The coming economic crisis

[John Zen]

There is the Law that tries to make people equals, and there is the Law that tries to treat people equally.

 

All of our debt comes from trying to make people equal through entitlement spending, and the day of reckoning will come sooner or later.

 

"Without laws or compulsion, men would dwell in harmony" - Lao Tzu

[joeblast]

Doublin up here...

 

 

 

http://www.huffingtonpost.com/matt-ridley/down-with-doom-how-the-wo_b_630792.html

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"`the world is coming to a turning point'.

 

Ah, that phrase again. I call it turning-point-itis. It's rarely far from the lips of the prophets of doom. They are convinced that they stand on the hinge of history, the inflexion point where the roller coaster starts to go downhill. But then I began looking back to see what pessimists said in the past and found the phrase, or an equivalent, being used by in every generation. The cause of their pessimism varied - it was often tinged with eugenics in the early twentieth century, for example - but the certainty that their own generation stood upon the fulcrum of the human story was the same.

 

I got back to 1830 and still the sentiment was being used. In fact, the poet and historian Thomas Macaulay was already sick of it then: `We cannot absolutely prove that those are in error who tell us that society has reached a turning point, that we have seen our best days. But so said all before us, and with just as much apparent reason.' He continued: `On what principle is it that, when we see nothing but improvement behind us, we are to expect nothing but deterioration before us.'

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Here's some realities on job creation and entrepreneurship - and how again, those things that will best create jobs are the first things ignored in the current jumble the US finds itself in.

 

http://freemktproject.com/?p=269

 

"the most important processes have happened, prior to anyone on Wall Street having anything to do with a company." (so in effect, harping on "wall street" is but a distraction in the context of the job creation process.)

 

"If one was to make an effort to create more wealth in a struggling economy, it would seem fairly obvious that a great place to begin would be to encourage and reward people going through the first three steps in this process. One might even think that making it easier to go from concept to production, and more rewarding for people who provide the creativity and take the risks would be an intelligent approach. Instead, the government is placing more regulatory burden on those who create and finance new businesses (such as higher qualification for being an Angel investor, which reduces the number of people available to be Angels), and it is reducing the pay off for taking the risk by increasing capital gains taxes and putting additional taxes on Venture Capitalists."

 

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So in effect, stifling the roots of job creation, tossing money at unemployment benefits and lumping hemorrhaging pension payments onto the national debt via "stimulus"....

[gendao]

http://freemktproject.com/?p=269

 

"the most important processes have happened, prior to anyone on Wall Street having anything to do with a company." (so in effect, harping on "wall street" is but a distraction in the context of the job creation process.)

 

"If one was to make an effort to create more wealth in a struggling economy, it would seem fairly obvious that a great place to begin would be to encourage and reward people going through the first three steps in this process. One might even think that making it easier to go from concept to production, and more rewarding for people who provide the creativity and take the risks would be an intelligent approach. Instead, the government is placing more regulatory burden on those who create and finance new businesses (such as higher qualification for being an Angel investor, which reduces the number of people available to be Angels), and it is reducing the pay off for taking the risk by increasing capital gains taxes and putting additional taxes on Venture Capitalists."

Of course, the real goal here is to destroy private industry and thereby keep increasing Socialism.

 

This really bites too because I may prospectively be starting a company in some time. So, what these Big Lib laws are eventually going to do is force entrepreneurs and employers (job suppliers) to take their companies overseas to less business-hostile countries. This is the ultimate effect of oppressing the Beta male class foundation of society and promoting welfare alpha thugs...

[-O-]

Of course, the real goal here is to destroy private industry and thereby keep increasing Socialism.

 

This really bites too because I may prospectively be starting a company in some time. So, what these Big Lib laws are eventually going to do is force entrepreneurs and employers (job suppliers) to take their companies overseas to less business-hostile countries. This is the ultimate effect of oppressing the Beta male class foundation of society and promoting welfare alpha thugs...

 

 

I'm reminded of a couple that I met in Lao. He was Swiss, about 65 years old, who owned a pharma company in the US. She was Loatian. They married in the early 70's and moved to the US. They were in Lao because he was evading taxes (thats a side note but probably relevant). She had been complaining for twenty years that she left a communist country (Lao) to move to a "Free Market" and said she didn't know what it was like to do business in a communist country until she immigrated to the west....

