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Archive for the ‘economics’ Category

“The entire economy of gold consists of digging it out of the ground in one place and putting it back into the ground in another place.” -Keynes

Gold is a shiny metal. It has little intrinsic value other than in the electronics industry and dentistry. You cannot eat it. You cannot drink it. You can wear jewelry made from it, but it won’t protect you from the cold or the rain. If someone is breaking into your home, gold will not kill them. Gold has, at times, been used as money, but it has value only insomuch as it can be traded for things with intrinsic value like food and fuel and guns without which an individual or a nation cannot survive. At present, it cannot be traded for such things — you cannot go into a supermarket and buy a can of beans with gold — thus is simply another asset, not money.

Currencies are, in the end, backed by the production of goods and services in an economy purchasable by said currency, not by assets. The whole point of a currency is their utility at purchasing goods and services. It’s interesting that some of the assets of the Bundesbank may actually be fictional. But as long as there are goods and services purchasable by Euros, the Euro will continue to have value. The same with the U.S. dollar.

— Badtux the Economics Penguin

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So, you get your economists who are saying, “competition will always reduce costs!”. Yet that is quite clearly incorrect for at least two places where the United States has more competition than in any other nation on the planet — healthcare, and higher education. WTF is going on here?!

The deal is that old criticism of economists — that they know the price of everything, and the value of nothing. If you have a life-threatening illness, the value of a cure for that illness is practically infinite to you. You’re not looking for the cheapest doctor. You’re looking for the doctor that can cure you — that has the latest certifications, the latest equipment, prescribes the latest medications, you’re going to pay for the best you can get. Because if you’re not cured, you’re *dead*. What good is saving money if you’re dead? So hospitals and doctors compete for your business not by being cheap. They compete by getting the latest certifications, the latest equipment, prescribing the latest medications. The fact that this results in an oversupply of doctors with that certification and equipment, and results in demand for that medication that allows its manufacturer to hike its price, is irrelevant to the doctors because they’re not paying the bill — patients (and their insurers) are, through higher prices and through overprescribing diagnostic tests.

The same is true of higher education, to a certain extent. Economists know the cost of higher education. But they don’t know the value of higher education. Education is your future. So you’re going to try to get the best education you can get, regardless of cost, because the better your education, the better your future will get. So colleges compete with each other based on how many high-priced “big name” scientists they have on staff, how much equipment they have in their labs, the plushness of their dormitories, the gleam of their shiny bright new classroom buildings and football stadiums, rather than competing with each other based on price.

Now: you and I both know that shiny isn’t always best. I graduated from a somewhat shabby state university with minimal college debt. I get paid the same as the people who graduated from Stanford or Cal-Berkeley that same year who will still be paying off their college debt a decade from now. Unfortunately, outcomes information is almost impossible to come by. So people use proxies such as the labs having the latest and greatest equipment, even if cheaper equipment would be just as good for their purposes. Which brings up another point that the “competition will always reduce costs!” guys just don’t get: they assume a world in which everybody has perfect information, where it actually is possible to tell that doctors A and B have equal results but doctor A is cheaper. But we don’t have perfect information. Hell, for a lot of things, we don’t have any information — we don’t have the outcomes information needed to know that doctors A and B have equal results, and it’s absolutely impossible to get pricing information out of doctors, they shrug and refer you to their back end billing people who then ask who your insurer is and tell you that it’d require submitting a claim etc. to know, literally nobody in that whole entire office knows how much your treatment will cost.

But the question of information is a topic for a post in and of itself, so I’ll leave you with the final takeaway: Competition does not always result in lower costs. In fact, we’ve proven with both healthcare and higher education that it can increase costs.

So take that and stick it up your ass crack and light it, neoliberal economists. Because reality simply *is* — and your “reality”, laughably, isn’t.

– Badtux the Economics Penguin

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A chilling story about how the Reagan Revolution unleashing vulture capitalism and destroyed Lancastor, Ohio, and its principal employer, Anchor Hocking.

There’s been plenty of people who claim that the goal of the 1% is serfdom for the 99%. But what they’re doing has nothing in common with serfdom. What our 1% lords have instituted is not a feudal system, unlike what their critics often claim. Under the feudal system, the lords of the realm looked after the serfs on their land, for if the serfs starved or became unable to work, their own fortunes dwindled. But our new lords of the realm say “there’s no shortage of serfs, I’m going to use up these serfs then move somewhere else where there’s more serfs.” They are burn and slash agriculturalists, burning down a forest to bring in a few crops, then once the soil is exhausted, moving on to another forest to burn down. And the people and animals who once lived in that now-forever-gone forest starve. But the 1% don’t care, because there’s always more serfs, another forest, another place to go.

