo group.   But I saw this posted, 
 
 
A doctor noted an increase in infant mortality along the West Coast including Seattle, up 35% since Fukishima.    
 
Hmmm Radiation and Aljazeera in the same email.   Well if we weren't on the "enemy of the state" list before, we are now. "

And from Hawaii...

 
Makes me think clouds of radiation are being released from fukushima.  It's probably melting down.  They should hurry up and throw a sarcophagus around around the reactor, like the Russians did with Chernobyl.   

So what are radiation readings in Seattle area?


Dakota Place Park  7 cpm
My back yard 7 cpm
 
State Dept of health monitoring stations remain off line with the last readings from 5/24/2011.  
 
EPA RadNet link to its radiation monitoring web site is broken.
 
 

Evidently 37 cities need thier EPA monitoring equipment fixed but it's not a priority. 
 


It is strange.   Keeping the monitor off makes people ask questions like,  Why would you stop monitoring when the biggest nuclear accident since Chernobyl rages on?  


Finally, if you search for geiger counters on amazon, you do not get geiger counters.  You get ghost meters and non-nuclear radiation detectors.


It sounds to me like there is a business to be had in reliable information and sources...




Conditioning On China

Here is a comment from a reader to a post yesterday:

If you are successful in producing something, China will surely be successful in undercutting you - Chris


There is nothing to support such a statement making any sense.  There are countless successful brands that have never been undercut by China, successfully or otherwise. And if the world worked that way, why would it matter?

Volkswagen, Apple, Bollinger, my books, almost nothing, really has ever been attempted at undercutting.  There are countless times where successful manufacturers build factories in China to produce goods for sale in USA.  But that is not China undercutting USA, that is USA undercutting USA.

There is the small issue of, if the Chinese were to undercut, to whom would they sell the items?  One does need customers.  Only someone who has never been in business can imagine they would be undercut by China.  What matters in business is your relationship with your customers.  Should your customers desire your products at a lower price, then you of course would be the one who undercut yourself.  This "China as the bad guy" stuff only serves to help that bad guys in our govt and industry who got us into this mess in the first place.

The reason behind the undercutting is starting with President Johnson, and excited under Nixon and all presidents forward, was inflating currency to pay for war and empire eventually brought USA dollars back home, where they might upset the economy.  When the Vietnam war ended, the dollars came back, so US Industry was directed to get that money back overseas, by buying factories, and building them.

Big govt and big biz worked hand in hand to control inflation by overseas "investment" and so draining our productive capacity.  The unemployed were put on welfare, outright checks or govt jobs, so the process was relatively painless.

As China emerged it saw and opportunity to play with the USA, take the offer, produce for USA.  And get paid in funny money. (China uses USA dollar payments to buy T-bills.) The idea from our industrialists was USA was trapping China by paying China in worthless paper.  We got real goods, they had to be nice to us, or we'd default on our bonds.

I never thought that could be quite right, because the Chinese are not stupid, in fact, it seems they field a better first string than we do.  China made things for USA, and got what they really wanted, our technology.  Mission accomplished.

Just as USA can buy things overseas to cool off the money supply, so can China use USA financial instruments to pay for things, around the world.  As far as I know I am the only person who has  spotted this likelihood:  China no longer has all those trillions...  China "spent them" buying friends by making infrastructure world wide, infrastructure that supports China trade.  China could care less if we default in that case, it would not cost them a dime.

There is almost nothing we buy from overseas that we cannot make ourselves.  Almost all importing, as well as exporting, is a reaction to stupid government policy.  We should never outlaw import or export, we should just get rid of the stupid government policies.


Tuesday, August 2, 2011

Will They Steal My Idea?


Hi All I have a great product idea for a business. The product is not for sale in all my extensive searches, I feel passionate about the idea, and I believe the product will sell well. Now I am not sure how to proceed and not have the product idea hyjacked. Copyright? 

Susan

Susan,

Certainly you can avail yourself of intellectual property rights, and operate from a monopoly enforced by violence, or you can proceed on the basis of marketing.  

If you proceed on the basis of marketing, you will learn more, have more fun, and most likely succeed far better.

A likely error in thinking is your idea is so good, everyone will want to buy it, and everyone will want to steal it.  This is wrong.

Although you think it is perfect, most new ides are far from ideal.  They need to be introduced, and constantly fixed, base don market feedback.  Over the years, I say years, it takes to get the product right, you will make money, as you wish.  And as it gets near perfect, you will drop the idea for other more profitable items to pursue, based on customer feedback.

Sure, after a few years, there may be some people "stealing" your idea, and selling it.  But this will be second rate products going to second rate customers.  You lose nothing, it is not your product, it is not your customers.

When you can name the people in the retail stores that have told you it is a good idea, and it does not exist, then you can proceed to the suppliers.  Are you there?

