07:56 – Over the last few years, I’ve mentioned several times that I thought China was in deep, deep trouble. People scoffed, but it’s becoming more and more obvious that I was right all along.
It’s not that I have a magic crystal ball. It’s that I understand something that appears to escape most politicians and journalists, including Ambrose Evans-Pritchard. The entire concept of Keynesian economics is fundamentally broken. Governments that make economic and financial decisions based on Keynes’ mistaken principles, which is to say nearly all governments, are doomed to suffer the consequences. Unfortunately, that also means the rest of us are also doomed to suffer those consequences. If only they’d listened to Hayek instead. We wouldn’t have $15 trillion in debt and there’d be no eurozone crisis. In fact, there’d be no eurozone.
20 Comments and discussion on "Thursday, 15 December 2011"
I’m not a Keynesian by any means, but Keynes didn’t advocate running a deficit every year, with bigger ones when the economy is bad. If I understand it, he was advocating something closer to a long term balance. Deficit based stimulus when the economy is bad balanced out with surpluses when the economy is good would be more in sync with Keynes ideas.
It’s the idea of running a deficit at all that is the fatal flaw. Once politicians come to understand that it’s possible to spend money they don’t have, we’re doomed. That’s why I favor an absolute requirement for a balanced budget. No exceptions, including time of war. None. If you don’t have the revenue in hand, you can’t spend it. Period.
The concept of a so-called “stimulus” is an excellent candidate for the dumbest idea ever. What politicians cannot get through their heads is that government *cannot* produce wealth or create jobs. Ever. All it can do is transfer wealth and/or jobs from one place to another. And it does so with less than 100% efficiency–usually *much* less–which means the net result is *always* less wealth and fewer jobs. Period.
My only concern with requiring a balanced budget is that our current crop of politicians would simply respond by increasing taxes every year to balance the budget.
Yes, but it makes spending increases obvious, and those politicians will pay the price come election time.
Likewise. I never knew the details of the PRC’s economy … but that’s kind of the point. No one knew the details, so no one could confirm whether the economy actually was growing at 10% per year or whether unemployment was effectively 0. I did know that many banks had bad “loans” (typically to relatives of high Communist Party members) which exceeded the bank’s nominal assets. Only high leverage and closed books concealed the problem. But the main point is, I don’t know economics but I do know coverups and lies. And the Chinese economy, as seen from here, was coverups and lies.
Similarly for many other topics. I know maybe 1% of what’s needed to have an informed opinion on weather, climate change, and anthropogenic effects on weather or climate. But I know coverups and lies, and even before revelations of East Anglia’s perfidy, the whole scam smelled.
Amazon has killed the bookstores, now WalMart ?
FWIW, I’ve been watching the Indian real estate market for a number of years now. It’s hard to come by facts and figures in the way we’re used to, but my impression is that the volume has dropped to nothing while prices have remained steady to downward. Such action is typical at a peak. They too have had a housing boom and every time I go down I see more and more unfinished flats and apartment buildings standing vacant.
Recently the rupee has been clobbered as everyone flees to the dollar, so my feelers will be on full alert when I go down in January. I suspect the lull over the past year or two is the “pause that depresses”.
The Keynsian meddling in markets has only prolonged the agony. If I had my way, we’d have had a Panic, a crash and then capital would flow at depressed prices. Sure, it would hurt; but the hurt would force some sense into people that life and investment of savings are not without risk.
The Keynsian meddling has had another effect I mean to take up with BofA. Instead of borrowing the money in my checking account and making the difference off of loans, they seem to think they can derive their income by buying T-bills on the money I lent them and by charging me $3.00 per check image. I have news for them…
Boy, that Forbes article was hard for me to read. Right off the bat, they commend General Electric, and Jack Welch specifically, as some kind of geniuses. Welch, as much as anyone, is responsible for moving US manufacturing abroad, so he is no champion of mine. How much brains does it take to stop making locomotives and become a bank, to push your stock options through the roof? Figuring out how to be profitable at making things, without selling out to foreigners and sending all your jobs overseas would have been genius.
By the way, at my Walmart, hardback books are now an end-cap (end of an aisle display) and paperbacks are one side of one aisle stretching only about 8 feet. Not many different titles, but several stacks of the same book on those shelves. The Steve Jobs biography makes up 80% of the hardback books on display. Of course, auctioneers and librarians here will tell you that no one reads in Tiny Town. Which I don’t doubt.
I use Walmart online about as much as Amazon, since shipping anything online to my local Walmart for pick-up is free. Amazon’s shipping rates have skyrocketed while I was in Germany, so it is no longer such a good deal. That Amazon premium thing is like a Costco membership to me: I doubt I would ever make my money back on the cost to belong. I just do not use the large size of anything, and Fry’s beats Costco on electronics in Meganapolis hands down.
Over time, I buy more and more from Amazon, as it’s just so convenient. As a household we spend a lot more at Walmart than we do at Amazon, though. I look for stuff online first, and then buy local if I need to do so. My wife looks locally first, and if she can’t find it gives up and asks me to order it.
I hardly ever shop at Fry’s any more. Due to the fact it’s on the other side of Indy from me. Electronic stuff is either Amazon or NewEgg. I’d think of getting a Costco membership, but it’s still a good distance away, and the only things we use a large quantity of are diapers and baby formula. I suppose I should look into a Sam’s Club membership for just those two items. (There are two Sam’s Clubs closer than the nearest Costco.
Following up on Jim’s comment, it appears to me that the world has become so closely intertwined with the advent of instant communications of the Internet, that what affects one country, inevitably infects another. Seems like a housing bubble has spread pretty much throughout the world.
