Economic Impact of Possibility of Francois Hollande Becoming Next President of France

With French President Nicholas Sarkozy coming in a close second to socialist candidate Francois Hollande in France’s first round of Presidential elections questions are being raised as to what the effect will be on financial markets.

On Monday April 23rd the CAC 40 index which contains the stocks of the forty largest French corporations was down close to 2%. The Euro was also down a bit as were French bonds.

However, many analysts attributed at least part of these declines to other bad economic news from other parts of Europe as that continent continue to struggle with ongoing economic problems arising from the decline of the failing welfare state economies, a decline which has been accelerating over the past year.

A couple of other factors to consider include the fact that Hollande will not be the first socialist President in France’s Fifth Republic coupled with the fact that Sarkozy, like other West European leaders claiming to be on the political right, has done little during the past five years to put France on a stronger free market footing.

From as far back as King Louis XIV, French leaders of all political stripes have favored a highly centralized government that has exercised strong control over the economy. So a win by Francois Hollande is liable to result in policies not much different than the present welfare state policies of Sarkozy.

While serious free market reforms would be great for the French economy and the stock market, neither candidate appears to be willing or able to offer this.

As for the third place winner, Marine Le Pen and her Front National party, who, despite her capturing nearly 20% of the vote, offers no promise economically. While labeled right wing, the party and its leader, in the words of Tim Stanley in a piece in the April 24, 2012 edition of The Telegraph, is neither right nor left but simply a hate group.

And, despite her capturing 20% of the vote overall, the bulk of her support came from just one Department, Gard, which was the only Department she placed first in. This is hardly a sign of widespread support for Le Pen and her party.

Overall, regardless who wins the final round, France will continue to stagnate economically until the nation’s politicians are ready to institute some serious free market reforms and replace the failing welfare state.

Fifteenth Anniversary of Opening of First McDonald's in St. Petersburg, Russia

An article from Russia in today’s St. Petersburg Times reminds us that Russia’s second largest city, St. Petersburg, formerly known as Leningrad during the Soviet Era, got its first McDonald’s restaurant fifteen years ago this month.

While common in the United States and much of the rest of the world, the opening of a McDonald’s was a big thing in Russia.

In the eyes of their former Soviet masters, McDonald’s was a sign American decadence and excessive consumerism.

However, following the fall of communism in Russia, the newly freed people flocked to places like McDonald’s to spend their rubles.

The first McDonald’s in Russia opened 20 years ago in Russia and served 35,000 customers THE DAY THEY FIRST OPENED THEIR DOORS! Talk about pent up demand, this type of opening is a capitalist’s dream.

2002 Photo of McDonald's Restaurant in St. Petersburg, Russia
Photo Copyright 2002 by Charles Nugent
When I visited Russia in 2002, six years after the first McDonald’s opened in St. Petersburg, not only did I treat my then fiancee to dinner at one of the local McDonald’s but saw numerous entrepreneurs on the streets selling red tee shirts with McDonald’s famous golden arches superimposed over a bust of Vladimir Lenin and under the words McLenin’s.

McLenin's tee shirt
Flicker Photo by Sjors Provoost
Creative Commons Use Rights
Vladimir Lenin once boasted that the supposed greed of capitalists was such that he would be able to sell capitalists the rope to hang them with.

Instead, following the inevitable fall of communism budding capitalists in Russia mad money selling tee shirts mocking Lenin and applauding the new freedom to eat at the local franchise of the American McDonald's chain.

Labor Day 2011

Today is Labor Day in the United States. While for the many who remain unemployed in this, the longest recession since the Great Depression of the 1930s, it is another year without work, there is hope that next year's election will provide new leadership that will return the nation around by replacing the present Administration's statist policies with economic policies that promote economic growth and job creation.



Despite the hardships being suffered by unemployed workers, this is the day that not only has come to mark the end of the traditional summer vacation season, but is also a day to honor the American worker. This is what those who in the late nineteenth century lobbied for in both the United States and Canada.

Economic growth has resulted in work weeks being reduced to below what these early crusaders envisioned and wages for average workers rising beyond anything the nineteenth century advocates could have imagined.

While this increase in leisure time and disposable income has tended to eclipse the original focus of the day away from the nation's workers and their contribution to our economy and, instead, allow workers and their families to use the increased leisure time and disposable income to relax and enjoy themselves on this day.

