For the circular flow of the economy to work efficiently, there needs to be an appropriate balance between capital and labor.
The disconnect between labor and the appropriate income for that labor is contributing to the weak economy today.
The irony of the current meltdown is that the layoffs are exacerbating the problems.
The Government bailouts of the banks and of main street America has not addressed the inefficiencies and the inequality of the appropriate income for labor.
Capital has a tendency to protect and insulate itself.
Labor gets compensated at the discretion of capital.
If capital does not efficiently compensate labor then the protectionism, inherent in capitalism, contributing to economic weakness, continues.
So how do we fix the problem?
First of all, there needs to be less politicization of our leaders.
For example, taxes should go up when the economy is doing well and when asset inflation takes place. A surplus from these taxes should go to form a rainy day fund. This fund should be balanced between equity and debt investments.
Taxes should go down when the economy weakens. The money for this should come from the investments in the rainy day fund.
Politicians have a tendency to get it backwards. They cut taxes to get elected and they raise taxes out of stress (as in the current environment). Their current policies are backwards from what it should be.
Saturday, March 7, 2009
Wednesday, March 4, 2009
Banks, Capitalism and Competition
Have you ever had a banker call you up and let you know that you could receive a higher interest rate on one of their other types of accounts?
I haven't.
The variety of interest bearing accounts at banks is overwhelming. I believe that it is overwhelming to create opportunities for "maximizing bank profitability".
Does the bank find ways to attach and increase fees on all kinds of accounts and services?
Yes.
Why?
To maximize shareholder wealth.
The bank says that they need to protect their own interests. They need to stay strong in the market place to be safe for their customers and shareholders.
Capitalism promotes competition. Competition promotes excellence. Excellence maximizes our potential.
But, competition often leads to cheating, overreaching and taking advantage of others.
As one ages, competition becomes less important, and the synergies of family, unity, teamwork and community become much more important.
In our telestial world, there are limits to maximizing potential.
Monopolies created out of competition distort that potential.
The spirit of capitalism needs to change.
It might as well start with banks.
Instead of corporate America having the mandate to "maximize shareholder wealth", maybe their mandate should be to "maximize shareholder potential through honorable competition and the synergy of community".
Maybe having a national bank, owned by taxpayers(that would include corporations), competing with corporate America, would help direct us that way.
The synergy of community is at risk, too, however, with the weaknesses inherent in the competition for power within socialism.
The old adage of absolute power corrupting absolutely, unfortunately, is often true.
Just as the banker is maximizing his and his shareholder's wealth, governments and the individuals governing, often protect their own self interests.
No wonder that we are in the economic mess that we are in.
The founder's of our constitution were really right.
There needs to be a balance between, and including, private property and government.
As the American experiment continues, my hope and prayer is that we the people will be wise, compassionate, productive and honorable in our dealings. I think that many are.
It feels to me that we the people, more than ever, need to trust in God, as we are not perfect.
I love Abraham Lincoln's famous quote, "Let us have faith that right makes might, and in that faith, let us, to the end, dare to do our duty as we understand it."
I haven't.
The variety of interest bearing accounts at banks is overwhelming. I believe that it is overwhelming to create opportunities for "maximizing bank profitability".
Does the bank find ways to attach and increase fees on all kinds of accounts and services?
Yes.
Why?
To maximize shareholder wealth.
The bank says that they need to protect their own interests. They need to stay strong in the market place to be safe for their customers and shareholders.
Capitalism promotes competition. Competition promotes excellence. Excellence maximizes our potential.
But, competition often leads to cheating, overreaching and taking advantage of others.
As one ages, competition becomes less important, and the synergies of family, unity, teamwork and community become much more important.
In our telestial world, there are limits to maximizing potential.
Monopolies created out of competition distort that potential.
The spirit of capitalism needs to change.
It might as well start with banks.
Instead of corporate America having the mandate to "maximize shareholder wealth", maybe their mandate should be to "maximize shareholder potential through honorable competition and the synergy of community".
Maybe having a national bank, owned by taxpayers(that would include corporations), competing with corporate America, would help direct us that way.
The synergy of community is at risk, too, however, with the weaknesses inherent in the competition for power within socialism.
The old adage of absolute power corrupting absolutely, unfortunately, is often true.
Just as the banker is maximizing his and his shareholder's wealth, governments and the individuals governing, often protect their own self interests.
No wonder that we are in the economic mess that we are in.
The founder's of our constitution were really right.
There needs to be a balance between, and including, private property and government.
As the American experiment continues, my hope and prayer is that we the people will be wise, compassionate, productive and honorable in our dealings. I think that many are.
It feels to me that we the people, more than ever, need to trust in God, as we are not perfect.
I love Abraham Lincoln's famous quote, "Let us have faith that right makes might, and in that faith, let us, to the end, dare to do our duty as we understand it."
Rush Limbaugh and a House Divided
Is Rush Limbaugh promoting a House Divided?
The irony of Abraham Lincoln's House Divided, Republicanism and Rush Limbaugh doesn't escape me.
The irony of Abraham Lincoln's House Divided, Republicanism and Rush Limbaugh doesn't escape me.
Monday, March 2, 2009
The Market Bottom
Will 6400 on the Dow Jones be the bottom of this particular bear market?
Some technicians are speculating that 6400 might be the bottom of this bear market, because it is a Fibonacci number relative to the lows of 1987 and the peak of 2007.
WD Gann used to say that the market would square it's range. That means that there should also be a relationship between the time and price of the market's highs and lows. When and where would he say that the market low will be in this bear market?
Time-wise, there will probably be a political agenda to the market low. If I was President Obama, I would want everything to look as bad as possible right now, so that in 4 years when I'm up for reelection, things will look much better. I'd say that the markets are set up for just such a scenario.
Fundamentally, the markets could be priced just about anywhere. Putting an optimistic spin on potential earnings, there is the distinct possibility that the market is significantly undervalued. As the economy improves, 14000 on the DJIA could be reached relatively quickly.
If the current administration manages this properly, the capital gains on the taxpayer investments into corporate America should help balance the budget, allowing for some principal repayment.
So where is the market bottom and will the technicians be right?
6400 is probably a reasonable guess. The self-fulfilling prophecies of aggregate psychology could allow a bottom to be put in place at 6400 on the DJIA.
Some technicians are speculating that 6400 might be the bottom of this bear market, because it is a Fibonacci number relative to the lows of 1987 and the peak of 2007.
WD Gann used to say that the market would square it's range. That means that there should also be a relationship between the time and price of the market's highs and lows. When and where would he say that the market low will be in this bear market?
Time-wise, there will probably be a political agenda to the market low. If I was President Obama, I would want everything to look as bad as possible right now, so that in 4 years when I'm up for reelection, things will look much better. I'd say that the markets are set up for just such a scenario.
Fundamentally, the markets could be priced just about anywhere. Putting an optimistic spin on potential earnings, there is the distinct possibility that the market is significantly undervalued. As the economy improves, 14000 on the DJIA could be reached relatively quickly.
If the current administration manages this properly, the capital gains on the taxpayer investments into corporate America should help balance the budget, allowing for some principal repayment.
So where is the market bottom and will the technicians be right?
6400 is probably a reasonable guess. The self-fulfilling prophecies of aggregate psychology could allow a bottom to be put in place at 6400 on the DJIA.
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