What positive steps can we take? The energy that is now expended by well intentioned, freedom-seeking individuals on the destructive course of politics can be turned into powerful steps that will have a positive effect on the future. All are moral, right and just. None require aggressing. Consider the following...
The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk.
Politicians and bureaucrats are notorious for manufacturing euphemisms -- clever but deceptive substitutes for what they really mean but don’t want to admit. That’s how the phrase “revenue enhancement” entered the vocabulary. Some of our courageous friends in government couldn’t bring themselves to say “tax hike.”
It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards a few weeks ago. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.First up, […]
The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self-sufficient.But our systems of state charity — aka welfare — have too frequently had the opposite effect: They have actually created dependency. It is time to rethink the way we help people.I’m going to […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
President Obama crowed in his State of the Union speech about the economy, even mentioning “a rebounding housing market.” Maybe he was referring to friends in high places, like the seller of Penthouse One in New York, which just closed for $50.9 million, all cash. Millions of mere-mortal homeowners likely wanted to throw something at […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the HealthCare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor supply issues. Given the mounting difficulties with and growing concerns about the […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”As the inequality gap grows, there is an ideological battle unfolding in the West.On the one hand, there are those who think government can fix things. It must do more, tax more, […]
On Feb. 7 the United States will once again reach its statutory debt limit, meaning it cannot legally borrow any more money. Since the obvious option of cutting spending to match the amount of revenue that the government collects is off the table for some inexplicable reason, Congress will have to pass a new, higher […]
The New York Times published an interminable article on health care recently. Plenty of facts — how scrupulous are these journalists! — but the article displayed absolutely no comprehension of the basics of cause and effect. I was left wondering about the whole point.The article details how the health care system rewards specialists to an […]
The Largest Company in History:“The United States Corporation of Government (USCOG)”I follow global social and commercial networks, looking for entrepreneurial opportunities.Innovation surges when industry and government models change. Buggy whips. Landline phones. Railroads. The Soviet Union. Apartheid South Africa. All marked social and commercial innovation, both bad and good.We are witnessing a new form of […]
We’d like to give the banks in Australia some credit. They’ve finally gone and done it. They have caught up with 1960s technology. They’ve figured out how to use PIN numbers.How to only use PIN numbers, that is. They’re considering scrapping signatures on credit cards to cut down on fraud. Apparently, having to verify your […]
We put in a good-citizen call to the SEC the other day.“There’s a massive scheme to manipulate stock prices,” we told the friendly agent.“I have to tell you that your call is being monitored so that we can better serve the public,” he replied.“Oh, don’t worry about that. The NSA is tapping our call anyway.”“Are […]
Dr. William C. Padgett is a retired optometrist who has been trying to bring an elderly care facility to Beaufort County, North Carolina, for over a decade.“Our senior citizens,” he laments, “are finding that it is difficult and in many cases impossible to find an appropriate long-term care facility locally.” Though he has received several […]
If you don’t have the angst out of your system concerning Wall Street banksters, Government Sachs, and the Affordable Care Act, settle in with Matt Taibbi’s Griftopia to make your blood boil one more time.Investors should be reminded of 2008 as they shrug their shoulders and put their money back in the stock market. The […]
What do 8 of the 10 wealthiest people in the U.S. have in common?Aside from being able to fly in private jets, the common thread is that each of them has made their fortune thanks to a start-up.Let me explain…From tech titans like Bill Gates and Larry Ellison (founders of Microsoft and Oracle, respectively), to […]
“Inequality is the defining challenge of our time,” according to President Obama. It’s certainly the topic of the day for Paul Krugman, Joe Stiglitz and a whole raft of liberal pundits.But have you noticed that hardly anyone else is talking about it? When is the last time you heard a shoeshine person or a taxi […]
In December of last year, I left my career to travel the world for one year.My plan was to visit as many countries as possible on my Star Alliance Around-the-World ticket in the first nine months, then, for the remaining three months, return back to the country that most caught my eye and my curiosity.Nine […]
Economic history is primed to repeat in the nastiest of ways unless the government stops distorting the price of something we use every day.Every product, good, or service has a price, which is essential to rational decision-making. We use prices every day as vital data that guide us. Without true prices, prices not distorted by […]
A new survey from Harvard University found a large majority of young Americans do not believe the law will save them money, do not believe it will improve their health, and do not intend to sign up for insurance through the new exchanges.
Uh-oh!The new pope, Francis from the Pampas, has just warned us to beware the “tyranny” of capitalism.Each man worships his own gods. Some worship at the altar of Jesus of Nazareth. Some at the altar of the Almighty Dollar. The capitalists don’t bad-mouth Francis’ god. You’d think he would cut them the same slack.Bad-mouthing Catholicism […]
The market has selected different things as money throughout history. Some of these items have served as money in isolated places for specific periods of time — for instance, cigarettes in prisoner-of-war camps. Cigarettes continue to be a currency in prisons if allowed, but if not, according to Wikipedia, “postage stamps have become a more […]
We live in parallel universes. Federal Reserve Chairman Ben Bernanke is said to have a healthy concern about deflation. McDonald’s franchisees, on the other hand, not so much.