JOhn







Social Conditioning

My father taught at a small liberal arts college, English, for 40 years.  He was armed with a .38 police special, every day, in every class.  Of course he kept a jacket on, as did all professors in those years.  And a tie.

Now you may say, well he was a Southern man.  That explains being armed, and having a back-up derringer at his ankle.  But there were other professors that were armed.  One just did not know.  No one cared.  Everyone knew some people were armed.

His campus, like many schools, had a gun range and a gun club on campus.  Students with rifles, usually in cases, but not always, were no more unusual than a tennis racket.  That was true on campuses all over America.

My father smoked, like most professors, while teaching.  It would not occur to him to drink coffee during  class.  And coffee out of a paper cup would iconographically signal there had been a disaster.  Coffee in paper cups only meant Red Cross, huge disaster, etc.  Today professors drink coffee and would not think of smoking in class.  This is complete reversal is 100% a result of social conditioning.


Sure there were nuts who showed up places and began shooting.  They did not get very far.  In 1966 a drug addled Marine killed a dozen people from an Austin Tower (so many because he was sniping at people).  Texans got out of their cars and returned fire.  Cops and a civilian went up the tower and killed the Marine.   None of this "form a perimeter" and wait.  These four had to get past the sniper to get to the tower, work their way up, and then surprise him.  No one hesitated in those days.

But now there are more nuts with guns shooting up campuses than then, because we have far more people on school prescripted drugs, and most of the people, if not all in the last few decades who have shot up schools, had haywire med crisis.  And no armed professors and students.  Since guns are not allowed on campuses, the nutters head where they know they will not be challenged.  Gun free zones.  When seconds count, the police will be there in minutes.


Today police officers are conditioned to panic when they see a gun.  As we moved from police as constabulary to paramilitary police, police work has attracted those who tend to fear and panic, or just follow orders.  It was not always thus.  If we are going to have police, we need to return to a constabulary.

Here is a picture, from the 1960s, when my father was armed.  The Black Panthers were active in Washington State.  They took their grievance to the Capital.  And came armed, with shotguns.  Six leather jacketed, bereted revolutionaries, and one bored State Patrolman.  No one panicked back then.


Courtesy of Washington State Archives.


Monday, August 1, 2011

Microsoft Store's Extremely Stupid Move, If True.

After the post below went up, I got wind that Microsoft is offering about $10 retail, the going rate, for new hires, but is offering $15 an hour for people to leave Apple Store and come across the street to the Microsoft store.  So apparently Microsoft wants to import Apple ethic into its store.

Now this is what is going on in China, where a new factory opens up, and it steals employees from an established factory, by offering higher wages.  This is good.  In this instance the few Apple employees for whom money is everything will move over to Microsoft, where money is everything.  Those who do not move over from Apple will grouse and no doubt Apple will raise some wages.  Better for workers all around.  And Microsoft then has no advantage, but Apple unloaded some not-so-good employees.

Next, Apple hires thence are all purely into Apple, not just the money.  Better for Apple and their customers.

At the same time, the majority of employees at Microsoft store will know, by their paychecks, that they are less valued than ex-Apple employees by Microsoft.

Microsoft had a reputation for having the smartest human resources people on the planet, and the proof was microsoft employees, who of course, because they got hired, were the smartest in the world.  Proof positive.  Well, if so, they must have left, because even I can tell this is very bad policy.


Are The Wars Over?

How would you like to be a soldier overseas, and read about the budget "crisis" (actually theatre) in USA, and see a breakdown of the deal, by the numbers:


•$1.2t – discretionary cuts – defense and non-defense. *Notes Boehner agreed to $1.2t before broke off talks w/ WH.
•...
•$1t in savings from winding down the wars in Afgh and Iraq.
•$400b in interest savings.
Now never mind that in this breakdown of the deal, "wars" might be counted twice, the point is USA politicians are talking plainly about throwing in the towel in its wars, as a done deal.
Because of the rules Congress itself has set, the CBO is required to take current war funding levels in Iraq and Afghanistan and extend them far into the future. Plus inflation.
"The way the CBO baseline is calculated is real simple," said Holtz-Eakin. "You take what is on the books and extrapolate at the rate of inflation."
But that isn't the best reflection of reality. War spending is at elevated levels at the moment. And it should soon decline. A lot.
Forget the theatre and politics, there are real USA soldiers facing real enemies overseas.  The other side, very ticked off citizens of those countries, read this stuff and plan accordingly.  We never had any right or business invading those countries, and now that the politicians no longer care, those soldiers are at higher risk.  This is nuts.  
Of course ending the wars would benefit the economy, if only to put all of those soldiers available on something productive.  Clinton prosperity was based on the end of the cold war.
This country was founded with the idea of no standing army.  A standing army is a toy for politicians.  The politicians are bored with this toy, so they have abandoned it in the sandbox.
The other side is watching closely, and thinking about this opportunity.  We should surprise them and pull all of our troops out before the other side figures something clever to do.


