Italy's Example We Ought Not Follow

For a lesson in the type of economy a country should not have, look at Italy. 

It penalizes entrepreneurs in so many ways. And the adverse effects are so evident; the country is always in a financial mess.

Today, Italy is on the verge of bankruptcy. Its government debt, as a percentage of GDP, is about 125% and unsustainable. Some reasons why:

An Italian company, after it has 15 employees and then decides to expand with another employee, sees the bureaucratic fun start. Health and safety regulations become prohibitive. The employer must pay two-thirds of the employee’s social security. Then unionization becomes inevitable. Forget the added problems of terminating employees.

And with the 51st employee, regulations become even more onerous. There is an odd emphasis on contrived handicapped provisions. Not enough added paperwork and expense? Wait until you have 101 employees.

With it all, there are loopholes and tax credits so that you need an army of expensive experts to tangle with various government agencies.

The best solution? Stay small. The result? Italy remains a 20th century country living in a 21st century economy, hoping to be bailed out by the rest of the world which cannot afford it. (See the Earl J. Weinreb NewsHole® comments.)

“Robber Baron” and “Sweat Shop” Are Poor Descriptions

The term “robber baron”  became part of our vocabulary thanks to a long-ago book, with a slant that was decidedly against free enterprise. The term is constantly misused today as a slur against entrepreneurs, whether deserved or not.

Another term that ought to be dropped  for future usage is “sweat shop.” It was coined by socialist union activists a century ago to denote clothing  industry conditions while organizing potential union members.

The truth is that those workers had the same hours,  under the same working conditions that all others endured at that time, when there were few modern factories, no electric fans or air conditioners. Even the so-called “ bosses” worked under the same conditions. As did the union bosses of the time. As well as multi-millionairs J.P. Morgan, Rockefeller, and all the other big capitalists of those days. (See the Earl J. Weinreb NewsHole® comments.)

When Will the Euro Mess End?

Unfortunately, the European Euro mess will be continually with us until the countries involved leave that union and go bust in their own fashion.

All we are getting now is a political dance by left-wing bureaucrats who are playing a game called  ‘lets kick the can down the road until we retire.” With an added chorus entitled “let the Germans take the bill in the meantime.”

There is a solution. Cut the size of European governments. Any cutting being done now has been on the private sector. And the latter is getting heavily taxed to boot. All of  which guarantees a lack of growth in each effected country.  (See the Earl J. Weinreb NewsHole® comments.)

The Patent Trap

I always recommend that everyone be involved in some kind of small or part-time business, using ideas and hobbies they come up with. It’s educational, especially for youngsters, and it can eventually prove profitable.

The questions often arise about the protection of ideas and products that may develop with such enterprise.

Copyright procedures, along with trademarks, are not diffficult or expensive to undertake. The patent question is another matter.

Patents require a special attorney with an initial bill of about $10,000, with more outlay assured. Then you have the distinct possibility that a patent may have to be defended against infringement by others who have bigger wallets. You may be facing millions of dollars of expense.

Patents are therefore not the protection they first appear to be. The first-to-market with the most funds, may well be. (See the Earl J. Weinreb NewsHole® comments.)

Business Folks Don’t Get Trials By Their Peers

A simple  thought that is little understood by the vast majority of Americans:

A citizen is supposed to have the basic constitutional right to trial by one’s peers. Yet, many a business man or woman has been in a court as a defendant or plaintiff, where jurors and judge are not truly his or her peers.

How can a business person get justice from any juror, judge, or for that matter, an arbitrary government official, when those doing the judging have no business experience?  Where they even lack basic understanding of business, its types and arcane intricacies, not easily acquired by the non-business public?

In fact, much of the media-dispensed business information is biased or skewed. (See the Earl J. Weinreb NewsHole® comments.)

Europe's Lack of Shale Development

I have commented before on the complaining of European bigwigs about their economies and how they pass the blame to others when they ought to be looking at their own prolifigate post-World War II lifestyles.

