What do you think would have happened if the US government had not decided to swoop in and bail out, rescue, takeover (pick the verb you like best) GM and Chrysler? I ask the question because I read a commentary about the current economy and the coming economy that sparked a feeling I have had since the initial bailout of the banks & AIG. The comment was essentially that we have not averted the coming economic chaos with massive government intervention and spending, but rather we have changed its shape, maybe delayed its arrival, but it is doubtful IMO that we have solved the problem.
The reason I mention this is the concept of equilibrium - a state of rest or balance due to the equal action of opposite forces. Markets, my golf game, the number of squirrels and rabbits that inhabit my yard and feast in my garden all have a point of equilibrium. When outside and unbalanced forces are introduced into the market, my golf game, or my yard...then equilibrium (balance) is broken and there are adjustments and changes until a new equilibrium is reached...one that might be radically different than the prior point of equilibrium.
By spending massive amounts of cash we don't have, the federal government over the past 2 years has been trying to artificially maintain an equilibrium in the economy that has long been out of balance. Someday, markets and the economy will get back in balance -governments will run out of prop-up cash, or there will be another oil shock...something will get us out of this expensive holding pattern trying to stop the creative destruction that free markets and economic growth requires.
Hence the question - what if we had let GM and Chrysler meet their natural fate without billions of prop-up cash from Washington? Well, we don't know but we can speculate. One outcome clearly in the solution set, is that they would have gone under. No more Chevy Tahoes, No more Jeep Wranglers. That would have been a massive economic shock, put hundreds of thousands out of work and created a depression in Michigan. But you know else? We would have cleansed the system. The bad practices, bad contracts, and bad products from GM and Chrysler would have gone away - as they should in any business cycle. Then, the assets that have value would have been bought by new investors, they would have been modified, optimized, and adapted to the new market of 2010. New jobs would have been created and either a new GM/Chrysler or totally new companies would have been formed out of the out-dated and mis-managed rubble of the originals. The tough times would have sucked, it would have been horrible for many families. However, the new companies that emerged from this creative destruction would have been best suited to produce cars for America and the rest of the world. Capital would have been reallocated to its highest use. Workers would have been hired at the new companies, investments would have delivered market returns and the new equilibrium would be etstablshed in the car market.
Instead however, we have a 1950's incarnation of US industry, propped up by billions of dollars in capital that could be put to far better uses in the economy elsewhere. This is why the efforts of the government to stop the march of market evolution by protecting outdated and inefficient businesses and industries is anathema to economic prosperity and it is why we have not solved the business challenges of the US auto industry, but rather changed their shape, time, and scope of their eventual impact.
The mess of GM and Chrysler being left on their own would have been enormous. It would have been the death of organized labor in America, which probably would have boosted GDP bu 1% alone. However, the real long term result would have been massively better than what we have now. We currently have GM and Chrysler still saddled with all of the same liabilities that put them on the market chopping block in the first place, spending capital that we gave them to continue their crummy business model.
It would have cost us a lot to let GM and Chrysler fail in 2008. It is going to cost us a lot more in the long run to have them around. Euilibrium is patient. It always wins given enough time. Given the massive debt of governments around the world, it is my opinion that equilibrium will not have to wait that much longer before it is restored. The question is how big will the tidal wave be?
Friday, July 30, 2010
Saturday, June 26, 2010
Two Ends to a Funnel
Arizona (and now other states and localities) have thrown gas on the smoldering immigration debate. Hopefully this will net out to be a good thing over the long term. There is no question that the past several administrations have done a crappy job securing the boarder and dealing with illegal immigration. It seems to me that the government, once again, has made a simple problem far more difficult than it should be.
First off, I don't blame the destitute Latinos who try to cross into the US looking for work. If I were in their shoes, short on money and with a family to support, I would probably do whatever I could to get across the boarder. Second, only with the government in charge could adjudication of immigration requests take years. Why wait in line for years when I can run across the boarder tomorrow and take my chances. I sympathize with the decision and would likely be a runner if posed with the choice of waiting years to cross legally or crossing tonight and having a job next week.