The chain of Golden Arches fame will give up its Dollar Menu after 11 years, renaming it “The Dollar Menu & More” next month. It turns out you simply can’t make a buck selling burgers for a buck. It must be hard to give up on such an amazing marketing gimmick, generating one-seventh of all sales since its inception. But as Derek Thompson describes in The Atlantic, the Dollar Menu is an anchor “enraging franchisees who can’t make any money selling 2013 processed cow meat at 2002 prices.”
If Ben Bernanke is paying attention, he is no doubt thrilled to hear about rising price pressures.
Franchisees were surveyed earlier this year, and one verbalized the unhappiness with the ongoing promotion: “Every item introduced comes with unlimited coupons for FREE and a ‘suggested price point’ that is ridiculous and does not meet franchisees’ needs for profitability. It does meet the corporation’s need to keep the appearance of customer transaction counts high, pushing the stock.”
While the corporate office kept adding items to the menu, franchisees were expected to serve the new items right away. Operators lamented that they had to “do it consistently and with a smile on our face.” Adding, however, that “there’s little to smile about.”
While franchisees grinned and bore it, competitors copied the idea. In 2009, Burger King instituted a dollar-burger promotion, prompting a lawsuit from franchisees who claimed the cost of a double cheeseburger was $1.10. Burger King required all locations to take part in the promotion.
Wendy’s changed its 99-cent menu to a “Right Price Right Size” menu. The Jr. Cheeseburger Deluxe went from 99 cents to $1.19. And customers got four chicken nuggets, instead of five, for 99 cents.
In his piece for The Atlantic, Thompson commented that beef prices have done anything but lag behind other items. He writes, “the price of beef and other staples has been turbulent.” What’s angered franchisees is the price of the double cheeseburger over the cost of its ingredients.
Meanwhile in the Fed’s ivory tower, Fed economists don’t have to worry about staying in business selling burgers below cost or tinkering with portion sizes. They theorize there is an absence of aggregate demand and low interest rates and more money will solve the problem. Their friends generating numbers down the street at the Bureau of Labor Statistics claim prices have increased only 1.5% over the past 12 months. They see no inflation and don’t want to hear about it.
In The San Diego Union-Tribune, Dan McSwain articulates the Fed’s fears that “falling inflation would give way to deflation, a spiral in which generally falling prices cause consumers to delay purchases in hopes of even lower prices, which depresses prices — and wages — further.”
This theoretical downward spiral does not generate an increase in demand, but instead causes sales to dry up. Despite goods and services being more affordable, Keynesians like Bernanke believe people will stop spending money, workers will then be laid off, real estate prices will fall, foreclosures will ensue, and banks will fail. In other words, it will be 1933 all over again.
Bernanke was asked earlier this year about the Bureau of Labor Statistics’ low inflation numbers. “Does this sort of inflation performance suggest that you should be pushing harder on the accelerator?” The Fed chair answered that low inflation was bad because it “It increases the risk of deflation. It raises real interest rates. It means that debt deleveraging takes place more slowly.”
He went on to say:
“There are a number of transitory factors that may be contributing to the very low inflation rate: For example, the effects of the sequester on medical payments, the fact that nonmarket prices are extraordinarily low right now. So these are some things that we expect to reverse, and we expect to see inflation come up a bit.”
In his world, he hasn’t seen inflation yet, so the Fed will continue to buy $85 billion in securities each month for the foreseeable future. Vancouver favorite Marc Faber, editor of The Gloom Boom & Doom Report, told a CNBC crowd it’s not a matter of when the Fed tapers, but when they start increasing their purchases. He was likely only half kidding when he predicted purchases of a trillion dollars a month.
The problem for McDonald’s franchisees is they don’t buy stuff to make burgers from the BLS. John Williams over at ShawdowStats.com figures consumer inflation to be either somewhere around 5% using the methodology used in 1990 or just short of 10% using the way CPI was figured in 1980.
And if things weren’t tough enough under the Golden Arches, franchisees say Obamacare threatens their already thin bottom lines. “Obamacare is going to destroy already low profits,” one franchisee said. “McDonald’s Corp. does not seem to care. The corporation is frantically trying to increase the number of 24-hour stores regardless of lack of profitability. Add rising commodity and insurance costs and McDonald’s drive to get operators to rebuild or remodel and the future looks bleak.”
In the real world of burgers and fries, costs are increasing. In the models generated in government offices, bureaucrats worry prices are teetering precariously on the edge of a cliff.
Famed American country musician Charley Pride sang a long time ago, “It was burgers and fries and cherry pies. It was simple and good back then.”
In the world of central bank central planning, it’s anything but simple, and “QE forever” certainly isn’t good.