Only Government can Create and Enforce a Monopoly

Posted by PITHOCRATES - April 19th, 2014

Week in Review

So many people fear the low prices of corporations.  They say they will put higher priced Mom and Pop shops out of business.  Then when they have a monopoly they will raise their prices and gouge their customers.  Which is silly.  Because corporations can’t create a monopoly.  Only government can grant them one.  Allowing them to charge the high prices once the government eliminates all competition.  But even when the government does if there is a market for lower prices some competition will find a way (see 3 epic fails that prove Uncle Sam is a terrible venture capitalist by Burton W. Folsom Jr. and Anita Folsom posted 4/19/2014 on the New York Post).

After 20 years in Europe perfecting his steamboat, an inventor named Robert Fulton returned to the US in December 1806.

He knew that a legislator, Robert Livingston of New York, would back him to the hilt. Livingston was a Founding Father who believed that steamboats would work well on the wide rivers of North America. Livingston and Fulton obtained a monopoly from the New York legislature for the privilege of carrying all steamboat traffic in New York for 30 years, if they could produce a working steamboat within two years…

One problem with Fulton’s monopoly, however, was that it affected shippers in neighboring states. As steamboats became more common, the Fulton monopoly meant that other companies couldn’t sail in New York waters without fear of fines. The monopoly also kept ticket prices high.

Finally, in 1817, Thomas Gibbons, a New Jersey steamboat man, tried to crack Fulton’s monopoly when he hired young Cornelius Vanderbilt. Gibbons asked Vanderbilt to run steamboats in New York and charge less than the monopoly rates…

For 60 days in 1817, Vanderbilt defied capture as he raced passengers cheaply from Elizabeth, NJ, to New York City. He became a popular figure on the Atlantic as he lowered the fares and eluded the law.

Finally, in 1824, in the landmark case of Gibbons v. Ogden, the US Supreme Court struck down the Fulton monopoly. Chief Justice John Marshall ruled that only the federal government, not the states, could regulate interstate commerce.

This extremely popular decision opened the waters of America to competition. A jubilant Vanderbilt was greeted in New Brunswick, NJ, by cannon salutes fired by “citizens desirous of testifying in a public manner their good will.”

On the Ohio River, steamboat traffic doubled in the first year after Gibbons v. Ogden and quadrupled after the second year. The real value of removing the Fulton monopoly was that the costs of traveling upriver dropped. Passenger traffic, for example, from New York City to Albany immediately dipped from $7 to $3 dollars after the court decision.

Only governments can maintain and enforce a monopoly.  And only a business with a government enforced monopoly can gouge their customers.  For with the government eliminating all competition what else is a consumer to do?  He or she has no choice but to buy from the business with the government enforced monopoly.  The same is true today.

Free market capitalism is always finding a better way to do something that costs less.  But people who enjoy government monopolies try to fight back.  To keep their government privileges.  Just look at the UAW and the automotive industry.  Which used the power of their government privilege to restrict competition.  Such as with tariffs and import quotas.  Which only let the UAW to continue to burden the American automotive industry with ever more costly union contracts that ultimately led to their bankruptcy/government bailout.  All the while keeping cars more expensive than they had to be.  As the UAW used their government privilege to gouge American automotive customers.

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The Cost of Recalls and Lost Goodwill

Posted by PITHOCRATES - April 7th, 2014

Economics 101

Manufacturers make a Point of not Killing their Customers because it’s just Bad for Business

There have been some costly recalls in the news lately.  From yoga pants that were see-through.  To cars with faulty ignition switches that can turn the engine off while driving.  Disabling the power steering and airbags.  Resulting in the loss of life.  These recalls have cost these companies a lot of trouble.  Including financial losses from the recalls and lawsuits.  Being called to testify before Congress.  And possible criminal charges.

No surprise, really.  As those who distrust corporations would say.  For they believe they constantly put their customers at risk to maximize their profits.  Even if it results in the death of their customers.  Which is why we need a vigilant government to keep these corporations honest.  So they can’t sell shoddy and dangerous goods that can kill their unsuspecting customers.  Which they will do if the government doesn’t have strong regulatory powers to stop them.  Or so says the left.

Of course, there is one problem with this line of thinking.  Dead customers can’t buy things.  And when word spreads that a corporation is killing their customers people don’t want to be their customers.  Because they don’t want to be killed.  Manufacturers know this.  And know the price they will pay if they kill their customers.  So manufacturers make a point of not killing their customers.  Because it’s just bad for business.

The Longer it takes to Recall a Defective Product the Greater the Company’s Losses

Manufacturing defects happen.  Because nothing is perfect.  And when they happen they are both costly and a public relations nightmare.  As no manufacturer wants to lose money.  And, worse, no manufacturer wants to lose the goodwill of their customers.  Because it’s not easy earning that back.  Which is why executive management wants to acknowledge and resolve these defects as soon as possible.  To limit their financial losses.  And limit the loss of their customers’ goodwill.

Let’s illustrate this with some numbers.  Let’s assume a company manufactures 5 product lines ranging from low price to high price.  The lowest priced product has the greatest unit sales.  And the lowest margin. The highest priced product has the fewest unit sales.  And the highest margin.  The other three items fall in between.  Rising in price.  And falling in margin.  Summarized here.

Cost of Recall - Gross Margin per Product Line R1

So each product line produces a sales revenue, a cost of sales and a gross margin (sales revenue less cost of sales).  Adding these departmentalized numbers together we can get total sales, cost of sales and gross margin.  And subtract from that overhead, interest expense and income taxes.  Summarized here.

Cost of Recall - Net Profit

So on approximately $5.8 million in sales this company earns $312,414.  A net profit of 5.4%.  Fictitiously, of course.  Not too bad.  That’s when everything is working well.  And they have nothing but satisfied customers.  But that’s not always the case.  Sometimes manufacturing defects happen.  Which can turn profits into losses quickly.  And the longer it takes to address the defects the greater those losses can be.

