tag:blogger.com,1999:blog-77371232024-03-07T07:06:08.000-07:00No Free LunchCommentary on current economic issues.Chuckhttp://www.blogger.com/profile/08147805668767599967noreply@blogger.comBlogger144125tag:blogger.com,1999:blog-7737123.post-87303556989024014032018-03-20T20:09:00.002-07:002018-03-20T20:09:43.047-07:00Is Inflation on the Horizon?<div dir="ltr" style="text-align: left;" trbidi="on">
After years of slow growth, high unemployment and a stagnant economy things are beginning to change. The rate of economic growth is increasing, more people are finding jobs and employers are beginning to increase wages are among the many signs the economy is finally rebounding.<br />
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The decline in unemployment is a very positive sign as is the fact that employers are finally beginning to increase wages. Employers don't raise the pay of their employees out of the goodness of their hearts. Instead, they raise wages to try to both retain current employees as well as recruit new employees. <br />
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Unlike the depths of the past recession when employers cut costs by not replacing employees who died or quit. Now employers are raising wages to encourage current employees to stay and not quit. Raising wages are also an attempt to recruit new employees to fill the new positions being created. When an employer advertises a job opening and 300 people apply there is no need to try to encourage more to apply by raising wages. However, when an employer advertises a position and only a few apply with most being unfit for the position wages have to be increased in order to not only encourage more to apply but to also encourage more qualified people to apply.<br />
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So, after years of economic stagnation the economic growth we are seeing is very good news.<br />
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However, there is some potentially bad news. Increasing wages will cause expenses and prices to increase somewhat. This is especially true if employers begin competing against each other for a shrinking supply of qualified workers. This bidding war for workers can result in rising prices and inflation as employers compete for the finite supply of workers.<br />
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However, there is a possible buffer in the form of people who have left the labor force and are no longer counted as unemployed. Monthly reporting of unemployment shows declining percentages of those unemployed and as the unemployment rate approaches 3% and lower the threat of rising inflation is a real fear.<br />
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However, the official unemployment figures only count people who are both out of work AND are actively looking for work. Those who have lost their jobs and have given up looking because there are no jobs are not included in the unemployment figures. <br />
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Many people became discouraged and quit looking for work during the recession. They live off of savings, borrowing, taking reduced early retirement pensions and Social Security, a spouses income, public welfare, etc. While unemployed, this group is not homeless or starving but many will not see a benefit in going to work just to receive an income that is no more than what they are receiving by not working. These people are not necessarily lazy and many are keeping busy taking care of children or grandchildren, going back to school, volunteering or other worthwhile activities that allow them to be productive and give them satisfaction.<br />
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However, rising wages change the equation by offering the chance to earn more than they are earning now. The flow of these workers back into the workforce will both tend to keep wages from becoming inflationary as well as increase output which will satisfy consumers needs without them having to get into bidding wars to obtain the goods and services they seek. </div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Since ancient times </span><span style="font-family: "arial" , "helvetica" , sans-serif;">holidays and festivals have brought people together to celebrate. The togetherness and celebratory mood have also attracted merchants to the celebrations hoping to cash in on the celebration.</span><br />
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<span style="font-family: "arial";">In the U.S. Christmas has long been the premier holiday for merchant sales. But other holidays - Halloween, Valentine's Day and Easter, have also resulted in major increases in retail sales. While not as big as Christmas, St. Patrick's Day has been another holiday in which merchants in recent years have seen a sales bump. </span></div>
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<span style="font-family: "arial";">St. Patrick's Day 2018 is projected to be a very good year because it falls on a Saturday which means that for most people it is a day off as well. Since the next day, Sunday, is also not a work day for many, people can stay out celebrating and spending more money until late in the night. According to the National Retail Federation St. Patrick's Day spending should reach $5.9 Billion dollars.</span></div>
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<span style="font-family: "arial";">Despite the fact that St. Patrick's Day has long been associated with consumption of alcohol and bars being the major beneficiaries of the holiday's spending, 50% of those surveyed indicated that they would be purchasing food with only 41% planning on purchasing alcohol. Food sales would include spending in restaurants as well as grocery stores for those planning on parties in their homes. Beverage sales would include purchases in</span></div>
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<span style="font-family: "arial";">Even Pets Get Into the Holiday</span></div>
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<span style="font-family: "arial"; font-size: x-small;">(<i>Photo Copyright </i><span lang="EN-GB" style="font-family: "calibri" , "sans-serif"; font-size: 11pt; line-height: 115%; margin: 0px;">© 2009 by Chuck Nugent)</span></span></div>
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<span style="font-family: "arial"; font-size: xx-small;"><span lang="EN-GB" style="font-size: 11pt; line-height: 115%; margin: 0px;"><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: small;"><br /></span></span></span>
<span style="font-family: "arial"; font-size: xx-small;"><span lang="EN-GB" style="font-size: 11pt; line-height: 115%; margin: 0px;"><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: small;">bars and restaurants as well as in liquor and grocery stores for those dining or partying at home. The beverage category probably includes non-alcoholic as well as alcoholic beverages. Other planned purchases include St. Patrick's Day apparel, for both humans and pets (31%), decorations (26%) and candy (16%). Obviously many people indicated plans to purchase one category items. Candy and apparel appear to appeal mainly to younger buyers (18-24 age group).</span></span></span><br />
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<span style="font-family: "arial";">Irish have been coming to America since colonial times and have been a major demographic group in the United States. Currently about 33 million Americans representing 10.5% of the population (as of 2013) claim Irish descent. If you add in those of <a href="https://hubpages.com/holidays/Scot-Irish---The-Other-Irish" target="_blank">Scot-Irish</a> descent (i.e., those who ancestors came from the Protestant Northern Ireland) the number becomes larger. Also, due to intermarriage, many people check the box for the ethnic group of another part of their family. </span><br />
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<span style="font-family: "arial";">Former President Barack Obama is considered to be of Black or African ancestry but is half-Irish on his mother's side. Then there are Americans of Hispanic and Mexican decent with Irish last names. Many Irish left Ireland in the 17th and 18th centuries for Spain and many then moved on to Mexico and what is now the American southwest. While they still have the Irish surname they probably consider themselves Hispanic rather than Irish.</span><br />
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<span style="font-family: "arial";">Finally, when it comes to listing Presidents of Irish ancestry (a category that includes both Irish and Scot Irish) 22 American Presidents from Andrew Jackson, the 7th President of the U.S. to Barack Obama, 44th President of the U.S., almost half of them in our 242 years as an independent nation have been of Irish ancestry.</span><br />
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<span style="font-family: Arial;">However, on March 17th, St. Patrick's Day, everyone claims to be Irish even if it is only for that day. And, the nation's retailers are more than happy with the flood of green dollars that flow into their cash registers from all their "Irish for a Day" customers.</span><br />
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<b id="docs-internal-guid-56f0fb31-fb9c-3f16-b60d-6bddec5ed2b7" style="font-weight: normal;"></b><br />
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<b id="docs-internal-guid-56f0fb31-fb9c-3f16-b60d-6bddec5ed2b7" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">Many people were surprised by the rise in the stock market and increase in economic </span></b><br />
<b id="docs-internal-guid-56f0fb31-fb9c-3f16-b60d-6bddec5ed2b7" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">activity immediately after Donald Trump won the election last year. </span></b></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<b id="docs-internal-guid-56f0fb31-fb9c-3f16-b60d-6bddec5ed2b7" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">Some of this increased activity began immediately after he was elected and before he took office. Even </span></b><br />
<b id="docs-internal-guid-56f0fb31-fb9c-3f16-b60d-6bddec5ed2b7" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">after he was sworn in as President people were surprised that the economy began taking off before he </span></b><br />
<b id="docs-internal-guid-56f0fb31-fb9c-3f16-b60d-6bddec5ed2b7" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">had time to start making changes.</span></b></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<b id="docs-internal-guid-56f0fb31-fb9c-3f16-b60d-6bddec5ed2b7" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">The fact is that many things in life are based not so much on current circumstances as on people’s </span></b><br />
<b id="docs-internal-guid-56f0fb31-fb9c-3f16-b60d-6bddec5ed2b7" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">expectations of what the future portends. In other words, many people begin acting as if the change </span></b><br />
<b id="docs-internal-guid-56f0fb31-fb9c-3f16-b60d-6bddec5ed2b7" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">they are expecting is already here.</span></b></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">Of course, people’s expectations for the future can be negative as well as positive. If people begin </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">believing that times are going to get bad they will begin cutting back economic activity in anticipation </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">of the hard times to come.</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">People are individuals and each individual will base his or her actions on what they expect the future </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">to be. However, individuals’ expectations are influenced by the actions of those around them as well </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">by whatever information is driving their expectations. </span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">In the case of the burst of economic activity that followed President Trump’s election and his taking </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">office, those who believed his promises to do things like cut taxes and reduce the regulatory burden </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">on business began acting as if these actions were already underway despite the fact Donald Trump </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">hadn’t been in office long enough to do much of anything. As President Trump began reducing </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">regulations and began working on tax cuts these people pushed ahead harder while others, seeing </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">that changes were occurring jumped on board and began acting as if the changes were already </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">completed.</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 700; text-decoration: none; vertical-align: baseline; white-space: pre;">Individuals, Not Just Businesses & Investors, Also Act on Expectations</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">When an individual expects the future to be more uncertain and accompanied by economic </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">challenges he or she will react by increasing savings, cutting back on spending and deferring </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">things like buying a new house or car, changing jobs, getting married, having children, etc. In other </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">words they hunker down and prepare to ride out the expected economic storm.</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">The opposite occurs when, in the midst of major hardship, individuals believe they are seeing a </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">light at the end of the tunnel, they become more confident and start to expand their economic </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">activity again.</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">Barring a major economic set back, I believe that people’s optimism about the economy will </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">continue and that we will see more of the millennials, that huge cohort of children that the 1960s </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">boomer generation gave birth to in the waning years of the 20th century (and this generation is</span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;"> larger than the boomer generation) move out of their parent’s homes and out of their part-time </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">and temporary jobs and into careers in the mainstream economy. With steady and larger incomes </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">vast numbers of these young people will begin marrying, having children, buying homes and other </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">things resulting in an economic boom similar to the big bursts of economic activity that followed </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">the end of World War II in the 1950s and long burst of economic growth launched in the 1980s by </span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 11pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre;">the Reagan Presidency. </span></div>
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The financial pages these days it is easy to see that deflation is the major worry among the world's central bankers including the U.S. Federal Reserve. The word "deflation" also turns up in articles and interviews with financial advisers. The price of gold is down and few financial advisers are providing advice or strategies for dealing with inflation.<br />
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While there is no question that much of the world economy, including to some extent the U.S. economy and to a much greater extent the European economies, is suffering to some degree from deflation, there is an inflation time bomb lurking just over the horizon.<br />
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While I generally don't pay much attention to the doom and gloom concerns of Glenn Beck, I did find myself in full agreement with him this past Tuesday when, on the Sean Hannity show he made reference to the trillions of dollars worth of reserves the U.S. Federal Reserve and other Central Banks have been pumping into the world's banking system since the start of today's ongoing recession.<br />
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These trillions of dollars of reserves are new money created by central banks out of thin air and deposited into the world's banks. While digitally created deposits, this money is basically no different than the massive amounts of <a href="http://chuck.hubpages.com/_shamrocks/hub/Hyperinflation_in_Post_World_War_I_Germany" target="_blank">paper money printed by the post World War I government in Germany</a>. The excessive printing of money by the German government resulted in hyperinflation which led to the rise of Hitler and his Nazi party.<br />
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One other difference between the digital funds the world's central banks have deposited into banks and the paper money printed by the post World War I German Weimar Republic is that the digital funds are not circulating but are sitting on bank balance sheets as excess reserves. So far banks have been hanging on to these funds and not loaning them out due to fear of another financial crises in which they might need these excess reserves to remain solvent.<br />
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While central banks intent at the start of the 2007-08 financial crisis was to shore up bank reserves with the injections, subsequent central bank efforts have been an attempt to increase the amount of money in circulation by providing banks with more money to lend. However, banks have continued to remain cautious and have kept most of this new money as reserves.<br />
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The ongoing recession that has resulted from the financial crisis at the start of President Obama's term has been due to people being a fearful as the banks about a future crisis. Just as the banks have kept the injected funds in reserve, people have been cautious about spending and have used much of their money to pay down debt and build up savings. This has slowed the circulation of money which has led to fewer sales of goods and services. This slow down in economic activity has led to layoffs and a reluctance to expand and hire more workers by employers.<br />
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This slowdown in the rate of spending by consumers has led to <a href="http://chuck.hubpages.com/_shamrocks/hub/Deflation-What-is-It-and-Why-are-We-Worried-About-It" target="_blank">deflation</a> which has prolonged the 2007-08 recession. Deflation is basically a reduction in the amount of money in the economy due to people hanging on to it rather than spending it. They standard Keynesian policy response is to try to ignite some inflation (the opposite of deflation). <br />
