Saturday, February 18, 2012

Say It Ain't So, Mish!


Mish claims the road back to prosperity is shared sacrifice.  He must have been blinded by the points in the specific article he was referring to and did not think through his argument.

What, in what proportion, is to be shared by whom, and on what schedule?  To believe this can be figured out, and summarized in the slogan "shared sacrifice" is to be as obtuse as the people who got us in this mess in the first place.  Mish is not obtuse.

Mish quotes from an interview that gets at the heart of the matter:

Right now, the four main components of the federal budget are Social Security, Medicare, Defense and interest payments on the debt.

Hang on, we have an immediate problem not contemplated by that list: misallocation of private wealth.

So there are two problem areas, overinvestment in public debt, misallocation in private debt.  The flip side is the unstable distribution of assets and wealth.  Here the government has no problem, because it can always commandeer private property, using violence if necessary.  It is private property where the pain is felt, and whence government wealth and incomes are derived.  So the problem is entirely within the sphere of government policy, the pain is entirely within the sphere of private property.

Now the patterns of laws in the United States prefer the concentration of wealth in the hands of the few as it militates against new wealth creation.  Yes, one big culprit is the federal reserve system, but the other is the fractional reserve laws and the problem if usury being protected in law.  (Usury, like gambling, should not be outlawed, but the usury portion of loans, like gambling debts, ought not be enforceable in the law. But that is another day...)

So to this idea that we can get out of this mess by shared sacrifice. What is it that we are suppose to share?  What is the sacrifice?  Is it we need to work more for less?  Get less than promised when we began pitching in to the above systems?  Die earlier so we are less of a burden?  Hard to say what is contemplated.  

But what is clear is that shared sacrifice means that Social Security, Medicare, Defense and interest payments on the debt, all failed government policies, is what is to be supported by our sacrifice.

We are on the path where bailouts and regulations will continue, all in the name of “shared sacrifice” and each program will have winners and losers, spiraling downward, where each attempt at sharing alienates ever more people... so we will need a strong man to fix problem. It will get so bad that we will need a “strong man”, a fuhrer, to lead us out of the problem.

We’ve opened the way for the US Military to take over and provide the strong man necessary to save our country.  Count on it.

How to redistribute without requiring a strong man?

The Amish are exempt from Social Security, so let’s learn from the Amish and get rid of it.  Medicare has ruined medicine, so let’s go back before Medicare in the 1960’s to when we had doctors who care.  Let’s follow the constitution on defense and save trillions.  And let’s repudiate interest payments, and return the principal.

That ends the failed government policy problem.  But that still does not solve the problem.   Our system promotes the misallocation of private wealth. 

Everyone holds exactly the assets and liabilities they gained during the boom that the failed system allowed.  One’s balance sheet perfectly reflects one’s praise or blame.  By returning to free markets, and property rights, those who have ill-gotten gains will have a hard time keeping them.

For example,  if we had respect for property rights, and a deleveraging of anti-market regulations, Goldman Sachs would find it simply does not have enough employees to keep track of all of its assets.

Goldman Sachs has trillions in assets under its control, and protected by a anti-free market collection of laws and regulation.  Among those trillions in assets is title to a hotel in Bakersfield, California, from which they mulct the profits while enjoying a tax write-off..

We have in the free market property rights a system called adverse possession.  One may take ownership of a piece of property, say a hotel, after a period of time, say ten years, as long as your use is exclusive, notorious, adverse among other elements, it is yours.  

So say the employees of that hotel form a corporation, or a soviet, or whatever, and stop sending money to Goldman Sachs.  Say 100,000 such assets did so.  Goldman Sachs would never get around to challenging all of the adverse possessions, so most would in time transfer to the adverse possessors.

A speculator with one condo too many is going to lose it.  Prices will fall.  Economy will recover.  Country’ll grow.

In precisely the measure the bad laws allowed Goldman Sachs to arrogate wealth unto itself, the undoing of those laws would redistribute the wealth into exactly the right hands.

So enough of this talk of “shared sacrifice.” What we need is a return to freedom, and stop propping up failed policies and those who fail under that system.

To return to prosperity we must return to a natural economy, not fix the unnatural things.


Friday, February 17, 2012

Minimum Wage Leads to No Wage

Buried in this Gallup Survey of Small Business are some fascinating tidbits.  For example, 1 in 20 small businesses plan to retain unpaid interns to do the work.  O! The ramifications!  The wage in these jobs is zero, by definition.

First, there are plenty of employers who would hire people at wages above zero but below minimum wage.  There are plenty of people who work would below minimum wage.  There would probably be no one available to work at zero by the time the market cleared all of the people willing to work for less than minimum wage.

A person working for less than minimum wage is in a position to advance within a company.   The unemployed do not.  Being unemployed makes it more unlikely someone will hire you.

Culinary schools each quarter graduate tens of thousands of chefs who understand that their first job will be unpaid.  The system is called "staging" (pronounced stazhing, I suppose to make it sound exotic, when it is really just unpaid work).  Ostensibly these graduates (owing from thousands to hundreds of thousands in student loans) are learning new techniques and strutting their stuff in restaurants.  They work for a short time (a few months) and move on.  Of course they are working for a meal, they work like dogs, go unpaid all because people need to adjust to the injustice of minimum wage laws.

