Category business

Nov 17 2014

Signs of Pre-Revolution France becoming alarmingly apparent in America…

Anonymous_-_Prise_de_la_Bastille

Storming of The Bastille by Jean-Pierre Houël

Continued income inequality… continued loss of political capital… wage stagnation… as these problems continue — they’ve alarmingly become worse — and with that, warning signs have begun to appear.

Back in the 18th Century, we had the French Revolution. Maybe you’ve heard of it. Jocularity aside, it was a time of political and social realignment in France that saw an end to established power and an economic and social liberalization that rapidly changed the face of the nation forever.

In a time where powerful oligarchies, the Church and economic elites ran the nation, the people themselves felt pushed out of the system, felt out of control and oppressed by the aforementioned elites. With them holding the political capital of the nation, the people turned against the ruling classes and gave rise to a liberal France, Napoleon Bonaparte and a shift in French history that’s seen and felt even today.

Fast forward to the United States of America in 2014. Still reeling from major political decisions such as Citizens United v. FEC and the Hobby Lobby case — where old power bases, such as religiously conservative institutions and “Old Money” continue to gain political capital in America; add to that stagnating wages, a growing income gap, a continued gap of benefits compared to the industrial/post-industrial world AND a continued rise in the wealth of the top 10% of America… and what do you have? You have a dangerous recipe for what sounds a lot like the French Revolution.

The New York Times published an op-ed of Steven Rattner, a Brown-educated presidential economic analyst, who illustrated that the income and wealth gap — already a chasm, continues to widen. The bottom 90% continue to lose as the top 10% continues to grow. Add to this mix the Supreme Court decisions such as Citizens United and the Hobby Lobby case, along with mounting conservative pressure in America to resist a liberalization of the economy and way of life — such as same-sex marriage, and other liberal reforms.

Add to that the recent economic problems — and the near-collapse of 2007, which wiped out many jobs, and replaced them with jobs that often paid less, and required more work.  An abysmal recovery, that — while gaining traction, is doing so at an anemic pace, while the upper echelons of society continue to reap the benefits.

Sound familiar?

Could it happen tomorrow? Not likely. Could it happen if some kind of realignment doesn’t happen and the bottom-half of society isn’t allowed to catch back up? I think so. There’s gasoline being poured in what’s already a spark-filled room. Could it ignite?

Further Reading/Watching:

NYTimes Op-Ed: Rattner:
http://www.nytimes.com/2014/11/17/opinion/inequality-unbelievably-gets-worse.html

YouTube: Nick Hanauer: Warning to Plutocrats: http://www.ted.com/talks/nick_hanauer_beware_fellow_plutocrats_the_pitchforks_are_coming?language=en

Oct 9 2014

UK begins borrowing in Chinese Yuan — dangerous thing to do?

The Treasury of the United Kingdom has noted that it has begun trading bonds in the Chinese Yuan.

Why is this a concern? The concern is two-fold: one, the currency and economy is centrally planned and manipulated in the People’s Republic of China. Not only is this in direct contradiction of the free-market model of the Western world — and not only is this validated by the Western world by sovereign funds trading in yuan; but this is also a concern of the authoritarian regime having a bigger centrally-planned grasp on Western economies, that is supposed to be relatively free from governmental controls past base consumer and business regulation.

Further, a serious concern is the manipulation of the currency itself by the Chinese government. Quite often, it depresses the yuan compared to the United States dollar, to inflate the US’ trade deficit with the PRC. Inso doing this, while it may be doing it strictly for the sake of manipulating its debt compared to the US currency, the reserve currency of the world, as it sits today — is the United States Dollar; and devaluing its currency compared to the US Dollar manipulates its value across the board. Is the United Kingdom taking a willing part in letting the PRC government manipulate its own currency and economic status by taking the yuan on as an informal reserve?

Further Reading:

– China’s currency dream gets U.K. lift
http://money.cnn.com/2014/10/09/investing/china-yuan-uk/index.html?hpt=hp_t3

May 18 2014

The Average American Taxpayer pays… WHAT?

If you’re a taxpayer in the United States, you may find it interesting how much you actually pay to businesses and other interests you already pay money to…

Thanks to some compiling by Moyers & Company, and a couple of other sources; I’ve put together a list:

– A policy analysis from the Cato Institute from 2012 shows that the United States Federal Government loses about $100 Billion a year to corporate subsidy, on everything from energy, to the food and housing industries.  With the methodology of 115 million families, that’s over $800 a year.

– The State and Local Governments themselves are different picture.  The New York Times ran an investigation that determined that State and Local (i.e., the County and City/Town level) gave on average $80 Billion.   That adds up to be almost $700 per year.