Shale development is another case in point. It has opened up lots of energy development in the U.S. but is not a factor in most of Europe. Why? Lack of infrastructure, environmentalism and other government meddling, so common in their governments. (See the Earl J. Weinreb NewsHole® comments.)

Europeans Blaming the U.S. For the Euro Mess?

In a recent statement, the European Commission president repeated a theme that often comes from that area; that their financial problems originated with the American financial meltdown of 2008-09.

They are wrong again. The Europe we see in a financial mess is a byproduct of thinking that goes back to the end of World War II.

While the U.S. had an economy that grew at an average GDP of over 3%, the European easy-living, government modulated type, had a GDP averaging about 2%. And as the saying goes, the chickens have come home to roost.

Notice that the German and Swiss economies have done well despite America’s influence? Their government style is different. (See the Earl J. Weinreb NewsHole® comments.)

Official Raw Material Predictions Are Usually Underestimated

It’s amazing how the world experts are usually wrong whenever they predict how much raw materials, such as oil and essential materials, will be available in the future. They like to look ahead ten years or so and invariably paint a gloomy picture. And are wrong.

We estimate, for example, more oil reserves today than we thought we would have ten years ago. The same held true ten years earlier. We find the same for other essentials. Yet the expert's forecasts when they look ahead are always gloomy. (See the Earl J. Weinreb NewsHole® comments.)

Public Education and Call-In Radio

I listen to call-in radio that discuss the topics of the day. It reminds me daily that most of the public who call are ill-informed when it comes to basic economics, especially when so much money is spent on education.

.  No matter how much expense is undertaken in the form of tax and tuition outlays, the public has little idea of basic economics. And you can observe it by the way they are taken in by vote-buying politicians. 

 

The populist media slant usually does little to correct the problem. (See the Earl J. Weinreb NewsHole® comments.)

The Rich Are Valuable For All

When politicians expound class warfare to seek votes, by scapegoating the rich for economic ills, usually made worse by government meddling, they are misinforming the public.

The politicos are overlooking what economists call “consumer surplus” sometimes referred to as Marshallian surplus.” This is the gain consumers get because they’re able to buy something at a price that’s less than the highest price they would want to pay.

Importantly: If wealth is taxed by the government and redistributed, or even if wealth is given to charity, research shows less consumer benefits result, as normally occurs when the rich are left to their own activity. (See the Earl J. Weinreb NewsHole® comments.)

Learn To Fight Recessions From Our 1920s Experience

An excessive number of our economists, and thus the public, have been taught about the means of fighting deep recessions from the experiences of the 1930s.

And what they took away from the fight during that Great Depression has been misinterpreted. Roosevelt’s New Deal, a Keynesian effort, never got us out of that financial mess.

A decade earlier, the U.S. was in a far more economic, post-World War I meltdown, with worse unemployment and conditions more serious than those of post 1929, and far, far worse than today. 

Yet, there was a sharp, complete turnaround in just a couple of years. All, with a balanced budget and strong dollar.

For some reason we don’t fully study the booming 1920s as a means of seeing what the free spenders did wrong in the 1930s, and what those emulating them today are still spending without achieving economic recovery. (See the Earl J. Weinreb NewsHole® comments.)

How Many Regulators Already Overview Banks?

A misconception from the media that most of the public gets is that we need regulators at banks, so the latter won’t trade for their own accounts and possibly lose money.

But the giant  banks already are constantly under watch by regulators. There are full time, on site  regulators at the big banks.How many shoulders are there to be watched over by a further army of these folks who are no smarter than the ones being dutifully watched. (See the Earl J. Weinreb NewsHole® comments.)

Why Not Government Insurance Against Bank Failure?

When banks were teetering during the 2008/09 financial meltdown, the U.S. government was ready to hand them bailout funds; some against the wishes of a few of the banks involved.
A better option the government had but not taken, and still has for future emergencies, is one that provides no taxpayer funds to individual banks that are operating with normal liquidity. That has complications about which I have commented before.
Instead there should be insurance in the form of a guaranty. Furthermore, there ought to be a fee paid by the banks to compensate the government (taxpayer) for the risk. (See the Earl J. Weinreb NewsHole® comments.)