Losing the Goodwill of your Customers will end up Costing More than any Product Recall

Let’s say Product 3 suffers a manufacturing defect.  By the time they identify the defect and halt production of the defective product they’ve produced 20% of the total of that product for the year.  Which they must recall.  Limiting their losses to 20% of the total of that product run.  Which they will have to refund the sales revenue for.  But they will have to eat the cost of sales for those defective units.  And despite the company’s quick response to the defective product and providing a full refund to all customers their goodwill suffers from the bad press of the recall.  Summarized here.

Cost of Recall - Recall

Refunding customers for the 20% of the line that was defective reduced net profits from 5.4% to 0.7%.  And when they lose some customers to their defect-free competition they lose some customer goodwill.  Resulting in a 15% drop in sales.  Leaving manufactured product unsold that they have to sell with steep discounting.  Bringing their sales revenue further down while their cost of sales remains the same.  Turning that 0.7% annual profit into a 2.8% loss.  But as time passes they recover the lost goodwill of their customers.  Limiting these losses in this one year.  Now let’s look at what would probably happen if the company had a ‘screw you’ attitude to their customers.  Like many on the left fervently believe.  Summarized here.

Cost of Recall - Loss of Goodwill R1

The company did not recall any of the defective products.  As word spread that this company was selling a defective product sales of that product soon fell to nothing after selling about 50% of the annual production run.  The other half sits unsold.  Even steep discounting won’t sell a defective product.  And seeing how they screwed their customers on the defective products sales fall on their other products (in this example by 30%).  As they don’t want to suffer the same fate as those other customers.  So what would have been only a $159,929 loss with a recall becomes a $1,494,344 loss.  Over nine times worse than what it could have been without a large loss of customer goodwill.  And this is why executive management moves fast to identify and resolve defects.  Because losing the goodwill of their customers will end up costing more than any product recall.  As it can take years to earn a customer’s trust again.

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Chick-fil-A outsells KFC and proves that there is no such thing as Monopolies in Free Markets

Posted by PITHOCRATES - March 30th, 2014

Week in Review

A lot of people fear big corporations.  And fight hard against them.  Especially the big ones that provide a wide variety of goods and/or services at lower prices than the competition.  The kind that put Mom and Pop stores out of business.  Opponents of these big corporations say those low prices are only a dirty trick to put the competition out of business.  To make themselves a monopoly.  And once they get rid of all competition with their unfair low prices there will be nothing to stop them from raising their prices.  Higher than even the Mom and Pop stores they put out of business.  Of course, if that were true then you wouldn’t read stories like this (see Chick-fil-A Stole KFC’s Chicken Crown With a Fraction of the Stores by Venessa Wong posted 3/28/2014 on BloombergBusinessweek).

The days when fried chicken was synonymous with a certain white-haired southern gentleman are over, at least in the U.S. A new champion has claimed KFC’s long-held chicken crown: Chick-fil-A…

Anyone in the northern half of the U.S. is likely scratching her head and wondering why she hasn’t seen Chick-fil-A outlets opening in the neighborhood. Last year Chick-fil-A only had about 1,775 U.S. stores to KFC’s 4,491, and most are in the South. Yet in dollar terms the Colonel is coming up short even with that much larger footprint: Chick-fil-A’s 2013 sales passed $5 billion, while all of KFC’s U.S. restaurants rang up about $4.22 billion, according to Technomic. And that’s with zero dollars coming in to Chick-fil-A on Sundays, when every restaurant is closed.

Chick-fil-A has fewer outlets than KFC.  Yet they have a greater sales volume.  Why?  Because they sell at higher prices than KFC.  According to those who fear big corporations this is not supposed to happen.  KFC should be able to sell at lower prices than the smaller Chick-fil-A.  So low that Chick-fil-A should go bankrupt trying to match the unfair lower prices of KFC.  But that isn’t happening.  Because there is no way any corporation can monopolize any industry without the government first creating a monopoly for them.  As Chick-fil-A has proven.  They thought they could offer food people would prefer over KFC.  And did.  Despite KFC dominating the industry.  And the people liked the food so much that they were willing to pay more to eat Chick-fil-A over the less expensive KFC.

The only way you can shut someone out of an industry is by raising the barriers to enter that industry.  Such as with costly licensing, permitting, fees, restrictive regulatory policies, etc.  Things only the government can force on the competition wishing to enter a market.  Thus limiting competition in that market to protect their crony friends.  But if there is no government protection of established businesses that are monopolies or quasi monopolies anyone can enter the market and compete against them.  As Chick-fil-A proves.

People shouldn’t fear big corporations.  They should fear government.  The only entity that can create and enforce a monopoly.  For it is only with the government’s help that a monopoly can gouge customers with their high prices.  Because in a free market with low barriers to enter it will be impossible to gouge customers as the competition will keep all pricing competitive.  Because if some try to gouge their customers those customers will just go to the lower-priced competition.

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FT213: “Rich liberals support a large welfare state to assuage their wealth guilt.” —Old Pithy

Posted by PITHOCRATES - March 14th, 2014

Fundamental Truth

Rich People become Liberals so People don’t Shame them for their Obscene Wealth

Rich people love being rich.  They love their mansions.  Their expensive cars.  Eating at the finest restaurants.  Drinking the finest wine.  Going on lavish vacations.  Going to the best parties.  Hanging with the beautiful people.  And rich men especially like the sex with beautiful young women their wealth can make happen.  To quote the Eagles song Life in the Fast Lane rich people love having everything all of the time.