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According to a report on CNBC at the start of the financial crisis, the total amount of new money the world's central banks injected into banks as reserves exceeded the total amount of money in circulation in the world economy at that time. Since then more money has been created and injected into bank reserves.<br />
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What central banks have been trying to do is get banks to move some of this money into the economies of their nations by loaning it out. This injection of new money into circulation would result in some inflation which would off set or cancel out the deflation and get the world's economy moving and growing again.<br />
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However, the real problem is lack of confidence by consumers and business in the Obama Administration's tax and regulatory policies and fear that these will lead to another economic downturn. In such a climate most people are being cautious and accumulating cash by cutting spending.<br />
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Creating money and putting it into the economy via the banking system is a traditional monetary tool for stimulating an ailing economy. Central banks can also do the reverse and pull reserves out of the banking system which results in banks having less money to loan which forces economic growth to slow when the central bankers feel inflation is accelerating at to rapid a pace. However, using monetary policy to stimulate or slow down an economy is not an exact science and considerable economic damage is frequently the result of these efforts.<br />
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The problem today is that if peoples confidence returns and banks respond by increasing lending there is the possibility that we will go from today's current deflation to rapidly increasing inflation. If central banks stay focused on deflation and hesitate to act quickly, rampant inflation could result. On the other hand, if central banks hit the monetary breaks too soon and too hard, the economy could fall back into a recession. <br />
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It is campaign season and the airways are full of political commercials. Fortunately for the politicians truth-in-advertising laws do not apply to campaign ads. If political ad were held to the same standard as commercial ads, they would be scarce on television.<br />
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A recent television spot by the Democratic Congressional Campaign Committee supporting Arizona Congressman Ron Barber in his campaign against challenger Martha McSally is not only guilty of the typical distortion of an opponent but goes a step further by implying that Social Security is a retirement savings program.<br />
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In the ad a middle aged woman accuses McSally of trying to destroy Social Security by privatizing it. <br />
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In addition to taking a response by McSally to a reporter's question out of context, it goes on to say:<br />
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<i>We worked hard. Played by the rules. But then you have Martha McSally who wanted to risk</i> <i><b>ALL THE SAVINGS</b></i> [emphasis mine]<i> we earned over a lifetime.</i><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"><b>Ad's Wording is Deceptive</b> </span></div>
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This wording is very deceptive<i> </i>but it is also a deception that Social Security's supporters have been promoting to the American public since the Social Security legislation was passed in 1935. While its supporters have always talked in public about Social Security as if it was a pension type retirement plan, the reality is that it has always been nothing more than a just another income transfer program. <br />
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The lady in the Democratic Congressional Campaign Committee uses the words <i>risk all the savings</i> which implies that the Social Security taxes paid by workers and their employers are a form of retirement savings. However, Social Security payments to retirees are not like payments from a pension fund or a 401(k) or other type of retirement savings accounts. <br />
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First, those who pay into and eventually qualify to receive Social Security payments when they retire have no legally protected contractual right to Social Security benefits. This is in contrast to the other sources of retirement income listed above in which participants have a contractual or ownership right to income from these plans.<br />
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In two separate cases (<i>Helvering vs Davis</i> in 1937 and <i>Flemming vs Nesor</i> in 1960) the U.S. Supreme Court ruled in the first case that Social Security is NOT a retirement savings or pension plan but, instead, a simple welfare plan where one group (workers and their employers) are taxed to raise funds to give to another group (retired workers). In the second case it ruled that people who pay Social Security taxes have no contractual right to the money taken from them by the tax or to any income generated by that money.<br />
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Secondly, the reference to <i>savings</i> in the campaign ad is deceptive since the money taken from workers' paychecks by the Social Security tax is not put into an account for each worker. There are no savings to lose for the simple reason that the money taken from current workers and their employers is immediately transferred as payments to current retirees. <br />
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When a worker retires, the Social Security payments that person receives comes from taxes on those still working and NOT from funds collected and stored in an account during that worker's working years.<br />
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<b><span style="font-family: Arial, Helvetica, sans-serif;">Social Security Law Can be Repealed by a Simple Vote of Congress</span></b></div>
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<b><span style="font-family: Arial, Helvetica, sans-serif;"> </span></b></div>
Social Security is a law like any other law and, as such, can be changed or repealed by a simple majority vote by Congress. Further, since the Social Security program, like any other program that requires the spending of money, relies on Congress to authorize funds for it to spend, payments can be stopped without actually repealing the law. <br />
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A simple majority in the House of Representatives voting NOT to approve it funding would halt Social Security payments to retirees for that year - however, existing workers would still have the Social Security tax deducted from their paychecks every payday.<br />
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What keeps Social Security from being repealed or not funded is the fact that millions of retirees depend upon Social Security for much of their retirement income. Not only do these retirees vote but their voting age children and grandchildren also vote and these younger voters don't want to see their retired parents and grandparents thrown out into the streets.<br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><b>Demographic Change Could Result in Repeal of Social Security</b></span> </div>
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However, as I described in my article <i><a href="http://chuck.hubpages.com/hub/The-Social-Security-Systems-Achilles-Heel" target="_blank">Social Security's Achilles Heel</a>,</i> I point out that the introduction of IRA and 401(k) accounts in the latter part of the 20th Century has made many retirees less dependent upon Social Security for retirement income. <br />
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While these retirees probably won't advocate ending Social Security many of them won't be motivated to actively oppose repeal. Meanwhile many younger workers who are struggling financially and want relief from Social Security taxes and whose parents or grandparents are not financially dependent upon Social Security will actively support repeal. <br />
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Politicians, like other people, want to keep their jobs and, once a majority of voters want to have Social Security repealed, politicians will change their stand and vote to repeal. This is the political risk that Social Security faces and this risk may come to the forefront sooner rather than later.<br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">The lead editorial on today's <i>Wall Street Journal's</i> editorial page titled </span><span style="font-family: Arial, Helvetica, sans-serif; font-size: small;"><b id="docs-internal-guid-47c1bd1b-1a88-231c-046e-0577441453d5" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-style: italic; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The Ebola Twilight of Public Institutions</span><span style="background-color: transparent; color: black; font-family: Arial; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> </span></b><span style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: Arial, Helvetica, sans-serif;">is a scathing critique of modern big government.</span></span></span></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;"><span style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: Arial, Helvetica, sans-serif;">The focus of the editorial and a related piece by Daniel Henninger (<i>A Year of Living on the Brink</i>) on a nearby page was the failure of modern big government to live up to its basic responsibility to protect its citizens. The thrust of both articles was that big government has become more focused on expanding and promoting itself than on its citizens. </span></span></span></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;"><span style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: Arial, Helvetica, sans-serif;">The mishandling of the growing Ebola epidemic by both the U.S. <i>Centers for Disease Control</i> (CDC) and the UN's <i>World Health Organization</i> (WHO) were cited as specific current examples of this failure of big gvernment. </span></span></span></span><br />
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<span style="font-size: small;"><span style="font-family: Arial, Helvetica, sans-serif;"><b>Start of the Ebola Epidemic</b> </span></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">In December 2013 cases of people infected with the Ebola virus began occurring in the West African nation of Guinea. The disease soon spread neighboring Liberia and Sierra Leone and soon reached epidemic proportions in Liberia.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">As early as March 2014 both the United Nations' <i>World Health Organization</i> (WHO) and the U.S. <i>Centers for Disease Control</i> (CDC) were reporting about 9,000 cases of the disease in Africa, especially Liberia.</span><br />
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<b><span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">One Large Company Takes Action to Protect its Workers</span></b><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;"> </span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">While WHO and the CDC began issuing reassuring press releases, one private company, <i>Firestone Liberia</i>, had a worker on its large rubber farm come down with the disease in March of 2014.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">The company, which is owned by Japan's Bridgestone Group, immediately sprung into action to both contain the outbreak in its area as well as treat those with the disease, most of whom were current or retired employees and their families. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">When the first Ebola victim appeared at the company's clinic the management team on site sprang into action. Turning to their computers they quickly learned all they could about Ebola from Internet searches. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">Two shipping containers were converted to isolation centers for victims. Teachers at the company's school visited student's homes to educate families on how to protect themselves from the disease as well as how to detect it and seek treatment immediately. Janitors were trained on how to bury victims of the disease while company surveyors mapped the locations of outbreaks which enabled managers to isolate and halt the spread of the disease.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">The rubber farm owned by Firestone Liberia covers some 185 square miles of land. It employs 8,500 Liberian workers. In addition to the workers the area also contains their families who comprise an additional 71,500 people. These plus some others not associated with the company comprise a large population scattered over a sizable area. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">To date 71 people in this community have contracted the disease, a small number compared to the number of victims in neighboring areas where the disease is running unchecked. More encouraging is the fact that as of last month there have been no new cases of the disease in the Firestone community.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">Following the success of its subsidiary in combating the disease, the Bridgestone Group itself recently announced the donation of one million dollars to help fight the spread of the disease in West Africa.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">The actions by Bridgstone and its employees shows that the private sector is better at handling problems like Ebola than are sprawling government bureaucracies. </span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><b id="docs-internal-guid-1c56868d-efc7-9214-f9bc-e21e9d44ff1a" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Today, October 9th is celebrated as </span><span style="background-color: transparent; color: black; font-style: italic; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><a href="http://chuck.hubpages.com/_shamrocks/hub/Lief_Erikson_Day_-_October_9th" target="_blank">Leif Erikson Day</a> </span><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">in the United States. </span></b></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><b id="docs-internal-guid-1c56868d-efc7-9214-f9bc-e21e9d44ff1a" style="font-weight: normal;"><br /></b></span></span>
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<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><b id="docs-internal-guid-1c56868d-efc7-9214-f9bc-e21e9d44ff1a" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Leif Erikson was the Viking sailor who founded what is believed to be the first European settlement in the New World. The colony, known as </span><span style="background-color: transparent; color: black; font-style: italic; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Vineland</span><span style="background-color: transparent; color: black; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> because of the abundance of wild grapevines, was located in what is now </span><span style="background-color: white; color: #333333; font-style: italic; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">L'Anse-aux-Meadows</span><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> in the Canadian province of Newfoundland.</span></b></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><b id="docs-internal-guid-1c56868d-efc7-9214-f9bc-e21e9d44ff1a" style="font-weight: normal;">
<br /><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">However, it is not Leif Erikson but the later Italian explorer, Christopher Columbus, who has been honored with a nearby holiday that falls near the Leif Erikson holiday each year on the second Monday in October, that </span></b><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">is today's focus.</span></span><b id="docs-internal-guid-1c56868d-efc7-9214-f9bc-e21e9d44ff1a" style="font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> </span></b></span></span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><b><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">While both men are remembered as great explorers and discoverers they were really a couple of ambitious fellows trying to make a living and get ahead </span></span></b><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">financially</span></span><b><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. This is </span></span></b>especially<b><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> true of Christopher Columbus who<b>,</b></span></span></b><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> if he were alive today, would </span></span><b><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">be<b> </b></span></span></b><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">considered</span></span><b><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> an</span></span></b><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> entrepreneur in the new tech economy.</span></span></span></span><br />
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<b><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Experience and Research Combine into a Plan to Find a New Route to Asia </span></span></span></span></b><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><br /></span></span>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Contrary to myth, Columbus did not set out to prove the world was round. Like most educated people, Columbus was familiar with the writings of both the ancient Greek mathematician Eratosthines of Cyrene (276 BC to 195 BC) and the Egyptian mathematician and writer Claudius Ptolemy (90 AD to 168 AD) both of whom not only produced mathematical proof that the world was round but also came up with estimates of the earth's circumference that were relatively close to its actual circumference. Ptolemy also produced a map of the world showing Europe and Asia and the Atlantic ocean in between. </span></span></span><span style="-webkit-text-stroke-width: 0px; background-color: white; color: #252525; display: inline !important; float: none; font-family: sans-serif; font-size: 14px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 22.3999996185303px; orphans: auto; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px;"></span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Columbus also believed that one could reach Asia by sailing west across the Atlantic. This was also accepted as possible by most educated people at the time. There two practical objections to sailing west to Asia. First, the distance between the two continents was not known which opened the possibility that a ship could run out of food and water before reaching land. Second, navigation and map tools were still quite primitive which meant that, once out of sight of land, it became very difficult to determine one's location which could result in aimless sailing until running out of supplies.</span></span></span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"></span></span></span>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Christopher Columbus had gone to sea as a teenager and, as an adult was an experienced sailor and navigator. He had experience sailing in both the Mediterranean and Atlantic. In the Atlantic he had sailed on voyages south along the African coast, west to the Azores and Canary Islands and north as far as England and possibly Ireland and Iceland. </span></span></span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><b>Columbus Had Extensive Network of Contacts and Connections</b></span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></span>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: #333333; font-size: small;">Like many of today's entrepreneurs Christopher Columbus appears to have had good networking skills. He used his networking skills to gather information and knowledge from the numerous sailors he encountered in his travels. His network also came to include scholars, businessmen and those with political connections. This gave him access not only to people in power but also libraries and archives where he increased his knowledge of geography, cartography and navigation.</span></span><br />