So how to fix the immigration problem? First, secure the boarder. 5,000, 10,000 agents, whatever it takes, but stop the illegal crossings. Second, invest heavily in the adjudication process. Make a deal with anyone looking to immigrate to the US - give us 90 days and you will have a decision on your request - no exceptions. There are two ends to a funnel and there is no reason that we cannot give people who want to come to America the chance, without having to wait years for legal entry. Lastly, punish employers who hire illegals...maybe $ 25K per illegal on the payroll. I am pretty sure that would diminish demand for cheap illegal labor. If folks who want to come here can live with a 90 day process instead of a 3 year process, the incentive to make a dash across the boarder is greatly reduced. If employers will get slammed for hiring illegals, demand drops. Those who still want to cross illegally, for expedient or nefarious reasons will meet sufficient enforcement resources to keep the boarder safe.
See? Not really a hard problem. People who want to come here legally deserve quick adjudication of their request. Those who exploit illegal labor should be punished. Sufficient boarder enforcement agents clean up the rabble who insist on breaking the law. Not a hard problem for those of us who live in the real world. Too bad those in Washington can't get with the program.
First off, I don't blame the destitute Latinos who try to cross into the US looking for work. If I were in their shoes, short on money and with a family to support, I would probably do whatever I could to get across the boarder. Second, only with the government in charge could adjudication of immigration requests take years. Why wait in line for years when I can run across the boarder tomorrow and take my chances. I sympathize with the decision and would likely be a runner if posed with the choice of waiting years to cross legally or crossing tonight and having a job next week.
So how to fix the immigration problem? First, secure the boarder. 5,000, 10,000 agents, whatever it takes, but stop the illegal crossings. Second, invest heavily in the adjudication process. Make a deal with anyone looking to immigrate to the US - give us 90 days and you will have a decision on your request - no exceptions. There are two ends to a funnel and there is no reason that we cannot give people who want to come to America the chance, without having to wait years for legal entry. Lastly, punish employers who hire illegals...maybe $ 25K per illegal on the payroll. I am pretty sure that would diminish demand for cheap illegal labor. If folks who want to come here can live with a 90 day process instead of a 3 year process, the incentive to make a dash across the boarder is greatly reduced. If employers will get slammed for hiring illegals, demand drops. Those who still want to cross illegally, for expedient or nefarious reasons will meet sufficient enforcement resources to keep the boarder safe.
See? Not really a hard problem. People who want to come here legally deserve quick adjudication of their request. Those who exploit illegal labor should be punished. Sufficient boarder enforcement agents clean up the rabble who insist on breaking the law. Not a hard problem for those of us who live in the real world. Too bad those in Washington can't get with the program.
Friday, February 5, 2010
Do the Democrats & Obama Really Support Small Business?
How many times have you heard something along the lines of...."we support America's small businesses....small business is the driver of job growth in America and we want to jump start small business owners...yadda, yadda, yadda".
Well, I guess Obama and the Democrats support small businesses, just not very good ones. It looks like Obama and his "progressive pals" want to raise taxes on the top 2% of wage earners in the United States to pay for his profligate spending. Well, guess who make up the vast majority of the top 2% of tax filers....you guessed it, small business owners. So Obama supports small businesses, just not businesses that make a lot of money. Those need to be punished through increased taxes. I am not sure why. I guess they took more than their share so the small business that are very successful need to be taxed so they are not so successful. Obama supports small businesses as long as they don't make much money - not sure why that is. I wonder if, when Obama needs a plummer, he calls a mediocre one, a firm that is teetering on bankruptcy versus a very successful, value adding company.
So the administration wants to help create jobs through small businesses by taxing them more. How does that work? I am a successful small business owner, my tax filing is reflective of the earnings from my business. Due to the increase in taxes, I will now have LESS money left after I pay Uncle Sam. How am I going to invest in my business (which is the only reason I hire more employees) with less money in my account? Why would I risk my capital only to have my returns dampened by increased taxes?