Some of the richest people in the United States are liberals.  Yes, those same people who argue for income and wealth equality.  Hollywood stars.  Televisions stars.  Authors.  And music stars.  Who are everything they stand against.  They’re part of that evil 1%.   And they live very ostentatious lives.  Their wealth is over the top.  Bling.  Cars.  Cars with bling.  Nothing but the best.  And then some.  This wealth is okay, though.  But those in the 1% other than them?  Government should raise their taxes to take as much of it away as possible.  And we should all shame them for daring to have such obscene wealth.

Of course, rich liberals like their obscene wealth.  They want to keep it.  And they want to continue their lavish lives.  But they don’t want people shaming them.  They want people to love them and adore them.  So they buy whatever they’re selling.  Movies, televisions shows, books or music.  They don’t want anyone shaming them for their obscene wealth.  So they do something very simple to avoid that shame.  They become public liberals.

Only those Businesses that Continually Please their Customers Succeed

Liberals can have the most obscene amounts of wealth without anyone shaming them for that obscene wealth.  Why?  Because they belong to the ‘right’ political party.  The one that argues against income and wealth inequality.  So they get a pass.  Which is why so many rich people are liberals.  They want to be left alone.  And their call for higher taxes on rich people?  Well, they’re so rich that they can hire the best accountants and tax attorneys to help them shield their wealth from the taxman.  There’s a reason why the tax code is so convoluted and not a simple flat tax like conservatives want.  To help rich liberals keep their money.

Then there are rich liberals who have too much of a conscious.  And they feel guilty for having obscene wealth.  But not guilty enough to give their wealth away.  These liberals are vehemently pro big government.  They want a massive welfare state.  To assuage their wealth guilt.  So they can continue to enjoy their obscene wealth.  Their 1% wealth.  Without having to feel guilty about it.  Such as, presumably, The Daily Show’s Jon Stewart.

Jon Stewart is a very well-read and intelligent man.  He knows a lot of stuff.  Unfortunately, though, he draws many wrong conclusions with that knowledge.  He favors big government.  And a vast welfare state to help those in need.  He trusts government while distrusting corporations and businesses.  Because, as he has said, we have no vote with corporations and businesses like we do with government.  Via elections.  But he’s wrong.  We do have a vote with all corporations and businesses.  The moment they stop treating their customers right those customers go to other corporations and businesses.  Most new businesses fail within 5 years.  And some big companies that have been around for years fail and go out of business.  Why?  Because their customers DO have a large vote in whether they succeed or not.  And only those businesses that continually please their customers succeed.  Something you just can’t say about government.  For no matter how much they anger the people little ever changes.

Not only is there Income and Wealth Inequality there’s also Income Tax Inequality

Fox News has been talking about people scamming the welfare state.  Highlighting a surfer dude in California as a typical welfare cheat.  Stewart lambasted Fox News for that.  Saying one person (or two or three, etc.) does not mean all people on welfare are gaming the system.  Although he uses that very logic to point at corporations caught in wrong-doing.  Saying they represent all corporations and businesses.  And he joins the choir about how rich corporations and rich people are not paying their fair share of taxes.  And how some of these rich corporations and rich people are hiding their income and wealth from the taxman.  Despite their paying the lion’s share of all taxes.

According to the National Taxpayer’s Union, when it comes to income taxes it’s rich people paying the most.  So not only is there income and wealth inequality.  There’s also income tax inequality.  Through recent years the top 1% of income earners has paid approximately a third of all income taxes.  The top 5% has paid more than half of all income taxes.  And the top 10% of income earners has paid about 70% of all income taxes.  While the bottom 50% of income earners, the people rich liberals want to help, pay about 3% (or less) of all income taxes.

You don’t have to raise tax rates on the wealthy.  They’re already paying a disproportionate share of all income taxes.  In fact, if you cut tax rates and cut business regulations to help rich business and rich people get even richer more tax revenue would flow into the treasury.  This would be a good thing.  Rich people getting richer.  And more people becoming rich.  This should be what everyone wants.  Based on the amount of taxes rich people pay.  So we should stop trying to help the less fortunate by raising taxes on the rich.  And creating more onerous regulations for businesses that benefit the less fortunate.  Like Obamacare.  For it hurts the profit incentive.  Which prevents rich people from getting richer and paying more income taxes.  As well as dissuades people from becoming business owners or expanding their businesses.  Which means fewer jobs.  Fewer hours in those jobs.  And the replacement of costly people with machines.  It’s because of these things that median family income has fallen under the Obama administration.  Which is the last thing any good liberal should want.  This is why rich liberals have got to stop supporting a large welfare state to assuage their wealth guilt.  It’s killing the middle class.  And destroying the jobs that could pull the less fortunate into the middle class.  And beyond.

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Chrysler turns down Government Loan for Guarantee to keep Minivans in Windsor

Posted by PITHOCRATES - March 8th, 2014

Week in Review

Cities and governments have long loved big industry.  Unions, too.  Because they’re big.  And are difficult to move. Such as an automobile assembly plant.  They take a lot of real estate.  Require a lot of specialized production and assembly equipment.  And a lot of infrastructure to support them.  Making them very difficult to move.  But not impossible (see Chrysler spurns government money, Windsor to build minivans posted 3/4/2014 on CBC News Windsor).

Chrysler will continue to build its popular minivan in Windsor, Ont., and has withdrawn all requests for government financial assistance in relation to the redevelopment of its assembly plants in Windsor and Brampton…

At the Detroit auto show seven weeks ago, Chrysler CEO Sergio Marchionne said that changes at the Windsor plant alone would cost at least $2 billion, and that Chrysler needed government help to finance the project.

Chrysler said in a media release Tuesday it will now “fund out of its own resources whatever capital requirements the Canadian operations require.”

Industry Minister James Moore said the government’s commitment to the auto industry is strong and he was surprised by Chrysler’s decision.

Essex Conservative MP Jeff Watson, whose riding is just south of Windsor, said he believed talks were going well.

