Browse Category

Econ

Will we even have a real market in broadband?

Comcast, the nations #1 Cable television/Cable Internet provider, is set to buy TimeWarner Cable, the nations #2 Cable television/Cable Internet provider. Given that there really is no cable television and internet markets (AT&T and Verizon both froze their roll out in Comcast and TimeWarner’s territories..hrmm). Satellite maybe national, but here too only 2 providers with almost similar pricing for television to each other and neither offers a serious internet package (ClearWire, despite their claims is not available everywhere). There is no real national broadband competitor, if there were we would see pricing similar to say Korea or parts of Europe.

The two largest cable providers along with the the two largest mobile phone providers (actually mainly Verizon) have for the past 5 years managed to get through local legislation barring local competition, especially from any public initiatives (think municipal wifi), Hell, they even managed to kick Google’s ass in several attempts to get Google Fiber going. If the DOJ and FCC approve this (Comcast does have clout), then I fear that any chance in a real market for broadband and television will be severely curtailed.

Price controls hit Venezuela…this will not end well!

Law Limiting Costs, Prices and Profits Comes into Force in Venezuela

By EWAN ROBERTSON

TAGS

economic war

Price Controls

Mérida, 24th January 2013 (Venezuelanalysis.com) – A law limiting costs, prices and profit margins across the Venezuelan economy came into effect yesterday.

The law is designed to prevent over-pricing, speculation and other abuses against consumer rights which have been occurring in the South American country.

It was drawn up by President Nicolas Maduro after problems with Venezuela’s currency control system and what officials argue is an “economic war” being waged by anti-government business sectors have created economic imbalances for consumers such as high inflation and shortages in some basic products.

via Law Limiting Costs, Prices and Profits Comes into Force in Venezuela | venezuelanalysis.com.

This….will not end well.

Many years ago I got to become friends with a young man from Caracas at one of my father’s BBQs. This was about a year before Chavez became President. He came from a well to do family who was in tool and die making. Anyways, he worked in retail before coming here and I learned a thing or two about how it is down there. Essentially, you had over the decades something akin to how our health insurance companies operated here, were a select few manage to consolidate and get the state to give its blessing. The state allowed and aided a select few to dominate at the expense of a real free market in retail.

Well..fast forward to today and you have the end result of state meddling/crony capitalism with a cabal of business interests. One hand helping the other. But instead of breaking up these retail combines and allowing the formation of a real free market for retail, we get something worse. Very rare does command economies and their price control schemes work out well. The fundamental forces of Supply & Demand ultimately will win out in one form or another. Incentives will be shifted, shortages will begin, oh the list goes on and on. We have seen this time and time again, be it here in the US or Cuba or the USSR or wherever, it almost always fails.

This, unfortunately for the average Venezuelan, in the end…will not end well.

The Return of the Automat?

I’m going to make a prediction here, starting either this year or next, you will start to see self-checkout systems at fast food joints. Now I wasn’t alive when these were big, but many decades ago they used to have these places called Automats, where one picked an item plunked down some change in a machine and you got a fresh meal. Think sorta like a room with vending machines and tables and a microwave today, only back then it was a hot meal already made.

An automat from 1904

I think you could start to see that again where one goes into a Burger King (for example), play with a touch screen and up comes your food. This isn’t a slam on raising the minimum wage, but you have to consider the laws of economics (especially with incentives and cost substitution). As would a consumer pick a viable substitute item if their first choice was beyond their budget, so would a business owner seek to do the same if there was a viable labor substitute.

Disability Insurance Abuse shouldn’t be a substitute for Unemployment

So I was at the doctor’s office (Again) this morning. Sitting in the lobby talking to some people, most were not the usual old codgers that my doc normally saw (his bread & butter are his Medicare patients). These were folks much younger….and unemployed. Some of them came in to see if his office will declare them disabled so they can collect Social Security Disability Income. I know my doc, odds are he will reject 99% of them.

Now I grant you that some could have been genuinely disabled in some way. But I also have seen a lot of abuse going on with the SSDI system. Its slated to go broke by 2016. We need a better solution for the unemployed versus using something that was meant to help you while you were injured as a substitute for an unemployment check!

The program now has seen an explosion in the number of users. In 1990, it was around 4.2 million and is now 14 million. The largest increase happening over the past decade. How many of these folks are genuinely disabled? The program is now paying out about $200 Billion per year. That 2016 meltdown date is getting more real as the rolls get larger.