Just how obvious that no one in the Administration has ever run or owned a business? News Flash to Obama!! I am not going to hire new employees just to "create jobs". I am going to create new jobs to increase the financial performance of my business. Second News Flash!! Increasing my taxes will not increase returns on my investments in my business. I cannot believe that concepts this simplistic escape all the Ivy League diplomas hanging in the offices of this Administration. I guess Community Organizations and the organizers who run them never had to read and income statement or deliver a return on capital. That's a shame, and an expensive one for those of us who have.
Well, I guess Obama and the Democrats support small businesses, just not very good ones. It looks like Obama and his "progressive pals" want to raise taxes on the top 2% of wage earners in the United States to pay for his profligate spending. Well, guess who make up the vast majority of the top 2% of tax filers....you guessed it, small business owners. So Obama supports small businesses, just not businesses that make a lot of money. Those need to be punished through increased taxes. I am not sure why. I guess they took more than their share so the small business that are very successful need to be taxed so they are not so successful. Obama supports small businesses as long as they don't make much money - not sure why that is. I wonder if, when Obama needs a plummer, he calls a mediocre one, a firm that is teetering on bankruptcy versus a very successful, value adding company.
So the administration wants to help create jobs through small businesses by taxing them more. How does that work? I am a successful small business owner, my tax filing is reflective of the earnings from my business. Due to the increase in taxes, I will now have LESS money left after I pay Uncle Sam. How am I going to invest in my business (which is the only reason I hire more employees) with less money in my account? Why would I risk my capital only to have my returns dampened by increased taxes?
Just how obvious that no one in the Administration has ever run or owned a business? News Flash to Obama!! I am not going to hire new employees just to "create jobs". I am going to create new jobs to increase the financial performance of my business. Second News Flash!! Increasing my taxes will not increase returns on my investments in my business. I cannot believe that concepts this simplistic escape all the Ivy League diplomas hanging in the offices of this Administration. I guess Community Organizations and the organizers who run them never had to read and income statement or deliver a return on capital. That's a shame, and an expensive one for those of us who have.
Thursday, January 21, 2010
If I could Ask Obama One Question...
If I could ask President Obama one question, I think it would be this...why does he always have to have a villain? Think about this for a minute. Obama is always bashing a villain....of his own choosing.
During the campaign and throughout his adolescent administration Obama has always vilified "the rich" (BTW, the rich defined as those who make more than $ 250k but not the super-rich because the super-rich throw really great fund raising parties) As Obama started his push to ram healthcare down America's throat he has railed against a variety of villains. First it was the docs who did unnecessary procedures to line their pockets. Next it was big Pharma, then it was the health insurance companies. Now that the voters of Massachusetts have summarily rejected Obama's health care fiasco, he is going after the banks. Now I am not here to defend obtuse Ivy Leaguers who can't understand why giving themselves mega-bonuses the year after the government bailed them out is a bad idea, but they are the the new villains in the Obama cross hairs. Thankfully Obama's aim is about as good as his ability to read public opinion, but why a new villain? It seems like the only people Obama has not vilified are the villains from radical Islam who want to blow us up.
Maybe Obama skipped his business law classes at Harvard or his finance classes at Columbia, but someone needs to point out that the "corporations" that Obama continually pummels are made up of employees, stockholders, and suppliers who feed their families, pay their mortgages, and buy their cars with salaries, commissions, and bonuses from their jobs...at corporations.
Maybe the common thread here is that all of these villains make money...but not enough money to be big donors to the Obama campaign. I can't figure it out. All of the employees of these corporations are regular Americans minding their business, trying to make a good living. I guess in the 3 years remaining in his administration, Obama will get around to making all of us a villain. Wait your turn.
During the campaign and throughout his adolescent administration Obama has always vilified "the rich" (BTW, the rich defined as those who make more than $ 250k but not the super-rich because the super-rich throw really great fund raising parties) As Obama started his push to ram healthcare down America's throat he has railed against a variety of villains. First it was the docs who did unnecessary procedures to line their pockets. Next it was big Pharma, then it was the health insurance companies. Now that the voters of Massachusetts have summarily rejected Obama's health care fiasco, he is going after the banks. Now I am not here to defend obtuse Ivy Leaguers who can't understand why giving themselves mega-bonuses the year after the government bailed them out is a bad idea, but they are the the new villains in the Obama cross hairs. Thankfully Obama's aim is about as good as his ability to read public opinion, but why a new villain? It seems like the only people Obama has not vilified are the villains from radical Islam who want to blow us up.