When forced by stupid laws to pay some people higher than they are worth, then the money has to come out of someone else's pocket.  Another worker, not the owner.  You can say that is unjust, but really it is only the effect of an earlier injustice, taking the right to contract away from free voluntary parties.

Working for free is illegal under the minimum wage law, so they came up with staging to disguise the fact.  With all the interning going on,  strict laws on interning have been written, with serious consequences for violations.

In order to qualify as an unpaid internship, the requirement is simple:  no work can be performed that is of any benefit at all to the company.  

 Does one think 1 in 20 businesses facing economic hardship intend to supervise people who will provide no benefit?  I think not. And as these things go, when the laws were written, they were written to exclude lawyers and politicians.  They are free to have unpaid interns. Of course.

Most small businesses are not hiring because they doubt the economy will rebound, and about half because of govt regulations.  Govt policy assures the economy will not rebound.  Because it will not rebound, we will get more regulations.  The bad USA economy is in a death spiral.  When it crashes, it will be the self employed, small businesses that lead the country back to peace and prosperity.

Starting a new business, unshackled by legacy dead economy malinvestment, is the path to economic health.



Thursday, February 16, 2012

How Many Customer Orders Can We Expect?

CJ sends in an excellent question from the trenches:


A general question: out of all the stores you show a product to, what is a good share of orders?  That is, if I show it to 100 stores (not happening), if I got orders from 50, is that good?  And a follow-up: out of the original 50, how many re-orders would be good?

***Wow...  I have no idea... never considered that metric, since trade shows are such chaotic events...  any given person at any given time in a booth might be on any mission... buyer, seller, press, show  management.. my guess is the big guys scanning badges are working those metrics and holding salepeople to performance.

And here is the other part, it’s not about percentages, it is about covering minimums.  Say the minimum supplier requirement is $5000 worth, and you are wholesaling at double, so you need $10,000 in orders collectively, and the workable time frame is X.  the goal is not some percentage of contacts converted to orders, the goal is the $10K within X.
So say the minimum needs be met is 250 orders within the ten weeks of the trade show cycle, and say that is within X.

Best case, you get 250 orders.

What if the first 250 orders were placed by the first 250 people to look at the item?  Then I’d say you spent way too much time on getting the design right. Such effort would cost a fortune you would likely never recover.

What if the first 250 orders were placed by the first 1000 people to look at the item?  Then I’d say your probably within reason, and the sales rep was not too disappointed.  

What if the first 25 orders were placed by the first 500 people to look at the item? Looks like a high rejection rate. Then I’d say your rep would be saying, “everyone says the sample is wrong color, weight, speed, function, material, flavor (or whatever) and you should redesign before we go on.”

What if the first 250 orders were placed by the first 50,000 people to look at the item?  Never been here, so it is an interesting problem.  Clearly you have negative feedback, but clearly you can import and make money.  What to do?  Do this transaction, plus re-design for the next cycle?  Reorders are unlikely for an item with so little attractiveness, but one never knows.  Interesting hypothetical problem

As to reorders, they indicate you are on the right track.  In the case of no reorders, the “no” always comes with “why...” the reason is that customers said “wrong color, weight, speed, function, material, flavor (or whatever).”  So redesign is necessary.

And reorders are being matched with new customer orders to make up a sufficient minimum order quantity, in order that we may increase the frquency of imports, so we can amke more money by frequency, not volume.

And as this is all going on, we are not only redesiging, we are acting on feedback of what else we shuld be developing, so we can sell more items to each customers with each order we get.

It is more of a spiral than a line.  Does this make sense?


Wednesday, February 15, 2012

Tuesday, February 14, 2012

Cheapest Worldwide Telephone

For my first 20 years in business, to make a call one had to find a telephone.  Of course one had a telephone at the desk, but to call outside the city was expensive indeed.  Then came cell phones, and then voice over internet.  Now cell phones can do fantastic things, but they cost at least $50 a month, minimum.  In the good old days, phones were about $10 a month maximum.

Well back to the future.  If you can stand making or receiving calls only within range of a wifi hot spot, then you can have worldwide telecommunications for about $10 a month, again.  For us who once had less access to phones, that compromise is no compromise.  How to do it?

You all know what an iPhone is, Apple's amazing cell phone.  Well, the iPhone has a twin, called the iPod Touch.  It can do everything the iPhone can do, it just has no cell phone circuitry. But it does have wifi circuitry.  So, for $10 a month, you get VOIP telephone, all USA and Canada, and overseas for cheeeeep.  You can assign your present phone number to the iPod touch.  If you are out of wifi, the service takes a message.  O and text messaging is no extra cost.

Here is info on the iPod touch, so you can learn more about it.  Apple sells it cheapest on Amazon.com.