So, to everyone who works for a living I say RELAX AND ENJOY THIS DAY. You have earned it!!

Here are links to my other Labor Day articles:

Labor Day and the North American Labor Movement

What is Labor Day?

Labor Day in America

Labor Day Food Ideas

Labor Day 2010 Bad News for American Workers

Advice From Former President Calvin Coolidge onTaxes, Spending and the National Debt

Our nation is currently embroiled in a major debate over the increasing the national debt limit.

Congress at the moment remains deadlocked with Republicans insisting that we reduce the need for debt with major cuts in spending while Democrats insist that we continue spending and finance it with increases in taxes.

At its heart, the debate is really about big government vs small government.

In the video below, we see then President Calvin Coolidge, in 1924 speaking from the White House lawn, on the need for the government to be small and frugal and limit its extractions of money from the labors of its citizens to what is needed for the necessary functions of a small government.



The above video is in the public domain with a Creative Commons License. It is being provided here courtesy of Internet Archive

The Choice is Welfare or Wealth

Economist Allan H. Meltzer has an excellent article in today's (June 16, 2011) Wall Street Journal opinion pages entitled A Welfare State or a Start-Up Nation? (article also available on the Web) in which he clearly lays out the economic and policy choice the United States is faced with.

We can either continue on with the tax, borrow and spend polices favored by the Obama Administration and its supporters or return to policies that encourage economic growth.

Meltzer makes the point that, while the redistributionist policies favored by the Obama Administration and the left are backed by good intentions to help the poor and less fortunate in society, these policies have never worked.  It has been the free market growth policies which have lifted millions of people out of poverty in recent decades and in times before that in the places, like the United States where free markets were allowed to flourish.

The United States, Great Britain and Japan all grew and their people prospered when their governments followed free market policies.

Following World Wars I and II Great Britain opted for statist, sosocialist style policies and by the 1970s had an that was approaching that of a poor, underdeveloped Third World nation.  However, the economy of Great Britain quickly turned around when Lady Margaret Thatcher became Prime Minister and immediately began instituting free market policies.

In the United States, President Franklin Roosevelt managed to turn the 1929 economic downturn into a quarter century long depression, with near zero economic growth and 25% of the workforce unemployed, by replacing the free market with his socialist style central planning.

In the immediate post World War II era Sir John Cowperthwaite spent his career as the British Royal Governor of Britain's former island colony of Hong Kong fighting off attempts by his superiors in London to impose their failed socialist policies on the colony.  Cowperthwaite succeeded in protecting Hong Kong's free market economy from Britain's left leaning government with the result that, in the years between the end of the war and the election of Margaret Thatcher, the Gross Domestic Product (GDP) of tiny Hong Kong was greater than that of the mother country Great Britain.

Then there is the rapid transformation of formerly dirt poor nations in Asia, Latin America and even parts of Africa which in the course of a couple of decades in the last part of the 20th Century whose economies were transformed from poverty to plenty thanks to government reforms that allowed the free market to operate within their borders.

Finally, there are the nations of the former Soviet Union which threw off the shackles of communism in the 1990s and today are prospering.

As a nation, America faces a choice of following the current Administration and its dream of a socialist utopia which has always resulted in an economic nightmare or a free market policy which has always resulted in a better life for everyone.

Socialist policies promise economic equality and sharing of the wealth.  But what people end up sharing is not prosperity and wealth but hardship and poverty.

The free market, on the other hand, doesn't promise economic equality and, in practice doesn't end up distributing the wealth equally.   What it does do is create wealth in quantities which make everyone better off economically.

Supply & Demand

A question on a recent exam in my online Introduction to Micro Economics course asked:

If the price of a product increases, we would expect

A. the level of demand to decrease.


B. quantity supplied to increase.


C. the level of supply to increase.


D. an increase in quantity demanded.

The correct answer here was B. quantity supplied to increase. However, one of my students chose option A. the level of demand to decrease and then sent me an email asking why here answer was incorrect.

Here is what I replied:

An increase in price, other things being equal, will cause suppliers to increase the amount they are producing and selling. The idea here is that existing producers can make more profit by producing and selling more while other, less efficient, producers who could not make the product profitably at the current price will be able to make a profit at the new, higher price.

You confused "level of demand" or "demand" with "quantity demanded". "Demand" refers to the entire demand curve and this only changes when the entire curve shifts.

"Quantity demanded" refers to a movement along an existing demand curve.