 

 

Anyway, people always toute that it is businesses that create jobs (for jobbers) which leads to wealth of a community.... but this is only half of the equation. If the jobs created do not leave enough expendable income for these "jobbers" then in a consumer community you will not have consumers to sell your goods and services too... The problem is the wealth that a company enjoys does not trickle down to the "jobbers". The lower and middle classes support the companies with thier purchases.... But the wealth flows to investors which then horde or reinvest into companies whose wealth does not tickle down to the "jobbers" etc. etc. etc.

 

Eventually that community's economy will turn to lending money to the "jobbers" from the investors to "stimulate" the economy.... and of course terms like "entitlement spending" and such things are then talked about. In the 60's there was a philisophical change in how to stimulate the economy which was to play with lending and mortgage rates and encourage "jobbers" who did not have money to spend - to borrow money and then spend it (or buy on payment plans etc etc) but what is over looked is the "leak" in the system. It is the investors which is where the wealth flows rather than it flowing into the hands of people who spend it in a manner which stimlates more business production and transaction....

 

I've been a business man and self-employed for my entire adult life (wth the exception of about 3 years). Micro and small businesses are godsent. When they prosper so do their employess (which then spend in a way which helps businesses prosper). When large businesses prosper so do their investors... and to continue to prosper they squeeze their workers and production/manufacturing vendors. Large business suck society dry - then move onto other countries, markets, or opportunities.

 

Governments who promote the trickle down thinking are not supporting trickle down economies, they are promoting "trickle out" economies where the money trickles out of the simple system which keeps this all chugging along (simply you and me buying stuff at a store) and placed that purchasing power (money) into the hands of investors.

 

If you do not support the lower and middle classes you will simplly run out of a market to sell your stuff to... what is left? Lend them money yourself so they can continue to buy your stuff Then how do you collect? If you do collect your right back to where you started - a dried up market which doesn't have the money to buy your stuff. Around 'round we go.

 

Governments attempt to then support the lower and middle classes, and at the same time support business which do not... then get called socialist. Businesses should be doing this support as a matter of self interest and survival... but nobody in those irony towers look very far down the road or from a consideration of the society as a whole and their place in it.... they review practices based on quarterly projections from the view of their own individual markets... gone are the days of truely good business leaders which undertstood that if the average man/woman is not working and being rewarded then this will end in thier own (the business leaders) demise. Gone are the rare breed that were willing to take personal responsibility for that... oh wait unless of course you do business with micro and samll business owners.... then you will find hoardes of folks that understand this important and simple truth.

Edited July 8, 2010 by -O-

[RiverSnake]

 

Ahh the wonders of youtube

 

-It's seems like every single person on this forum is certain that some pseudo apocalyptic event is going to occur.

 

-Just because you've read a couple of books doesn't mean you can predict the future.

 

-What makes you fellas so certain that the end is near?

 

-And if it is near i better catch up on my sword-play: swords never run out of ammo.

[Aetherous]

-It's seems like every single person on this forum is certain that some pseudo apocalyptic event is going to occur.

 

Nope. But if you look at history, you find that no country lasts forever. It's good to be ready for that.

[Brian]

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[gendao]

^^^ I disagree. Anyone can choose to profit-share in any large company by buying their stock.

 

Large companies can actually save everyone money by lowering unit costs through mass production and economy of scale too. There's trickle-down savings for ANY consumer at every point-of-sale here even if they don't purchase any stock. That's why poor people all shop at Walmart. And if it weren't for large companies, nobody could afford cars and we wouldn't have air travel, etc.

 

Also, you ask poor people in ghettos what they want the most - and they all say JOBS (ok, after more government handouts). But they'll at least claim they want well-paying jobs by large employers too. McBourgeois love bashing large corporations - yet poor Walmart shoppers complain that they need jobs and wish some large employers would move into their areas...

Edited July 8, 2010 by vortex

[-O-]

Ahh the wonders of youtube

 

-It's seems like every single person on this forum is certain that some pseudo apocalyptic event is going to occur.

 

-Just because you've read a couple of books doesn't mean you can predict the future.