– Retirement Banking Fees are another hefty loss for taxpayers — on average costing over $350 per year; which assumes a 1% management fee per year of one’s retirement fund, and a middle-range percentile retirement fund amount as cited by the Economic Policy Institute was assumed to be about $35,000.

– A report by the International Monetary Fund reports that over $83 Billion winds up in interest payments on loans and banking.  That accounts to $722 per year.  A further sobering fact: the five wealthiest banks in the world, JPMorganChase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs account for THREE QUARTERS of these subsidies!

– Overpriced Medications were a surprise to me on this list — while the notion itself was not, the amount certainly was.  A study conducted by the Center for Economic and Policy Research found that US drug patent monopolies raises the price of prescription medications in the US by over $270 Billion per year!  That translates to over $2000 per year.

– $870 per year goes to corporate tax subsidies, which total about $100 Billion per year, as mentioned by The Tax Foundation.  This includes everything from depreciation, and even experimental tax credits.

– Corporate Tax havens are a very serious problem.  Indeed, the US Public Interest Research Group found that the average taxpayer family paid $1231 per year to offset the losses by those [such as large banks and wealthy individuals] who offshore their monies to avoid taxation.

According to my calculations, that’s $4873 PER YEAR.  Almost five thousand dollars; assuming an average income of about $50,000.

Consider these numbers, when one looks at what they pay out for social programs:

– The Examiner released some information in 2012 about what Americans pay in social programs, such things as Education, etc.  A complete list can be found at that link, but leaving out the costs of Defense [as the Military Contract Industry is another racket in and of itself…], the costs turned out to be LESS than $500 PER YEAR.  This accounts for everything including Veterans Benefits spending, Housing, SSI, and even things like our contributions to the Railroad Retirement Fund!

…who should you *really* be mad at when it comes to who can’t afford what?  Where *IS* the “Big Government,” really?  I’ll let you decide.

I freely admit, I’ve abridged *some* information — mostly, related to Defense in Social Spending, but that, to me, doesn’t count…  and even then, admittedly, is only another $250 per year.  I also admit, I rounded *UP* on those figures — so the *actual* costs for Social Programs, are ACTUALLY a little lower.   But I’m a fair guy.

All of a sudden, the political cartoon above isn’t so ridiculous, is it?

I want to especially thank Moyers & Co., and Paul Buchheit for their work on compiling some of this data.

May 13 2014

China set to surpass the US Economically This Year — Wait, not so fast…

US-China-Economy-2011

US and China – 2011. Courtesy: WSJ Click for Larger.

While it’s true that the economy of People’s Republic of China [PRC] is indeed set to surpass that of the United States “soon,” [some estimates even say by the end of the current year] — that’s really not that important.  Here’s why:

The United States has held the top economic spot in the world for well over 120 years.  It turns out, if you count everything but sheer “mass money,” America still is the largest economy — and still will be for quite some time.  Here’s why:

Firstly, the Chinese market and economy is manipulated and controlled directly by the Chinese government.  While a lot of what goes on in China that involves international trade or business goes on in “Special Economic Zones” [which are areas that involve far less government intervention than anywhere else], its relatively safe to say that the Chinese economy, as such, is otherwise centrally planned and managed.  The world knows this, and this is something born in mind in any economist, businessman/businesswoman or otherwise when considering the economic power of the PRC.

Secondly, PPP.  Fareed Zakaria aptly demonstrates that the Purchasing Power Parity of the United States still far exceeds that of the PRC.  Indeed, Fareed’s demonstration of the same loaf of bread in China being bought for $1.66, compared to that of $2.39 on average in the States.  Further, his example of the cost of utilities, on average being a third the cost in the PRC compared to a similarly sized home in the US also further demonstrates the US’ superior PPP standing.

Quite so, when one analyzes the PPP of the US and China, China could combined its PPP with that of JAPAN and still not exceed that of the United States.  Indeed, China’s still not able to bank on its PPP — it has to pay for everything at the prevailing exchange rate — not the rate based on its PPP, unlike the US.  And this is just one singular example.

So… is China really overtaking the US economically?   In the words of Tom Wright at the Wall Street Journal, “Yes and No.”  You decide.

Further Reading:

– Tom Wright.  China’s Economy Surpassing U.S.?  Well, Yes and No – The Wall Street Journal Blog

– Chung-Tong Wu. China’s special economic zones: five years later – Asian Journal of Public Administration

– Fareed Zakaria  Is China really about to overtake the US? – Fareed Zakaria 360 – Global Public Square

Apr 8 2014

RadioShack — On the Decline…

One of the places that was special to me as a kid was RadioShack.  As late-20s guy, I saw RadioShack at its height — late 90s/early 2000s, as the corporatization of the stores was taking place.  Back in the day, RadioShack was more a hobby-shop, a place where you could get LEDs, solder for your soldering iron, and was meant to be a “Geeky place, for Geeks, by Geeks.”