And, sadly, the people who live in the destroyed landscape once our slash-and-burn capitalists move on still worship Ronald Reagan, who made the destruction they live in possible.

— Badtux the Baffled Penguin

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Donald Trump is talking about levying a 20% import tax against Mexican imports in order to pay for his wall, a wall so effective that two typical college girls can defeat it:

So anyhow, one argument is that this will help American manufacturing by eliminating Mexican competition. There’s just one problem with that concept: Virtually every American manufacturer relies on parts and components manufactured in Mexico, even if their stuff is built in America.

I’m most familiar with Chrysler. Their 3.6L Pentastar engine is used in virtually all of their vehicles, from their Dodge Challenger to Jeep Wranglers to their giant RAM pickup trucks. And approximately half of these are manufactured in Saltillo, Mexico, along with roughly 3/4ths of their RAM 1500 pickup trucks.

Could Chrysler survive if Trump imposed a 20% tax on their engines as they imported them to assemble into their vehicles? Probably not. They can’t raise their prices by 5% to counter the cost of the engine (remember, the engine is roughly 1/3rd of the cost of the vehicle), because prices are set by the market, not by them — their competitors would run them out of business. So they’d lose money. And Fiat isn’t exactly flush with cash, they’ve had record sales the past few years, but have had to invest massive amounts of money too. For example, tooling up for the 2018 Jeep Wrangler is costing them $1B (one BILLION dollars). They apparently spent TWO billion dollars tooling up for their new Pacifica minivan. And so forth. So they can’t afford to lose money. Especially since one of their big cash cows, the Ram 1500 pickup and all of the heavy duty pickup trucks, are made in Saltillo (the extended cab 1500’s and some of the crew cab 1500’s are made at Warren Truck near Detroit).

To make things even more confusing, FCA makes small cars as well as some Mexican-market cars in Toluca, near Mexico City, and every engine in the Fiat 500, Jeep Compass, and Dodge Journey that are made in Toluca is made in their Dundee engine plant near Detroit and exported to Mexico. So let’s get this straight — a made-in-America engine is exported to Mexico to be installed in a car that is importing back to the United States, and it’s going to get tariffed in order to encourage American manufacturing? Not to mention all the American-built cars with the imported 3.6L engines that are being turned right back around and exported *back* to Mexico or Latin America, meaning they have to effectively pay an *export* tax on those vehicles thanks to the import tax on the engines? In what world does that make sense? Not to mention that a lot of these small cars are not being imported — they’re going to the Mexican or Latin American markets.

In short: A 20% tariff on Mexican goods would devastate Chrysler. It’d hurt sales of their cars south of the border since they’d still have to pay the import tax on the imported components before being able to export the cars, and it’d cause major supply chain disruptions. Being unable to get engines would cause assembly lines to be idled all around the area within a 200 mile radius of Detroit where Chrysler has the majority of its assembly plants. Tens of thousands of Americans would be thrown out on the streets. All because His Fraudulency Donald the Trump wants a frickin’ wall that can’t work…

Okay, are you back? LOL. So, could a tariff work to encourage manufacturing on US soil?

The answer: Yes. But it’d have to be carefully targeted, slowly brought into effect over a course of years, and assistance to companies like Chrysler who would need literally billions of dollars to bring those manufacturing facilities back from Mexico would be absolutely necessary or there will be massive job losses in the United States as a result of being cut off from critical components. It’d be a complex and intricate task, one that would challenge a competent administration — nevermind one as incompetent as the Trump Administration is proving to be.

And that, people, is why Trump’s proposal to help American manufacturing would destroy American manufacturing. We simply need too many foreign-built components to build our stuff nowadays, and moving production of those components back to the United States will take years, if not decades. Imposing a tariff next week wouldn’t move production of those components back to America — it’d just make it expensive to import them, making American goods less competitive in foreign markets and making prices rise here in the United States.

And let’s not even start to talk about the other Mexican goods affected, from tequila to fresh fruits and vegetables… the reality just looking at manufacturing is dire enough. Every single dime of that tariff would immediately be passed on as higher prices to consumers. We’d end up paying *twice* for the wall — once as taxes while it is built, and then forever after as tariffs after it was built. In what world is that a reasonable thing to do?!