 

-What makes you fellas so certain that the end is near?

 

-And if it is near i better catch up on my sword-play: swords never run out of ammo.

 

I don't think there is an empending end of the world occurring, nor a massive implosion of society (because that is what everyone is really talking about).

 

..But if there is you can blame me for not meditating enough (or properly), or adopting that belief system - or that other one.... this is more about persuasion then anything...

oh and also

There are many folks whose contirbution to the world is intrisitcally worthless. They then need to make up a reason as to why/what they are teaching(selling) is of tremendous importance.... just compensating for their own inherent guilt and angst. "Do this and you will help heal the world" "You'll be on of the 10,000 people to be assimilated into the next higher vibration" "you'll be important" "you'll be SPECIAL".

 

If society collapsed tomorrow - the earth/nature would barely notice. And if it did implode tomorrow it is most like to balance nature out anyway.

[-O-]

^^^ I disagree. Anyone can choose to profit-share in any large company by buying their stock.

 

Large companies can actually save everyone money by lowering unit costs through mass production and economy of scale. There's trickle-down savings for ANY consumer at every point-of-sale here even if they don't purchase any stock. That's why poor people all shop at Walmart. And if it weren't for large companies, nobody could afford cars and we wouldn't have air travel, etc.

 

Also, you ask poor people in ghettos what they want the most - and they all say JOBS (ok, after more government handouts). But they'll at least claim they want well-paying jobs by large employers. McBourgeois love bashing large corporations - yet poor Walmart shoppers complain that they need jobs and wish some large employers would move into their areas...

 

 

Dude, do a little business... then do a little more for a large corporation then you'll see what I'm talking about.

 

If the large corporation can save us all a little money by reducing the cost of production then ask yourself this.... when they move that production overseas to lower the cost to you... where are the jobs, where does the money go - think in terms of number of transactions (not dollar vlaue).

 

So sure you save per unit cost and great quality products for really low prices and in the mean time the manufacturing base of your coutry dissappears, the value of your natural resources drops tremendously... The human resources of your working class changes from skilled labour to unskilled labour and retail work... you kick the foundation of your economy out from under yourself.

 

So now you can sell more stuff to people with less money i.e. Walmart - who the smaller and micro businesses can not compete with... and these businesses account for 80% of the jobs and 80% of the transaction which occur with in your economy... etc etc etc.

 

Let me expand this a little more....

Say I have a machine shop in the outskirts of Toronto and I can fill your order of 50,000 COGS each quarter for $2m a year... but you can get the same COGS from indonesia for $1.5M(shipping included :-). You buy from Indonesia... now there is $2m less money in the market you sell to, to buy food, gas, beer, popcorn whatever.... that 1.5M is now being spent in markets you don't sell to...

 

Time goes on and the machine shop has to downsize... the journeyman machinist now, not out of work (or poor or in a ghetto somewhere) is now working custodial services at a local school - less money - things are tight. He's not broke, but he's not buying COGS.

 

You sales drop overtime... people in Toronto are not buying COGS anymore... Why? (because the $2M didn't stay in Toronto - it went else where) so you look around at other markets and low and behold over in Indonesia the middle class has grown, their economy is looking good (strong manufacturing), good base o skilled labour... hey this looks good - lets sell COGS in Indonesia... this is what is happening. Corporations over ther last fifty years have shot themselves in the foot. The only immediate recourse was to lend money to people who didn't have it (or as much of it as they did in the 60's,70's,80's) and it is catching up to them.

 

I recently am looking into a manufactuing company - it is virtually impossible to have my wares manufactured in North America because teh current market price will not support the cost. If I do this I have to look ad asia or eastern europe to have them made.... why? Because of large companies' ability to reduce the cost of production. They have created a market of "poor" "entitled" people primarily to keep investors happy.

Edited July 8, 2010 by -O-

[joeblast]

That's why both exist, because there is a niche for them.

 

Problems arise when overregulation puts way more burdens on the small business, and the large business is all too keen to jump on the lobby bandwagon at times.

 

(keep in mind that the word overregulation can have many applications and it is not every single instance I'm pointing at, but there are a great many examples for and against regulation - that's why its very important that regulations are used as judiciously and as prudently as possible - the government is there to make sure blatant ripoffs of the system in whatever form dont happen, but they inadvertently wind up with the market's carotid in between thumb and forefinger all too often.)