The same is true of supply. "Supply" or "level of supply" which refers to the entire curve while "Quantity supplied" refers to movements along the curve.

In this question all we know for sure is that the price has changed and there is no indication that the curves have shifted so the answers referring to "Level" of demand or supply don't apply. Of course, since the price has risen the answer "an increase in quantity demanded" is wrong which leaves "quantity supplied to increase" as the only possible answer.

What has happened here could be a government imposed price floor in which a law is passed making it illegal to sell below a certain price and that price has been set above equilibrium. Or it could be a cartel (a group of suppliers coming together to agree not to sell below a certain price - this is illegal in the U.S.) like OPEC and the new agreed upon price is above equilibrium.

Finally, it could be a shift in the supply and/or demand curve which results in a new, higher equilibrium price. Any one of these will result in an increase in the quantity supplied as explained in the first paragraph. However, there is nothing in the question that indicates this, so all we have to go on in selecting an answer is the fact that the price has risen.

Deleveraging Defined

Deleveraging or de-leveraging is a financial term that has become increasingly common since the start of the current recession.

In finance we use the term leverage or financial leverage to describe the process of borrowing and using debt to help finance the purchase or acquisition of assets. It is no secret that borrowing is a way for a business or a person to acquire more money for a purchase and the more money one has the more they can buy.

Deleveraging refers to paying down and reducing debt. In business this usually involves the selling of assets and using the proceeds to repay debt. In many cases the assets being sold are ones that the business took on debt by borrowing money to purchase the assets they are now selling.

Deleveraging is a term that is also applied to individuals. Since the start of the current recession the term has frequently been used to describe reduction of debt by individuals.

While many individuals have done this by selling assets - homes, cars, etc. - the more common way is to accelerate the repayment of outstanding debts by devoting more of their disposable income to debt reduction rather than to other things. This has frustrated some economists and policy makers, especially those of the Keynesian persuasion, who have been counting on households to maintain their spending levels on consumer goods rather than on paying down debts.

Debt can be a useful tool for business, households and even governments when used wisely. However, after splurging on debt for the past couple of decades or so, the current spate of deleveraging is a healthy trend.

http://hubpages.com/_shamrocks/hub/Financial_Leverage

Why Congress Shouldn't Raise the Deficit Ceiling

Listening to the Democrats in Washington and their allies in the liberal media one would think that the United States is similar to Greece and on the brink of financial collapse.

However, looking at the financial markets, especially the bond market, one sees business as usual with no concern.

The markets are only concerned with default if the default, which is failing to pay or being unable to pay a debt on time, affects the government's ability to pay the interest due bond holders when due. What the markets are concerned with is not whether the U.S. Government will be pay all its bills on time, but whether or not the U.S. Government will be able to make the full interest payment that is due holders of U.S. Government bonds later this summer.

In the case of the U.S. Government, even skipping the interest payment would not put the U.S. on par with Greece. Instead, it would be more like and individual being late with a mortgage payment. The bank would become concerned, slap a late charge on the account and lower the individual's credit score. However, so long as the borrower has the potential to continue to make payments, the bank is not going to foreclose just because a payment is a few days late.

The United States remains a very wealthy nation and has the capacity to honor all of the government's debts.

The U.S. Government is basically having a cash flow problem in which its revenues (tax receipts and other sources of revenue) are not quite sufficient to meet its expenses as they come due. This revenue shortage is due partly to the recession which has resulted in an economic slowdown and mostly due to the out of control spending by the mostly Democratic Congress and Obama Administration.

This irresponsible spending binge has now caught up with them and their solution is to ask Congress to be allowed to borrow more and to also raise taxes so that the Administration's spending binge can continue. This is like an individual maxing out his credit cards in Vegas and, rather than coming home, calls his credit card issuers and asks to have his credit limit raised on the cards and then calling his employer requesting a raise supposedly to pay down the debt.

However, if he gets the credit card limits increased and pay raise he will simply continue his Las Vegas vacation and run his debts up to the new credit card limits.

If the employer and credit card issuers refuse to grant the vacationer's requests, he will be forced to cut his vacation short, return home and start making some serious changes in his spending habits.

The same is true of the Administration and Democratic controlled Senate. This is why the Republican controlled House of Representatives should hold the line and demand major spending cuts, and no tax increases, before agreeing to raise the debt limit which will allow the Government to continue to pay all of its bills - bond interest and other bills - on time as they come due.

