The 6 Pack Economist

There are no free lunches, just cheap food with a sales pitch.  Don’t be sad, this is just how the world works.  This is a good thing.  There is another cliché that goes along with this.  You get what you pay for.

But what about “love”, love takes time, and time is money.  I would also say that it takes money too.  How often do you stand in the street just staring at each other?  Not much, usually shared time involves getting dinner, seeing a movie, or taking a vacation.  All take time and money. 

I was watching the movie “The Beach” with Leonardo DiCaprio, which despite being a marketed as a chick flick, was rather good.  I know that I dismissed it when it came out eight years ago as just a movie for girls in love with Leonardo.  The movie focuses around a hidden paradise.  One of the striking things about the paradise enclave was that they still depended on the outside world.  To do this they sold Pot to the outside world to get various luxury items for themselves.  Even in this paradise they still needed an exchange of goods to survive. 

If you can’t get free stuff in paradise you ain’t getting nutten ‘ere either.

I really don’t know what to do about drugs, mainly because I think us as a species desire a way to alter our perception of the world.  I definitely don’t think giving drugs out like candy is the answer though.

I wonder how many people are going to continue their self-destructive behavior because the risk of the behavior has been reduced.  Some of the risks of heroin are of course disease from dirty needles, improper use of the needles, poor quality drugs, robbery, rape, etc. the list goes on.  It is not that I don’t care about these people; it’s that I believe this “make a bad behavior safer” only encourages more of the behavior.  Reduce the cost of something and you will increase the demand of it.  You can’t get away from it.

I tend to be a libertarian for most things.  If it is between consenting adults have fun, don’t ask me to subsidize it unless it benefits me (like a married couple having kids).  But if said action requires you to get public assistance then I care about it. Go beat each other with rotten salami all you want, but your insurance pays for it, not mine.  Want to go home and smoke pot, fine just make sure you get up and go to work the next day. 

If you start taking money from me though, that’s when I get all “angry dad” on your ass.  The above mentioned program will eventually lead to the local government taking a similar approach.  This in turn leads to my money being spent on this type of crap.  What is needed is for these people to stop doing bad behavior, not making the behavior safer.  It just destroys the risk to reward ratio and that is what blew-up our banking system. Who knows maybe in a moment of clarity one of these addicts will realize that the risks of doing heroin does not equal the reward, and then they go and get help.

I scratch my head at the numbers that are casually just thrown around in the financial crisis.  The numbers are so large they are essentially meaningless.  We have reached the point that no-one can risk stopping the game.  We have feed the monster so much debt it is now so big we can not anger it by not feeding it.  

We basically have an 800ton gorilla that wants its Twinkies.  Unfortunately it also thinks we taste like Twinkies.  At this point we are at the stage that everyone involved is absolutely screwed.  I have yet to see a winner in this whole mess.  Who is making money on this?  Real Estate? Commodities? Military Industrial Complex? Tech Stocks?  I can’t seem to find who is going to make money on this.

 In way that may be good since nobody is looking to get paid.  Just about everyone seems to be losing. I know the following is tongue in cheek, but perhaps we should just reboot.  Just pretend all of this did not happen.  A Re-Do like playing football when you were a kid and the ball hit a power-line or tree.

Part of me feels that all the bail-outs are nothing more then rearranging the chairs on the titanic.  Or maybe it is just a way for some very rich fat-cats to grab as much money as possible before the ship finally sinks.  Some how I feel the promises of the fat-cats of “We need to take the life boats to go find help” is going leave me in the icy waters. 

 Where is global warming when you need it.

I enjoy reading conspiracy theories because they tend to be such cool stories and when they are read as stories people can keep their heads.  But this batshit story truly boggles the mind.  So I am to believe the CIA made a copy of Bin Laden so the war could continue?  Do I think they are that evil, sure but they are not that competent.  Seriously they are more concerned about the FBI getting credit for a bust then actually doing a bust. I believe that this will become a recurring theme.  BatShit links.

If you ever wanted to do a little experiment to figure out why socialism fails do the following.

Get a little lunch group together.  Preferably with a jerk or two.  The second requirement should not be too hard to do, as most people are jerks.  Hopefully you have a group of about 8 people or more. Go to lunch and get one bill.  At the end of the meal just split the tip and bill 8 ways (or how ever many people are in the group). Do not account for who got what.  Just split it evenly.  Note who got what and how much each person spent individually.  Especially note what the experimental jerks ordered.