<span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span>
<span style="font-family: Arial,Helvetica,sans-serif;">His marriage in 1478 or 1479 to </span><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Felipa Perestello e Moniz (or Felipa Moniz Perstello) the daughter of a somewhat impoverished but respected Portuguese noble who had been appointed governor of the Maderias Islands by Prince Henry the Navigator not only gave him access to people with access to the royal court of Portugal and later Spain but, according to some historians, to </span></span><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Bartolomeo Perestrello's personal archive of charts and other materials relating to sailing and navigation.</span></span></span></span><br />
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<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><b><b><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i>Enterprise of the Indies</i></span></span></span></span></b> - Columbus' Business Plan</b></span></span></span></span><br />
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<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Sometime after his marriage, Columbus began formulating a plan, which came to be known as <i>Enterprise of the Indies.</i> </span></span></span></span><br />
<br />
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In this plan Columbus described how he planned to sail west to Asia along with evidence showing how this could be accomplished. He also provided details and the costs of what would be needed for the venture as well as detailed estimates of the profits to be made from the venture. Finally, the plan included what he personally expected from the venture. </span></span></span></span><br />
<br />
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In addition to one-tenth of revenue to be earned from the sale of products shipped from Asia to Spain via the new trade route, he also demanded that he be given the rank of Admiral of the Ocean, as well as Viceroy and Governor of the Indies. These titles and revenues were to be ongoing and passed on to his descendants.</span></span></span></span><br />
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<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The </span></span></span></span><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i>Enterprise of the Indies</i></span></span></span></span> was a business plan designed to get investors to invest in his venture. Columbus traveled around Europe, especially Portugal and Spain, meeting not only with monarchs but others who whose support could influence a monarch to provide other political and financial backing needed to launch the enterprise.</span></span></span></span><br />
<br />
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><b>Christopher Columbus Raises Funds and Other Backing Needed for the Voyage</b></span></span></span></span><br />
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> </span></span></span></span><br />
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the end it was Luis de Santangel, royal treasurer to King Ferdinand ("Spain" at that time was the Kingdom of Castile which was ruled by Queen Isabella and the Kingdom of Aragon ruled by King Ferdinand, these two kingdoms were later united into one along with other areas to make modern Spain but this was not in the lifetime of Ferdinand and Isabella) and a member of a banking family, who got the two monarchs to put aside the objections of their other advisers and reconsider the plan by Columbus. De Santangel argued that the potential return on the investment was so much greater than the initial investment that it was worth the risk.</span></span></span></span><br />
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<br />
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Part of the contribution by the two monarchs was their requiring that certain people in the sea port city of Palos provide Columbus with two ships as well as join Columbus in his voyage. </span></span></span></span><br />
<br />
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Whether this order applied directly to Martin Alonso Pinzon and his family or to others in the town as well is unclear. In addition to being experienced seafarers and ship builders the family was well known and wealthy. Martin or the family not only provided the ships but Martin also contributed a half a million maravedis toward the cost of the first voyage of Columbus. This was half the amount Ferdinand and Isabella contributed and came to one-eighth of the total cost of the voyage.</span></span></span></span><br />
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<b><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Martin Pinzon and His Contribution</span></span></span></span></b><br />
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> </span></span></span></span><br />
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Martin and his two brothers, Francisco and Vincent Yanez, sailed with Columbus on the first voyage. Martin commanded the Pinta with Francisco as master and the youngest brother, Vincent, commanding the Nina. Martin, as one of the leading members of the area was instrumental in recruiting skilled local sailors for the voyage.</span></span></span></span><br />
<br />
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">While they started out as close partners, Columbus and Martin Pinzon became bitter rivals following their arrival in the New Wold and their return to Spain. </span></span></span></span><br />
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></span></span>
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Finally, in addition to the financing by the monarchs and Pinzons, Columbus is also supposed to have contributed personal funds to the voyage. A syndicate consisting of the Seville branches of seven Genovese banks also made a sizable contribution to the cost of the first voyage. </span></span></span></span><br />
<br />
<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The contribution by the monarchs, Columbus and Martin Pinzon were obviously equity investments in the project. </span></span></span></span><br />
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<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">As to the Genovese banks it is unclear as to whether their contribution was in the form of loans or equity investments on behalf of their owners or clients.</span></span></span></span><br />
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Arial;"><b>Gains and Losses by Columbus</b></span></span></span><br />
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Arial;">While Christopher Columbus was smart and successful in his endeavor to find a new route to Asia, he wasn't without his faults. </span></span></span><br />
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Arial;">In researching his life one finds more than a trace of greed and egotism. The profits, rewards and titles he requested were not only excessive but also unrealistic. </span></span></span><br />
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Arial;">Seeking a ten percent return on an investment is reasonable. But demanding ten percent of all revenues from trade on the route he proposed to find was excessive especially since he was demanding this for himself and his heirs in perpetuity. </span></span></span><br />
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Arial;">The royal titles and positions he demanded for himself and heirs in perpetuity were also unrealistic.</span></span></span><br />
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Arial;">These demands kept the King of Portugal from backing him and initially kept the Spanish monarchs from backing him. It was only the financial acumen of </span></span></span><span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Luis de Santangel, Treasurer to King Ferdinand, that saved Columbus after being first turned down by Ferdinand and Isabella. </span></span></span></span><br />
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Arial;">Despite his brilliance in devising and carrying out his plan, Columbus was naive to believe that the monarchs would actually live up to their part of the bargain they agreed to. Just as ambitious politicians today don't hesitate dump supporters and reverse positions when it becomes inconvenient so too were monarchs of old. </span></span></span><br />
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Arial;">Finally, these faults hurt and distracted Columbus in the long run. While he made three more voyages to the New World he was also forced to spend time and energy in legal battles and in other disputes. </span></span></span><br />
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Arial;">Like other successful entrepreneurs, Columbus was a good promoter and this served to help sell his plan and get backing for his successful first voyage. Later activities in this area probably helped to spread his fame and keep his name and success alive in the ages since.</span></span></span><br />
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Arial;">However, his preoccupation with proving that he had reached Asia and with fighting his critics helped to blind him to the fact he had discovered a new and previously unknown land. </span></span></span><br />
<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Arial;">Others soon figured out that the route Columbus discovered led to a new land and not Asia. One who figured this out and publicized it was a Columbus contemporary, Amerigo Vespucci (who at the time of the first voyage of Columbus was manager of one of the banks that were involved in the financing of that first voyage). </span></span></span><br />
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Arial;">As a result of of his published accounts of the fact the lands Columbus were a previously unknown landmass rather than Asia, a German mapmaker in 1507, one year after the death of Columbus, published a map of the world on which <i>America</i>, the feminine form of Vespucci's first name, rather than <i>Columbia</i>, appeared as the name of the new lands. </span></span></span><br />
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<span style="font-size: small; font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> </span></span></span></span><br />
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<span style="font-weight: normal;"><span style="background-color: white; color: #333333; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span>
</div>
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</script></div>Chuckhttp://www.blogger.com/profile/08147805668767599967noreply@blogger.com0tag:blogger.com,1999:blog-7737123.post-49639144351576458972014-10-03T19:36:00.000-07:002014-10-03T19:36:30.294-07:00Expanding Airport Parking Options Without Building new Parking Lots or Parking Garages<div dir="ltr" style="text-align: left;" trbidi="on">
One of the major differences between economic decisions in a free market and decisions by government bureaucrats in a socialist economic system is that anyone in a free market has freedom to see a perceived need and try to satisfy it while bureaucrats tend to be limited not only to their area of expertise but also limit themselves to the constraints of the status quo.<br />
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I saw an example of this on a recent trip which took me across the nation by air.<br />
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Once airborne, airplanes are a fast way to travel over a long distance. However, getting to the airport can be both time consuming and stressful. This is especially true when one lives in a small city, like Tucson where I live, and decides to take advantage of more choice and often lower fares offered by a major airport in a nearby large city like Phoenix.<br />
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While there are often van and bus lines offering reasonably priced service to nearby large airports, there is still the problem of scheduling and parking. For early morning flights there is the added problem of first, the service not offering service early enough to make the connection and, second, even if they do offer early service this usually requires getting up at one or two in the morning in order to catch a shuttle in time to make your flight.<br />
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Driving to the airport is an option but here one has to contend with the congestion that surrounds large airports as well as having to leave your car in some expensive and often distant lot with little security.<br />
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A few years ago I discovered some motels near Phoenix Sky Harbor Airport offering free parking to those who spent the night before the flight at their hotel. This enabled my family and me to drive to Phoenix the night before, get up at a reasonable hour for the flight and take the motel's free shuttle directly to the terminal while leaving our car behind in their lot.<br />
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For my wife's and my recent trip only a couple of motels offered this service and the parking was limited to one week while we were going to be gone for three weeks. With a 7 a.m. flight there was no question of whether or not my wife and I would spend the night before the flight in a motel. The only question was how to handle the logistics of finding a place to stay, finding convenient long term parking and getting to and from the airport with the least amount of time and stress.<br />
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In searching the web for the simplest way to juggle hotel, car, parking and getting to and from the airport to the car with all our luggage I came across an outfit called <i>Global Airport Parking</i>.<br />
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Not only did this service provide the simple parking and travel solution I was looking for, I was also intrigued by their business model.<br />
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Their website states that they are a national company offering parking services located near both airports and cruise ship ports in cities around the U.S. However, they appear to be basically a virtual company that doesn't own or lease any of the parking real-estate that they rent out to customers.<br />
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Instead, the company contracts with hotels and motels located near airports and cruise ports to rent the unused parking spaces that these establishments have. For motels much of their clientele are travelers traveling in their own cars. Thus, with the exception of some in large cities where real-estate is scarce and expensive, parking is provided at no extra charge along with rooms. <br />
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Since, it is not common for these establishments to have every room rented every night they usually have some empty parking spaces most of the time. Also, some of their business travelers don't come with cars which leaves additional spaces available.<br />
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Global Airport Parking is thus able to rent these unused parking spaces to travelers like my wife and I who need a place to park our car while flying off to some other vacation destination.<br />
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All the motel has to do is judge how much unused parking space they will have at a given time and make that space available to Global Airport Parking to rent out. In return the motel gets to share in the revenue paid by people leaving their cars in these otherwise unused spots.<br />
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The motel also gains from possible additional customers for their rooms as many with early morning departures and/or late evening arrivals also rent a room at the beginning and/or end of their trip as well as renting the parking space for the duration of their trip. Further, in addition to the potential for additional room rentals the motel also benefits from more potential customers visiting their site and remembering it for future trips requiring motel accommodations.<br />
<br />
Finally, in addition to more parking choices for tourists continuing their trip by air or sea and the opportunity for additional marginal revenue for the motels, society also benefits from the fact that the additional parking space for out of town travelers has been created not by bulldozing more land and building more parking structures but by utilizing the existing, but un-used, parking space in motel parking lots. <br />
<br />
Another example of how entrepreneurs create more goods and services while utilizing fewer resources.<br />
<br />
<br />
<br /></div>
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<div style="text-align: center;">
<span style="background-color: rgba(255, 255, 255, 0);">(<i>NOTE: this is an updated version of a previous 2011 post)</i></span></div>
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<span style="background-color: rgba(255, 255, 255, 0);">Many people are uncomfortable with the concept of profit. For them there is an underlying belief or feeling that profits made by entrepreneurs and their businesses are made at the expense of the rest of society.</span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<div style="text-align: left;">
<span style="background-color: rgba(255, 255, 255, 0);">However, in economics, profit is defined as the excess of the total revenues of a business over its total costs. Profit is the surplus left over from the revenues after paying for the raw materials needed for production, paying the workers, paying the lenders and investors and, of course paying all of the various r due to all government entities having jurisdiction over the enterprise.</span></div>