Maybe Obama skipped his business law classes at Harvard or his finance classes at Columbia, but someone needs to point out that the "corporations" that Obama continually pummels are made up of employees, stockholders, and suppliers who feed their families, pay their mortgages, and buy their cars with salaries, commissions, and bonuses from their jobs...at corporations.
Maybe the common thread here is that all of these villains make money...but not enough money to be big donors to the Obama campaign. I can't figure it out. All of the employees of these corporations are regular Americans minding their business, trying to make a good living. I guess in the 3 years remaining in his administration, Obama will get around to making all of us a villain. Wait your turn.
Monday, December 21, 2009
Senators Webb & Warner = Lapdogs for Harry Reid
It either must be terribly humiliating or maybe these two just aren't as smart as everyone thought they were. I suspect it is the former, because I know that Senators Warner and Webb are plenty smart. They are also plenty wimpy. These guys folded like a flimsy tent when we we needed them. Warner ran as a "radical centrist" Webb publicly fancies himself a renegade and a free thinker. Well, when Harry Reid needed these two to fall in line they snapped a crisp salute, voted the way Harry wanted them to and then posted statements on their websites explaining their votes in approved talking points from the DNC.
The real problem here, and it goes beyond gutless senators like Mark and Jim, the problem is that these guys are already fabulously wealthy. The taxes they are going to impose upon us (assuming they have not exempted themselves somewhere in the 2000 page bill) are a drop in the bucket to them. They mean nothing. These two could easily pay (though I bet they won't) another 100K in taxes each and they would not blink an eye. The problem is that for the rest of America, those of us who work for a living, who build businesses and create jobs, these taxes are real and they hurt. So my tax dollars are going to Nebraska, Louisiana, and Vermont in order to keep their senators votes in line. This is good government....why?
Nice job Senators from Virginia. You cowered in front of a moron like Harry Reid. I cannot imagine how it feels to be a lapdog for man of Reid's caliber...but it must suck. Good luck in your re-election bids. You are going to need it! HAHAHAHA!!!!
The real problem here, and it goes beyond gutless senators like Mark and Jim, the problem is that these guys are already fabulously wealthy. The taxes they are going to impose upon us (assuming they have not exempted themselves somewhere in the 2000 page bill) are a drop in the bucket to them. They mean nothing. These two could easily pay (though I bet they won't) another 100K in taxes each and they would not blink an eye. The problem is that for the rest of America, those of us who work for a living, who build businesses and create jobs, these taxes are real and they hurt. So my tax dollars are going to Nebraska, Louisiana, and Vermont in order to keep their senators votes in line. This is good government....why?
Nice job Senators from Virginia. You cowered in front of a moron like Harry Reid. I cannot imagine how it feels to be a lapdog for man of Reid's caliber...but it must suck. Good luck in your re-election bids. You are going to need it! HAHAHAHA!!!!
Sunday, December 20, 2009
Term Limits Now More Than Ever
Get these people out of Washington as soon as we can...all of them. Super rich, ivory tower lemmings completely out of touch with the daily lives of real Americans in Washington is a recipe for...disaster - just what we are getting from Congress and the President today. Agenda driven, political legislation that has nothing to do with solving problems in our country.
Here are the no longer covert priorities of every legislator in Washington 1) Get re-elected 2) Score political "victories" that hopefully make the opposition look bad 3) Get re-elected again. That's pretty much it. See the problem.
Senate, one term; House 2 terms. Then go home and earn a living like the rest of us.
Elect me president, I will get it done :)
Here are the no longer covert priorities of every legislator in Washington 1) Get re-elected 2) Score political "victories" that hopefully make the opposition look bad 3) Get re-elected again. That's pretty much it. See the problem.