Do the same lunch again next week.  At the end of the meal again check what people ordered.  The per person expense should have increased.  If not keep repeating for a few more weeks.  It will eventually increase (before the restaurant raises prices itself). 

It should not take a genius to figure out what is going on.  The first few people will see a real benefit to their bottom line by scamming the system, but soon the whole group will be recklessly ordering food.  This my fellow readers is the primary reason that socialism fails.  People figure out the game and very soon they begin to exploit it. Soon everyone is scamming the system and it collapses under its own weight. 

Good luck and there is never a free lunch.  Occasionally government subsidies but it’s never free.

This in no way an official poll by any means.  But I thought it ironic that while listening to the news talk about Obama and Pelosi fighting for a bail out of the Big 3.  I saw three cars with Obama 08 bumper stickers.  Two Toyotas and a Honda.

I am not one of those people that think you should buy american no matter what.  I just believe you should keep an open mind and buy on value.  But when you do that understand what that decision means.  Choosing one product over the other will cause one to lose money and possibly go out of business. 

In the meantime I take advantage of the fact that the perception of American cars is so bad.  I was able to walk away with a cadilliac for 10K less then an equivalent lexus.  And that price difference included an extended warrenty.  If I was purchasing in cash I could have put close to 10K into a CD and just waited for the breakdown to occur.  For 10K I could replace the whole drivetrain.  If my past experience is any indication I should get my money out of it. 

Keep an open mind about domestics, you may be able to save us 25 Billion.

The Top five on the JD Powers survey were

1. Lexus
2. Mercury
3. Caddillac
4. Toyota
5. Acura

In the ongoing conspiracy theory segment I bring you another one.  Although this one I thought of on my own.  It is about global warming or climate change depending on their current predictions.  As with all conspiracy theories I would read this as a good story and not as an authoritarian piece on what is actually going on.  I personally believe that most conspiracy theories are too complex to work.

In any type of political movement I always try to look at whole will gain and what they will gain. What confused me for a long time was that it seemed that the climate change produced no-gainers.  Sure some people were able to get on a stage and preach to use how bad we are and such, but no one seemed to gain anything from these proposals.  I eventually figured it out that it was not monetary gain but a gain in power.

The capitalist model depends on a goods and services being exchanged and valued by the market participants.  In order to either create goods or perform a service there is a need for energy.  This can be in the form of burning oil, wind, or just eating a burger.  What all transactions boil down to is an exchange of energy.  It is all most like another form of E=MC2 but for economics. 

Now that we have established that capitalism requires “energy” to function (all economic systems depend on energy it’s just that capitalism depends on more of it).  We can start to see what kind of power one can have if they were able to ration energy.  Control the flow of energy by rations, carbon credits, etc. and one could essentially control the world. 

We have the “what” and “why” all we need now is the “how”.  I remember reading sometime around 2002ish that a few scientists were predicting a drop in global temps by 2010 even if we do nothing about carbon output. (I am sorry I can’t find the link any more)  Well if you haven’t noticed global temperatures have been coming down. The reasons for this seem to primarily be La Nina or the cycle of the Sun.  I am one of those crazy people who believe our climate has more to do with the massive fireball in the sky then anything we (humans) can do short of or nuclear war. 

I have still not yet gotten into the “how”. I just established that there were scientists predicting a drop in global temperatures towards the end of first decade of this century.  So let us pretend that Kyoto was implemented or that people in general took Climate Change serious, and we all did our part to reduce our carbon footprint.  Seven years later the global temperatures had began to show an effect.  This would have successfully created a sense of cause and effect.  We reduced carbon output and the temperatures decreased therefore we can control the global temperature by regulating carbon output. 

Perhaps those who desire to rule the world realized that temps were going to cycle anyway, but if they could implement something to make it seem like an action they did or were in charge of caused the change, then they would gain power.   Almost like a mystic or high priest who understood the solar cycle could gain power by predicting the change of season.  “Send me your most beautiful virgins and I will make summer come”

Of course what did happen was we as a species basically said “that carbon stuff seems like it could be bad, I am going to drive my Hummer to a meeting about it”.   We gave lip-service to the environmentalists concerns and went on increasing carbon output and then the temps decreased. 

In closing my conspiracy theory is as follows:  The powerful are using the climate change groups to control the availability of energy and thereby control the method of commerce.  Once they control the primary engine of commerce it will enable them to control all that occurs on a macro-level on the planet.