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<span style="background-color: rgba(255, 255, 255, 0);">For the business there are two ways of increasing profit.</span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<span style="background-color: rgba(255, 255, 255, 0);">The first is to increase sales and revenue while holding costs constant. This can be done by expanding and finding new customers, improving the quality and desirability of the product to attract new customers, better marketing of the product, etc.</span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<span style="background-color: rgba(255, 255, 255, 0);">When businesses expand more labor is needed which creates more jobs which results in income opportunities for more people. </span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<span style="background-color: rgba(255, 255, 255, 0);">The second is to keep revenue constant while reducing costs. This involves finding less expensive ways of doing things without reducing the quality of the product.</span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<span style="background-color: rgba(255, 255, 255, 0);">Costs can be reduced in many ways. A business can invest in more efficient equipment which enables its workers to produce more in the same amount of time with the same or less effort. This saves on labor costs because it allows a business to expand its output without hiring more, or as many more workers, as would be needed in the absence of the labor saving machinery.</span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<span style="background-color: rgba(255, 255, 255, 0);">Costs can be reduced by eliminating waste. In the era before digital photography when photographers had to use film when taking pictures the giant film producer and developer, Eastman Kodak, was a big consumer of silver which, in the form of silver nitrate, was used in the making of photographic film. The amount of silver used to make each roll of film was small but, when multiplied by the number of rolls of film produced each year it added up to a very large amount.</span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<span style="background-color: rgba(255, 255, 255, 0);">After taking pictures with the film, photographers would send the film back to Kodak to be developed and developing film made up another large portion of Kodak's business. In the developing process the silver nitrate used in making the film was literally washed down the drain as it was no longer needed once the picture had been taken. Again, the amount of silver nitrate was minute. However, when multiplied by the hundreds of thousands of rolls of film developed by Kodak each year a lot of silver was going down the drain. Because of this Kodak invested in equipment to recapture this used silver nitrate and recycled it for use on new film thereby reducing the cost of purchasing silver for film making considerably.</span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<span style="background-color: rgba(255, 255, 255, 0);">Another example of cost saving by recycling was described in a 2008 entry on this blog entitled <i><a href="http://nugent-economics.blogspot.com/2008/06/saving-money-environment-by-recycling.html">Saving Money and the Environment by Recycling old Roadbeds</a></i>. In this case, companies that tear up and remove the old, broken asphalt from roads that are being enlarged or replaced no longer send the truckloads of asphalt they remove to landfills, instead, they use a recycling process that extracts up to 80% of the bitumen, the basic ingredient in asphalt, from the chunks of old road and use that in the building of the new road thereby reducing the cost of building the new road.</span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<span style="background-color: rgba(255, 255, 255, 0);">The point of this is is that while the hard life of the poor is mitigated somewhat by government programs and private charities, the real force that alleviates poverty is the pursuit of profit by driving down the cost of production which, in turn drives down the price of goods brought by consumers both rich and poor.</span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<span style="background-color: rgba(255, 255, 255, 0);">It is this lowering the cost of living that has been and still is, the main force improving the lot of the poor.</span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<span style="background-color: rgba(255, 255, 255, 0);">Links to Related Articles:</span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<i><b><a href="http://hubpages.com/_shamrocks/hub/Prices-Profits-and-Low-Income-Consumers" style="background-color: rgba(255, 255, 255, 0);">Prices, Profits and Low Income Consumers</a></b></i><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<i><b><a href="http://www.theinfomine.com/2010/08/28/going-green-is-not-cheap/" style="background-color: rgba(255, 255, 255, 0);">Going Green Is Not Cheap</a></b></i><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>
<i><b><a href="http://shetoldme.com/Politics/Solar-Energy-and-Economic-Efficiency" style="background-color: rgba(255, 255, 255, 0);">Solar Energy and Economic Efficiency</a></b></i></div>
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Today, Thursday September 18th, all Scots age 16 and older can go to the polls to decide whether or not Scotland should remain a part of the United Kingdom or become independent.<br />
<br />
While Scotland was an independent nation during the Middle Ages, it has shared the same monarch with England since King James VI of Scotland succeeded the childless English Queen Elizabeth I in 1603. James was the closest heir to the English throne following the death of his cousin Elizabelth who had never married and left no children to succeed her.<br />
<br />
While the two nations shared the same monarch from 1603 onward they remained independent nations (just as Canada and other Commonwealth nations today have Queen Elizabeth II of England as their Queen but are independent of Britain).<br />
<br />
It wasn't until 1707 that the Parliaments of both nations enacted legislation uniting the two kingdoms into the present day United Kingdom of Scotland, England and Ireland. The flags of the two kingdoms were combined as well with English banner containing the red cross of St. George, the patron saint of England, on a white background combined with the white cross of St. Andrew, patron saint of Scotland, on a blue background to form the Union Jack which is the flag of the United Kingdom,<br />
<br />
Pro independence forces seem to be mostly idealistic young people, artists and other intellectuals and nationalist politicians. Opponents seem to be people satisfied with the current political arrangement as well as businesses and those concerned about the economy of an independent Scotland.<br />
<br />
The current Scot government is basically socialist and the British Labor party dominates Scot politics. Independence will be a threat to the Scot economy since the extensive welfare system in Scotland relies heavily subsides from both England and the EU. <br />
<br />
The leaders of the independence movement feel that they can survive on oil revenues and taxes on the wealthy English owners of Scottish estates. They are also banking on being allowed to join the EU.<br />
<br />
However, there are some clouds on the horizon. <br />
<br />
First, while ownership of the North Sea oil fields would fall to Scotland once it is independent, vast new oil and gas reserves in North America (Canada and the U.S.) threaten to drive oil prices down as well as replace oil with less expensive natural gas.<br />
<br />
Second, as for the wealthy English landowners, wealthy people don't mind spending money but they like to get something in return. Simply paying more taxes is not appealing and they may abandon the properties (or donate them to a charitable preservation trust) thereby avoiding the taxes.<br />
<br />
Finally, with separatist movements in other EU nations, such as Catalonia in Spain, EU members may not be open to allowing a separatist Scotland into the EU for fear of encouraging separatist movements in their nations.<br />
<br />
We will know in a few hours whether or not voters in Scotland vote to separate. If they do, they may find themselves in for a rough ride economically.</div>
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<b id="docs-internal-guid-9065b3e9-6b7e-0da9-4ff5-5392bb3e9d6b" style="font-weight: normal;"></b><br />
<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<b id="docs-internal-guid-9065b3e9-6b7e-0da9-4ff5-5392bb3e9d6b" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Thirteen years ago on September 11, 2001 terrorists hijacked four airliners. Unlike previous airline hijackings in which the hijackers sought ransom money or escape to another country, these four planes were hijacked to use as flying bombs.</span></b></div>
<b id="docs-internal-guid-9065b3e9-6b7e-0da9-4ff5-5392bb3e9d6b" style="font-weight: normal;"><br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Like most Americans alive then, I remember that day.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It began normally. Like other mornings I got up early and checked my email. </span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Signing into Yahoo I noticed a small headline about a plane having crashed into one of the towers of the World Trade Center in New York. I remembered as a youth having seen an old movie on TV about a plane flying into the Empire State Building on a foggy night. My father commented that this had really happened and, seeing the Yahoo headline, I assumed that the pilot of a small plane had been in a fog or had flown off course and had crashed into the WTC. If the Empire State building had withstood a small plane flying into it then so could the the larger WTC, so I proceeded to my email and thought no more about it.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">After breakfast I got my two sons into the car and we headed off to school and work. As usual, one of them immediately turned on the car radio expecting their favorite FM rock station but instead got a news commentator from the AM talk station I listened to when they weren't in the car. They pushed the AM/FM button but the same man kept talking. Pushing the button again and same reporter was still talking. In frustration my older son changed to another FM rock station and the same fellow was still speaking. </span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I suddenly remembered that all three stations were owned by the same broadcaster and that something was going on. It took a couple of minutes before the reporter finished the details he was discussing and gave an update on the towers having been hit by an airplane for those who had just turned in.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This is when I learned that it wasn’t a small plane going off course and flying into the World Trade Center but a commercial airliner full of highly flammable jet fuel that had been taken over by hijackers and deliberately flown into the World Trade Center.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">After dropping my boys off at their respective schools, I drove to work where everyone on the office was talking about the attack. While the community college I worked for remained open all day, most of us spent as much time on listening to updates from radios and the Internet as we did working. The school officials did eventually announce that all evening classes would be cancelled and the college would shut down completely when the work day ended at 5 pm.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It was my youngest son’s 14th birthday and I had promised to buy some pizza and take it to the school cafeteria for him and his friends for lunch. </span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I called my pizza order in to a small pizza parlor down the street and left early for lunch. When I arrive at the pizza parlor the young lady at the pizza parlor looked shaken and told me that she had recently moved to Tucson from New York City and was worried about friends and relatives back in New York. That is when I remembered that I had two cousins whom I hadn’t seen in years as well as my Mother’s cousin all whom lived in the New York City area. </span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">While none of my relatives lived in Manhattan, my two cousins did work there while my Mother’s cousin had retired and lived out in Queens. </span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I managed to get my pizzas and get them over to my son and his friends, but due to heavy traffic, I was somewhat late and don’t know how much of it they actually got to eat.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I had to wait to get home to make calls about my family. All the lines to New York City were tied up but I was able to get ahold of my two cousin’s sister in Connecticut. She had received an email from my cousin Tom’s wife saying that he had made it home safely. He worked on Wall Street either in one of the other towers or a neighboring building and had been able to see the fire from his office.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">His building evacuated and he spent the rest of the day walking around the traffic jams and ultimately making his way home to Brooklyn on foot. With most public transit shut down and some bridge closures it took him hours to finally make it home.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It turned out that the company that my other cousin worked for had decided to escape the high rents in Manhattan and had moved most of their staff to an office building across the river in New Jersey a couple of years before. This cousin had seen the towers burning but was safely away from the target area.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I wasn’t able to reach my Mother’s cousin either but did receive a call from my sister in Western New York who informed me that he and his family were safe in their home that was a safe distance from lower Manhattan.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One of my sisters had been attending some sort of trade gathering in Toronto at the time of the attack and, with the border closed and all non-military aircraft in the U.S. grounded, she ended up spending a few extra days in Toronto.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I was fortunate that everyone I knew had come through safely. And, living in Arizona, I was far from the the disaster area.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">However, I was impacted slightly a couple of years later. Shortly after the terror attack I met and fell in love with a woman from Russia. Having been divorced and a single parent for over a decade I was ready for a new love. </span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Things went fine for us except that new laws and regulations and the consolidation of border security and immigration in the new Department of Homeland Security resulted in some obstacles and delays in our coming together. It took longer than usual to process the paperwork to bring my new fiancee and her two children to the U.S.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Once here, I discovered that the Department of Homeland Security was so busy changing signs and headings on stationery that brought the processing of green cards to a crawl. It thus took close to six months for my wife to get a green card allowing her to work. </span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This was the economic impact of 9/11 on my household finances. Upon her arrival my household doubled in size from my two sons and me to now include my wife, my two sons, her son and daughter and me - moving from supporting a household of three to one of six puts a big dent in a family’s finances. </span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But we tightened our belts and made it through. Her green card finally arrived on a Saturday and by the following Wednesday she had found a job and started working.</span></div>
</b><br class="Apple-interchange-newline" /></div>
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<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"></b><br />
<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">With summer over, it is back to school for the thousands of students enrolled in the nation’s colleges and universities.</span></b></div>
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">For most students and/or their parents, a college education is an expensive undertaking. In addition to tuition and room and board, books and supplies will consume a large portion of a student’s education budget.</span></b></div>
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;">
</b>
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<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Despite steadily rising book costs, textbook publishers have found themselves squeezed for revenue. A major source of revenue loss can be attributed to the burgeoning used textbook market.</span></b></div>
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;">
</b>
<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The used textbook market has always existed but, prior to the rise of the world wide web and sites like eBay, it was not too big of a threat as the market for used textbooks was limited to students in the next semester’s or year’s courses. Since many localities had only one college or university options to buy or sell used textbooks was limited.</span></b></div>
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;">
</b><br />
<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Despite the limited re-sale market, publishers were able to narrow the market further by regularly coming out with new editions of books. Generally this just involved a few changes (such as reversing the order of chapters, adding or replacing some content, etc), and then convincing professors to adapt the new addition for their next semester’s courses.</span></b></div>
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;">
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">However, with the rise of auction and resale sites like eBay, Amazon, Half.com, etc. the market suddenly became global and textbook publishers found themselves competing for business against students selling used copies of the same textbooks the publishers were selling new.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It wasn’t just individual students logging on to sites where they could sell their used textbooks at the end of the term. Other entrepreneurs, including entrepreneurial students, began purchasing used books directly from students and then re-selling them online at a higher price. Some even went so far as to<b> </b>negotiate with the local college bookstore to purchase unsold new books that were not going to be used the next term. This saved the bookstore the cost of shipping the books back to the publisher. </span></div>
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</b><b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"></span></div>
</b><br />
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<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"></b><br /></div>
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<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"></span></b></div>
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<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;">
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<div style="text-align: center;">
<iframe frameborder="0" marginheight="0" marginwidth="0" scrolling="no" src="//ws-na.amazon-adsystem.com/widgets/q?ServiceVersion=20070822&OneJS=1&Operation=GetAdHtml&MarketPlace=US&source=ss&ref=ss_til&ad_type=product_link&tracking_id=hubpagescom03-20&marketplace=amazon&region=US&placement=0674009886&asins=0674009886&linkId=KQGUUBZV5FXK7GI7&show_border=true&link_opens_in_new_window=true" style="height: 240px; width: 120px;">
