Ben Bernanke of the Federal Reserve Bank

Ben Bernanke, who heads up the Federal Reserve Bank, works hard at his job, which has been dealt a rough hand, and his intentions are fine.

However, I feel his latest announcement to provide four media open conferences each year will not do the American economy any good. The actions of the fed should not be disclosed to the public in advance, in any event. So why this policy?

The Fed is most effective when it creates economic shock, not by tipping off the financial world in advance. Otherwise, financial players will act in advance, and help counteract what the fed action is supposed to do.

Importing Workers With Little Skills

I comment often abut the poor education American students get in public schools and in college, despite the huge drain such education takes each and every year on taxpayers.

In the high schools, the U.S. has a high dropout rate. It’s interesting to see how we compare with other countries in this regard. Our rate is about 23%, Germany’s is under 3% and Japan’s a bit more than 5%; Great Britain’s about 9%. However, Portugal’s is 37% and Mexico’s 56%.

Little is said in the media about the result of U.S. immigration policy where we import even legal immigrants who do not have high school equivalency. How do we train them for the skilled jobs we need? There are already no jobs for the able. How do we prepare for the unready?

Costs That Rise Faster Than Inflation

Many costs are rising faster than inflation. The most important is that of going to college.

One reason is that the government subsidizes this effort with tax breaks. Schools are, therefore, not under pressure to reduce their charges. They do give scholarships, but charges tend to rise far too much beyond normal inflation.

Schools claim their own expenses are rising but they may not be exerting enough effort to curtail budgetary controls, with government subsidies and income tax accommodations assured.

Franchise Ownership Negatives

Do you know what should be the two major reasons for buying a franchise?

One is name recognition. The other is the training that they ought to give you.

However, few franchisers give you real name recognition and training?

Yet, franchises are not cheap. You pay up front for a license, and the royalties thereafter will be a big cut of your bottom line. In fact, those royalties may equal half your net profits, if you ever manage to get any.

I hardly ever recommend the purchase of a franchise because franchisees never really get true name recognition, and the required training from the average franchiser.

Only a handful of franchises are worth buying. (See my Earl J Weinreb NewsHole® comments).

Build From Scratch or Buy Companies?

Larger companies often have to decide whether to build their business or a new operation from scratch or buy a company outright, that is, one already in operation.

Many companies, especially in the pharmaceutical business, prefer the acquisition route. It’s expensive because you pay a big premium for a company after it has developed an expensive new drug.

On the other hand, if you attempt to research new drugs, with all startup losses and heartbreak expenses, you have lots of cost as well.

My feeling from my observations is this: In the long run, pharma companies, at least, will pay less for in-house drug product development; there’s a major premium for successful products.

MBA Futility

An MBA or Master of Business Administration degree is available for almost any college program from accounting, business management, criminal justice, education, engineering, finance, government, politics, real estate, to a variety of arcane subjects.

There’s an overabundance of MBA students and graduates with MBA degrees. They have become relatively useless, except, for their use in a resume. There are simply too many to attract the attention they formerly did.

MBAs are expensive to get and, someday, students may realize they are not even worth their use on a resume.

Government Stimulus 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 Obama stimulus plan to create 5 million jobs actually resulted in a loss of 3 million jobs instead.

An often misunderstood lesson: Government spending crowds out private spending with its added disadvantage of having zero multipliers.