[Brian]

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[-O-]

The main problem with this thread as with several others going on like it (in my opinion) is an unspoken and fallacious assumption -- that being that it is within the capability of government to control & manipulate the economy.

 

From my perspective, this entire approach is pure hubris and serious debates about it are not dissimilar to arguing about whose design for a perpetual motion machine is correct.

 

History shows again & again, in every example, in every nation and in every age, that the only real difference turns out to be how impressive the fireworks show is when the machine fails.

 

As Thomas Paine wrote, "That government is best which governs least" -- not because it is the "correct" design but because it is the least bad design (least corruption, least damage done, least intrusion, least manipulation, least power-mongering, etc.)

 

Canada banks faired well through this specifically because of regulation.

Edited July 8, 2010 by -O-

[Brian]

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[-O-]

LOL!

 

I'll save my e-breath for another topic...

 

EDIT: FWIW, much of what you have written in your other posts (above) is true, -O-; you just seem to be missing the big picture.

 

 

Is this deference and redirection? Mind enlightening me?

Edited July 8, 2010 by -O-

[gendao]

I can fill your order of 50,000 COGS each quarter for $2m a year... but you can get the same COGS from indonesia for $1.5M(shipping included :-). You buy from Indonesia... now there is $2m less money in the market you sell to, to buy food, gas, beer, popcorn whatever.... that 1.5M is now being spent in markets you don't sell to...

Right, but in return this country got merchandise that was worth MORE than 1.5M. So, we made a .5M profit from that transaction.

 

You have to factor in the value of goods exchanged as well to make a true comparison. You failed to do that.

 

In reality, the US (including consumers) benefits greatly from buying cheap goods from Asia - because they are getting higher value for their money spent. Yet Asia also still benefits relatively since otherwise they would be making even less money if they only sold to much fewer people domestically. I agree that this may mean less core manufacturing jobs here in the long run - but that's unfortunately what undereducation, affirmative action, entitlement benefits, unions, bailouts rewarding the biggest failures, etc all end up doing to any businesses. Like parasites, they choke it to death and force it to move elsewhere.

 

 

BTW, liberals always point to Canada as an example of how Socialism works well. Well, it can ONLY work fairly well in a homogeneous society full of productive beta males. That's why they purposely have such a STRICT immigration policy that basically allows only highly-intelligent, healthy beta males and females citizenship. Undesirables include: those without higher education, illiterates, no work experience, no prearranged employment in Canada, no family relations in Canada, those who lack $10K, a criminal history or PREEXISTING HEALTH CONDITIONS IN YOUR FAMILY!

 

Funny how liberals never recommend us copying their immigration policy, though! Even though for that system to work - you need BOTH in tandem!

Edited July 8, 2010 by vortex

[-O-]

Right, but in return this country got merchandise that was worth MORE than 1.5M. So, we made a .5M profit from that transaction.

You have to factor in the value of goods exchanged as well to make a true comparison. You failed to do that.

 

In reality, the US (including consumers) benefits greatly from buying cheap goods from Asia - because they are getting higher value for their money spent. Yet Asia also still benefits relatively since otherwise they would be making even less money if they only sold to much fewer people domestically. I agree that this may mean less core manufacturing jobs here in the long run - but that's unfortunately what undereducation, affirmative action, entitlement benefits, unions, etc all end up doing to any business. Like parasites, they choke it to death and force it to move elsewhere.

 

 

BTW, liberals always point to Canada as an example of how Socialism works well. Well, it can ONLY work fairly well in a homogeneous society full of productive beta males. That's why they purposely have such a STRICT immigration policy that basically allows only highly-intelligent, healthy beta males and females citizenship. Undesirables include: those without higher education, illiterates, no work experience, no prearranged employment in Canada, no family relations in Canada, those who lack $10K, a criminal history or PREEXISTING HEALTH CONDITIONS IN YOUR FAMILY!

 

Funny how liberals never recommend us copying their immigration policy, though! Even though for that system to work - you need BOTH in tandem!