“We were prepared to invest in exchange for guarantees for Canadian production and a Canadian supply chain,” Watson said.

Money from the government doesn’t come without strings.  And the string here was a guarantee that Chrysler wouldn’t leave.  No matter how costly the government or union contracts made it to stay in Windsor.  Costs that Chrysler has to recover in the sales price of their cars.  Which can’t be so high as to price them out of the market.  So Chrysler chose to spend their own money.  So they didn’t get stuck in an adverse economic situation when trying to compete in a global market.

“It is clear to us that our projects are now being used as a political football, a process that, in our view, apart from being unnecessary and ill-advised, will ultimately not be to the benefit of Chrysler,” the company said in a news release.

“As a result, Chrysler will deal in an unfettered fashion with its strategic alternatives regarding product development and allocation, and will fund out of its own resources whatever capital requirements the Canadian operations require.”

The government wanted what was best for them.  Economic activity they could tax.  While Chrysler wanted what was best for them.  Being able to sell cars at market prices.  And leaving their options open in the future.  Should it become too costly to continue to build cars in Canada.  Due to the cost of labor.  Or new regulatory policies.  Or higher taxes to fund a welfare state struggling under the costs of an aging population.  Governments are desperate for new tax revenue.  And will make almost any promise to get it.  Making long-term deals with governments risky.

According to the Ontario government, the auto sector employs 94,000 Ontarians, and supports as many as 500,000 families through indirect jobs…

Unifor Local 444 president Dino Chiodo, who represents hourly employees in Windsor, said he wasn’t completely surprised by Marchionne’s announcement…

Chiodo said Tuesday’s announcement is short of the $2-billion retooling and flexible manufacturing line employees were looking for in Windsor…

Chiodo said a $2.3-billion investment would secure three generations of minivans, which could secure jobs for decades…

Marchionne also wants union concessions.

Yes, they love the jobs these corporations create.  And all that economic activity those jobs create.  Economic activity they can’t create.  But they still hate corporations.  That’s why they tax them.  Regulate them.  Call them greedy.  Exploiters of labor.  And that the only way they can get them to do something decent is by making deals with them that favor them and not these evil corporations.  But sometimes these evil corporations don’t enter agreements that may harm them in the long run.  And when they do governments and unions panic.  As they fear they may have let a cash piñata slip through their fingers.  Which is a problem for them.  For they can’t create a single job those evil corporations can.

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The Dow Jones Industrial Average and the Labor Force Participation Rate from Ronald Reagan to Barack Obama

Posted by PITHOCRATES - February 10th, 2014

Economics 101

(Originally published May 21st, 2013)

The DJIA and the Labor Force Participation Rate tell us how both Wall Street and Main Street are Doing

Rich people don’t need jobs.  They can make money with money.  Investing in the stock market.  When you see the Dow Jones Industrial Average (DJIA) increasing you know rich people are getting richer.  Whereas the middle class, the working people, aren’t getting rich.  But they may be building a retirement nest egg.  Which is good.  So they benefit, too, from a rising DJIA.  But that’s for later.  What they need now is a job.  Unlike rich people.  The middle class typically lives from paycheck to paycheck.  So more important to them is a growing job market.  Not so much a growing stock market.  For the middle class needs a day job to be able to invest in the stock market.  Whereas rich people don’t.  For a rich person’s money works enough for the both of them.

So the Dow Jones Industrial Average shows how well rich people are doing.   And how well the working class’ retirement nest eggs are growing for their retirement.  But it doesn’t really show how well the middle class is living.  For they need a job to pay their bills.  To put food on their tables.  And to raise their families.  So the DJIA doesn’t necessarily show how well the middle class is doing.  But there is an economic indicator that does.  The labor force participation rate.  Which shows the percentage of people who could be working that are working.  So if the labor force participation rate (LFPR) is increasing it means more people looking for a job can find a job.  Allowing more people to be able to pay their bills, put food on their tables and raise their families.

These two economic indicators (the DJIA and the LFPR) can give us an idea of how both Wall Street and Main Street are doing.  Ideally you’d want to see both increasing.  A rising DJIA shows businesses are growing.  Allowing Wall Street to profit from rising stock prices.  While those growing businesses create jobs for Main Street.   If we look at these economic indicators over time we can even see which ‘street’ an administration’s policies favor.   Interestingly, it’s not the one you would think based on the political rhetoric.

Wall Street grew 75% Richer under Clinton than it did under Reagan while Main Street grew 65% Poorer

Those going through our public schools and universities are taught that capitalism is unfair.  Corporations are evil.  And government is good.  The Democrats favor a growing welfare state.  Funded by a highly progressive tax code.  That taxes rich people at higher tax rates.  While Republicans favor a limited government.  A minimum of government spending and regulation.  And lower tax rates.  Therefore the Republicans are for rich people and evil corporations.  While the Democrats are for the working man.  Our schools and universities teach our kids this.  The mainstream media reinforces this view.  As does Hollywood, television and the music industry.  But one thing doesn’t.  The historical record (see Civilian Labor Force Participation Rate and Recessions 1950-Present and Dow Jones Industrial Average Index: Historical Data).

DJIA vs Labor Force Participation Rate - Reagan

The Democrats hated Ronald Reagan.  Because he believed in classical economics.  Which is what made this country great.  Before Keynesian economics came along in the early 20th Century.  And ushered in the era of Big Government.  Reagan reversed a lot of the damage the Keynesians caused.  He tamed inflation.  Cut taxes.  Reduced regulation.  And made a business-friendly environment.  Where the government intervened little into the private sector economy.  And during his 8 years in office we see that BOTH Wall Street (the Dow Jones Industrial Average) and Main Street (the labor force participation rate) did well.  Contrary to everything the left says.  The DJIA increased about 129%.  And the LFPR increased about 3.4%.  Indicating a huge increase of jobs for the working class.  Showing that it wasn’t only the rich doing well under Reaganomics.  The policies of his successor, though, changed that.  As Wall Street did better under Bill Clinton than Main Street.