I suspect multinationals also influence what goes on inside companies, and that spreads to others. At the chemical company, nothing changed as the US worked its way from 2007 through 2009. But in the fall of 2009, the company would no longer allow employees to take language instruction during work hours. Since language training was optional, you can guess what happened to the number of people who signed up.
There were no signs of slowdown in European operations, but their US companies were particularly hard hit. I am guessing, — but pretty sure, — that when international management got together, they were insisting on cutbacks everywhere, even though European operations did not warrant that — and the employees really needed and benefited from language instruction. But, that kind of influence is pretty much how recessions spread.
Back to the Amazon issue, I remember years ago the prediction that computing would speed up everything in life. It took a while for that to take hold; — it is only now just beginning to take hold. But it certainly is taking no time at all for traditional publishing and distribution to fall. Following the leads in that Forbes article, led me to this NYTimes piece
Clearly, that article represents the opinions of people who love bookstores. What does the future hold for them in what we constantly hear is a free capitalist society?
I am not among those book store lovers. I once read voraciously, but never was a bookstore more than a grocery to me: there to pick up something I needed on the way to somewhere else. If I was seriously interested in browsing books, I spent time in the library — and from my childhood, the library was one of my favorite places.
The fact is, I am not going to miss bookstores, and I suspect mine is the overwhelming majority view. I am ready for the speed and convenience Amazon offers. When someone here mentions a good book or reference, with a couple clicks, I have it for the Kindle. No need to bundle up, drive to the bookstore, wait in line for someone to help me; order the book that is not in stock; wait for days on a phone call to tell me I need to repeat the process of going back to the bookstore to pick up the purchase.
Did Walmart kill off local mom and pop stores? According to most business studies, the answer is no. The mom and pop’s were already dying; Walmart just sped up the process by a couple or three years. We still have a stationery store in Tiny Town, but good lord, his prices are double or triple what it costs to get delivery from any of the major online retailers, including Amazon. And in spite of the fact he advertises consistent opening hours, the store is locked up during those hours when I have tried to do business with him.
We know what the future holds, and it is not one with bookstores in every mall and in lots of strip malls. It is sad that the poor girl in Maine is betting her life savings on opening a new bookstore. She will lose it all. How many people want a book adviser, that she clearly wants to be?
But is that a sad future, like the Occupy Amazon people say? Not to me. I am far happier that I do not have to drive somewhere for a book. If I need advice on books, there is always the library. And I have found that good librarians know far more about books, authors, and content than sales people in bookstores. Running into someone as knowledgeable as that girl in Maine, is the exception, not the rule.
Jim Cooley wrote:
“If I had my way, we’d have had a Panic, a crash and then capital would flow at depressed prices. Sure, it would hurt; but the hurt would force some sense into people that life and investment of savings are not without risk. ”
Boy, you sure are an optimist! I’ve seen enough boom/bust cycles to know that people *never* learn.
“I am not among those book store lovers. I once read voraciously, but never was a bookstore more than a grocery to me: there to pick up something I needed on the way to somewhere else. If I was seriously interested in browsing books, I spent time in the library…”
I miss/will miss the bookstores. I used to have a fetish for *owning* books, not just borrowing at the library and returning. I did that too, but when I could afford to and had my own house I bought any book that I wanted. Eight or so bookcases later I’ve been weaned off that habit but I still have happy memories of the days spent in the huge bookshops in Oxford, London and elsewhere.
I selfishly hope that Oxford can keep a few of its large bookshops and libraries. There’s something wonderful about seeing all those books together.
Not sure what you’re implying. If investment and preservation of even a worker’s savings is a thoughful, personal objective — and not the “duty” of government, or insurance by FDIC and oversight by same, then capital might flow the way it ought, with all attendent risk.
When people seek a free lunch or a “Get out of jail free card” by virtue of the largesse of the public treasury is when things go wrong.
And then you have this on ebook prices.
Seems like the publishers are getting together to fix prices and keep their antiquated business model.
“I selfishly hope that Oxford can keep a few of its large bookshops and libraries. There’s something wonderful about seeing all those books together.”
Before I visited the UK for the first time in 1990 I asked my medieval history lecturer for a suggested tour itinerary, and also the names of some good bookshops in London and Oxford (he’d emigrated from England 20 years earlier, so I expected him to know). On that and subsequent visits I spent 2-3 days in those bookshops, loading up on books to bring home. I don’t regret that, although I’m sure my executors will… 🙂
That will hold them for another year at most. And when they do jack up the price, everybody will start downloading illegal copies and the publishers, and Amazon, won’t get a dime. When that happens Amazon will kick some butt, and I doubt it will be their customer’s.
Raymond Thompson says:
Seems like the publishers are getting together to fix prices and keep their antiquated business model.
I love the title of the article: “New e-book pricing scheme a surprising assault on the wallet”
This is more an assault on themselves than consumer wallets. The underlying WSJ article this report is based on, indicates that sales growth is in e-books, not at all in print, which is contracting dramatically, as we know. Those who signed up for this price-fixing (and it has been going on since March) have slowed their growth “significantly” compared to those who have not signed up, according to Amazon’s VP of Kindle Content.
When you consider that under the no price-fixing plan, the wholesale price of most popular e-books was $12.50, but Amazon was selling them for $9.99, that was the equivalent of $2.01 of sales promotion money to the publishers for each book. The publishers still got their price, while Amazon paid for increasing their sales.
Nope. Not gonna have that. Bottom line that publishers seem to have a hard time grasping, is that inflexible price setting does not exempt them from the Bell curve of price vs. maximizing profits.
Although I knew this was going on, this is the first time I have read that it was Steve Jobs who put the plan in place. Guess what’s good for the iPod is not the same for the iPad. Very, very strange.
$2.51 of sales promotion money, not 2.01. But I cannot go back and correct it.
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