Singapore and Great Britain affirm their Good Relations

Posted by PITHOCRATES - July 28th, 2012

Week in Review

Singapore is doing very well.  It has one of the strongest economies in the world.  And has one of the highest per capita wealth.  Not surprisingly it was one of the original Four Asian Tigers.  Along with Hong Kong.  South Korea.  And Taiwan.  Singapore and the United States have something in common.  Besides bustling economies (well, it was once bustling in the United States).  They were both once part of the British Empire.  And remain on good relations with Britain (see President Tony Tan underlines warmth of longstanding S’pore-UK ties posted 7/28/2012 on Channel News Asia).

President Tony Tan Keng Yam underlined the warmth of longstanding relations between the United Kingdom and Singapore, during a reception at Buckingham Palace hosted by Queen Elizabeth II on Friday.

Just something else to think about as you watch the 2012 Olympics in Great Britain.  Just how much Britain gave the world.  A lot of people like to pick on Britain.  But just look at some of the best places in the world in terms of individual liberty and the standard of living.  The United States of America.  Canada.  Australia.  Hong Kong.  And, of course, Singapore.  To name a few.  And what do they have in common?  They were all once part of the British Empire.  All achieved greatness in large part due to their British heritage.  And grew into nations based on the rule of law.  Representative government.  Free trade.  And free market capitalism.  Giving us our individual liberty.  And our high standards of living.  All in all not a bad trade for a little colonial imperialism.

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The Great Recession is Reducing Businesses’ Revenue and causing them to Default on their Debt

Posted by PITHOCRATES - July 28th, 2012

Week in Review

The Great Recession lingers on.  Because people don’t have jobs.  So they can’t spend money.  And when people aren’t spending money businesses can’t pay their bills.  Or service their debt (see More companies defaulting on their debt: 47 this year alone by Matt Krantz posted 7/24/2012 on USA Today).

This year, 47 global companies have been unable to keep paying the interest on their debt, which is more than double the levels a year ago, says Standard & Poor’s. A majority of those defaults, 25, are by U.S. companies…

This is happening despite record low interest rates that should allow companies to refinance and reduce their interest costs.

A long time ago an auditor once told me that bankruptcies rarely saved businesses.  For excessive debt at unattractive interest rates didn’t cause their problems.  It’s always insufficient revenue that couldn’t service their debt that caused their problems.  For if you have healthy revenue you’ll be able to service enormous amounts of debt at the worst interest rates.  Which is typically what happens during booming economic times.  Businesses take on debt at high rates.  Because they can then.  They take on debt based on what they can pay during the good times.  Not on what they can pay during the bad times that inevitably follow.

So excessive debt doesn’t cause their problems.  But excessive debt ultimately solves their problems.  Through bankruptcy.  And liquidation.  Unfortunately it comes with a rather unpleasant side affect.  The demise of the business.

So low interest rates aren’t the panacea the Keynesians think they are.  No matter how much faith our governments put into their Keynesian economists.  Who are constantly urging the government to lower interest rates.  But it doesn’t work.  Because borrowing money simply doesn’t increase sales revenue.  You need a healthier economy to do that.  One that is more business-friendly.  One that doesn’t kill economic activity with excessive regulation.  And one that doesn’t tax so much wealth out of the private sector.  So people can earn money and keep what they earn.  So they can spend it in the economy.  And businesses need a business-friendly environment with low regulatory costs.  So they can sell at prices low enough to encourage consumers to buy their goods and services.  This is how you generate real economic activity.  And until we have this environment the Great Recession will linger on.

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Falling Demand in the Great Recession forces Southwest to Raise their Ticket Prices

Posted by PITHOCRATES - July 28th, 2012

Week in Review

Typically prices rise during good economic times.  And fall during bad.  Because demand rises during good economic times and falls during bad times.  And prices typically follow demand.  As businesses can raise prices when the demand for their goods or services rises.  But rising prices don’t always indicate good economic times (see Southwest joins as airlines raise fares on most U.S. routes by Nancy Trejos posted 7/24/2012 on USA Today).

A three-month break from airfare increases has ended, with Southwest Airlines raising fares by $4 to $10 round trip on most routes inside the U.S…

Kevin Schorr of Campbell-Hill Aviation Group, a Virginia consulting firm, says airlines haven’t been able to raise fares in recent months because of the economic uncertainty surrounding the presidential election and Europe.

He says airlines are cutting the number of flights they’re making available. “By doing that, they’re able to raise fares if there’s less supply,” he says…

Paul Flaningan, a spokesman for Southwest, says the airline raised fares on non-sale tickets and excluded routes shorter than 500 miles.