Sunday, July 31, 2011

Another Fake Apple Store! In USA! Across from Apple!

For the longest time, there were no specialty retailers, competing on design, in the category of computer gear.  Apple finally figured this out, and designed their own upscale stores.  They are doing so well, in China people are faking complete Apple stores, to the point the employees think they are working for Apple, see here.

This, from Apple, is the real thing.


Now, directly across the street from a very busy Apple store, another group is faking an Apple store.


That company is Microsoft, who is copying every feature of the Apple store, down to the clerks wearing solid T Shirts.  Microsoft is really pushing the envelope when they put their logo on the sleeve of the shirt rather than the chest.

Happily Apple was already doing business when Microsoft began, so there was a choice in the micro-computer world.  I found the Microsoft products dismaying, even a net deficit when trying to get work done.  Apple products suffered no such lack, so I have been all Apple, all the time, since 1984.  (I did twice buy a pc, thinking it was required in some application, but it turned out to be not true.)  I go farther than many, I will not allow any microsoft software on my machines.

In their Apple store copy, Microsoft is mimicking the Apple "Genius Bar" with the Microsoft "Answer Disk."  Microsoft is going after the business market, but too late, Apple is winning that battle.  And Microsoft will push its Windows Phone 7.  Uggh!  As Apple always makes their products better with the new versions, Microsoft is always just trying to get their products to work.  Version 7 and it still is no good.

Microsoft is trolling for employees, and no doubt people not hired by Steve Jobs at Apple will find gainful employment.  But the url for a job at the store with Microsoft is MicrosoftStoreJobs.com.  Is this subliminal advertising referring to Steve Jobs?  Will people feel "Steve Jobs?"

I was mystified to watch microsoft grow in spite of its mediocre, or worse, offerings.  Then I happened to see an article with the charts of growth of government workers juxtaposed to an article on the growth of microsoft.  Looking closely, they were one and the same.  Aha!  Microsoft was selling to a government hiring people like crazy in the 80s and 90s and 00s, and provided all these people something to do all day.  Screw around with a computer.  And governments actually paid for software back in those days! There was no market feedback to Microsoft, just govt worker feedback that did not care if the product was any good.  Whether or not these people produced anything did not matter, the taxpayer would shovel out their pay no matter what.

And since microsoft could simply shift the cost of computer security onto the govt and taxpayers, they could keep the money that would have been invested stopping spam and building security.  Thus Gates' deca-billions.

Apple of course served real working people, so security was good and they came up with good spam protection, but most of all, the computers and software do what we want them to do.  Microsoft never inculcated customer satisfaction into their corporate identity.  So now as govt shrinks, and microsoft follows, microsoft can only copy Apple.  It is kinda sad.  Others have tried it, in the same shopping district, and their stores have more employees than customers.

Maybe there is hope.  Bertolt Brecht said a man can reform his life with his dying breath.  True, and Graham Greene countered if it is not a lifelong practice it is unlikely to occur at death.

Also, a Neiman Marcus grade electronics store might work well, as a retail venture.


Blaming Obama

Just as the perpetrators of the Boston Tea Party dressed up like Mohicans to disguise the villains, so the democrats and republicans dressed up Obama to disguise their theft and perfidy.  So the budget is up 35% since Obama took office.  He did that all by himself?  So the Allentown steel plant closed after Obama promised to keep it open.he could have done that all by himself?

If you are dumb enough to believe it's all Obama's fault, then you are dumb enough to think the next politician can fix it all by herself.

We don't need the right people, we need less people in government and more people working.


Islam is the Religion of Peace الإسلام هو دين السلام

Islam kept the "eye for an eye" justice of the Judeo-Christian heritage, including the part that the witness or the victim be the executioner.  It seems so harsh to a people conditioned to passing off their responsibility for justice to third parties, paid for by fourth parties, as we do in the United States.

In this system we have, the state becomes the offended party, and the state has no choice but to fill, and then overfill, its prisons.  And whatever the political agenda of the state powers that be happens to be, is followed by this apparatus.  In USA, the state policy is eugenics.

What a mess.

I occasionally hear on some talk radio while driving some nut, usually women, going on about Sharia law being instituted in USA.  We never got any rule of law instituted here, why would anyone think Moslems will succeed?  And even if they did, how is Sharia law worse?

Here a woman, blinded by a jilted suitor, is about to pour acid in his eyes, per the law, and she forgives him.  He goes free.  Allah favors the compassionate!  تفضل الله الرحيم Jesus, of course, said the same thing.

Why God Almighty himself recommended eye-for-an-eye law that Jews and Christians reject is, it seems, that it allows perfect mercy instead of imperfect justice.  It also provides for perfectly graded compensation, since the perpetrator is very interested in making a deal that will save his eyes. He may agree to run errands for her 4 hours a day for the rest of his life rather than be blinded himself.  The taking of the eye was a relatively rare event in history of Sharia law.  But mercy is far more likely.