Indeed, people actually KNEW what they were selling, and what they did — and how they worked.  You effectively had to have a Ph.D. in “Geek” to work there.  Now, not so much.

Walking into the store, I’m often surprised to find how much Associates do *not* know about the product… more about how to *sell* it.  When asking about products capacity, or the output of another product, etc…  they simply don’t know anymore.  They’re educated now, in “upselling,” and “add-ons,” versus how products themselves actually work.

This is a stark contrast from the RadioShack I grew up with — maybe its because of the restructuring that took place in the early 2000s, where hiring was adjusted from the Store Managers, to now strictly out of its Headquarters in Fort Worth, and Store Managers having little control, past scheduling, to the restructuring of simple education and training — versus being a “hands-on with your project,” they’ve become “hands-on at getting you to spend more.”  While there’s nothing wrong with that in and of itself — its changed the culture of the store, dramatically.

Maybe it’s a symptom of my age, maybe it’s a symptom of the brand of the RadioShack label, I’m not sure — but I think if RadioShack went “back to the basics,” and went back to the model that worked, of hobbyists doing what they love — versus a corporatist atmosphere of “We wanna get you what you want, but also sell you this shit too!” I think they could find the glory they once had.

Further, recently, RadioShack noted the close of 1100 stores, citing a 19% loss in sales, particularly during the last holiday season.  CFO John Feray says simply “We are overstored.”

I tend to disagree — I think its more a matter of quality of experience, versus simply being overstaffed.  RadioShack isn’t the place it used to be — and people are taking notice, I think.

I miss *this* RadioShack.

radioshack

Nov 14 2013

JPMorganChase plans, axes Twitter Q&A after #Ohsh!t moment…

JPMorgan1

JPMorganChase Vice Chairman Jimmy Lee was all set to use their official Twitter account, @JPMorgan to answer questions posed to the banking giant using #AskJPM.  The seemingly innocuous move turned immediately to panic as apparent distrust, anger and indeed simple trolling immediately took over the hashtag.

Several hours later, JPM retracted the idea.
Image

Why did this become such a problem?

Aside from simple internet trolling, public confidence in America‘s banking system remains low — and indeed, possibly even contemptuous.  Even I stopped myself from submitting the following question:

“Why did you purchase new jets and hangars for them while you received $25 Billion of my money? Wasn’t it because you were in trouble and needed help? Or was it because you screwed America, and you knew it and wanted to get away with it again? #TARPFunds #BankingCrisis #AskJPM

I still don’t trust the banking system — particularly after having worked in it for several years from the mortgage backed securities side.  Consumers get ripped off at every opportunity, and while improvements have been made, it’s a system of ethics and thought that drives the industry to produce “more, more, more; and damn everything else!”

…like any rabidly for-profit market, I guess.

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Nov 12 2013

The one family you’ve probably never heard of… who’ve influenced your life the most

English: The heraldic achievement of the House...

The House of Medici

 

The Medici Family of Italy is probably something you’ve never heard of, unless you’re involved in high finance, politics, or the academic sides of each… but they’ve likely influenced your life more than you’ll ever know.

The Medici family rose to prominence during the 14th century in Florence, getting very wealthy off the textile and later, further gathering power in the Kingdom’s local governments. At the time, their seemingly unstoppable rise continued onward and upward, to the point where they founded the Medici Bank, the largest and most notable bank of the 15th Century of Italy.

Why is this so important? The Medici family not only produced FOUR Catholic popes (Popes Leo X, Clement VII, Pius IV and Leo XI) — but it also made massive contributions to accounting and finance methodology — including the advent of the dual-book accounting system and overall improvements of the general ledger. Many of these improvements are still used by public and management accountants even today!

Coat of Arms of the Medici Family. based on Ar...

Coat of Arms of the Medici Family

 

Arguably, the Medici’s were the most wealthy family in Europe, and among the most powerful — effecting policy, religion and even banking methodology that’s still in use today. Next time you balance your checkbook, take a minute, and think about how the whole system of finance works, and where it came from… and look into it! You’d be surprised how the simple methods we use today to balance our sheets were revolutionary just a few hundred years ago…

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Oct 19 2013

China’s call for a “De-Americanized” Future?

