Saturday, October 10, 2015

The Right Interest Rate, Jews and Small Business Start-up

As a sideline I began teaching small business international trade in 1984, after a decade of working for others in the field.  My goal was actually to write a book, for two reasons; 1. To get down the essence of the work, 2. To make a record of what was important as we moved into (as anyone could see) big changes in the world.

Thirty years later, principles haven't changed, but we are now an impoverished nation, and no more aware of it than the Soviet Union was in 1989.  The biggest challenge for the USA, as it has been for the Russians, is too few know how to run a real business.  Anyone can get get loans and pretend to be in business for years if need be (serial "entrepreneurs") and our biggest companies have all been on life support for 40 years.  There has been no apprenticeship program that led to new masters in each field. We've lost three generations of entrepreneurs to F I R E.

Let me define terms again, first, there is mal-credit and bene-credit.  I recall bene-credit, when the vast majority of commerce worked neither on money nor credit-at-interest (usury) but at on credit at no interest.  Sure there has always been loan-sharking, but what was new starting in the mid-seventies was the fraud of lending credit with no assets backing the loan.  Loan sharks actually lent something and took a risk of loss.  But not banks, starting in the very early 1970s.

With no rational limit to what might be financed, astonishing misallocation and malinvestment followed.  Anything goes!  There has been no rational limit to what we can finance, so instead of alabaster cities we got wars, more wars, poverty, crumbling infrastructure, sports stadiums for billionaires, privatized profits and socialized losses.

What astonishes me is how all commentators look to interest rates as the nexus of the problem.  They agree the problem is to the degree the interest rate distorts the economy, we have problems.  They only argument is what is the correct interest rate, and in this case each specially pleads that someone else's ox  be gored, not their own.

So there is near 100% agreement the problem is interest rates, but the sturm-und-drang is over the right rate and how to achieve it.  What do we know?

1. For most of history, most commerce has been on asset-backed, interest-free credit as the basis for an economy.  Money (properly defined) is for special deals in which relational obligations are extinguished.  There is simply no need for and interest-based loan in commerce.  All needs can be met by other means.

2.  In this forty-five year experiment in asset-less credit lending, at interest, we have seen interest rates go from a few percent to 21% and now down to zero (and even negative, effectively.)  That range pretty much gives every interest advocate an empirical basis to stake a claim on the benefits of charging interest. Care to point out when, since 1970, the economy has been fruitful, prosperous, just, (name your standard)?  Show us your ox.

3. You might argue, well, at the current zero (effective) interest rate, is not the usury-free argument destroyed by the present dreadful economy?  Not at all, for the overwhelming factor is that presently the zero interest is with asset-free backing.  Even if you are not charging interest on cars, you've misallocated resources to make cars the "buyers" will not pay for, and you've "educated" students with content they will not use and student loans they will not repay.  Java coders re-educated to be roofers, roofers re-educated to be java-coders.

4. And finally we know the solution to the problem, de-legitimize (not criminalize) the charging of interest on loans.  If and when no judge will enforce the interest portion of a contract (like no judge will enforce a gambling debt) then the practice will dwindle and drift away, losing the force needed to maintain the fraud of any loan at interest at any amount for any duration.

There is no rational limit to how far this might go, the bankers simply keep probing further and deeper, without a clue, but always with a jet ready to flee to a paradise prepared elsewhere.  There is no rational limit to how far this can go, so when it comes crashing down, it will also be for some irrational reason.

(And as an aside, when I say "bankers" I don't mean Jews, I am not persuaded by the delusional argument "it's the Jews."  It's us, the Rockefellers, Morgans, Mellons and their protestant work ethic devotees. It's no coincidence that before this experiment in massive fraud the Chairmen of the Fed Reserve were WASPs, and starting in 1970 (that year again!) the Fed Chairmen have been Jews.  If you are going to risk your country's economic health for personal gain, make sure you have some Jews out front to take the blame. It always works. Jimmy Carter, my favorite president, appointed a goy in '79, in an attempt to get us back on track.  The guy lasted a couple of months.)