Too Many Bank Regulators Mean Poor Regulation

 

We presently have too many regulating agencies supervising banks. True, state-chartered banks are supervised separately.And there is a question of states’ rights here, as there are currently with insurance regulation.

But even among those banks with federal charters, we need but one overseer. There has to be a way information can be coordinated under one control in order to achieve better coordination..

I would suggest the Federal Deposit Insurance Corp and not the Federal Reserve. (I have commented in the past on the latter’s ineffective efforts in its primary job of controlling inflation.)

Too many current regulators, with thousands of pages of contradictory and confusing edicts that are interpreted by whim of too many bureaucrats, is a sure-fire formula for the unintended consequences our economy has been subject to. (See the Earl J. Weinreb NewsHole® comments.)

How Many Regulators Do We Really Need?

When it comes to banking and economics, it’s about time we streamlined regulation in America.

We need one agency to control the value of the U.S. dollar and inflation. As a graduate student specializing in the federal reserve system, I can tell you the current Federal Reserve has entirely lost its way and has become an arm of the government Treasury and is no longer a relatively independent body it once was. (See the Earl J. Weinreb NewsHole® comments.)

Distinguish Between Real Capitalism and State Capitalism

Too many Americans do not know the difference between real capitalism and state capitalism which is a form of crony capitalism or (that taboo word) socialism.

Yet, all the poor results of the U.S. using forms of state capitalism are erroneously chalked up against capitalism. That’s the problem. When capitalism gets demerits for the ills of government meddling, the public gets an even worse education about basic economics than it already, unfortunately has.

If you want proof of government-induced attacks on capitalism, look at the mess in Euro-Europe , with its numbing state-controls of cradle to grave economics.(See the Earl J. Weinreb NewsHole® comments.)

Career Poverty Can Be Sharply Reduced

There is a way to reduce poverty in America, the conventional type, not that caused by misfortune or accident.

For the most part, poverty is the result of an inability to get and hold a job. That is, the aftermath of not learning enough job skills that will attract employers ready to hire decent skills.

You don’t need a high school or college diploma to avoid economic poverty, but you need some job skills and the initiative to work.

Experience shows that about three quarters of those who have such basic skills and initiatives not only will escape poverty, they will eventually become part of the middle-class.(See the Earl J. Weinreb NewsHole® comments.)

   

Government Vs Private Jobs

Using alleged Keynesian estimates, the government-sponsored stimulus was supposed to create 5 million jobs. This was estimated at the time to be $1.50 of economic activity for every $1 spent by the government.

But that estimate never considered the economic costs of borrowing or higher taxes. The government stimulus plan to create 5 million jobs actually resulted in a loss of 3 million jobs instead. (See the Earl J. Weinreb NewsHole® comments.)

   

The More Bank Regulation, the More Bank Risk-Taking

Banks will become public utilities if trends toward super-regulation continue. Politicians in charge of this direction have no clue of the effect of such consequences.

The unintended result of all this? How will banks make money if more and more capital is tied up at minimal return?

There won’t be more business loans in such an atmosphere but there will be efforts to take more risks that can make up for earnings shortfalls. (See the Earl J. Weinreb NewsHole® comments.)

   

The Significance of the Auto Bailouts

To this day, most Americans do not truly grasp the underlying, fundamental problem of the government having bailed out two major auto companies by simply taking them over, and disposing the assets as the presiding administration saw fit.

The event was not just highly controversial. These  auto bailouts did an end run around bankruptcy law. to defy bondholder rights and hand over stockholder assets to the auto union. (It has the U.S. taxpayer underwater as a stockholder to this very day.)

And it resulted in one of the companies virtually being handed over without Congressional approval to a foreign company, not one for the American economy to prosper from.