 

 

Yes the value of the goods is factored in... it is .5M in more profit made - it is also 1.5 M that isn't spent in on labour, logisitcs and natural resource with in the market you are selling.... and yes there is great value to buying goods overseas... like I said about my current venture - to have a competetive price I need to buy it there - which is good for me - but not the economy I am seeling too....

 

the .5M doesn't go back into the market to support your sales - but rather to the investors which do not have the same impact on the economy, as a demographic, as say the average working class.

 

And the 2M worth of godd you bought at 1.5 then devalues the resource of the market your are selling to, leaving less wealth there.

 

Like anything it is the trade offs. Buying from emerging markets spreads the wealth to regions that need it most, but it also weakens the market you are thriving from. So the eye has to be on the balance.

 

I few years back (about 8 years or so) when the 0%, no down payment mortgage market was opening up south of the 49th, I was doing a fair amount of work for the Real Estate industry on the west coast. Well you can't do 0% down on a mortgage in Cananda - its regulated. So there were all of these ways around it - like getting a cash back for the equivalent of your down payment (and the amount is tacked onto the mortgage). So you would have 20year old kids, which have been working for a only few months buying a condo because they could borrow the down payment from Dad for 30 days (house closes get your cashback and pay Dad off), and the mortages were similar in monthly payments to rent in more central locations. Well people were buying up like gang buster and all were high risk... but the thing is - because of the regulation is wasn't wide open - it was risky, but not wide open for just anybody to walk into a home and default 6 months later. It forced the people buying to have at least a credible co-signer who was on the hook if they defaulted etc. In all of that; the Agents, the REM's and the mortgage borkers could care less if the person was able to pay for these homes - because they are all paid the day the deal closes... but the banks cared and governement cared, not so much to shut down the practice but enough to make sure that the industry wasn't killing itself - because the people involved surely would have done it if they could have gotten away with it. without a doubt.

 

Like anything it is balance.

 

If wealth creates wealth and wealth (like water) is flowing away from its source without being repleated then it will dry up. If you have no interest in preserving that source what else would you expect to happen.

 

And I agree - it has to be in tandem.

 

(and by the way Canada is not Socialist - we're a mixed economy that leans towards capatalism more than most - sorry they need to point the fingers in other directions)

Edited July 8, 2010 by -O-

[gendao]

the .5M doesn't go back into the market to support your sales - but rather to the investors which do not have the same impact on the economy, as a demographic, as say the average working class.

 

Like anything it is balance.

 

And I agree - it has to be in tandem.

 

(and by the way Canada is not Socialist - we're a mixed economy that leans towards capatalism more than most - sorry they need to point the fingers in other directions)

Well, not directly - but the .5M will still also trickle down to the local market whenever those employees spend money locally.

 

Also again, ANYONE ANYWHERE is still free to "get a piece" of that .5M "profit" by buying stock in the company. Anyone who bought Microsoft stock when it first came out would have shared in their wild success and be millionaires many, many times over by now.

 

And apologies, I was only using "Socialist" in a very loose sense about Canada in certain aspects. I think we both agree on the point that it only works best under specific, controlled conditions though - none of which the US has or promotes now.

 

In short, a country with a large, diverse welfare class on the dole and open borders will not mix well with Socialism. That will only drain the remaining life out of the productive beta males and collapse the system as all the takers outpace the givers. Which is exactly what quickly happened in every US state that state-run healthcare was pilot-tested in...

Edited July 8, 2010 by vortex

[-O-]

Well, not directly - but the .5M will still also trickle down to the local market whenever those employees spend money locally.

 

Also again, ANYONE ANYWHERE is still free to "get a piece" of that .5M "profit" by buying stock in the company. Anyone who bought Microsoft stock when it first came out would have shared in their wild success and be millionaires many, many times over by now.

 

And apologies, I was only using "Socialist" in a very loose sense about Canada in certain aspects. I think we both agree on the point that it only works best under specific, controlled conditions though - none of which the US has or promotes now.

 

In short, a country with a large, diverse welfare class on the dole and open borders will not mix well with Socialism. That will only drain the remaining life out of the productive beta males and collapse the system as all the takers outpace the givers. Which is exactly what quickly happened in every US state that state-run healthcare was pilot-tested in...

