Anything and everything worth doing takes effort, time and money to get done. Nothing has ever been free and nothing will ever be free. Everything has a cost.
Free people pay their own way, sometimes with saved money and occasionally with borrowed money. Dependent people expect others to pay for the things they want.
Do Americans want to be free people?
If we want to be free, we can’t continue to punish hard work through higher taxes and we can’t continue to reward laziness through entitlements.
Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
Friday, September 23, 2011
Wednesday, January 21, 2009
Stimulus or Burden?
Government deficit spending can stimulate an economy. However, most government spending, most of the time, is a burden on the economy and our lives, not a stimulant.
Our lives are not improved simply by having more money circulating in the economy and lower unemployment numbers. Our lives are only improved when our time spent working can pay for more of the things we want or when we can spend more time doing the things we enjoy and consider important. Hard work has its own value, but very few of us consider employment the ultimate goal.
Economies grow when more goods and services are purchased during a defined period of time than where purchased during the previous defined period of time. Therefore, if government borrows or prints money to increase spending for the period, the economy will be considered to be growing as long as the private sector does not reduce spending by more than the government increased its spending.
If government spending alone could improve our lives, why not just have government pay for everything? Because there are also negative consequences of deficit spending, that's why.
When government borrows money, less money is available to be borrowed by the private sector without an increase in the amount of interest paid to service the loans. This has not been a problem in the United States recently because China has been willing to take the money they have made off of their exports to America and lend it back to America at reasonable rates, but if the United States decides to start printing money to pay for the deficit spending, China is not likely to lend money back to America if they believe they will be paid back with a cheaper currency. When government prints money, the money supply increases, and the value of each denomination decreases because more are available. This is called inflation which hurts those who save and invest.
Government spending rarely comes with an expiration date. New infrastructure that gets built during recessions needs to be maintained long after the economy recovers. Money spent on social programs creates a dependency from recipients who learn to love handouts more than self reliance. Bureaucracies created by government spending have a life of their own which includes the survival instinct.
Citizens end up paying for government spending with higher taxes or lower purchasing power or higher costs for debt or all of the three. In the end, we may have more actual money, but less real purchasing power and less time doing what we enjoy.
The only real ways the government can stimulate the economy would be to start a business and then the sell the business to private investors or start selling government assets like land and buildings. The citizens of the Untied States really don’t need any more long term obligations/burdens to go along with Social Security and Medicare.
America needs more workers, more affordable housing, and more places to create attractive communities. It's time to start developing government land in places like Utah and Montana. It's time to open America to more immigrants who want to prosper in the land of the free. It's time to really stimulate the economy. Sorry Robert Redford and Ted Turner. You don’t get to hog the best places for yourself anymore.
Our lives are not improved simply by having more money circulating in the economy and lower unemployment numbers. Our lives are only improved when our time spent working can pay for more of the things we want or when we can spend more time doing the things we enjoy and consider important. Hard work has its own value, but very few of us consider employment the ultimate goal.
Economies grow when more goods and services are purchased during a defined period of time than where purchased during the previous defined period of time. Therefore, if government borrows or prints money to increase spending for the period, the economy will be considered to be growing as long as the private sector does not reduce spending by more than the government increased its spending.
If government spending alone could improve our lives, why not just have government pay for everything? Because there are also negative consequences of deficit spending, that's why.
When government borrows money, less money is available to be borrowed by the private sector without an increase in the amount of interest paid to service the loans. This has not been a problem in the United States recently because China has been willing to take the money they have made off of their exports to America and lend it back to America at reasonable rates, but if the United States decides to start printing money to pay for the deficit spending, China is not likely to lend money back to America if they believe they will be paid back with a cheaper currency. When government prints money, the money supply increases, and the value of each denomination decreases because more are available. This is called inflation which hurts those who save and invest.
Government spending rarely comes with an expiration date. New infrastructure that gets built during recessions needs to be maintained long after the economy recovers. Money spent on social programs creates a dependency from recipients who learn to love handouts more than self reliance. Bureaucracies created by government spending have a life of their own which includes the survival instinct.
Citizens end up paying for government spending with higher taxes or lower purchasing power or higher costs for debt or all of the three. In the end, we may have more actual money, but less real purchasing power and less time doing what we enjoy.
The only real ways the government can stimulate the economy would be to start a business and then the sell the business to private investors or start selling government assets like land and buildings. The citizens of the Untied States really don’t need any more long term obligations/burdens to go along with Social Security and Medicare.
America needs more workers, more affordable housing, and more places to create attractive communities. It's time to start developing government land in places like Utah and Montana. It's time to open America to more immigrants who want to prosper in the land of the free. It's time to really stimulate the economy. Sorry Robert Redford and Ted Turner. You don’t get to hog the best places for yourself anymore.