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<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<br />
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Publishers struck back by going digital themselves. This took the form of developing digital content, including robust content and tests (thus saving professors from having to hand out, monitor and correct tests) designed to aid in the teaching and learning. This content required the student to purchase an access code that allowed them to enter the online site. The pass code was good for the semester and initially only available with the purchase of a book and pass code package.</span></b></div>
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The addition of online content available via a pass code not only produced an additional revenue stream from the sale of pass codes, but, packaging the code with the textbook forced students to purchase their books new (since pass codes cannot be re-used, students could not re-sell them). This was a blow to the used book market as students had to purchase new books in order to get the pass code for the online access which many professors required as a part of the course.</span></b></div>
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;">
</b>
<br />
<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The threat of new laws or regulations on the textbook industry has resulted in many publishers offering the option of purchasing the textbook and access code separately. This allows students to purchase the access code alone and then purchase a used textbook or, in some cases, rent a textbook. </span></b></div>
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;">
</b>
<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Purchasing the access code separately from the book offers the potential for savings. However, it pays to shop around. The college bookstore may sell the access code separately and also offer both new and used copies of the textbook as well as various bundling options.</span></b></div>
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;">
</b><br />
<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">However, the publisher may also sell access codes directly from their websites and prices might differ from those at bookstores. Also, used copies of the textbook may be less expensive from an online seller than from the bookstore. Ebooks are also an option that are usually less expensive than print books and there are some eBook and access code packages which could result in a savings.</span></b></div>
<b id="docs-internal-guid-c2a5a51a-3ea8-0098-29e5-8d9e05868c7c" style="font-weight: normal;">
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Finally, many college bookstores offer a textbook rental option that may be a less expensive alternative to purchasing a used textbook. Amazon.com also offers textbook rental options and this may be more of a savings than the bookstore offers.</span></div>
<br /><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">College is expensive and textbooks are a big part of this expense. However, investing some time checking all options can result in a significant savings in this area. </span></div>
<br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Finally, in making your decisions on how to go about keeping your textbook costs down keep in mind that purchasing a new or used print edition gives you the possibility of getting some of your money back at the end of the term by selling the textbook. This, of course, cannot be done with rental books or with most eBooks.</span></b></div>
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Despite the sluggish economy that has been with us since 2008, there have been periodic complaints from employers about their difficulties in finding employees. Given the high unemployment rates of the past few years these complaints seemed strange.<br />
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In the labor market, employers are the buyers of labor services and workers are the sellers of labor services. With thousands of people out of work, it was only natural for many employers to assume that finding employees would be easy. Logically this should have been the case and for many employers this probably has been the case.<br />
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No one likes to take a pay cut and, for many people, the available jobs being offered were at lower rates of pay than their previous jobs. For those without any options, their only choice has been to suck it in and take a lower paying job. <br />
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However, extended unemployment benefits (sometimes continuing for a year or more), free re-training opportunities, food stamps, a spouse's income and/or savings provide many unemployed people with the means to hang on and hope for a better job opportunity. While this can' go on forever, it does partly explain why we have both high unemployment and employers complaining about not being able to find workers.<br />
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A recent <i>Wall Street Journal</i> article (<i>U.S. Companies Schooled on Wages</i>, Aug 21, 2014) reported that one area that employers are experiencing trouble finding applicants is unskilled labor jobs. Workers are being sought for unskilled labor jobs in areas like construction and other industries that employ unskilled or low skilled workers<br />
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This shortage is difficult to understand given that the segment of the workforce these employers are targeting, which consists of people with a high-school education or less and little or no formal job training, continues to have unemployment rates that continue to be higher than for the labor force as a whole.<br />
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A major factor is the fact that the number of unemployed people in the 25 to 34 age group who have a high-school or less education has shrunk to less than 2.6% of the population. According to the article, this 25 to 34 age group is where employers of unskilled labor draw most of their recruits. Many of the unemployed in this group qualify for funding for training programs which offer the potential of improving their future job and pay prospects. As a result many in this occupation group may be electing to continue with their training and not respond to current unskilled job opportunities.<br />
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This leaves those in the 25 to 34 age group who are neither working nor looking for work which means they are <a href="http://nugent-economics.blogspot.com/2014/08/this-increase-in-unemployment-is-good.html" target="_blank">not considered a part of the labor force</a>. This is a potential pool of workers that employers can try to induce them to come forward and apply for these jobs.<br />
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The best, and possibly the only, way to recruit these people is by increasing the wages being offered. This will cost these businesses more money. More money will be needed to not only attract workers from this group of people who currently not considered a part of the labor force but these employers may also find they have to increase the pay of current workers with some skills who are working at the next level so they do not feel short changed and leave to seek employment elsewhere.<br />
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Reports by the Department of Labor this past month (July 2014) showed an increase in unemployment. However, unlike previous reports, the number of workers losing their jobs was negligible. <br />
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Rising unemployment is bad news for the economy and especially bad news for job seekers as it indicates that employers are reducing their workforce rather than expanding and seeking additional workers.<br />
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However, as a result of the way the U.S. Department of Labor (DOL) defines <em>unemployment,</em> an increase in unemployment can be viewed on occasion as good news for job seekers.<br />
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How is that, you ask?<br />
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According to the DOL an unemployed person is one who is both not working AND is actively looking for work. <br />
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Once an individual who is not working gets discouraged and STOPS looking for work he or she is no longer officially considered to be unemployed. For government statistical purposes they are no longer in the workforce and thus in the same class, employment wise, as young children, full time students, retired people, etc. who are not gainfully employed and receiving a pay check.<br />
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Thanks to things like savings, unemployment compensation, food stamps, income from a working spouse, etc. many people are able to scrape by without a job. <br />
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These people were not necessarily lazy. Rather, they simply accepted the reality that there were no jobs available and decided to hunker down and ride out the economic storm. Also, depending upon the amount of resources (noted above) available for support, many were able to afford to patiently wait for the right type of job to come along - a job similar in pay and stature to their previous position.<br />
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The recession also forced employers to become more efficient and able to maintain or increase the output of their goods or services with the same or fewer resources. However, there are limits to efficiency and at some point expanding output further to meet growing demand requires more resources including labor resources.<br />
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Our economy appears to have reached the point where employers are both more confident in the economy's continued growth and face the need to begin hiring again in order to keep pace with that growth.<br />
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The result is that hiring has started to increase and as the discouraged workers, who previously stopped looking for work, have begun seeing family members, friends and neighbors suddenly finding jobs, they too are deciding to begin looking again. Once these previously discouraged workers begin actively looking for work they are considered unemployed once more.<br />
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With employers hiring rather than laying off workers the current swelling of the ranks of the unemployed is the result of discouraged workers re-entering the labor force rather than the result of more layoffs.<br />
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This is why the recent increase in unemployment numbers that were not accompanied by increases in layoffs is good news for both the economy and for those wanting to work.<br />
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<br />
<div class="MsoNormal">
This past Thursday (July 18, 2013) the city of Detroit, to
no one’s surprise, filed for bankruptcy.<span style="mso-spacerun: yes;">
</span>With over $18 billion worth of debts the city appears to have had no
choice.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
However, some bond holders and the city’s two municipal
pension funds appear to be prepared to fight to prevent Detroit’s request for bankruptcy
being approved.<span style="mso-spacerun: yes;"> </span>Ironically, it was the
refusal of these bondholders and pension funds to agree to the city’s <i style="mso-bidi-font-style: normal;">haircut</i> proposal in which the
bondholders and pension funds would have been required to accept cents on the
dollar for their holdings, which, according to city officials, forced it to
seek bankruptcy protection.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Detroit’s bankruptcy filing is the largest municipal
bankruptcy filing in history.<span style="mso-spacerun: yes;"> </span>However,
not only is the bankruptcy no surprise but it also could have been avoided as
warning signs of serious fiscal problems for the city have been popping up as
the city has been declining during recent decades.</div>
<div class="MsoNormal">
While there are many factors contributing to Detroit’s
decline a major, if not the major factor, is modern liberal welfare state with
its emphasis on ever expanding government and its tendency to undertake every
project that presents itself regardless of cost.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
A March2011 <i style="mso-bidi-font-style: normal;">Wall
Street Journal</i> article on the 2010 Census figures for Detroit.<span style="mso-spacerun: yes;"> </span>The paper reported that the city’s population
had declined by 25% between 2000 and 2010.<span style="mso-spacerun: yes;">
</span>The 2010 population came in at 713,777.</div>
<div class="MsoNormal">
</div>
<div class="MsoNormal">
The article quoted Mayor Bing as saying:</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<i style="mso-bidi-font-style: normal;"><span style="background: white; color: black; mso-bidi-font-family: Arial;">If we could go
out and identify another 40,000 people that were missed, and it brings us over
the threshold of 750,000, that would make a difference from what we can get
from the federal and state government</span></i><span style="background: white; color: black; mso-bidi-font-family: Arial;">…</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="background: white; color: black; mso-bidi-font-family: Arial;">The fact is that state and federal funding was probably at
the root of many of Detroit’s problems.<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal">
<span style="background: white; color: black; mso-bidi-font-family: Arial;">To the politicians and bureaucrats these federal and state
funds were free money that they did not have to try to extract from the
taxpayers.<span style="mso-spacerun: yes;"> </span>Unfortunately, these federal
and state funds were problems in two ways:</span></div>
<br />
<ul style="text-align: left;">
<li><span style="background: white; color: black; mso-bidi-font-family: Arial;"> </span><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";">
</span></span></span><span style="background: white; color: black; mso-bidi-font-family: Arial;">First such funds usually come with strings in
that they are frequently in the form of seed money to be used to start programs
which the city will have to fund in the future or were for programs which the
city had to share the cost with the higher level of government.</span></li>
</ul>
<br />
<ul style="text-align: left;">
<li><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";">
</span></span></span><span style="background: white; color: black; mso-bidi-font-family: Arial;">Second, taxpaying residents tend to be less
concerned with the cost of such programs since they aren’t paying for them
directly with their local tax dollars.<span style="mso-spacerun: yes;">
</span>Of course, the special interests that benefit directly from the programs
love them.</span></li>
</ul>
<br />
<div class="MsoNormal">
If local government leaders were forced to rely on the tax
paying residents of the city they would tend to be more frugal with their
spending as increased spending would result in increased taxes.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Increased taxes tend to get people upset and
provide an incentive to either get out and vote the current leaders out or move
and avoid the higher taxes.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
For years, leaders in Detroit (and many other cities as well
– Detroit is just the first big city to hit the wall of reality) have ignored
costs and fiscal realities by choosing to rely on financial gimmicks to keep
spending.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Borrowing, aid from the State of Michigan and the Federal
government, raising taxes and deferring spending for like the maintenance of
infrastructure and adequately funding pensions have all been used to enable
leaders to charge ahead without regard for cost.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
With few<span style="mso-spacerun: yes;"> </span>effective
checks on their spending and, as managers lacking any equity interest in the
city beyond their pensions which they are theoretically contractually entitled
to receive, those who have been running Detroit have been able to ignore fiscal
realities and continue business as usual.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The usual reaction of managers is to concentrate on today’s
problems and ignore the long term effects of their current actions.<span style="mso-spacerun: yes;"> </span>After all, if the predicted financial consequences
aren’t expected to occur for another thirty or forty years, then they don’t
have to worry as they will be retired and gone before any days of reckoning
occur.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Well, the day of reckoning appears to have arrived and, just
as in Greece and other failing social welfare states in Europe, many innocent
victims are going to pay the price for the decades of fiscal irresponsibility
of politicians and bureaucrats who have safely retired someplace else.</div>
</div>
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</script></div>Chuckhttp://www.blogger.com/profile/08147805668767599967noreply@blogger.com0tag:blogger.com,1999:blog-7737123.post-68471150548331719402013-07-18T05:48:00.000-07:002013-07-19T09:29:24.197-07:00Uncoupling Food Stamps from Farm Bill<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-size: small;"><span style="font-family: Verdana, sans-serif;">Last Thursday (July 11, 2013) the House of Representatives voted 216-208</span></span> <span style="font-family: Verdana, sans-serif;">to remove Food Stamp program funding from Farm Bill that the Senate had previously passed and sent to the House.</span><br />
<br />
<span style="font-family: Verdana, sans-serif;">This is a historic first and, if Republicans (all of the 216 votes for the proposal were from Republicans while the 208 included 12 Republicans with the remainder being Democrats) can get both houses to pass the House version of the bill and the President to sign it this will be a major step in reigning in both programs.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">While the odds of passage of the bill are slim, the debate itself will be a start at weakening these two pieces of bad progressive legislation.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;"><b>Farm Price Supports Have a Long History</b></span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">A revolution in agricultural production accompanied the Industrial Revolution. Like the Industrial Revolution in which technology and innovation moved to make industrial workers more efficient, so too did the Agricultural Revolution make farming more efficient and less labor intensive. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">The result of these advances in agricultural output was to increase agricultural output while reducing the number of people needed in agriculture. At the time of the American Revolution when we became an independent nation, over 90% of the population was directly involved in farming. Today less than 10% of the population is directly involved in raising or growing food.</span><br />