 

This was not only classic crony capitalism, it was state-controlled economic action, and fundamentally unconstitutional. (See the Earl J. Weinreb NewsHole® comments.)

The Best Way To Make Banking Secure

Too big to fail banks can be dangerous. There is no reason for them to be that big because they can partner for big deals when necessary. They have done so in the past when they were much smaller.

                                               

The Dodd-Frank law has to be repaired. Federal deposit insurance should be confined only to commercial bank activity and not investment banking.

Uncle Sam has been hurting community banks with strict and very costly regulations aimed at giant banks. The smaller banks are merely innocent bystanders

The giant banks, in the meanwhile,  are now bigger than ever by about 20%. The ten largest banks now account for about two-thirds of all banking assets. The five largest banks account for half of that. Yet, twenty five years ago , the top five U.S. banks controlled under 10% of total banking deposits. (See the Earl J. Weinreb NewsHole® comments.)

     

What Government Regulators and Meddlers Have Made Worse

We have learned there is no problem so severe that our government can't make worse with more regulation and meddling.

  We know, if we bother to get past the media and its political cant, that the subprime mortgage crisis was not started by banks. It began with government legislative enabling and sponsorship of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). With further overlooking of the agencies' strict supervision.                       

Then you have the government bailing out investment banks with the Troubled Asset Relief Program or TARP. Taxpayer money starting with $700 billion was to be used to buy up distressed mortgages. However, the Treasury used the money to make loans directly to troubled banks. The banks have since repaid such loans but the time and focus was misdirected.TARP has since been viewed as a giveaway by a former government official who was a government official at the time.    

The Dodd-Frank financial reform law, that  imposes 400 new regulations upon bankers is another meddler. It's  devastating  to community banks, which don't employ large legal staffs. The American Bankers Association estimates that Dodd-Frank will force 1,000 small banks  out of business by 2020.

The law’s additional staff requirement will cost taxpayers $1.3 billion, according to the Government Accountability Office estimates. And you can be sure it cannot reduce bank risk unless banks keep funds in a mattress. (See the Earl J. Weinreb NewsHole® comments.)

     

Reducing Business Fraud

Business fraud grows apace, despite internal vigilance and official governmental oversight. Regulatory laws are expensive and time-consuming for industry to enforce; still industry fraud remains a problem.

Whether you operate a small shop or a section of a very large business, there are some corrective rules of thumb. Check and double-check the background of those you hire. Once they’re on staff, constantly educate employees about fraud. The idea is to show them you are strict about the subject, as there is a strong psychological element to the educational process.

For large corporations: Despite Sarbanes-Oxley and annual audits, fraud is a business constant. A change of auditors every year is one solution. (See the Earl J Weinreb NewsHole® comments.)

     

Business-Related Justice

American justice can be questionable when it concerns businessmen.

It’s time to note once again a problem about the lack of civil rights for citizens who are involved in business. Whether as entrepreneurs, small business operators, merchants, or CEOs of small and large companies.

They really ought to be protected as a minority, as compared to the majority who work for others as employees.

To those unfortunates: Beware of Hanging Juries and Judges, should you wind up in court as a defendant. Whether in a civil or a criminal case. Even if you are innocent.

Because many members of the jury, including the judge, may well be inclined to consider you guilty before you can prove yourself innocent. And just because you are an entrepreneur, merchant, or CEO of a small or large company.

Most Americans. including college graduates, lawyers and judges, have little knowledge of business and finance.  

Therefore, they are influenced by the media’s negative attitude towards business and finance and they tend to harp on “greed” of those involved in industry.(See the Earl J Weinreb NewsHole® comments.)

 

When Half the Citizens Pay no Income Taxes

I know this subject gets little attention in our colleges where students are supposed to be taught how to think. But how many of all our citizens truly reflect on how democracy can work well where half its voters pay no federal taxes? 

With the proverbial condition known as “no skin in the game” how do voters direct the fortunes of government?

It wasn’t too long ago when as much as three quarters of Americans, and more, paid some tax. But the the open-handed politicians learned how to really buy votes. Today, about 47% of American pay no income tax.