317b5967cf5b1b4ca8849bfa3f7f89e52a4d4aeeWhile this would, no doubt, be disastrous for the American economy, which is vastly based on the “full faith and credit of the United States government” of the United States dollar — could China’s own less-than-impartial statement that the future of the world should be “de-Americanized” have a point?

Partisan infighting in Congress, on top of massive trade deficits with China and Japan (among others) are threatening the faith the world has in the US government’s ability to pay the debts it has already racked up — even in simple interest payments on Treasury Bills and other things.

While there’s yet been a default on any obligation of the United States, if partisan gridlock doesn’t change in Washington, could it be an inevitable future?

Those on the right say our borrowing to fund the government and to pay our obligations say this is an unsustainable model do have a point.  Borrowing forever with no intention to fix it will only result in a catastrophic failure — sooner or later.

However, liberal economics specifically state that when the economy is in a recession, or otherwise growing at an anemic rate, that it is the government’s duty to pump money into the economy to ensure that consumer confidence remains high and that people spend — particularly during problems like high unemployment or lower consumer confidence, the two silver bullets to economic futures.  When people are scared (fiscally speaking) they withhold money; and not spending money grinds the economy to a halt.  Very effectively.

Are both goals mutually exclusive?  I don’t think so.

While a plan to begin to work down our debt obviously needs to be in place, because consumer confidence still hasn’t fully recovered from The Great Recession, this is where [neo?]liberal economics comes in.  Adaptive economics, in particular.  The economy “running itself,” particularly without any regulation, obviously doesn’t work as much as an authoritarian, centrally planned economy.  A government buffer helps “prop up” the economy, while the wheels of the private sector continue to spin.

It’s a mess, but it’s one we can fix — if we come together and work the problem… and not just point fingers — and America can still be a leader in the world.

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Oct 6 2013

#2013Shutdown’s effect on Business and the Future of America…

Professor David Victor, Ph.D.

Professor David Victor, Ph.D.

One of my former (and future, no doubt!) professors from Eastern Michigan University, Dr. David Victor, posted this morning about a possible future oil boom for Iceland, noting that a recent survey and discovery shows Iceland sits on a *LOT* of the possible undiscovered oil reserves in the world, estimates place it at 13%.  With the thawing of the northern ice cap, and the North Atlantic Current keeping ice from marring up the major ports of the island nation, all of these things could conspire to bring a well-needed boon to it’s economy.

However, another follower on Facebook of Dr. Victor, the Chair of CitrinGroup, also threw in his two cents, stating that while the Chinese are courting and betting on future oil producers, such as Iceland, the United States, already suffering an anemic economy, is wasting it’s time on policy matters that in the grand scheme of things, don’t really matter.  I tend to agree.

The United States’ economy is JUST starting to  gain traction, while sitting fairly stationery and spinning it’s wheels, begging to move forward since the crisis began in the Subprime Mortgage market in 2007.  We’re finally starting to see forward momentum beyond the familiar numbers of “0.04% gains.”  People are beginning to feel confident in the economic system again.

However, when people see the Government itself can’t get it together and pay it’s OWN bills, that’s when people begin to hold onto their OWN money, going “What if I find myself right back in 2008 again?”  I admit, I found myself thinking twice when I made a relatively small purchase this morning, because the well-being of MY household budget is determined by the fiscal health of the Federal Government.

When recessions and slumps hit the nation, the Government is there to provide relief, to buffer the blow with benefits, stimulus and other some-such capital, by pumping money into the system.  However, if that money is cut off too soon, the economy can slump again.  Bad news breeds bad feelings.  Bad feelings breed either a binge on spending, or a lack of spending, more often, the latter.  When people stop spending, the economy grinds to a screeching halt — as we saw starting with the credit freezes of 2008.  While one can argue the merits of policy on both sides of the aisle, the latest budgetary and policy debate is doing nothing but killing consumer confidence, and indeed, making foreign markets question the stability of the American economy.

While Obamacare is certainly an expensive program, so was the F-35 Fighter — which estimates have the cancelled fighter costing as much as a trillion dollars — a number often attributed to the cost of Obamacare.  Oddly enough, I haven’t heard it mentioned once by Republicans on the Hill, even though it is now essentially a great waste of capital and expenditures.

Who’s right?  Who knows.  One thing I do know is — #2013Shutdown can be a death knell for the fragile traction the American economy took years to get.

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Oct 1 2013

A Government Shutdown… what it means, and why you should care…

download“Due to the failure of Congress to enact appropriations for fiscal year 2014, Office of Management and Budget Director Sylvia Mathews Burwell tonight directed agencies to execute their plans for an orderly shutdown of the Federal government.”

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