DJIA vs Labor Force Participation Rate - Clinton

Despite the Democrats being for the working man and Bill Clinton’s numerous statements about going back to work to help the middle class (especially during his impeachment) Wall Street clearly did better than Main Street under Bill Clinton.  During his 8 years in office the LFPR increased 1.2%.  While the DJIA increased 226%.  Which means Wall Street grew 75% richer under Clinton than it did under Reagan.  While Main Street grew 65% poorer under Clinton than it did under Reagan.  Which means the gap between the rich and the middle class grew greater under Clinton than it did under Reagan.  Clearly showing that Reagan’s policies favored the Middle Class more than Clinton’s policies did.  And that Clinton’s policies favored Wall Street more than Regan’s did.  Which is the complete opposite of the Democrat narrative.  But it gets worse.

The Historical Record shows the Rich do Better under Democrats and the Middle Class does Better under Republicans

The great economy of the Nineties the Democrats love to talk about was nothing more than a bubble.  A bubble of irrational exuberance.  As investors borrowed boatloads of cheap money thanks to artificially low interest rates.  And poured it into dot-com companies that had nothing to sell.  After these dot-coms spent that start-up capital they had no revenue to replace it.  And went belly-up in droves.  Giving George W. Bush a nasty recession at the beginning of his presidency.  Compounded by the 9/11 terrorist attacks.

DJIA vs Labor Force Participation Rate - Bush

The LFPR fell throughout Bush’s first term as all those dot-com jobs went away in the dot-com crash.  Made worse by the 9/11 attacks.  As all the malinvestments of the Clinton presidency were wrung out of the economy things started to get better.  The LFPR leveled off and the DJIA began to rise.  But then the specter of Bill Clinton cast another pall over the Bush presidency.  Clinton’s Policy Statement on Discrimination in Lending forced lenders to lower their lending standards to qualify more of the unqualified.  Which they did under fear of the full force and fury of the federal government.  Using the subprime mortgage to put the unqualified into homes they couldn’t afford.  This policy also pressured Fannie Mae and Freddie Mac to buy these toxic subprime mortgages from these lenders.  Freeing them up to make more toxic loans.  This house of cards came crashing down at the end of the Bush presidency.  Which is why the DJIA fell 19.4%.  And the LFPR fell 2.1%.  Even though the economy tanked thanks to those artificially low interest rates that brought on the subprime mortgage crisis and Great Recession both Wall Street and Main Street took this rocky ride together.  They fell together in his first term.  Rose then fell together in his second term.  Something that didn’t happen in the Obama presidency.

DJIA vs Labor Force Participation Rate - Obama

During the Obama presidency Wall Street has done better over time.  Just as Main Street has done worse over time.  This despite hearing nothing about how President Obama cares for the middle class.  When it is clear he doesn’t.  As his policies have clearly benefited rich people.  Wall Street.  While Main Street suffers the worst economic recovery since that following the Great Depression.  So far during his presidency the LFPR has fallen 3.7%.  While the DJIA has risen by 86%.  Creating one of the largest gaps between the rich and the middle class.  This despite President Obama being the champion of the middle class.  Which he isn’t.  In fact, one should always be suspect about anyone claiming to be the champion of the middle class.  As the middle class always suffers more than the rich when these people come to power.  Just look at Venezuela under Hugo Chaves.  Where the rich got richer.  And the middle class today can’t find any toilet paper to buy.  This is what the historical record tells us.  The rich do better under Democrats.  And the middle class does better under Republicans.  Despite what our schools and universities teach our kids.  Or what they say in movies and television.

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Billionaires increasing Income Inequality is bad but Women Billionaires are Not

Posted by PITHOCRATES - January 26th, 2014

Week in Review

According to the left rich people in corporations are bad.  They’re evil incarnate.  That’s why they hated 2012 presidential candidate Mitt Romney so much.  He was a rich guy in the corporate world.  Who screw the people to enrich themselves.  Making rich people richer.  And poor people poorer.  Which is the new theme President Obama is using these days.  Income inequality.  Which just isn’t right.  Rich people having so much more than poor people.  Especially those billionaires in corporations.  They’re the worst.  Money-grubbing parasites.  These billionaires threaten human progress (see 85 people have as much money as half the world by Li Anne Wong, CNBC, posted 1/20/2014 on MSN Money).

The combined wealth of the world’s richest 85 people is now equivalent to that owned by half of the world’s population — or 3.5 billion of the poorest people — according to a new report from Oxfam.

In a report titled “Working for the Few” released Monday, the global aid and development organization detailed the extent of global economic inequality created by the rapidly increasing wealth of the richest, warning of the major risks it poses to “human progress.”

According to the report, 210 people have become billionaires in the past year, joining a select group of 1,426 individuals with a combined net worth of $5.4 trillion.

It added that the wealth of the richest one percent of people in the world now amounts to $110 trillion, or 65 times the total wealth of the bottom half of the world’s population.

Imagine that.  There are 1,426 of these money-grubbing parasites.  Who can only make the world a worse place.  According to the left.  For any one person having that much money is just wrong.  Unless, that is, she’s a woman (see Facebook’s Sandberg is now a billionaire by Chris Isidore posted 1/22/2014 on CNN Money).

A record high close for Facebook shares has made Sheryl Sandberg one of the youngest female billionaires ever, according to a ranking from Bloomberg.

Sandberg, who is the company’s chief operating officer, owns 12.3 million shares. That makes her stake worth about $720 million.

In addition, she owns 4.7 million options, which would net her $220.6 million at her exercise price.

She has also received stock awards which have not yet vested, the estimated value of which takes her over the $1 billion mark.