Senate, one term; House 2 terms. Then go home and earn a living like the rest of us.
Elect me president, I will get it done :)
Sunday, November 15, 2009
Obama, you are the President...time to start acting like it
I know that coming from Chicago, everything for Barak Obama is political. However, the decision to send more troops, stand with current levels, or withdraw from Afghanistan should rise above typical, frustrating, and self-serving partisan gnashing of teeth. Unfortunately for Obama, he cannot rise from the sewer of Chicago politics. Every decision is political and is made through the decision tree of what makes Obama and the Democratic party look good and the other side look bad. Furthermore, what position strengthens his political foundation and erodes any competitor, in party or out.
The Afghanistan decision is not all that hard if put through a simple analysis. First, what does it take to win? Are we willing to pay that price? If we are not willing to go all in and win, then get out. General McCrystal believes 40,000 more troops will give him a winning hand. He believes he can secure the population, defeat that Taliban, and leave a nascent free society. He is closest to the ground, either give him what he needs or relieve him and pull out. I was shocked to think that Obama was considering splitting the difference and sending more troops but not as many as his general requested. This would be politics at its worst. This is the worst case scenario for he troops already there and the new ones he would send. It is not the addition in force that a trained military professional believes is needed to win. However it is enough to make Obama not look like a sissy, but not what the military needs, so he is still okay with his left wing loony supporters. This is a political decision. It is tantamount to throwing away American lives....not enough to win, but just enough to provide political cover with the opposing views on what to do in Afghanistan.
Obama is not big on American "winning". We know he is a man of the world. If he feels that a convincing and forceful American victory is not in our best interests....then make that decision and live with the consequences. That is what leaders do, it is not what politicians do. If Obama wants to get out, I would rather he say so and get the warring American forces home. Sending them a fractional reinforcement on what is needed to win is wasteful and immoral.
Obama, you are the President of the United States. It is time to start acting like it. Make a decision, lead for a change. We will let you know how you did in 2012.
The Afghanistan decision is not all that hard if put through a simple analysis. First, what does it take to win? Are we willing to pay that price? If we are not willing to go all in and win, then get out. General McCrystal believes 40,000 more troops will give him a winning hand. He believes he can secure the population, defeat that Taliban, and leave a nascent free society. He is closest to the ground, either give him what he needs or relieve him and pull out. I was shocked to think that Obama was considering splitting the difference and sending more troops but not as many as his general requested. This would be politics at its worst. This is the worst case scenario for he troops already there and the new ones he would send. It is not the addition in force that a trained military professional believes is needed to win. However it is enough to make Obama not look like a sissy, but not what the military needs, so he is still okay with his left wing loony supporters. This is a political decision. It is tantamount to throwing away American lives....not enough to win, but just enough to provide political cover with the opposing views on what to do in Afghanistan.
Obama is not big on American "winning". We know he is a man of the world. If he feels that a convincing and forceful American victory is not in our best interests....then make that decision and live with the consequences. That is what leaders do, it is not what politicians do. If Obama wants to get out, I would rather he say so and get the warring American forces home. Sending them a fractional reinforcement on what is needed to win is wasteful and immoral.
Obama, you are the President of the United States. It is time to start acting like it. Make a decision, lead for a change. We will let you know how you did in 2012.
Are you kidding me?
We are really going to bring the 9/11 terrorist a$$holes to American soil for a civilian trial...to be put on the docket right after a carjacking case is resolved? So the planners of the 9/11 jihadist massacre are due the same rights as the local car thief? Newsflash for Eric Holder - these bastards are not American citizens. They are not due any constitutional due process. They are ar criminals. This is both an irrational and stupid political decision...very Nixonian...by an administration that fancies itself as far smarter than markets, economies, and certainly average Americans.
There is an intersection of interests in the KSM matter. The only thing he wants out of his remaining pathetic and wasted life is to die as a martyr. The only thing we as Americans owe KSM is a bullet between the eyes. It is my suggestion that we recognize the intersection of these common interests...and save ourselves a lot of money, time, and national turmoil.