Stockman is doing a good job collecting and distributing commentary...  Buchanan on the Bush/Cheney/Rumsfeld criminal wars, how mal-credit made China a commodity giant, and now it has a giant usury problem.  Global Stock markets have lost ten trillion in the last three months.  Lost?  No, the valuations are just be adjusted and saps paying into pension plans are being gored.  One specific loser is a Chinese billionaire who made a bid to create a second Panama canal.  Oooops, he is down 90% on his tally, for no billionaire actually has any money, they have nominal tallies of what they have accumulated.  No one objected when they were told in 1998 their $200,000 house was worth $300,000 as interest rates (there it goes again, the heart of all of these problems, usury, charging money on loans) dropped from 9% to 6%.  But now that interest rates are near zero, and the house is nominally worth a million, and the household income has not gone up, but taxes are still a flat .006 on a million instead of $200k, and the debt on the house cannot be paid... oh ouch, once a millionaire and house rich, now a slave tied to a bank loan.

What is the policy answer?  More funny money, until it breaks.  if and when, watch out below!

A big unseen monster is global dollar fund shortage.  Well, yes and no. Yes, it is a symptom of a terrible  disintegration, but a disintegration of the false economy.  It has nothing to do with money, everything to do with currency as tallies and nominal valuations.  If you see syphilis dying out, you can relax.  Watching these problems, I am relaxing.  It's an economy dying, their economy, not mine.

Chinese containerized freight is down 30%...  bad for the big boys.  Good for me and my customers, my economy.  In their economy it is all lay-offs and cooking books.

USA Ag exports collapsing,  which is disastrous for the big boys, like Monsanto whose unnatural practices are catching up with them, stock down 25% this year.  At the same time, the food in my economy is enjoying growing exports.

None of this is secret, but what else can people do?  They just await the news, or play on facebook, a drug designed expressly for this time and place.

There is a solution, it is well known, but there is a problem with that.  A great idea can be had, but does anyone know how to market a product and develop a business?

Well, not enough people, and certainly no one learns "how to" in school.

They all learned false economy methods in which results do not count.

Let me give you one tiny insight that astonishes any student I teach under 40 years old (for they know no better.)  I deliver noncredit courses through colleges on small business international around the USA and Canada both online and in person.  The schools have learned online marketing is delusional.  To get enrollments, they must still mail out a catalog of course offerings, that is the offerings printed on paper and sent through the USMails.  Cost of acquisition of enrollments is about $7 each.  With online marketing, cost of acquisition is about $90 each.  (Divide the money spent by enrollments gained, learn the cost of acquisition by method.) Since most course fees are less than $90, schools avoid online marketing.  This is the problem for all online marketing, whatever the product, the cost of customer acquisition is more than the cost of what you are selling.  Yet, try to hire a marketer who is not trained to drain your company of all profitability, sooner or later.  (In 22 years of asking, I ask again, someone prove me wrong with evidence of online marketing working.)

On the other hand like paper catalogs of course mailed to homes, there are still principles and practices that actually work, although as perplexing as a slide rule to an engineer who is used to the TI-90.

But access to that cutting edge info is fast becoming lost. How come?  Usury again, charging anything on any loan at any amount for any length of time.  Student loans, crossing a trillion and a half, have nearly killed the market for continuing ed.  Burdened with useless information (as Drucker said, you can tell when info is obsolute, universities make it core curriculum) and crushing loan debt, people who would have gladly taken an improving noncredit course are wondering where the next meal is coming from.

This will come back to haunt university administrators, for it is well-established that continuing education is a prime recruiter for credit programs (degrees).

I've had two seminars cancelled for low enrollments, a first in 30 years of lecturing.  The time not lecturing will be spent on considering this development.  Often when I see something unexpected of perplexing in business, I look to the music industry as a model.  The seminars sell the books?  How about the books sell the seminar?  Back to correspondence school model?  hard to say, but I'll for a hypothesis and test it. I'll keep you updated...