But think about it. How does a country prosper when half the voters are supported by the other half? It easily becomes a habit of picking the other guy’s pocket for as much as you can. (See the Earl J. Weinreb NewsHole® comments.)

     

Art Collecting As an Investment: The Bigger Fool Theory in Practice.

This is a lesson I write about periodically because it’s worth repeating. If you want what I often refer to as a perfect example of the Bigger Fool Theory, collect art as an investment without first bothering to understand some fundamentals. 

I talk as a collector of art myself; of original prints where I can be assured of the originality of the prints. (That eliminates much of what’s out there.)

Art collecting has become Big Business as much as has athletics with its $20 million dollar a year athletes playing a boy’s game. Few collectors know what to buy but depend on a buyer who’s more ignorant than they, to pay more than they for the item in a future sale. 

What isn’t truly original in an artistic sense is often passed off as original in the eyes of so-called sophisticated professionals.

In fact, Ponzi artists who have been jailed for operating in Wall Street were in the wrong business. In the art business, most would never be caught. I will explain in future comments. (See the Earl J. Weinreb NewsHole® comments.)

Attending College for High School Jobs

There are a large number of job categories still available for those who have not gone to college and who do not have mechanical skills to qualify for higher-pay positions.

These start at janitorial and comparable bottom-run levels. But they include clerks and cashiers and retail positions, as well as restaurant positions such as cooks, waiters or waitresses.

What’s interesting here is that so many college graduates are now working at the very positions that have been always available to those who never bothered to undertake the time and expense of advanced education. (See the Earl J. Weinreb NewsHole® comments.)

Why Bother to Actually Attend College for Comparable Study?

There are so many ways much of college attendance is a waste of valuable time and money.

One: That four years can be accomplished in three by cutting out summer vacations that do little for education.

Two: In the day of the Internet, much college-level study can and has been done without the need of the classroom.

Three; Inasmuch as too many college professors do not teach, a better quality of teaching can be arranged though Internet study for many courses.

Conventional colleges are better only for those who value the problematic benefits of social contact. But not everyone attends Harvard for the prospective benefit of going to Washington to become a government bigwig, or a Wall Street Insider.

College attendance is also great for four years of dating and boozing for adolescents so inclined. (See the Earl J. Weinreb NewsHole® comments.)

Hamiltonian Vs Jeffersonian Democracy

Leave it to the politicians of today to get it all wrong today, especially if they want to rationalize today’s liberal politics by suggesting Thomas Hamilton, a founding father, would be a strong government liberal. This on the basis of his being a Federalist at the creation of the United States.

He believed in the constitution, as it was written with all its restrictions, not its expansion. That’s a major difference with today’s political liberalism. All the liberals today point to is the fact that Hamilton wanted the federal government to take over the debts of the states, which were incurred in fighting the Revolutionary War. This was not a permanent incursion into state affairs. 

   

The Jeffersonians headed by Thomas Jefferson believed in more states’ rights than did Hamilton’s Federalists, and though they are supposedly the source of the current Democrat Party, they bore little resemblance to today’s liberal politicians. (See the Earl J. Weinreb NewsHole® comments.)

Really Trying To Save Energy?

The environmentalists are trying to save energy every which way. After all, they know that coal has to meet about 40% of the world’s electricity production. And they know coal gives off carbon deposits. That phenomenon is the number one bane of an environmentalist’s existence.
 

So these enthusiasts go all out for solar and wind power which are very poor sources of energy. Expensive to compete with other energy sources and wanting, even when they must be bolstered with substantial funds from taxpayers. And hypocritical when they must use other scarce commodities, such as water or food supplies or they kill off birds in their operation.

 I wonder how many environmentalists who use bikes instead of an auto to save energy, consider how much coal they burn when they use the Internet? The major social Internet sites alone use enough electricity to light up the equivalent of  hundreds of cities around the world. (See the Earl J. Weinreb NewsHole® comments.)