<br />
<span style="font-family: Verdana, sans-serif;">The transition from a predominantly rural agricultural society to an urban industrial society is never easy or painless and this transition in the United States was no exception. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">Many farmers sought to preserve their traditional life and occupation by turning to politics. Beginning in the late 19th and early 20th centuries the Federal and state governments began enacting legislation aimed at helping to preserve the traditional family farm through various regulations and subsidy programs.</span><br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgwk0vysfah7ZcmOdcQfLjAXx5JX97i654qtbqvlYpfECJtzbs2bhCaxutPxmsdNmvUH1B4LV04xPkdfIH-s8jbEnpRnWlCyUxFykOkq4sIxOmu5eh6BksCmhNnqkVaNGga-c8lgQ/s1600/IMG_0910.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgwk0vysfah7ZcmOdcQfLjAXx5JX97i654qtbqvlYpfECJtzbs2bhCaxutPxmsdNmvUH1B4LV04xPkdfIH-s8jbEnpRnWlCyUxFykOkq4sIxOmu5eh6BksCmhNnqkVaNGga-c8lgQ/s400/IMG_0910.JPG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Bundled Corn Stalks on New York Farm following harvest in 1930s (photo copyright 1936, 2013 by Estate of Charles Nugent Sr.)</td></tr>
</tbody></table>
<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<span style="font-family: Verdana, sans-serif;"></span>
<span style="font-family: Verdana, sans-serif;">By the 1930s, Franklin Roosevelt's <i>New Deal </i>was very active in creating agricultural cartels, enacting tariffs and quotas on agricultural imports as well as taking more direct action toward reducing the supply of agricultural output by placing quotas on how much each farmer could produce and paying farmers to keep part of their cropland out of production.</span><br />
<br />
<span style="font-family: Verdana, sans-serif;">Eventually the government began determining what price farmers needed from the sale of various produce in order to continue as profitable operations. The government then entered the market and, using tax dollars, purchased and stored large amounts of produce before it reached the market. This, of course, reduced the supply of that produce causing the market price to increase to what was deemed necessary to keep farmers in business.</span><br />
<br />
<span style="font-family: Verdana, sans-serif;">During the Great Depression of the 1930s Franklin Roosevelt's <i>New Deal </i>Administration began to experiment with limited distribution of wheat and other commodities to the unemployed and poor. The program was gradually expanded but, while helping the poor was a political selling point, the program was focused and driven by the political need to help maintain farm incomes.</span><br />
<br />
<span style="font-family: Verdana, sans-serif;">In 1939 an experimental food stamp program was initiated in which unemployed and poor could purchase orange stamps from the government at face value and, in turn, receive blue stamps equal to half the value of orange stamps purchased. The stamps could then be used to purchase food.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">This program was popular with both retailers, who saw larger sales, and farmers. The program ended in 1943.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">Following World War II new food stamp programs were initiated and expanded over the years. As before the primary goal was to raise farm incomes.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">President Ronald Reagan, during his term in the 1980s tried to kill the food stamp program. This was not only a period of prosperity and growth with low unemployment as a result of his domestic programs, but also a period of rising farm income due to increase world demand for U.S. agricultural output.</span><br />
<br />
<span style="font-family: Verdana, sans-serif;">In addition to being a popular conservative Republican president, Reagan had a Republican majority in the Senate and strong support in the House. He had a very good chance of eliminating the Food Stamp Program and probably would have except for the fact that the opposition to eliminating food stamps was led by the conservative Republican Senate Majority Leader, Senator Robert Dole from the farm state of Kansas.</span><br />
<br />
<span style="font-family: Verdana, sans-serif;">Leading a coalition of farm state conservatives and urban liberals, Senator Dole was able to thwart President Reagan's attempt to eliminate the food stamp program. </span><br />
<br />
<span style="font-family: Verdana, sans-serif;">Dole realized that farmers alone no longer had the numbers to maintain the political clout that had given them their victories in the past. </span><br />
<br />
<span style="font-family: Verdana, sans-serif;">The family farm had long since been replaced by giant corporate agribusiness and so called hobby farms - farms owned by wealthy urban dwellers as rural retreats. Though they didn't needed and couldn't justify the subsidies and other financial support from the Federal Government, these two groups were still the beneficiaries of millions of dollars of Federal aid.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">Food stamps not only helped to keep prices of farm produce high but, more importantly, provided urban political support for the continuation of farm programs. By keeping both food stamps and the various farm support programs in one <i>Farm Bill</i> the two programs had the support both needed to survive. </span><br />
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<span style="font-family: Verdana, sans-serif;">As separate pieces of legislation the future of both farm subsidies and food stamps the odds of both of these programs continuing could be in doubt.</span><br />
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
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<b id="internal-source-marker_0.11937376065179706" style="-webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px; color: black; font-family: 'Times New Roman'; font-size: medium; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;">My spring semester Introduction to MacroEconomics course has started. Income distribution is covered in the first assigned chapter and a number of students had questions concerning the low wages of unskilled workers.</span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;"></span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;">Wages are the price of labor and, like other prices, wages are determined by supply and demand. While there is still demand for unskilled labor in the United States, supply has been shrinking and this should cause wages to increase.</span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;"></span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;">One reason why wages for unskilled labor do not increase very much is the fact that output per worker is low. Thus, when wages begin to increase due to declining supply, companies tend to either invest in and begin substituting capital for labor or <a href="http://www.webanswers.com/politics/politics/_alwpsgs4q/do-you-think-more-people-are-becoming-attuned-to-the-thought-that-buying-american-is-of-higher-764641" target="_blank">move production overseas</a> to a place where such labor is cheap and plentiful.</span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;"></span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;">However, another reason is that the role of the price mechanism is to attract resources to areas of scarcity. So whenever the supply of something decreases its price increases and this increase in price (and the potential profit from meeting this shortfall) results in efforts to increase the supply.</span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;"></span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;">In the case of unskilled labor an increase in wages results in an immediate increase in supply. </span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;"></span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;">Unskilled workers, due to lack of training and education, have nothing to offer employers beyond time and muscle. The fact is that any able bodied individual can provide muscle power. As to time, if the wage rate is high enough, the opportunity cost of such jobs is generally greater than using their time working in their skilled job.</span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;"></span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;">Because the supply of unskilled labor is so elastic, noticeable increases in unskilled worker wages results in the supply increasing and driving the wages back down.</span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;"></span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;">Skilled jobs require training which takes an investment of time and money. This tends to set skilled workers apart and limits the supply to only those with the necessary skills. </span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;"></span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: initial; vertical-align: baseline; white-space: pre-wrap;">So, while an unskilled worker can never compete with a skilled worker for a skilled job without first making the necessary investment of time and money to acquire the skills, a skilled worker can easily compete for unskilled positions. Skilled workers generally don’t compete for unskilled jobs, but if the wage is high enough, they can quickly move into that market, thereby increasing the supply of available workers.</span></b></div>
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Barter is an ancient form of exchange in which a person traded something he owned for something that someone else had and he wanted or needed.<br />
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A major problem with a barter system is the fact that one has to spend time searching for another person who both has what one wants and is willing to trade it for what you have to offer. <br />
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The introduction of money removed this inefficiency as money is a universal good that everyone wants and thus be traded for anything anyone is willing to sell.<br />
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However, while the use of barter has for the most part been replaced by the use of money it still comes in handy on occasion.<br />
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In a previous article, <a href="http://nugent-economics.blogspot.com/2008/07/bartering-pepsi-cola-for-vodka-and.html" target="_blank"><i>Bartering Pepsi Cola for Vodka and Tanker Ships</i></a>, I described how Pepsi Corporation got around the problem of repatriating profits from the production and sale of Pepsi Cola in the old Soviet Union by basically accepting vodka and tanker ships in exchange the cash it earned in the Soviet Union.<br />
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Currency controls and lack of foreign exchange in some countries make it difficult for foreign companies to do business in these nations. In these cases, barter may be a solution. In essence the company selling its product in the country accepts goods produced in the country in lieu of cash. It then brings the bartered goods to its home nation where it sells the bartered goods for the cash it would have earned in dealing with the nation which either forbid the export of currency or lacked hard currency reserves to make the payment.<br />
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Small businesses, especially those starting out often lack the funds to obtain the supplies they need to produce their product. Barter can be a solution in these cases as one small business can trade the goods or services it has to offer for goods or services it needs from other small businesses. However, searching for such matches is inefficient.<br />
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Enter barter exchanges. These are organizations that enable small businesses to trade their services without having to spend time searching for those both offering the good or service the business needs and also wanting what the seeking business has to offer.<br />
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With a barter exchange, a business simply provides its good or service to a business seeking that good or service and receives a credit to its account with the exchange for the value of what it provided. The selling business can then use the credit to purchase a good or service it needs from another participating member. <br />
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For example a motel (most of which, despite bearing the name of a national or global chain are actually franchises and thus operate as a small local business) may need some computer work done. Rather than searching for a small business providing tech services, the motel owners simple look in the local barter directory for a tech company and call to have the work done. <br />
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The motel pays for the work by transferring barter credits (either by writing a check against its barter account or transferring them electronically) from its account with the exchange to the tech company's account. The credits are equal to the dollar value of the services it received. <br />
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What the tech company receives is not motel services but the dollar value of these services. It can then use those credits to purchase some other good or service it needs such as tools or replacement parts for computers or services such as marketing, printing, meals at a restaurant, etc. However, somewhere along the line some other member, who has never provided services to the motel may need a motel for a meeting or workshop will use its credits from other trades for the room at the motel.<br />
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Generally the barter exchange will charge small membership and exchange fees which have to be paid in cash but these are small compared to the value of services being exchanged. Also, the dollar value (which is what is credited to a member's account when trades occur) is reported to the IRS for income tax purposes.<br />
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The best way to become involved with barter is to join an exchange or use a service like Craigslist. Links for some large exchanges are listed below.<br />
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<a href="https://www.imsbarter.com/" target="_blank">IMS Barter Exchange Network</a><br />
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<a href="http://www.barterexchangenetwork.com/" target="_blank">Barter Exchange Network</a><br />
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<a href="http://superbiznow.com/" target="_blank">Superbiz</a><br />
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As I described in a previous, <a href="http://nugent-economics.blogspot.com/2012/12/capital-stock-and-retiree-income.html" target="_blank">December 11, 2012 post</a>, a stock of productive capital is needed to generate the output and associated income needed to support people in retirement.<br />
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In other words, current workers need sufficient capital to enable them to produce enough goods and services to not only support themselves and their families but also current retirees.<br />
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The economy is like a pie in that the larger the pie, the more people it will feed and what retirees need is an economic pie that is large enough to feed them along with everyone else even though they are no longer working and producing.<br />
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The U.S. Social Security System has always been a risky bet at best, being basically a ponzi type system in which current investors (eg., workers) payments are used as payouts to existing retirees rather than being invested for their own retirement.<br />
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<a href="http://www.amazon.com/gp/product/1118205731/ref=as_li_ss_il?ie=UTF8&tag=hubpagescom03-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=1118205731"><img border="0" src="http://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL110_&ASIN=1118205731&MarketPlace=US&ID=AsinImage&WS=1&tag=hubpagescom03-20&ServiceVersion=20070822" /></a><img alt="" border="0" height="1" src="http://www.assoc-amazon.com/e/ir?t=hubpagescom03-20&l=as2&o=1&a=1118205731" style="border: none !important; margin: 0px !important;" width="1" />
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Like any ponzi type scheme, the system worked initially as the number of working people was more than enough to support existing retirees.<br />
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By having large families, the post war generation of workers ensured that the system would take care of them despite the fact that their life expectancy ended being considerably longer than that of the first generation of retirees under the system.<br />
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However, the post World War II Boomer Generation (of which I am a member) is not going to be so lucky.<br />
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First of all, this generation tended to postpone marriage and having children until later in life with the result that the generation immediately behind them is small. As the boomers approached their forties, they did start having children and, on net, have a generation as large as their own behind them.<br />
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However, most of this generation was born late and is just now entering the workforce at the same time their parents are beginning to retire.<br />
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Second, the prolonged 2008 recession has resulted in double digit unemployment for the new generation just as they begin their careers. Not only is this high unemployment among youth keeping any of them from working and paying Social Security taxes now, the late start in the labor force will impact their future wages which will further reduce money available for benefits.<br />
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<a href="http://www.amazon.com/gp/product/1475089457/ref=as_li_ss_il?ie=UTF8&tag=hubpagescom03-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=1475089457"><img border="0" src="http://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL110_&ASIN=1475089457&MarketPlace=US&ID=AsinImage&WS=1&tag=hubpagescom03-20&ServiceVersion=20070822" /></a><img alt="" border="0" height="1" src="http://www.assoc-amazon.com/e/ir?t=hubpagescom03-20&l=as2&o=1&a=1475089457" style="border: none !important; margin: 0px !important;" width="1" />
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Finally, the recession has also resulted in many members of the boomer generation losing their jobs and having to take Social Security early putting further pressure on the system.<br />
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Many people may be surprised to learn that Social Security is not a pension plan in the sense that benefits are paid out of earnings on the investments made with their tax payments. Instead, the program has always been a simple transfer of income from current workers to retirees.<br />