Tuesday, December 23, 2008
Best Practices
There are many different ways a team, or enterprise, or person can compete to win. Superior God gifted talent and physical assets provide a great head start or advantage, yet rarely does the first or most gifted competitor persevere until the end. Some teams, like the Dallas Cowboys of the early 90’s, some companies, like Microsoft, and some athletes, like Michael Phelps, can simply overwhelm anyone and anything that gets in their way, but most of the time, the difference between the winners and the losers is a matter of small intangibles, not complete superiority.
Competition is the key to economic success in any free market system. In fact, a free market system with competition is the only path to widespread individual economic success. New products get invented and improved processes get developed when innovation is rewarded at an individual level. Countries, companies, and individuals stagnate when innovation is ignored or discouraged.
The current worldwide recession has renewed the old debate regarding government regulation. Those on the left claim our governments were asleep at the wheel as BIG business raped and pillaged the citizenry. Those on the right claim the mortgage crisis that initiated this recession was a result of BIG government mandates, not unfettered capitalism.
As with most difficulties in life, a symptom of our economic problems is getting all of the attention while the real problem is barely mentioned or acknowledged. Government regulation, or the lack of regulation, is not our root problem. Our increasing unwillingness as individuals to compete with each other is the root cause of our economic problems.
BIG business spends more time and makes more effort to agree with competitors on sets of industry wide “best practices” than on actually trying to be better than the competitors. BIG Unions reward conformity for employees willing give up individual rewards for group rewards. BIG government is more than willing to enable many of these best practices through rules and regulations.
Why should we be surprised when Newspapers and Automobile companies are no longer profitable when every company in their industry is just like every other company in their industry. They all build the same kind of cars the same way and they all tell the same stories the same way and they all look alike and they all sound alike and they all act alike.
Circuit City had a great business for many years by hiring experienced and knowledgeable salespeople to assist consumers wanting to buy consumer electronics. Circuit City made money, their employees made money, and their customers were happy with the great service at Circuit City. All was good at Circuit City until Best Buy started building bigger stores and hiring younger less experienced sales people at a lower wage rate. Rather than continue to do what Circuit City did best, their management decided the way to compete with Best Buy was to be more like Best Buy so Circuit City started cutting experienced staff and hiring inexperienced staff. Circuit City is now in bankruptcy court because the consumers of electronic goods didn’t need another Best Buy.
Government regulations are not necessarily and impediment to competition, but regulations do tend to place a bigger burden on smaller companies than on BIG business. We won’t break out of this recession if our government leaders enact rules that require conformity. The only way out of this or any recession is to revive the competitive spirit by allowing the nonconformists and contrarians to compete with the established companies and all of their “Best” practices.
Competition is the key to economic success in any free market system. In fact, a free market system with competition is the only path to widespread individual economic success. New products get invented and improved processes get developed when innovation is rewarded at an individual level. Countries, companies, and individuals stagnate when innovation is ignored or discouraged.
The current worldwide recession has renewed the old debate regarding government regulation. Those on the left claim our governments were asleep at the wheel as BIG business raped and pillaged the citizenry. Those on the right claim the mortgage crisis that initiated this recession was a result of BIG government mandates, not unfettered capitalism.
As with most difficulties in life, a symptom of our economic problems is getting all of the attention while the real problem is barely mentioned or acknowledged. Government regulation, or the lack of regulation, is not our root problem. Our increasing unwillingness as individuals to compete with each other is the root cause of our economic problems.
BIG business spends more time and makes more effort to agree with competitors on sets of industry wide “best practices” than on actually trying to be better than the competitors. BIG Unions reward conformity for employees willing give up individual rewards for group rewards. BIG government is more than willing to enable many of these best practices through rules and regulations.
Why should we be surprised when Newspapers and Automobile companies are no longer profitable when every company in their industry is just like every other company in their industry. They all build the same kind of cars the same way and they all tell the same stories the same way and they all look alike and they all sound alike and they all act alike.
Circuit City had a great business for many years by hiring experienced and knowledgeable salespeople to assist consumers wanting to buy consumer electronics. Circuit City made money, their employees made money, and their customers were happy with the great service at Circuit City. All was good at Circuit City until Best Buy started building bigger stores and hiring younger less experienced sales people at a lower wage rate. Rather than continue to do what Circuit City did best, their management decided the way to compete with Best Buy was to be more like Best Buy so Circuit City started cutting experienced staff and hiring inexperienced staff. Circuit City is now in bankruptcy court because the consumers of electronic goods didn’t need another Best Buy.