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Sunday, October 4, 2015

All Unemployment is Voluntary

It's risky including "all" in any statement, but in this case it is accurate.  Now, there are people unable to work for illness or injury, but they are on the casualty list, not unemployed.

If someone is not working, it is because unemployment is preferable to what work is on offer.  Countless jobs go begging to be filled, and I am not talking "would you like fries with that burger?" or the poverty draft into the military.  More below.

For those who say "Mexicans" stole their job, feel free to sign up with Labor Ready and "steal" a job a Mexican would do.  Anyone complaining about immigrants is lying to himself, and slandering people who are willing to work.  Indeed Labor Ready is changing its name to True Blue, and their system of dispatch is truly random.  Whole lotta "temp to hire" blue collar work there.

Since we are no longer offered a good education in USA, there is no way to know we've seen this all before.  Lucretius was complaining about all the immigrants in Rome, made something of a career of it (like Pat Buchanan today, who well studied Lucretius).  I am also well acquainted with the reality on the ground, practices that would get WASPs thrown in jail that are tolerated among the recent immigrants.  Yes, yet again, the hegemon understands perfectly well people thrive in anarchy, and allows anarchy among the newly arrived, in order that they establish and thrive better faster.  Yes, I see the BMWs and the MBs at the welfare offices, and I even know some of the people driving.  Don't be bitter, be happy with your portion.

As to Indian and Chinese immigrants "stealing" your job, and the mysterious preference for foreign engineers over USA engineers, we have one well documented case of a foreign engineer turning his work over to a dozen people overseas.  Glowing reports on his productivity.  If that is how the game is played, then play it, don't whine. If you need to go to India and line up a dozen people in India to pay to do your job while you are in USA, then go!  Every computer engineer major in USA should spend his junior year abroad in India lining up a crew to create his cutting edge senior project and standby to work when he gets hired at Google or Amazon or Apple.

I once worked a year in the orchards to learn the food business from the ground up and the tree out, and I got paid better than the foreigners, in spite of being rather worthless in the field.  How come?  Because I was white...  owners are desperate to have American managers, if they can find them.

Of course, there is an alternative, and that is start your own business.  The probability is these people all standing in line in 2011 are still standing in line.
Job seekers line up for a job fair in midtown in New York on Monday, August 15, 2011. (Frances M. Roberts)
http://dailysignal.com/2011/08/24/cbo-reports-good-news-possible-built-on-shifting-economic-sands/
But had they begun their own business, they'd be hiring, not standing.  There may not be any jobs, but there is plenty of work, if you understand the accurate definition of wealth.  Start your business now!

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Example 77,402,349 of Why Never Let Government Regulate

If true, VW has been exceptionally sober and clever about the state of regulation in USA.  Their diesel engines were programmed to perform to spec when tested by the sinecurial emission testing crew.
Suffice to say, regulators were livid once they caught on. Last Friday, the Environmental Protection Agency announced that Volkswagen had very flagrantly violated the Clean Air Act. Not only did the EPA order the German firm to fix the affected vehicles — which include diesel TDI versions of the Golf, Jetta, Beetle, and Passat — but the agency could end up levying fines as high as $18 billion. The Department of Justice is also contemplatingcriminal charges.
Livid. "Once they caught on."  VW was scamming the regulators for ten years, and they never caught on.  (Sound familiar, can you say Madoff?)

It was of course, a private group, nosing around on their own, that sniffed out the mischief.  There are no cases in which USA regulators have found wrongdoing.  They only wake-up when private entities make enough noise to drive the media form its comatose state.

Now groggy and cranky, they will fine VW, which will raise prices to cover the cost, and since the best (everyone agrees, VW) will be priced higher, welfare-queen USA diesel producers at Ford and GM will also raise prices and be as competitive as yesterday.  As usual, when the regulators get busy, the consumer is harmed.

If we care about holding entities to standards, to that degree it is work too important to trust to the hegemon, which fails at everything, by choice.  Free markets keep businesses honest, and government protects malefactors.

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