Female billionaires are still relatively rare. Bloomberg’s list of the 200 richest people worldwide shows only 17 who are women.

Forbes reported last year that there were 138 female billionaires worldwide, but that’s out of a total 1,426 billionaires worldwide.

And only 24 of the women billionaires on the Forbes list earned their wealth themselves; most inherited a significant portion of their fortune.

Not a bad word in this article about this billionaire.  For when a woman becomes a billionaire it is reason to celebrate.  For shattering yet another glass ceiling.  Not to lament that there is another good for nothing money-grubbing billionaire in the world today.  Who will only make that income inequality worse.  Funny how that works.

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The Dow Jones Industrial Average and the Labor Force Participation Rate from Ronald Reagan to Barack Obama

Posted by PITHOCRATES - May 21st, 2013

History 101

The DJIA and the Labor Force Participation Rate tell us how both Wall Street and Main Street are Doing

Rich people don’t need jobs.  They can make money with money.  Investing in the stock market.  When you see the Dow Jones Industrial Average (DJIA) increasing you know rich people are getting richer.  Whereas the middle class, the working people, aren’t getting rich.  But they may be building a retirement nest egg.  Which is good.  So they benefit, too, from a rising DJIA.  But that’s for later.  What they need now is a job.  Unlike rich people.  The middle class typically lives from paycheck to paycheck.  So more important to them is a growing job market.  Not so much a growing stock market.  For the middle class needs a day job to be able to invest in the stock market.  Whereas rich people don’t.  For a rich person’s money works enough for the both of them.

So the Dow Jones Industrial Average shows how well rich people are doing.   And how well the working class’ retirement nest eggs are growing for their retirement.  But it doesn’t really show how well the middle class is living.  For they need a job to pay their bills.  To put food on their tables.  And to raise their families.  So the DJIA doesn’t necessarily show how well the middle class is doing.  But there is an economic indicator that does.  The labor force participation rate.  Which shows the percentage of people who could be working that are working.  So if the labor force participation rate (LFPR) is increasing it means more people looking for a job can find a job.  Allowing more people to be able to pay their bills, put food on their tables and raise their families.

These two economic indicators (the DJIA and the LFPR) can give us an idea of how both Wall Street and Main Street are doing.  Ideally you’d want to see both increasing.  A rising DJIA shows businesses are growing.  Allowing Wall Street to profit from rising stock prices.  While those growing businesses create jobs for Main Street.   If we look at these economic indicators over time we can even see which ‘street’ an administration’s policies favor.   Interestingly, it’s not the one you would think based on the political rhetoric.

Wall Street grew 75% Richer under Clinton than it did under Reagan while Main Street grew 65% Poorer

Those going through our public schools and universities are taught that capitalism is unfair.  Corporations are evil.  And government is good.  The Democrats favor a growing welfare state.  Funded by a highly progressive tax code.  That taxes rich people at higher tax rates.  While Republicans favor a limited government.  A minimum of government spending and regulation.  And lower tax rates.  Therefore the Republicans are for rich people and evil corporations.  While the Democrats are for the working man.  Our schools and universities teach our kids this.  The mainstream media reinforces this view.  As does Hollywood, television and the music industry.  But one thing doesn’t.  The historical record (see Civilian Labor Force Participation Rate and Recessions 1950-Present and Dow Jones Industrial Average Index: Historical Data).

DJIA vs Labor Force Participation Rate - Reagan

The Democrats hated Ronald Reagan.  Because he believed in classical economics.  Which is what made this country great.  Before Keynesian economics came along in the early 20th Century.  And ushered in the era of Big Government.  Reagan reversed a lot of the damage the Keynesians caused.  He tamed inflation.  Cut taxes.  Reduced regulation.  And made a business-friendly environment.  Where the government intervened little into the private sector economy.  And during his 8 years in office we see that BOTH Wall Street (the Dow Jones Industrial Average) and Main Street (the labor force participation rate) did well.  Contrary to everything the left says.  The DJIA increased about 129%.  And the LFPR increased about 3.4%.  Indicating a huge increase of jobs for the working class.  Showing that it wasn’t only the rich doing well under Reaganomics.  The policies of his successor, though, changed that.  As Wall Street did better under Bill Clinton than Main Street.

DJIA vs Labor Force Participation Rate - Clinton

Despite the Democrats being for the working man and Bill Clinton’s numerous statements about going back to work to help the middle class (especially during his impeachment) Wall Street clearly did better than Main Street under Bill Clinton.  During his 8 years in office the LFPR increased 1.2%.  While the DJIA increased 226%.  Which means Wall Street grew 75% richer under Clinton than it did under Reagan.  While Main Street grew 65% poorer under Clinton than it did under Reagan.  Which means the gap between the rich and the middle class grew greater under Clinton than it did under Reagan.  Clearly showing that Reagan’s policies favored the Middle Class more than Clinton’s policies did.  And that Clinton’s policies favored Wall Street more than Regan’s did.  Which is the complete opposite of the Democrat narrative.  But it gets worse.

The Historical Record shows the Rich do Better under Democrats and the Middle Class does Better under Republicans

The great economy of the Nineties the Democrats love to talk about was nothing more than a bubble.  A bubble of irrational exuberance.  As investors borrowed boatloads of cheap money thanks to artificially low interest rates.  And poured it into dot-com companies that had nothing to sell.  After these dot-coms spent that start-up capital they had no revenue to replace it.  And went belly-up in droves.  Giving George W. Bush a nasty recession at the beginning of his presidency.  Compounded by the 9/11 terrorist attacks.