– Badtux the “These people are dangerous morons” Penguin

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The black community? Uh, no. Macho white males who’ve lost their manufacturing or mining jobs.

So the new jobs in rural America are mostly caregiver jobs, since the population of white Americans is aging and Medicare is one of the few sources of money in those communities today. You’d think that the white men unemployed with the collapse of mining and factory work would be flocking to these new occupations, which, while they’re not the best paying jobs on the planet, are at least reliable and easy to enter.

Uhm… not so much. Appears that these misogynist assholes think that “women’s work” is beneath them.

– Badtux the “These people are sick” Penguin

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Playing with numbers from the Bureau of Economic Analysis, “Gross Domestic Product By State”. I downloaded the Excel file and fiddled around with the numbers there. Interesting thing is that matching this map with the 2016 election results, the red states and the blue states have roughly equivalent GDP at around $9 trillion apiece. However: 1/6th of the red states’ GDP is Texas. The same is true of the blue states and California, except there’s much fewer of them so it’s not quite so much one queen state and a buncha loser states. Interesting.

Things get more lopsided if you look at the county level. The Brookings Institute did a county-level matchup of the maps and found that the counties Hillary won accounted for around 2/3rds of the economy — around $12 trillion, with the red counties accounting for $6 trillion. I would need to see their source data to see if they’re adding right, but a brief check seems to show that their claim that every one of the top twenty major counties (as sorted by economic activity) went to Hillary other than Maricopa County (AZ) is correct.

This is… interesting. What it seems to say is that this election boiled down to an election between the 21st century and the 20th century. Those counties that have embraced the 21st century and its demands for a smart flexible workforce and thus are thriving voted for more of the same. Those counties that want their 20th century back, when a man could make a living for his family with a strong back and a narrow mind, went for Trump, who promised that they could have their 20th century back.

Of course, the 20th century is gone and isn’t coming back. Even if manufacturing comes back, today’s manufacturing is highly automated and demands far more intellectual flexibility than 20th century manufacturing required, where you just needed to be able to do one thing, and do it well, and it’s unlikely that they will be employing the people who were laid off when the toaster factory in Coushatta Louisiana shut down to move production to Thailand. Those people had little education and no skills other than being able to put peg A into slot B, over and over again, and we have robots that do that now. But hey, people have been believing false promises by politicians since long before we were born, so.

– Badtux the Economics Penguin

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You want to know why we outsource our manufacturing to China here in the Silicon Valley? Hint: It’s not because it’s cheaper. After decades of union-busting, when you consider the cost of shipping and the cost of interfacing with people whose language and culture is utterly alien to us, it’s actually just as cheap to manufacture in the United States today. If it’s something bulky, like cars, it’s actually *cheaper* to manufacture in the United States than to import it from China, which is why none of the automakers are importing cars from China.

But: The Chinese workers *work*. They don’t lollygag around all day complaining about the boss. They don’t steal everything left laying around, I’ve been with American “workers” who bragged about all the shit they stole from their (industrial) employer, from stuff as trivial as hard hats all the way to multi-thousand-dollar welding rigs. The Chinese workers are educated, so they can learn new production methods quickly just by reading directions. We have to draw fucking *COMIC BOOKS* to teach American assembly line workers how to assemble shit, ’cause they’re basically illiterate.

Basically, American workers just give us too much goddamn trouble to make it worth building iPhone factories and shit here in the United States. Yeah, it’s modestly cheaper to build iPhones in China versus here, but if that was *all* there was to it, iPhones would be built in Kansas CIty because dealing with the Chinese is a massive headache just from the timezone point of view, nevermind the language and cultural barrier issues. Instead, they’re built in a suburb of Shanghai.

Same deal with why the Central Valley farmers here in California hire Mexicans rather than whites or blacks. The Mexicans fucking *work*. The whites or blacks? They complain all day that the sun is too hot, the water too warm, they gotta go pee fifteen times in an 8 hour shift, their back hurts, their fee-fees got hurt by a supervisor talking mean to them. Meanwhile, the Mexicans? They’re busting their asses. BTW, most of those Mexicans are legal. Hell, half of them were even born here. But they still got that culture of working their ass off. Most white people and black people today… not so much.

– Badtux the Politically Incorrect Penguin

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