There is an intersection of interests in the KSM matter. The only thing he wants out of his remaining pathetic and wasted life is to die as a martyr. The only thing we as Americans owe KSM is a bullet between the eyes. It is my suggestion that we recognize the intersection of these common interests...and save ourselves a lot of money, time, and national turmoil.
Sunday, October 25, 2009
Use Your Heads People
I am not a big fiction reader. I strongly prefer non-fiction. I especially dislike reading fiction in the news media and then hearing fiction repeated as fact by people following what they hear rather than using their heads and thinking for themselves.
Here are some facts that are not refutable. The democrats control the House of Representatives by 79 seats. They have an insurmountable voting majority of 60 in the senate (58 democrats +2 reliable "independents"). So when I hear chatter in the media and in conversation about the "obstructionist" republicans my head starts to throb. The republicans cannot in anyway obstruct anything the democrats want to do. They do not have the votes. This is like stating that my pair of two's is obstructing your full house in the poker hand of life. The full house wins every time. It just is. So, if the democrats want to pass legislation, there is nothing the republicans can do to stop it. They do not have the votes. They would be steamrolled on every vote.
If fellow democrats are jumping ship from democratic causes, why does that make republicans obstructionist? The answer is, it doesn't. However, most of the media needs a boogey man to demonize and an excuse to cite when liberalism fails. If the democrats agenda does not roll forward this year, it isn't because of the meanie republicans, it is because the democrats don't agree on the policy...and maybe, just maybe because it is bad for America.
Come on people use your heads. This one isn't that hard.
Here are some facts that are not refutable. The democrats control the House of Representatives by 79 seats. They have an insurmountable voting majority of 60 in the senate (58 democrats +2 reliable "independents"). So when I hear chatter in the media and in conversation about the "obstructionist" republicans my head starts to throb. The republicans cannot in anyway obstruct anything the democrats want to do. They do not have the votes. This is like stating that my pair of two's is obstructing your full house in the poker hand of life. The full house wins every time. It just is. So, if the democrats want to pass legislation, there is nothing the republicans can do to stop it. They do not have the votes. They would be steamrolled on every vote.
If fellow democrats are jumping ship from democratic causes, why does that make republicans obstructionist? The answer is, it doesn't. However, most of the media needs a boogey man to demonize and an excuse to cite when liberalism fails. If the democrats agenda does not roll forward this year, it isn't because of the meanie republicans, it is because the democrats don't agree on the policy...and maybe, just maybe because it is bad for America.
Come on people use your heads. This one isn't that hard.
Thursday, October 22, 2009
When Fat Cats Become Bone Heads
So major banks in the US are managed by their leadership to the point of collapse and the US Govt has to rescue them with billions of taxpayer dollars. Now as their business recovers, at least for now, what does the leadership do? They pay themselves huge bonuses like nothing ever happened. What planet do these idiots live on?
It is my opinion that cronyism in both the private and public sectors is one of the biggest threats to the future of the United States. Once a person becomes a fat cat in business or politics, short of being convicted of being an ax murderer (or taking 90K in bribes and stashing the cash in the freezer), they are entitled to riches and perks unknown to the rest of America. I guess a meritocracy is only in effect for those not in the fat cat club. Once in, membership appears stickier than university tenure.
What were these clowns thinking? What a self inflicted PR nightmare. If fat cats forget that their fat wallets don't impress most Americans and their fate egos will be their undoing. What a bunch of boneheads. Obama should have fired all of them for being morons - they work for the government. Remember?
It is my opinion that cronyism in both the private and public sectors is one of the biggest threats to the future of the United States. Once a person becomes a fat cat in business or politics, short of being convicted of being an ax murderer (or taking 90K in bribes and stashing the cash in the freezer), they are entitled to riches and perks unknown to the rest of America. I guess a meritocracy is only in effect for those not in the fat cat club. Once in, membership appears stickier than university tenure.
What were these clowns thinking? What a self inflicted PR nightmare. If fat cats forget that their fat wallets don't impress most Americans and their fate egos will be their undoing. What a bunch of boneheads. Obama should have fired all of them for being morons - they work for the government. Remember?
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