P.S.  Remember all posts in the conspiracy theory section should be taken with a large dash of salt or sugar.  Most are just a crazy idea I came up with while walking somewhere.

One of the ads that google gave me when I was re-reading my post on the death of capitalism was on Socialism vs Communism.   I find it entertaining because the difference is simple.  Socialism is communism with sugar on top.  Its like argueing if its better to be stuck in the water with a bunch of tiger sharks or great white sharks. 

In socialism the incrediably rich don’t have to change their name.  In communism they have register as part of the communist party.  Anyone not part of the super rich get screwed in either system.  Socialism will legislate the small guy out of business while communism just take it.

And remember all big corporations started as small business.

So who is to blame at the UAW for this mess?  My last post talked about the corporations blame.  This one will go into the UAW blame.

 I never begrudge someone from making a good living and trying to become rich.  I hope to be there one day.  What I don’t like is when it gets abused.  And looking at the salaries of the UAW, I firmly believe that it was abused.  

 Unions can be just as short sighted as Corporations and this is definitely the case with the big 3.  Who signed these contracts?  147K a year (salary plus benefits) for an assembly-line worker?  Is there a special talent needed for this or perhaps many years of technical training?  Just a high school degree and a good work ethic (plus a connection I am sure) is all that is needed. 

 I think what we have here is a supply and demand problem.  I can’t believe that the supply of high school grads with a good work ethic is so low that these assembly line workers can demand such a high salary (I would love to get the salary by the way).  I will never begrudge someone from getting a good salary but this is just ridiculous.

 Was there a time when the big 3 controlled all and were so full of profits that they could pay these salaries? Sure there was, oddly enough it was when they were making some of their worst products.  The unions pushed to get ever little bit they could out of the corps with the idea that they were only going to get stronger and would be able to pay these benefits.  But alas like all things, this was soon to change. 

 Now Detroit can no longer pay these extravagant salaries (the upper management too).  Detroit needs to change and change fast.  They need to cut costs and make better cars.  Some people will have be cut or everyone will have to be cut.

 Figures, just when they make a car I am really excited about too.

 NOTE: Although the orginal salary was based on a shady number, the real number is closer to $55 an hour for pay and benefits or about 100,000 a year.  Still seems like their would be a larger supply of people willing to the do the job then the demand for the jobs but who knows.

So the Big 3 American Auto companies look like they are screwed.  I have mixed feelings about this.  First off I think they put themselves into this situation, from the CEOs to the UAW.  On the other hand I always like my Fords, Dodges, and Cadillac (I drive two GM products right now) so I would hate to think that they would be gone.

 I do believe that the big 3  treated their customers like a bunch of dumb hicks for way to long especially from 70’s to late 90’s.  In the late 90’s even GM realized they may have to put money into research and development.  In addition they had to at least compete with the imports (Japanese, the Germans have never been too much better then the domestics) on the issue of quality.  The Japanese put out a very reliable automobile in most segments.  By the time the 1990s came around the Japanese cars have established a reputation for reliable cars (sure the wheel wells rusted out, but it still ran).  Meanwhile GMs, Fords, and Chryslers were making a reputation for inferior quality.  The market began to change and the big 3 refused to recognize this.  Unfortunately once your reputation for long-term reliability is lost it takes a long time to get back. 

 The only thing that saved the big 3 or at least staved off this problem for a few more years was the low-gas prices, OJ Simpson making Ford Broncos famous, and a series of bad winters in the north east.  The SUV and Big Trucks ruled the road and the Big 3 were good at making them.  Even during the dark days of the “80’s crappy domestics” the American companies were good at rear wheel drive V8s. 

 In what has become typical of American corporations all emphasis was on short term profitability.  R&D and marketing went into SUVs while the lower profit cars languished.  The Japanese were able to make steady gains within in the car market which was virtually ceded to them by the domestics.  Other then ford, which had a few nice cars in the late 90’s, looking for a domestic car was pretty disappointing.  All of their money or profit was going to marketing SUVs.  These short sighted fools held onto a belief that gas prices will never rise or that the imports will not start making some fine SUVs to compete with the domestic golden goose.

 In late 2006 the weather forecast was in and a perfect storm was coming.  Gas prices were rising, imports were making better SUVs, and a recession was on the horizon.  The big 3 had all of their eggs in one basket and that basket was smashed.  The innovation and quality improvements that they made in their product came too late, the well they poisoned for so long was going to take a lot longer clean up. 

 
My next post will go into what the UAW did to help cause this.