Southwest, on the other hand, is raising prices because of falling demand.  Fewer people are flying because of the bad economy.  Leaving some planes to fly with empty seats.  Of course, a plane flying with empty seats makes it harder for that plane to cover its flying costs.  So they pulled some planes out of service.  Because a plane sitting on the tarmac is not burning jet fuel.  And planes sitting on the tarmac helps them fill the seats on the planes remaining in service.  Allowing those planes to fly profitably.

Then there are overhead costs.  With fewer ticket sales there’s less money coming in to pay their overhead costs.  This is an example of economies of scales in reverse.  With fewer unit sales (i.e., ticket sales) they have to recover their overhead costs on fewer tickets sold by increasing the price of each ticket.

So the airlines are not raising their ticket prices because they are greedy.  They are raising them because the economy is so bad that fewer people are flying.  Forcing them to raise ticket prices on the remaining few who are still flying.  Just another indicator of how long and deep the Great Recession has been.  And continues to be.

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The Cuban People are Moving their Country towards Free Market Capitalism

Posted by PITHOCRATES - July 28th, 2012

Week in Review

Cuba’s National Assembly is meeting to discuss Raul Castro’s economic reforms.  And people within and without Cuba are watching anxiously.  To see if Cuba will throw off their socialist/communist shackles.  So the Cuban people can breathe liberty and enjoy prosperity.  Where all Cubans can live the good life.  Not just the inner party members (see Cuban parliament meets on Raul Castro’s economic reforms, budget, tax system by Peter Orsi, Associated Press, posted 7/23/2012 on The Washington Post).

Islanders and Cuba-watchers will be seeing if the assembly takes any action on long-promised measures such as the easing of travel restrictions, increased private farming of state-controlled land or the approval of cooperative businesses…

And last week the island’s burgeoning small business class was dealt a blow with the low-key announcement of new, stiff tariffs on imported goods.

The entrepreneurs say that without access to wholesale markets, the only way they can supply their businesses is through “mules” who transit between Cuba and places such as Miami, Ecuador and Panama with their bags stuffed with food, spices, clothing, electronics, diapers and other items tough to come by on the island…

It made no mention of the small businesses, however, and insisted that the measures were necessary because excess baggage is slowing down service at the airport, making it resemble a cargo terminal.

By 2015, Cuban officials are gunning to have removed 1 million workers from bloated state employment rolls and have transferred more than 40 percent of the economy into private hands, compared with about 15 percent today.

Import tariffs don’t protect domestic business.  They hurt domestic business.  By raising their costs.  Which forces businesses to raise their prices.  Which hurts their sales because people buy less when prices are high.  So they find ways around paying those high tariffs.  So they can keep their prices low so people can afford to buy their wares.  And the Cuban small business owners turn to “mules” to bring in what the command economy of Cuba can’t.  Goods at free market prices.

The command economy of socialism/communism doesn’t work.  Free market capitalism works.  Free trade works.  As proven by the Cuban black market.  People were jamming their bags so much with the goods that are in demand that it was turning the airport into a “cargo terminal.”  The government may not know how to supply businesses in a free market.  But entrepreneurs do.  And the Cubans are ready, willing and able to advance Cuba into the 21st century.  All they need is for the government to let them.

The Obama administration could take a lesson from the Cubans.  In what works.  And what doesn’t work.  The Cubans are trying to move towards free market capitalism.  While President Obama is moving America in the other direction.  The Cubans want less government in their economy.  Because it clearly doesn’t work.  And they have the scars (economic and physical) to prove it.  While the Obama administration is trying to put more government into the economy despite this not working anywhere it has ever been tried.  Even our one-time Cold War nemesis is admitting this.  And when they do perhaps it’s time for our president to do likewise.

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Los Angeles Medical Marijuana Dispensaries attract Drug Addicts and Crime

Posted by PITHOCRATES - July 28th, 2012

Week in Review

As if the potheads and college students didn’t have enough troubles.  First it was the Israelis harshing their mellow.  By making a marijuana that does everything medicinally beneficial without getting you high.  And now this.  Soon the potheads and college students will have little reason to get out of bed in the afternoon (see Los Angeles council bans medical marijuana dispensaries by Rory Carroll posted 7/24/2012 on the Guardian).

Los Angeles may soon be off the map as a pot-smoking mecca following a city council vote to ban storefront medical marijuana dispensaries.

The council has voted unanimously in favour of the crackdown after the mayor, the police chief, the city’s attorney office and residents’ groups called for restrictions…

The council decision followed mounting complaints from police and neighbourhood groups that legalisation of medicinal marijuana – which remains legal – spawned seedy stores that peddled weed to recreational users on medical pretexts.

Most were profit-making businesses catering to “healthy young adults” rather than sick people with chronic pain, the LAPD chief, Charlie Beck, said in a letter to the council.