 

No worries about the Socialist reference... I get CNN - when they mention Canada I often have to stop and remind myself that I don't own a "Che Guevara" T-shirt.

 

Both my wife and I do pretty well. By most peoples standards (in any neighbourhood but the one we live in) would consider us pretty well off (not rich but maybe wealthy). We recently bought into stock options in the company she works for. To do so we had to go onto a payment program. So no, not anyone anywhere can get a piece of the action... we might like to think as consumers we are all created equally, but this is just not so. You need to have the money on hand to get in on the game.

 

One thing that is misunderstood about our system, specifically medi-care. It is not a freeloader system of free health care. It is paid for. We pay for it in our taxes and health care premiums. But we've also had about 70 years to grow into it, both our economy and our culture. For EI (employment insurance) you can only claim against what you have paid into... there's no way to "make a living" off of it. It is government controlled - but when a person walks into an employment centre here, they are walking into a private business that has competed for that contract. And has to do so every year. They are held accountable to the result they produce, so there is an incentive to get people back to work in a way that is successful in the long term.

 

One thing you can always count on - a person's investment in their own self-interest. I think that is a good thing (self-interest) when it is mated up with personal accountability. My alert sirens go off when I hear of people's selflessness. They are either lying or worse lying to themselves. You tell me clearly what you are getting or wanting out of an activity and I will trust you. Tell me it is for everyone else and I will head for the hills screaming.

Edited July 8, 2010 by -O-

[Nanashi]

It is clear that Lao-tzu and the Tao-te-ching advocates anarcho-primitivism. Let us return to the trees, my brethren!

[Brian]

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[Brian]

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[Brian]

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[Brian]

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[-O-]

Ummm... Not quite.

 

I think your posts in this thread are an interesting mix of micro- & macro-economics realities (gained, I think, from a successful capitalistic life) combined with odd governmental apologetics (the result, I suspect, of some unrecognized assumptions).

 

I post a statement comparing debates over which style of government manipulation is better to debates over which design for a perpetual motion machine is better and you respond by telling me that you think your perpetual motion machine is works pretty darn good.

 

I would imagine that the physicians who bled George Washington to death probably made comments to the effect of, "Just think how bad his condition would have been if we hadn't acted so quickly!"

 

 

My post is not to argue that my perpetual motion machine is better, but rather the logic in your comparision is seriously flawed. Much like the news which comes from below the 49th which states any government intervention at all is "socialism" and has never worked. Yet there are WORKING examples existing around you of mixed economies. I do get your arguement - even though you don't back the claims (References to GW blood letting doctors is not backing a claim by the way - just more deflection) and I recognized that they are not based in the reality of the world. Communism has failed yes, but capitalist economies with some government over sights have not - thats a fact jack.

 

Markets left with no intervention at all will always be bubble and bust. SOME government regulation can soften the extremes of this and lengthen the term of those cycles. The markets on their own will not do this. (supply and demand encourages bubble and bust).

 

IMHO the ideal would be if businesses regulate themselves. But this takes foresight and a value placed on slower, stable growth with smaller margins (which over the long term are more profitable when smaller margins are maintained for longer periods). I beleive that greed and self interest can be the basis of this... but it takes a willingness to be responsible for (like a gardener adn his flowers) of the market you're exploiting.

 

But as long as businesses do not do this - then the government does. I lke small business because they are "closer" to thier market - see them everyday - they are real, breathing people. They understand that if those people can not buy then their business will fail. I've seen vendours invest in client companies because they know if that business suffers they will loose that client. I've seen service provider reduce rates ridiculously and work tirelessly to help a client out of a down turn, because if they are gone in the long run so is that revenue. (Large coporations CAN NOT do this because they are accountable -not to the market- but to investors)

 

People often sight greed and laziness regarding capitalism vs socialism. And I agreed it is niave to believe these things will go away (or for that matter should go away)... but this greed and laziness is always in refference to the lower and middle classes and not the top, large and rich. The greed and laziness of the wealthy leads to the economic crap we have been going through. Quick buck making without the effort to consider the long term impact or the intrisic value of the activity. It is short sighted "hoorahh" thinking of folks with allot of money and power and little regard for the long term impact of the market they are gaining their wealth from.

Edited July 9, 2010 by -O-