The expansion of SSDI isn’t a cause of the federal budget’s woes, its a symptom of the woes our current economic system imposes. While I abhore someone using because they have run out of unemployment benefits, I also abhor that that person’s benefits have run out or that they could not find a job. Many, indeed I speculate the majority of new cases are those who are entering middle age or are middle age to nearing retirement age. For these folks, the job market has been cruel to say the least. I’m reminded of my friend’s accountant who worked at a firm that got bought out. The man is now in his upper 50s, it was folks like him that got bought out, sadly in his case just prior to the bottom falling out. He has spent the past half decade looking for a job. Now I’m not aware if he is on SSDI, but it would not surprise me, as he fits the bill.

Social Security Disability Income will soon face some fiscal draconian measures to keep it alive. Once the money runs out, and it will at the rate things are going, those on it will be faced with a new stark reality. While Uncle Same will probably pump money into it, most likely new rules and standards will be put in place. And there should be, as perhaps we can curtail the abuse. But then what happens to folks who are without a job prospect despite looking and now face a reality with no other benefits? Many are in the Middle Class, a socioeconomic class that is losing membership fast. Many losing SSDI and facing harsh odds of being hired will fall through the class into America’s fastest growing demographic…the poor.

You were better off in 1965 in terms of wages

I’ve heard a lot of talk in the past few hours about the proposed rate increase for minimum wage. Now I can see, if I were a business, freaking out if they said we’re boosting it to $20/hr if the the bulk of my labor force was in that pay category. But the proposed raise is actually not much of a raise, indeed it does not even make up the Federal Reserve-induced rate of depreciation of purchasing power.

You can tell me all you want that there shouldn’t be a minimum wage or that it should only be something states handle, but the fact is that there is a federal minimum wage and it isn’t going anyways. So, saying all that, here is something to consider, in 1965 the minimum wage was $1.25 an hour which in TODAY’S money would be $9.32/hr. That’s what, if kept with inflation, the minimum wage should have been NOW not in the future but right now. The President’s proposal is STILL BELOW what someone in 1965 was earning, and he wants (from what I can tell) to take into effect in 2015!

Our new American economy via robots

The next phase in productivity in the American economy. As one manager at a logistics firm noted, one robot equaled 1.5 humans. That isn’t all bad, robots are helping manufacturing return back to America’s shores, with albeit a smaller human workforce now managing such machines. The labor cost advantages that nations like China or Vietnam will now be edged out by this industrial Skynet. From law work to military air assaults, the machines are everywhere and the future.

Japan’s Abe just gave every currency trader the green light to short the Yen!

Incoming Japanese Prime Minister Shinzo Abe reiterated calls for the Bank of Japan to conduct bold monetary easing to beat deflation by setting an inflation target of 2 percent.

Abe, to be sworn in as Japan’s next premier on Wednesday when he is also expected to name his cabinet, said his new government hopes to sign an agreement with the BOJ to aim for 2 percent inflation, double the central bank’s current target.

via Japan’s Abe: No Fiscal Reform Unless Deflation Is Defeated.

To accomplish this goal, Japan is going to have to print a lot of Yen. Those printing presses are going to go on day in and day out. Even digitally, as the government tries to introduce more of the currency to obtain velocity, the pressure to devalue will be enormous! Exporters are going to love this, that’s for sure. Maybe its time to go long something like Toyota or Sony? I know one thing, my screens will be focusing on USD/JPY and EUR/JPY and any other derivative for a while!

Happy Birthday to two economic giants, Adam Smith & John Maynard Keynes

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

~ Adam Smith (Scottish philosopher and economist, 1723-1790)

“The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

~John Maynard Keynes (English economist, journalist, and financier, 1883-1946)

Want a job? Hand over your privacy!

When Justin Bassett interviewed for a new job, he expected the usual questions about experience and references.So he was astonished when the interviewer asked for something else: his Facebook username and password.Source: FacebookBassett, a New York City statistician, had just finished answering a few character questions when the interviewer turned to her computer to search for his Facebook page. But she couldnt see his private profile. She turned back and asked him to hand over his login information.Bassett refused and withdrew his application, saying he didnt want to work for a company that would seek such personal information.

via Jobseekers Get Asked for Facebook Passwords – US Business News – CNBC.

Now this is just pure wrong. I can see an employer viewing someone’s social network profile, but dammit all to hell if we are going to just hand over the password to someone who you just met. That’s just pushing it, in my book! Think about it for a second. The person you’re being interviewed by, you don’t know this person! Sure they have leverage in the sense that you’re looking for a job and they have the keys to the employment castle. But why must you hand over your password? The best thing to do is either have a separate “public” profile or before the interview make your current social network profile set to public viewing.  But I don’t think handing your password to a stranger is simply justified.