DJIA vs Labor Force Participation Rate - Bush

The LFPR fell throughout Bush’s first term as all those dot-com jobs went away in the dot-com crash.  Made worse by the 9/11 attacks.  As all the malinvestments of the Clinton presidency were wrung out of the economy things started to get better.  The LFPR leveled off and the DJIA began to rise.  But then the specter of Bill Clinton cast another pall over the Bush presidency.  Clinton’s Policy Statement on Discrimination in Lending forced lenders to lower their lending standards to qualify more of the unqualified.  Which they did under fear of the full force and fury of the federal government.  Using the subprime mortgage to put the unqualified into homes they couldn’t afford.  This policy also pressured Fannie Mae and Freddie Mac to buy these toxic subprime mortgages from these lenders.  Freeing them up to make more toxic loans.  This house of cards came crashing down at the end of the Bush presidency.  Which is why the DJIA fell 19.4%.  And the LFPR fell 2.1%.  Even though the economy tanked thanks to those artificially low interest rates that brought on the subprime mortgage crisis and Great Recession both Wall Street and Main Street took this rocky ride together.  They fell together in his first term.  Rose then fell together in his second term.  Something that didn’t happen in the Obama presidency.

DJIA vs Labor Force Participation Rate - Obama

During the Obama presidency Wall Street has done better over time.  Just as Main Street has done worse over time.  This despite hearing nothing about how President Obama cares for the middle class.  When it is clear he doesn’t.  As his policies have clearly benefited rich people.  Wall Street.  While Main Street suffers the worst economic recovery since that following the Great Depression.  So far during his presidency the LFPR has fallen 3.7%.  While the DJIA has risen by 86%.  Creating one of the largest gaps between the rich and the middle class.  This despite President Obama being the champion of the middle class.  Which he isn’t.  In fact, one should always be suspect about anyone claiming to be the champion of the middle class.  As the middle class always suffers more than the rich when these people come to power.  Just look at Venezuela under Hugo Chaves.  Where the rich got richer.  And the middle class today can’t find any toilet paper to buy.  This is what the historical record tells us.  The rich do better under Democrats.  And the middle class does better under Republicans.  Despite what our schools and universities teach our kids.  Or what they say in movies and television.

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FT165: “Republicans vote as responsible adults while Democrats vote as selfish children programmed to hate and fear Republicans.” —Old Pithy

Posted by PITHOCRATES - April 12th, 2013

Fundamental Truth

Our Public Schools teach our Children that Capitalism is Bad and Government is Good

The Democrats want some form of national childcare.  President Obama just said that he wanted 4 year olds in preschool.  Some political operative just made a video saying that we need to destroy the notion that children belong to their parents.  And get people thinking more collectively about their children.  That they belong to the community.  Not to their parents.  So why this push to take children away from their parents and place them into institutions more controlled by the state?  For one reason.  To make them think ‘correctly’.

Our public schools teach our children at an early age about global warming.  Why?  There’s nothing children can do about it.  And it’s likely not man-made.  For the glaciers moved their farthest before man ever put warming emissions into the atmosphere.  So why scare them of an impending global warming apocalypse?  Filling their heads with things to give them nightmares?  Because it is useful to make them fear global warming.  Useful how?  Well, who is it that is supposedly causing global warming?  Businesses.  Corporations.  In general, capitalism.  In particular, unfettered capitalism.  Which teaches children what?  That if left to its own devises unfettered capitalism will destroy the world.  So we need government to act like cops.  To protect these children, their families and the world from these evil and greedy corporations that are trying to kill people with global warming.  Just so they can make a buck.

This is what they’re teaching our children in the public schools.  That unfettered capitalism is unfair.  Cruel.  And will kill us to make a buck.  So our children learn the evils of the profit incentive.  And the goodness of government.  They teach our children how FDR, LBJ and President Obama made the country better.  By preventing the evil corporations from running wild in pursuit of profits.  They don’t teach them how America became the world’s number one economy with the greatest liberty and highest standard of liberty because of unfettered capitalism.  Or why this was the reason people immigrated to the United States.  No.  Instead they teach them to fear corporations.  And support unions.  Because unions like government stop the evil corporations from hurting people to make a buck.  They’ll even hold picket signs for their teachers when they go on strike.  Teachers repeat this lesson over and over again.  Corporations bad.  Capitalism bad.  Unions good.  Government good.  So when they start voting they will vote ‘correctly’.

Someone has to Teach People to have Negative Views of Republicans because they’re not Born with Them

So this is why the Democrats want to take children away from their parents.  So they can start teaching them how to think ‘correctly’.  So they will vote ‘correctly’.  And when our kids get to college they take it up a notch.  Back in the Sixties radicals protested at college campuses.  Protested the Vietnam War.  Wearing shirts with pictures of communist icons like Chairman Mao and Chez Guevara.  They wanted to establish communism in the United States.  They hated the profit-incentive.  And corporate America.  They wanted to abolish private property.  Make everything communal.  They even lived in communes.  Just like the communists they so admired.  Even though the communist utopias in the Soviet Union and The People’s Republic of China oppressed and killed their people if they didn’t think ‘correctly’.

They wanted a world where everyone had whatever they needed without having to work for the man.  So they could spend their days the way they believed people should pass their days.  Getting high, engaging in free love and singing songs about love.  These radicals then changed their tactics.  Instead of fighting the system from the outside they began fighting it from the inside.  By becoming college professors.  Now they are teaching our kids.  And writing the curriculum.  Even those who went to jail for acts of domestic terrorism are joining the faculty at our colleges.  And those who avoided jail on a technicality.  Liberal Democrats revere these people.  And the students they’re programming to become good liberal Democrats love them.  For they, too, want to enjoy a life full of drugs and sex.  They see these radical professors as enlightened.  For they find nothing wrong with enjoying the moment.  Instead of sacrificing for the future.  Like their parents did.  Who always frowned on their having a good time.  Most colleges today lean left.  And the radical Left keeps out the riff raff.  Conservatives.  Who are just too much like these students’ parents.  And bestows tenure on those who think as radically as they do.  While denying it to those who don’t.  Those conservatives.