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For the Social Security System to work as planned for the boomer generation, the U.S. will need a quick end to the current recession as well as strong economic growth. <br />
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Given what is happening in Greece and other places where Social Security type systems are breaking down, it is probably a good strategy for current recent retirees and those near retirement to have a back-up plan for possible cuts in the system.<br />
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I doubt that the system will disappear completely, especially for older retirees. However, at a minimum the cost of living adjustment (which was not a part of the original law but an amendment added during the inflation of the late 1960s and early 70s) will be adjusted or eliminated completely.<br />
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There is also talk about <i>means testing</i> for benefits which means that benefits would be reduced or eliminated for those with other sources of income (pensions, IRAs, 401(k)s, part-time jobs or other household income.<br />
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As mentioned above, Social Security is not a pension plan but basically a welfare program designed to transfer income from those with wage incomes to those retired and not receiving a wage income.<br />
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<div style="text-align: center;">
<a href="http://www.amazon.com/gp/product/0815718373/ref=as_li_ss_il?ie=UTF8&tag=hubpagescom03-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=0815718373"><img border="0" src="http://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL110_&ASIN=0815718373&MarketPlace=US&ID=AsinImage&WS=1&tag=hubpagescom03-20&ServiceVersion=20070822" /></a><img alt="" border="0" height="1" src="http://www.assoc-amazon.com/e/ir?t=hubpagescom03-20&l=as2&o=1&a=0815718373" style="border: none !important; margin: 0px !important;" width="1" />
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While I doubt that the Social Security program will be eliminated completely (as retirees plus those who have been paying Social Security taxes for a number of years probably outnumber, in terms of votes, those who are just entering the labor force and have no real financial stake in the system, as either long time tax payers or recipients) but I will not be surprised if cuts and restrictions are enacted in the foreseeable future.<br />
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I elaborated these concerns about Social Security cuts and arguments supporting my concern (including links to Supreme Court cases stating that Social Security is not a pension system but a welfare plan which Congress can change at any time) in a HubPage article entitled <a href="http://chuck.hubpages.com/_shamrocks/hub/The-Social-Security-Systems-Achilles-Heel" target="_blank"><i>The Social Security System's Achilles Heel</i></a>. <br />
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In a third and final post I will explain potential problems with employer administered defined benefit pension plans.<br />
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As usual, listening to the Washington Beltway crowd and their friends in the Mainstream Media one can easily conclude that the American economy is headed for a major crash as the economy careens over the January 1, 2013 <i>Fiscal Cliff</i>.<br />
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Despite Chicken Little scaremongering by the chattering classes, most people seem to be taking the cliff fairly calmly. The stock market has declined a bit as it usually does when faced with uncertainty and potentially bad news but the nation has remained calm.<br />
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The so called Fiscal Cliff is basically a fiscal tightening or <i>anti-stimulus</i> that involves cuts in Federal spending and increases in taxes. This is the opposite of a Keynesian obsession with throwing money at the economy.<br />
<div style="text-align: center;">
<a href="http://www.amazon.com/gp/product/B00A4EW3WU/ref=as_li_ss_il?ie=UTF8&tag=hubpagescom03-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=B00A4EW3WU"><img border="0" src="http://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL110_&ASIN=B00A4EW3WU&MarketPlace=US&ID=AsinImage&WS=1&tag=hubpagescom03-20&ServiceVersion=20070822" /></a><img alt="" border="0" height="1" src="http://www.assoc-amazon.com/e/ir?t=hubpagescom03-20&l=as2&o=1&a=B00A4EW3WU" style="border: none !important; margin: 0px !important;" width="1" /></div>
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Following the end of World War II we hit a major fiscal cliff in 1946 and beginning of 1947. Then as now, Keynes and his followers were certain that going over the fiscal cliff would result in an economic crash and renewed economic depression. <br />
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According to popular myth, World War II brought us out of the Depression. Granted, everyone not drafted into the military had a job and factories, mines and farms were at full production throughout the war. Government spending on materials needed to fight the war amounted to a huge economic stimulus which had the economy operating at maximum capacity.<br />
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While the statistics looked good, consumer production was minimal leaving workers with little on which to spend their earnings. Everyone had a job but only limited quantities of bare necessities were available for purchase by consumers.<br />
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It was in this immediate post war period that President Truman in a speech uttered words to the effect that <i>war is hell but peace could be worse</i>, alluding to the Keynesian belief that, without the continued stimulus of massive government spending, the economy would quickly collapse.<br />
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The dropping of the atomic bombs on Hiroshima (August 6, 1945) and Nagasaki (August 9, 1945) coupled with the Soviet Union joining the war against Japan on August 8, 1945 quickly brought the war to an end on August 15, 1945.<br />
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Not only did the war end much sooner than expected, but, under pressure from the people who were sick the austerity that marked the Depression and World War II, the U.S. government immediately began demobilizing the troops (which represented about 18% of the labor force), canceling contracts for military material and lifting wartime regulations and restrictions on consumer production. <br />
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<a href="http://www.amazon.com/gp/product/B00AMS1GN0/ref=as_li_ss_il?ie=UTF8&tag=hubpagescom03-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=B00AMS1GN0"><img border="0" src="http://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL110_&ASIN=B00AMS1GN0&MarketPlace=US&ID=AsinImage&WS=1&tag=hubpagescom03-20&ServiceVersion=20070822" /></a><img alt="" border="0" height="1" src="http://www.assoc-amazon.com/e/ir?t=hubpagescom03-20&l=as2&o=1&a=B00AMS1GN0" style="border: none !important; margin: 0px !important;" width="1" /><br /></div>
In the1946 mid-term Congressional elections the Republicans retook the House of Representatives defeating 54 Democrats and 1 left wing Progressive Party member to obtain a majority of 246 seats against the Democrat's 188. In the Senate the Republicans picked up eleven seats from the Democrats plus defeating the left leaning Progressive Republican Robert LaFollette Jr.in the primary and keeping the seat for a 51 to 45 Republican majority in the Senate.<br />
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While Democrats and believers in Keynesian economic theories fanned fears that there would be a major Depression in 1946, it never materialized as the private sector, freed of many of the New Deal regulations and controls quickly switched from war production to civilian production. <br />
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Federal spending fell from $84 Billion in 1945 to less than $30 Billion in 1946. The sharp drop in spending enabled the Federal Government to both quickly begin paying down the war debt. The deep cuts in spending also resulted in a small Federal budget surplus in 1947.<br />
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Both the Depression of the 1930s and the current massive economic downturn under President Obama have resulted from the ill conceived stimulus spending and massive increase in unnecessary regulations. <br />
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Going of the Fiscal Cliff may not be that bad and could result in the economy quickly turning around and recovering early in 2013.<br />
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Click the links below for more on the feared Depression of 1946:<br />
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<i><a href="http://www.cato.org/policy-report/mayjune-2010/stimulus-spending-cuts-lessons-1946" target="_blank">Stimulus by Spending Cuts: Lessons from 1946</a> - Cato Institute Policy Report</i><br />
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<i><a href="http://online.barrons.com/article/SB50001424052748704723404578199651206018818.html?mod=BOL_hpp_mag#articleTabs_article%3D1" target="_blank">Cheer Up! The Cliff Doesn't Look So Grim </a>- Barrons December 31, 2012 issue </i> <br />
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The Christmas Season is upon us and this is a traditional season of giving.<br />
<br />
It is not just the gifts for family and friends, but also the giving of goods and money to charitable causes. <br />
<br />
Giving and sharing with those less fortunate makes the giver feel good. Giving is also a part of most cultures and is reinforced by the dictates of most religions which require believers to give as a part of their religious duty.<br />
<br />
In the United States people who give money or goods to charities have an additional, financial, incentive to give and that comes in the form of lower income taxes. Both the Federal government and most states with an income tax allow people to deduct the value of charitable contributions from their gross income for tax purposes. <br />
<br />
Now with concerns about the fiscal cliff and the Federal government's need for more revenue to pay for its out of control spending the search is on for ways to increase revenue. <br />
<br />
While logically the solution should be to bring spending into alignment with revenues, politicians and bureaucrats tend to take spending as a given and look to tax increases to make up the difference. <br />
<br />
Currently, two approaches are being explored for increasing tax revenues. One approach is to simply raise tax rates despite the fact that, historically, that tends to result in <a href="http://chuck.hubpages.com/_shamrocks/hub/How_Tax_Cuts_Work" target="_blank">less revenue</a>. A second approach calls for keeping current rates but restricting or eliminating deductions.<br />
<br />
Deductions allow people to subtract certain types of expenses from their gross income thereby reducing their income for tax purposes. Eliminating or restricting deductions would certainly result in more revenue for the government as people's ability to reduce their taxable income would be curtailed.<br />
<br />
Of course, organizations and businesses, whose activities or products are affected by people's ability to reduce their tax bills by contributing to or buying from these organizations, are opposed to this solution - at least as far as their activities are concerned.<br />
<br />
However, while it is clear that deductions for home mortgage interest and local real estate taxes provide a powerful incentive for people to buy rather than rent their living quarters, there is some question as to whether allowing people to deduct charitable contributions is an incentive for people to give to charity.<br />
<br />
Proponents of eliminating the deduction cite statistics showing that charitable giving in the U.S. has remained a relatively constant 2% of Gross Domestic Product despite numerous changes in tax laws affecting such giving. <br />
<br />
Charitable giving also has a long history going back to ancient times - long before there was an income tax and the need for income tax deductions. Long before governments became involved in building social safety nets, churches were involved in soliciting money from members to help those less fortunate. Hospitals, orphanages, poor houses, etc. all began as services provided and paid for by churches.<br />
<br />
In the Western world the idea of people having a duty to look out for those less fortunate has long been ingrained in the culture. Sharing one's good fortune with those less fortunate is the thing to do for many people.<br />
<br />
As one who not only contributes to charity but also keeps records of contributions for tax purposes and benefits from the deduction, I can honestly say that I would miss the deduction but, after reviewing my contributions haven't found any that I would stop donating to in the absence of the deduction. Friends I have spoken with have said the same thing about continuing their contributions in the absence of a tax deduction.<br />
<br />
That being said, eliminating the tax deduction will reduce contributions to many non-profits. Part of this will result from people taking a closer look at an organization, its mission and how efficient it is with their money. <br />
<br />
In the absence of a tax deduction, those donating to charities will be apt to take a closer look and how the charity uses their money. Those charities in which administrative and/or fundraising consumes most of each dollar received will find contributions being redirected to other charities where the bulk of each dollar goes to helping those in need.<br />
<br />
<br />
<br />
<br /></div>
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<div dir="ltr" style="text-align: left;" trbidi="on">
Conservatives and reputable economists for years have argued and used income tax data to show that high marginal income tax rates result in lower tax revenue as people adjust their work to reduce income and the tax burden or avoid the tax by leaving the jurisdiction.<br />
<br />
So it was no surprise when French actor Gérard Depardieu, best known as the star of the world-wide 1990 hit movie <i>Green Card</i>, quietly relocated his residence to the Belgium town of Néchin, located a stone's throw from the French border, earlier this month.<br />
<br />
It was obvious that Depardieu's move, like that of many other wealthy French people in recent weeks, was in reaction to Socialist French President François Hollande's plans to levy a 75% tax on incomes above 1 million euros.<br />
<br />
Most of the others left France quietly as Depardieu tried to do. However, unlike some of the others who ignored the insults from socialist government officials and France's far left press, Gérard Depardieu reacted publicly and with anger this past weekend following last Wednesday's (Dec 12) harsh and insulting comments about him by France's Socialist Prime Minister, Jean-Marc Ayrault.<br />
<br />
Speaking on the television channel France 2, the Prime Minister referred to Depardieu's decision to leave France as being "rather pathetic." Adding “He’s a great star, everyone loves him as an artist,... [but] to pay a tax is an
act of solidarity, a patriotic act.”<br />
<br />
<br />
The actor responded the Prime Minister's comments with a three page, open letter that was published in the Saturday (December 15th) edition of the French weekly<a href="http://www.lejdd.fr/Politique/Actualite/Gerard-Depardieu-Je-rends-mon-passeport-581254" target="_blank"> </a><i><a href="http://www.lejdd.fr/Politique/Actualite/Gerard-Depardieu-Je-rends-mon-passeport-581254" target="_blank">Journal du Dimarche</a>.</i> <br />
<br />
In his letter, which I translated using Google Translate, Depardieu starts by writing:<span style="background-color: white;"></span><br />
<span style="background-color: white;"><br /></span>
<b id="internal-source-marker_0.34761497005820274" style="font-family: 'Times New Roman'; font-size: medium; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"></b><br />
<div dir="ltr" style="margin-bottom: 0pt; margin-top: 0pt; text-align: justify;">
<i><b id="internal-source-marker_0.34761497005820274" style="font-family: 'Times New Roman'; font-size: medium; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span 13px="13px" arial="arial" baseline="baseline" font-size:="font-size:" font-style:="font-style:" font-variant:="font-variant:" font-weight:="font-weight:" italic="italic" normal="normal" pre-wrap="pre-wrap" vertical-align:="vertical-align:" white-space:="white-space:"><i>Miserable, you say "pathetic"? As it is pathetic.</i></span></b></i></div>
<div dir="ltr" style="margin-bottom: 0pt; margin-top: 0pt; text-align: justify;">
<br /></div>
<div dir="ltr" style="margin-bottom: 0pt; margin-top: 0pt; text-align: justify;">
<b id="internal-source-marker_0.34761497005820274" style="font-family: 'Times New Roman'; font-size: medium; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="background-color: white; font-family: Arial; font-size: 13px; font-style: italic; font-variant: normal; font-weight: normal; vertical-align: baseline; white-space: pre-wrap;">I was born in 1948<b>. </b> I started working at the age of 14 years as a printer, then as a warehouseman <b>then</b> as dramatic artist. I always paid my taxes regardless of the rate under all governments.</span></b></div>
<br />
<br />
He goes on to state that he has always paid his taxes, including his 2012 taxes and further notes that over his 45 year career he as paid over <span style="font-size: x-small;"><span style="color: black; display: inline ! important; float: none; font-family: Arial,Helvetica,sans-serif; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 23.3833px; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">€</span></span>145 million in taxes to the French government. <br />
<br class="Apple-interchange-newline" />
<span style="font-size: small;">In a telling line he states: <span style="background-color: white; font-family: Arial; font-style: italic; font-variant: normal; font-weight: normal; vertical-align: baseline; white-space: pre-wrap;">I am leaving because you consider that success, creativity, talent, in fact, the difference must be punished. </span><span style="background-color: white; font-family: Arial; font-variant: normal; font-weight: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></span><br />
<br />
<span style="font-size: small;"><span style="font-family: Arial; font-variant: normal; font-weight: normal; vertical-align: baseline;"> And toward the end of the letter he adds, </span></span><br />
<br />
<span style="font-size: small;"><b id="internal-source-marker_0.34761497005820274" style="color: black; font-family: 'Times New Roman'; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span arial="arial" baseline="baseline" font-family:="font-family:" font-style:="font-style:" font-variant:="font-variant:" font-weight:="font-weight:" italic="italic" normal="normal" vertical-align:="vertical-align:"><i>I am a free being, sir,...</i></span></b></span></div>
<br />