Several council members including Jose Huizar had previously supported the dispensaries but changed their minds after residents complained they attracted drug addicts and crime.

Imagine that.  Healthy young people were buying medical marijuana just to have a good time.  And the proponents of medical marijuana said that wouldn’t happen.

Marijuana enthusiasts in LA are unhappy with these restrictions.  Even those without medical conditions.  Who appear to be using medical marijuana as a backdoor to legalizing marijuana.  The proponents of medical marijuana said that wouldn’t happen, either.

Worse, these marijuana dispensaries were attracting drug users.  And crime.  Because drug users want to buy drugs.  Which takes money.  So drug users steal money to pay for their drugs.  Which apparently hasn’t changed since making marijuana legal to buy in California.  Probably because drug addicts have difficulty in finding a job.  What with their addiction and all.  So they turn to crime to fund their drug needs.  Stealing.  Or prostitution.

So it is easy to understand why people living in the communities with these medical marijuana dispensaries want to close them down.  Because they are in their communities.  People don’t want to live near a bar where people are coming out drunk.  So drunk that they are falling down.  Vomiting.  And urinating in the parking lot.  Or on the streets.  Sure, going to the bar is fun.  But not when that bar is in your neighborhood.  And you have to see the seedier side of fun night after night.  It’s the same with these marijuana dispensaries.  Only it’s worse than public vomiting and urination.  There’re drug addicts.  And crime.  And no one wants that in their neighborhood.

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Budget Deficits in the NHS force Mental Health Patients to Wait up to 3 Months to see a Specialist

Posted by PITHOCRATES - July 28th, 2012

Week in Review

Great Britain kicked off the 2012 Olympic Games.  And the opening ceremonies took us through their venerated history.  And their music.  For Britain gave us more than agriculture advances, representative government, capitalism and the Industrial Revolution.  They gave us Led Zeppelin, The Rolling Stones, Queen, David Bowie and the Beatles.  To name a few.  And what a few they are.

The institutions of Britain helped shape the world.  And brought peace to the world.  Pax Britannica (1815–1914).  Where the Royal Navy suppressed piracy on the high seas.  Ended the slave trade.  And brought peace to the world by facilitating free trade.  The British Empire grew into the greatest Empire since the Roman Empire.  The empire that founded Britain’s capital city on the Thames River in AD 43.  Londinium.  Host of the 2012 Olympic Games.  Yes, that’s right.  Britain dates back to the Roman Empire.  And was once part of the Roman Empire.  Right up to Hadrian’s Wall.  Built across northern England.  Marking the northern border of the Roman Empire in Britain.

So the Brits have much to be proud about.  And it showed in the opening ceremonies.  Included a salute to their National Health Service (NHS).  Which the British are especially proud of.  And rightly so.  For it may be the finest national health system in the world.  But it’s a different Britain today.  An aging Britain.  And as the population ages it is stretching the NHS thin (see NHS ‘Is Failing’ Mental Health Patients by Thomas Moore posted 7/24/2012 on Sky News).

The NHS is still failing people with mental health problems, despite a Government strategy launched more than a year ago, charities have warned.

They say patients in some areas are waiting at least three months for specialist counselling. Some end up going private because they need more urgent care…

But mental health services have long been seen as an easy cut to make when money is tight. Implementation of the Government strategy stalled while the NHS and social care was reorganised.

Waiting three months?  Why the long wait-time?  Because the NHS is running chronic deficits.  Because of that aging population.  Which makes any social program that transfers the cost of one generation to a future generation impossible to sustain.  Because the group of retirees is growing at a greater rate than the rate new workers are entering the work force to pay for that retired generation.  Which means higher tax rates on the younger generations.  Rationing of health services.  And, of course, longer wait-times.

Obamacare is starting out on the upside of the retiree curve.  So they are entering the world of national health care as an aging population is already pushing up health care costs.  And will only see those costs rise exponentially as the baby boom generation begins to retire en masse.  At which point people in Britain waiting three months for treatment will say, “It could be worse.  We could be in America.”  Why?  Because with five times the population of Great Britain the US will rewrite the book on service rationing and wait-times.  As Americans see the quality of their health care plummet.  Along with the quality of their life.  For the Americans already have trillion dollar deficits without the cost of Obamacare factored in.  The Americans will add so much debt that their credit rating will fall again.  Which will raise their borrowing costs.  Forcing them to borrow money just to pay the interest on the debt.  Until eventually the Americans will go through what Greece is going through.  Only on a grander scale.

The proponents of Obamacare like to point out that America is the only ‘rich’ country that doesn’t have a national health care system.  Well, we may soon have one as Obamacare goes into full effect.  So we may finally have a national health care system.  But we won’t be rich anymore.  Which will be rather ironic.

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