Conservative students have recorded some of these classes.  Where we can hear liberal professors telling their captive audience that Republicans are all racist white men.  And are the most inflexible in their thinking.  Stubborn.  And mean spirited.  That they hate minorities, the poor and women.  Even want to prevent them from voting.  They want to put blacks back at the back of the bus.  And women back into the Fifties where they’re barefoot and pregnant.  Are these isolated incidents?  Or is this what they teach all of our children?  Well, if you watch the Daily Show, Saturday Night Live, most any television sitcom, most any Hollywood movie or watch the network news you have to believe this teaching is pervasive.  As no one is born with political views someone had to teach these people to have these negative views of Republicans.  And who teaches our kids?  Our public schools.  And our colleges.

Liberal Democrats don’t Engage in Debate but Instead Lie and Launch Personal Attacks

The liberal viewpoint is a minority viewpoint.  Only about 21% of the people identify themselves as liberal.  While 35% identify themselves as moderate.  And 40% identify themselves as conservative (see Conservatives Remain the Largest Ideological Group in U.S. on Gallup).  So those wishing to implement a liberal agenda have their work cut out for them.  Because about 75% of the people don’t think like they do.  That is, not yet.

This is why the president wants to get 4 year olds into state-paid childcare.  And why liberals want to take our children away so the state can raise them.  So the liberals can get them while they’re young.  And diminish the influence of their parents.  Especially when those parents are conservatives.  Who resist the liberal indoctrination of their children.  And undo some of the hard work they’ve done in getting these children to think ‘correctly’.  Which is a big problem for liberal Democrats.  Because they can’t win on the merits of their policies.  Not when 75% of the people don’t think like they do.

So liberal Democrats teach our kids to fear and hate those who don’t think like they do.  And they mock, belittle, disparage, demean, deride, etc., these people who don’t think like they do.  They don’t engage in debate.  They lie.  And launch personal attacks.  Which our high school and college kids find so entertaining.  They fill the audience at the Daily Show and the Late Show with David Lettermen.  They may not understand the issues.  But they know that they should laugh.  And how they should vote.  For they know that corporations are bad.  Capitalism is bad.  While unions are good.  And government is good.  The cool people they admire so much are liberal Democrats.  So they, too, are liberal Democrats.  And until they learn from age and experience to vote like adults they will continue to vote as self-indulgent children.  Living to maximize the pleasure of the moment.  No matter the long-term consequence of their actions.

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Female CEOs are lowering CEO Compensation just as the Left wants yet the Left Complains

Posted by PITHOCRATES - December 15th, 2012

Week in Review

President Obama won reelection in 2012 because, apparently, people hate the rich.  And they hate corporations.  When Mitt Romney said corporations are people the opposition pounced on that.  As the masses believe corporations are evil entities that serve only profits.  And Satan.  They hate corporations with a passion.  And the rich people that run them.  That’s why President Obama wants to raise tax rates.  Not to raise tax revenue.  For these proposed tax hikes may fund the government for maybe 8 days.  If we’re lucky.  No.  These tax rates are to punish the rich.  Who have raped and pillaged this country so they can live their caviar and champagne lifestyles.

According to President Obama the young should shun these corporations and do something better with their lives.  Like working for a nonprofit.  By doing something where we give.  Not get rich.  For that is being a good American in these Obama times.  We shouldn’t pursue meaningless high-paying jobs.  Instead we should get a low-paying social services job.  Or work in a food kitchen.  Anything is better than working for these most evil and vile corporations (see What Did Marissa Mayer Mean in a Year When 86% of Executives Were Still Men? by Rebecca Greenfield posted 12/11/2012 on The Atlantic Wire).

As of June, women held a mere 14.3 percent of executive positions at Fortune 500 companies, according to new data from Catalyst, reports Bloomberg’s Brooke Sutherland. That 1.4 percent increase from last year represents a “glacial pace,” the report states…

And it’s difficult to find signs of change elsewhere. Of the 71 leaders ranked in a new Forbes list of the world’s most powerful people, only four women made the cut…

As for the future of female CEOs, the gender pay-gap is still alive and well, even for fresh college graduates.

All right, I’m confused.  If corporations are so evil and serve Satan why is it so important for women to become rich CEOs at them?

This is the general consensus on the Left.  Who are not happy about glass ceilings.  Or gender pay-gaps.

If we pay CEOs too much why are they so concerned that female CEOs earn less than their male counterparts?  If we want to reduce CEO compensation we should applaud these women for doing just that.  These women may just be choosing not to rape and pillage the people with high prices.  With less profits (a good thing according to everyone on the Left) there’s less money to pay their CEO.  Or perhaps they aren’t drawing a large paycheck so their employees can have bigger paychecks.

Women are more nurturing and feeling.  We hear it all of the time.  It’s why we need more women in Congress.  Who will listen to the poor instead of the lobbyists.  Perhaps this is why there are so few female CEOs.  Because they are too nurturing and feeling to maximize profits for their shareholders.  Because profits are bad.  Or so the Left has told them all of their life from public school through college.  Institutions all controlled by the Left.  And more women did vote for President Obama than the rich CEO Mitt Romney.  Showing their disdain for corporate profits.  Perhaps shareholders noticed this general trend and prefer greedy, heartless, male sons of bitches to run their corporations so they will maximize their profits.  Someone who doesn’t favor birth control and abortion over profits, a driving factor in why women voted for President Obama according to exit polls.

So what are corporations?  Evil?  Or so good that we need more women running them?  They can’t be both.  They can’t be the source of everything that is wrong in this country while at the same time we criticize them for not having more women running them.  If they’re evil we should applaud the fact that few women run them and that we don’t pay those that do a lot.  If they’re not evil we need to stop attacking them.  And blaming our budget deficits on them.

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