Monday, February 13, 2012

China Social Unrest

Mish is noting debate is China is heating up as the economy there softens.  Here are some excerpts from a typical article with the typical argument:


The deterioration of the social ecosystem comes from the growing corruption of uncontrolled power. In the study of the process of China's transformation to a market economy, we have faced the fundamental issue of how to regard the costs and benefits of reform. Questions arise, such as: Where does the motivation for reform come from? Who benefits the most from reform? Who bears the heaviest cost? Talk of the "labor pains" of reform and the unavoidable "costs" of reform has already lost its persuasiveness because the same people are always bearing the costs and the same people are always receiving the benefits.
....
Power is becoming too formidable and cruel. It is out of control, and without limits. It has kidnapped society and strangled reform. Facing this, finding a solution is a matter of vital importance. In a situation where special interest groups have choked off the possibility of various types of progress, building a just society and enacting reform is difficult. Moreover, there is not a ready-made civil society waiting to settle into the void.
We need to realize several things. The impetus for reform comes from society, not from authority, and reform within the system is produced under the force of social strength. Fair and just rules are formed by interaction between various forces. Civil society is produced by the participation of citizens. Extrication from stagnation and the restoration of social vitality can only come from the start of civil consciousness and civil action. Only by empowering society and enlightening citizens can the strength to reform be developed.

What I would note is that the problems do not come from a market economy, but from the elements of the economy which are not market-based.  State owned enterprises, in my experience, are the most trustworthy entities to trade with.  It may be best to corporatize them (as opposed to privatize, a mistake Russia made), but also keep in mind within them they have the discipline to produce clean products in fair dealing.

China may have SOE (state-owned enterprises) but USA has SDEs (state directing enterprises).  Several Nobel Laureates have noted that in capitalism the regulated own the regulators.  Big Pharmacy tells Big Government what to do in USA.  Whereas with the communists you might get fair dealing, you won't with Big Business in USA.

I'd say there is no ready-made civil society to support a free market in USA either.  If Ron Paul won the election, there would be too few people to fill in the gap between what a free market could produce in time before the SDE's (state-directing enterprises) were dismantled.

His final call is for  the emergence of common law, which history shows is the fairest and soundest kind of law.  The best governments adopt that kind of law.  China's legal system is still evolving, so it has a chance.

Also, at over 2000 years old, China has the Tang Dynasty as a cultural precedent to study and learn from.  And China has Hong Kong today as an example.  USA has neither resource to guide it out of the troubles it experiences.  It looks to war to solve problems.


Sunday, February 12, 2012

How to Scam a Catholic Bishop

After Saints built hospitals, schools, universities so there would be an independent and self-supporting network of social services compliant with church teaching, well-meaning church leaders decided to go for the big bucks that the Great Society was passing around.  What a mess.

The model was established for Catholic Colleges after a conference in Wisconsin. As money, and new regulations with it,  those pesky strings attached, poured into Catholic schools, so went the hospitals and every other Catholic charitable effort.  It does not take long before the Catholic operations cannot function without govt (taxpayers) cash.  People who once put $5 in the collection basket when that was a lot of money continue the practice, because their taxes are going up to support government programs delivered through Catholic charities.  All the more the Church depends on the taxpayers.

At the time these changes were taking place plenty of people were jumping up and down and screaming at the bishops "don't do it, don't do it..."  But they did it.

When societal mores change, the Bishops are in the funny position of arguing they must not be told what to do with taxpayers money.  Now the Bishops are in a showdown with Obama.  They are organizing resistance to Obamacare, and here is an important premise from which they proceed in their arguments:

The Catholic bishops have long supported access to life-affirming healthcare for all, and the conscience rights of everyone involved in the complex process of providing that healthcare. 


Note the two errors there?

Access to life-affirming health care cannot be provided by the state.  To integrate private medicine with state delivery is to yoke two unequal animals to the plow.  Actually it is to yoke two animals heading in opposite directions. And access is not enough, there must also be innovation and a general inexporable lowering of cost.  The state cannot provide this.  Only the market can provide this.

The second error is to assent to the idea that medicine delivery is a complicated process.  Not true.  Regulations and malinvestment complicate things, but there again it is the state intervention that is the problem.

Now the Bishops are saying you cannot force them to offer contraceptives and abortions in their facilities.  In places where they were forced, the Catholics either accommodated the state, or shut down.  The church cannot start over because medicine now militates against innovation and start-up hospitals.  There is no going back to free trade in medicine without first dismantling the USA economy.

The Bishops are fighting fiercely to get back to where the government supports them only to a certain extent.  What the Bishops should do is fight for free trade in medicine, not single payer with exemptions. But you can't do what you know nothing about.

Don't worry, Obama will back off.  Obama was set up in this as part of the campaign to elect Hillary.  But the net result is the bishops will offer a sigh of relief when they are given an exception to single payer, in a system that offers dubious health care.

At the same time, Christians who stick close to the teachings of Jesus came up with health insurance that provides for no contraceptives or abortion, is not subsidized in any way, and was one of the 800 + orgs that was given and exception to obamacare mandates.  Bishops should reflect that when all else fails, try to follow Jesus.

When will the bishops learn not to take the money?  The pas de deux between church and state over the millennia has been been disastrous whenever the Church integrates with the state.  Here we go again.