<b id="internal-source-marker_0.34761497005820274" style="-webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px; color: black; font-family: 'Times New Roman'; font-size: medium; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="color: #222222; font-family: Arial; font-size: 13px; font-variant: normal; font-weight: normal; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: small;">These last two comments<span style="font-size: small;"><b> </b></span></span></span></b><span style="-webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px; font-family: 'Times New Roman'; font-size: small; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="color: #222222; font-family: Arial; font-size: 13px; font-variant: normal; font-weight: normal; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: small;"><span style="font-size: small;"><span style="font-size: small;">reveal wh<span style="font-size: small;">at the true objectives of socialist leaders like French President </span></span></span></span></span></span>Hollande and U.S. President Obama with their tax the rich policies. The goal here is to discourage individual initiative and freedom and, instead replace it with dependency on government.<br />
<br />
While not good for freedom loving individuals, this is the perfect prescription for big government politicians who want to ensure the continued growth of big government.</div>
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<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">Social Security and pensions are a growing concern for
many people these days.<span style="mso-spacerun: yes;"> </span>Retired people
and those nearing retirement are especially concerned about these issues as
they affect such people directly.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">Most people look upon this crisis as a financial or
money issue and it is true that a growing lack of money available in retirement
funds is the main indicator that a problem is at hand.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">However, money itself is merely the means by which we
measure the ability of the government or private employer to pay the promised
retirement benefits.</span></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">No one can survive without access to the food,
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</span>And, most want more than the basic necessities of life.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">There are only two ways to obtain necessities and
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the labor of others.<span style="mso-spacerun: yes;"> </span>However, relaying
on the labor of others assumes that the others in question are both able to
produce more than they need and are willing to share the surplus they produce.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">The ability of working people to support themselves
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<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">These tools make workers more productive and better
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own needs and desires as well as the needs and desires of those not working.</span></div>
<div class="MsoNormal">
<br /></div>
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<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">Investment requires that some production be diverted
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<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">Savings requires sacrifice.<span style="mso-spacerun: yes;"> </span>Sacrifice in the form of choosing to forgo
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for a future emergency or investing it in tools that will enable them to
produce more in the future.</span></div>
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<br /></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">In times past a farmer could increase his wealth by a
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and his family tightening their belts and saving and extra portion of the
current year’s crop as seed to plant in the new fields next year.</span></div>
<div class="MsoNormal">
<br /></div>
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animals to enable him to produce more in the same amount of time.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">Modern urban workers do the same by setting aside
money out of current income for emergencies and as savings for retirement.<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">This savings takes the form of investments in income
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etc.<span style="mso-spacerun: yes;"> </span>Unless the worker owns a business
in which he is investing in and growing, the savings is usually assigned to
organizations or professionals who do the actual investing on behalf of the
worker.</span></div>
<div class="MsoNormal">
<br /></div>
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their savings with professional investors.<span style="mso-spacerun: yes;">
</span>The result is the same, namely resources going into the production of
tools to enable workers as a whole to produce more in the same amount of time.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">Continuing investment is needed for two reasons.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">First, a certain level of current investment is
continually needed to replace equipment that wears out and is no longer
operational.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">Second as the population increases or, as is happening
in many nations, ages and the aging workers retire, existing workers have to produce
more simply to provide for themselves and the young, old and infirm who cannot
work and produce. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-GB" style="font-family: "Verdana","sans-serif"; mso-ansi-language: EN-GB;">While older retired workers are still consuming but no
longer working and producing the legacy of productive capital produced from
their savings leaves the new generation of workers with the ability to produce
and support both themselves and the retirees.</span></div>
<div class="MsoNormal">
<br /></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="font-family: "Verdana","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-GB;">Next:<span style="mso-spacerun: yes;"> </span>Why Social Security and Pensions are in
Trouble</span></b></div>
</div>
<div class="blogger-post-footer"><script type="text/javascript"><!--
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</script></div>Chuckhttp://www.blogger.com/profile/08147805668767599967noreply@blogger.com0tag:blogger.com,1999:blog-7737123.post-20247093902096583872012-12-03T05:00:00.000-07:002012-12-03T05:00:09.065-07:00Allowing Bush Tax Cuts to Expire Now Makes no Eonomic Sense<div dir="ltr" style="text-align: left;" trbidi="on">
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<br />
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;"> As we approach the December 31st Fiscal Cliff one of the major points of debate is taxes. Specifically increasing taxes on the rich.</span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;"><br /></span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;">President Obama and other left-leaning Democrats are targeting three types of income the taxes on which were reduced during the administration of former President Bush and which are slated to automatically increase at the start of 2013.</span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;"><br /></span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;">The first is the tax on dividend and capital gains income. Capital gains refer to the difference between what a person paid for and asset (with stock being the most common asset affected) and what that person received when the asset was sold. If the sales price is higher than the purchase price the difference or <i>profit</i> is referred to as a capital gain.</span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;"><br /></span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;">Dividends,of course, refer to the periodic dividends or portion of a company's profit that corporations pay to their stockholders. Profits are already taxed once in the form of the tax that the Federal Government levies on a corporation's profit (i.e., revenue minus expenses). Any dividends paid come out of the corporation's after tax profits. Stockholders then have to turn around and pay additional tax on the dividends they receive.</span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;"><br /></span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;">The Bush Tax Cuts eliminated the tax on capital gains and dividends for those in the two lowest income tax brackets which are currently the 10% and 15% brackets and set the maximum tax on these for people in the brackets above these two bottom brackets at 15%.</span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;"><br /></span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;">These two taxes will go up unless the current rates are extended by Congress</span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;"><br /></span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;">The second area of income affected will be income from sources other than capital gains and dividends. This is basically wages, salaries, bonuses and other income earned as compensation for work performed. </span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;"><br /></span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;">Here the President is claiming to want to keep current rates for those with this type of income below $250,000 and raise the rates on those earning more than $250,000.</span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;"><br /></span></span></div>
<div style="text-align: left;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: 11pt;">Since our income tax system is progressive this means that the government will accomplish this increase by increasing the tax rate on upper brackets of income as well as creating some new brackets at the top end of the bracket scale.</span></span></div>
<br />
<br />
The problem with increasing the tax rates on the top income brackets is that many wealthy people have the ability to reduce their income by working less.<br />
<br />
It makes sense to work less when the tax rate on the higher income resulting from working longer and harder is such that most of this extra income is taxed away. <br />
<br />
When high income earners do this the government not only loses the projected tax revenue that the high top rate would be applied to but also stand to lose taxes from other workers in lower brackets.<br />
<br />
Take a small business owner planning to expand by adding an additional production plant, restaurant, store etc. The expanded business will result in more income for the owner. However, the expansion will also require the small business owner to hire more people. <br />
<br />
With almost 8% of the workforce currently out of work and looking for work and an additional 6% to 8% or more of the workforce wanting to work but has given up looking for work (thereby no longer considered by the Department of Labor as being in the workforce and unemployed) the government could collect considerably more taxes if large numbers of these unemployed people were earning wages and paying taxes on those wages.<br />
<br />
The only things that President Obama will accomplish by raising taxes in the current economic climate will be to continue the present recession and continue running large deficits.<br />
<br />
<br />
<br />
</div>
<div class="blogger-post-footer"><script type="text/javascript"><!--
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</script></div>Chuckhttp://www.blogger.com/profile/08147805668767599967noreply@blogger.com0tag:blogger.com,1999:blog-7737123.post-77941440344773353342012-11-26T06:56:00.000-07:002012-11-26T06:56:19.592-07:00Could Retailers Begin Declining to Participate in the Black Friday Frenzy?<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;">Today is Cyber Monday when workers who have
been off for the four day Thanksgiving Holiday return to the office and
continue their post-Thanksgiving shopping online using their office computers.</span></div>
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<br /></div>
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<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;">This is assuming they have any money left to
continue shopping following the Black Friday shopping frenzy that retailers
began on Thanksgiving afternoon and have continued through the weekend.</span></div>
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<br /></div>
<div class="MsoNormal">
<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;">Is it possible that Black Friday could be
losing it appeal to retailers?</span></div>
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<br /></div>
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<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;">Black Friday, of course, is the day following
Thanksgiving that, for stores and shoppers, has assumed holiday status itself.
For many shoppers Black Friday almost eclipses the real holiday,
Christmas, for which it is associated. And, for sellers</span>, Black
Friday sales can mean the difference between a profitable Christmas Season or a
not so profitable Christmas Season.</div>
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<br /></div>
<div class="MsoNormal">
<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;">Normally </span><i><span style="text-decoration: initial; white-space: pre-wrap;">black</span></i><span style="text-decoration: initial; white-space: pre-wrap;"> is associated with things that are bad or even evil. Blackmail, black markets, black ops, black arts, etc. all conjure up images of crime or other anti-social behavior.</span></div>
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<br /></div>
<div class="MsoNormal">
<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;">However, for one profession, accounting,
black is good given that accountants have traditionally recorded profits with
common black ink while making losses stand out by recording them using red ink.
</span></div>
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<br /></div>
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<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;">As Christmas and the tradition of extensive
gift giving began becoming more popular beginning in the late nineteenth
century, retailers began to see profits rise during the Christmas Season as
shoppers began opening their wallets wider and spending more lavishly on
gifts for family and friends.</span></div>
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<br /></div>
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<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;">Occurring about a month before Christmas,
Thanksgiving began to be looked upon as the day before the start of the
Christmas shopping season. This image was helped by the fact that,
because Thanksgiving always fell on a Thursday, it didn’t make sense for most factories
to re-open for just one day, Friday, and then shut down again for the weekend. </span></div>
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<br /></div>
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<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;">Thanksgiving thus became the start of a four
day holiday weekend and the day after Thanksgiving, Friday, became the start of
the Christmas shopping season.</span></div>
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<span style="color: black; font-size: 13.5pt; line-height: 115%;"><br />
</span><span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;"><span style="text-decoration: initial; white-space: pre-wrap;">Thanksgiving, of course, brought families together for a day of feasting and fun and, being
close to Christmas, got their minds on that big holiday get together that was only a few weeks away. This was just the frame of mind people needed to get started right away on Friday, the day after Thanksgiving, with their Christmas shopping. </span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;"><span style="text-decoration: initial; white-space: pre-wrap;">Retailers, of course, saw this and began fanning the flames of the Christmas shopping spirit by offering special deals to lure shoppers out – after all, the sooner people start Christmas shopping the more time retailers have to lure them in.</span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;">The competition associated with the free
market meant that all stores soon entered the fray with sales and promotions
and, as time went on the sales and promotions became increasingly intense and
widespread. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;">All of this hype, of course, succeeded in firing up the
competitive spirits of shoppers causing them to come out en mass and eager to
hunt for deals.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: black; font-family: "Arial","sans-serif"; font-size: 11.5pt; line-height: 115%;">The Friday after Thanksgiving soon became
such a big shopping day that, for many retailers, the sales volume was such
that it tipped the scales from breaking even or even losing money for the year
to profit – i.e., the accountants began writing the bottom line numbers with
black rather than red, ink.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: black; font-size: 13.5pt; line-height: 115%;">However,
Black Friday may be approaching the point where the shopping frenzy associated
with it reaches a tipping point where store hours, shoppers and sales all begin
to decline.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: black; font-size: 13.5pt; line-height: 115%;">Shoppers
in increasing numbers may be tireing of this and begin declining to join the Black
Friday frenzy and, instead, enjoy their Thanksgiving while choosing to <span style="mso-spacerun: yes;"> </span>spend the next day relaxing with their
families.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: black; font-size: 13.5pt; line-height: 115%;">More
important, many businesses will begin finding that the ever increasing price
reductions needed to lure consumers on Black Friday combined with the
increasing costs associated with opening earlier and staying open with extra
sales personnel result in losses rather than profits.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: black; font-size: 13.5pt; line-height: 115%;">Results
from last year indicate that, rather than getting the Christmas shopping season
off to a strong and sustained start that added to sales and revenues, Black
Friday tended to be a buying surge followed by a significant drop off in
selling the following weeks.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: black; font-size: 13.5pt; line-height: 115%;">Overall
sales were as expected and in line with previous years but rather than being
spread out over the weeks between Thanksgiving and Christmas, were concentrated
on Black Friday.<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: black; font-size: 13.5pt; line-height: 115%;">The
problem with this for retailers is that while total sales are good in terms of
merchandise sold, revenue is down due to price cutting and costs up due to
extra costs of added staff and hours on Black Friday.<span style="mso-spacerun: yes;"> </span></span></div>
</div>
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