Government regulations are not necessarily and impediment to competition, but regulations do tend to place a bigger burden on smaller companies than on BIG business. We won’t break out of this recession if our government leaders enact rules that require conformity. The only way out of this or any recession is to revive the competitive spirit by allowing the nonconformists and contrarians to compete with the established companies and all of their “Best” practices.
Wednesday, October 15, 2008
Hole Rule
When we find ourselves in a hole, it is usually prudent to stop digging.
The shovel for many holes is the good intentions of the digger.
Way back in 1977, the United States Congress enacted a new law called the Community Reinvestment Act (CRA). The purpose for this new law was for the Federal Government to monitor and ensure that local banks were making loans to home buyers in low and moderate income areas. Then in 1992, congress passed the Federal Housing Enterprises Financial Safety and Soundness Act which allowed Freddie Mae and Freddie Mac to assume responsibility for home loans made to low income buyers.
Low income buyers are not at all responsible for the current financial mess, but as low income buyers were approved for home loans that did not meet traditional credit standards, the demand for houses and the asking price for houses increased [basic economics]. As prices increased, fewer buyers qualified for traditional home loans which meant that more and more home buyers needed sub-prime loans backed by the Government Sponsored Enterprises (GSE’s) Fannie Mae and Freddie Mac. As more and more low and middle income buyers took advantage of sub-prime loans, more and more middle and high income buyers took advantage of lax lending standards to purchase new homes. Many of these buyers were investors and speculators. This Ponzi scheme finally reached a point where many buyers, not even able to pay their interest only loans, walked away from their property and mortgage with nothing to lose but their credit rating. Prices plummeted, banks ended up with more debt than equity, and new lending stopped.
The solution to the problems caused by easy credit seems to be more easy, perhaps even easier, credit for banks and businesses.
At some point we will have to suffer the consequences of easy credit. Perhaps it is time to stop digging.
The shovel for many holes is the good intentions of the digger.
Way back in 1977, the United States Congress enacted a new law called the Community Reinvestment Act (CRA). The purpose for this new law was for the Federal Government to monitor and ensure that local banks were making loans to home buyers in low and moderate income areas. Then in 1992, congress passed the Federal Housing Enterprises Financial Safety and Soundness Act which allowed Freddie Mae and Freddie Mac to assume responsibility for home loans made to low income buyers.
FHEFSSA established risk-based and minimum capital standards for Fannie Mae and Freddie Mac. And, it established HUD-imposed housing goals for financing of affordable housing and housing in central cities and other rural and underserved areas.
Low income buyers are not at all responsible for the current financial mess, but as low income buyers were approved for home loans that did not meet traditional credit standards, the demand for houses and the asking price for houses increased [basic economics]. As prices increased, fewer buyers qualified for traditional home loans which meant that more and more home buyers needed sub-prime loans backed by the Government Sponsored Enterprises (GSE’s) Fannie Mae and Freddie Mac. As more and more low and middle income buyers took advantage of sub-prime loans, more and more middle and high income buyers took advantage of lax lending standards to purchase new homes. Many of these buyers were investors and speculators. This Ponzi scheme finally reached a point where many buyers, not even able to pay their interest only loans, walked away from their property and mortgage with nothing to lose but their credit rating. Prices plummeted, banks ended up with more debt than equity, and new lending stopped.
The solution to the problems caused by easy credit seems to be more easy, perhaps even easier, credit for banks and businesses.
At some point we will have to suffer the consequences of easy credit. Perhaps it is time to stop digging.
Friday, August 03, 2007
Mayor Giulini's Economic Soul
Mayor Giuliani is advocating free market reforms for improving health care in America.
Of course he is right about health care. However, his free market solution to health care will also solve many of the other problems in America now, including reliance on oil from the Middle East. So why is he advocating government mandates when it comes to energy, but free market solutions when it comes to health care? Why does he trust Americans to make their own health care choices but not their own energy choices? Why does he trust health care providers to be innovative and efficient but not energy providers? Does Mayor Giuliani have an economic soul or is he just making appeals to different voting blocks?
Most Republicans believe in expanding individual choice and decision-making. I believe we can reduce costs and improve the quality of care by increasing competition. We can do it through tax cuts, not tax hikes. We can do it by empowering patients and their doctors, not government bureaucrats. Instead of being more like Europe, we need to be more like America.
Of course he is right about health care. However, his free market solution to health care will also solve many of the other problems in America now, including reliance on oil from the Middle East. So why is he advocating government mandates when it comes to energy, but free market solutions when it comes to health care? Why does he trust Americans to make their own health care choices but not their own energy choices? Why does he trust health care providers to be innovative and efficient but not energy providers? Does Mayor Giuliani have an economic soul or is he just making appeals to different voting blocks?
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