Since the U.S. Constitution stipulates that all revenue bills (i.e., bills dealing with taxes, spending and borrowing authority) must originate in the House of Representatives, responsibility for halting the insane spending and borrowing by the government lies with the House of Representatives. With their control of the House of Representatives, the Republicans are in a position to force the rest of the government to get its fiscal house in order so that U.S. does not end up facing bankruptcy like Greece.

Fear of Future Oil Shortages are Causing Gas Prices to Rise

In addition to the stagnant economy and continued high unemployment, the American economy is also being hit by rising gas prices.

People are paying as much as $100 or more every time they fill their tank.

According to the Administration, Congressional Democrats and their supporters in the mainstream media the problem is a combination of a shortage of oil and and the OPEC cartel conspiring to raise oil prices.

The fact is that the so called oil shortage or energy crisis is a myth. The problem is the misguided policies of the Federal Government and not a lack of oil or conspiring by Middle Eastern oil producing nations.

The oil shale lands in the Rocky Mountain area of the United States and the oil sands area in western Canada EACH have potential oil reserves greater than the proven reserves in the Middle East.

These shale oil deposits are in ADDITION to other oil producing areas in Texas, California, Pennsylvania, Alaska and other parts of the U.S. which are currently producing oil.

Then there are the proven reserves, most of which are currently off limits to drilling, off our Pacific, Gulf and Atlantic coasts as well as the, also off limits, Alaskan National Wildlife Refuge (ANWR).

Oil and gasoline prices are being driven up not so much by rising current demand and limited Middle Eastern supplies of oil but by fears of future shortages when the Middle Eastern supplies run out.

It is true that oil produced from the shale fields and offshore fields will be more expensive than current Middle Eastern oil and. It is also true that it will take a number of years to get production in these areas in the United States up to speed (actually Canada is already producing from its oil sands fields, but environmentalists in the U.S. are blocking a proposed pipeline that would bring it to the U.S.).

However, simply removing U.S. Government restrictions preventing the drilling of the shale oil and in off shore areas would be a signal to users that future supplies will be available. This act alone will cause prices in oil futures markets to fall and when they fall current prices will also fall.

Proof of this can be found in 2008 rapid rise in oil prices which promptly fell when then President George Bush removed restrictions on offshore drilling causing current prices to drop almost immediately. Click on the link below for my article on this.

Politics and Falling Oil Prices

.

A Plan to Keep Medicare From Going Broke

It is no secret that Medicare is going broke.  Costs are rising faster than revenue from Medicare taxes paid by existing workers.  Each time a member of the Boomer generation retires and becomes covered by Medicare, the system's costs increase due to increase in the number of people covered while its revenues decrease as fewer people are working and paying Medicare taxes.

Left unchecked, the system will soon go broke.  To prevent this Wisconsin Congressman Paul Ryan and his fellow House Republicans in their budget proposal, known as A Road Map for America's Future, have included a section with a very good proposal to solve the Medicare problem and keep it from financial collapse.  

Congressman Ryan explains the plan for Medicare in the video above.

Big Victory for Stephen Harper and Conservative Party in May 2nd Canadian Elections

While the United States was celebrating our Navy SEALs successful attacking of the Al Qaeda compound and the killing of its leader, Osama Bin Laden, in Abbottabad, Pakistan last Sunday (May 1, 2011) another historic event took place to our North the next day.


On Monday, May 2, 2011 Canadians went to the polls to elect a new Parliament which resulted in Prime Minister Stephen Harper and his Conservative Party winning a majority of the 308 seats in Parliament.


Stephen Harper first became Prime Minister following the 2006 elections in which he led the Conservative Party to victory by winning 124 of the 308 seats in Parliament.  While not a majority, the inability of the opposition Liberals (103 seats), Bloc Québécois (51 seats) and New Democratic Party (29 seats)  to come together in a coalition resulted in the Governor General of Canada calling upon Stephen Harper to form a minority government.


Harper’s first government lasted until 2008 when he was forced to call for new elections.  While the Conservatives succeeded in increasing the number of seats they held by winning 143 out of the 308 total seats they were still a minority in Parliament.  However, both the Liberals (77 seats) and Bloc Québécois (47) lost seats while the more radical New Democratic Party or NDP (36 seats) gained seats.


Much like the United States, Conservatives were gaining among the people while the left was losing but becoming more radical.


Even in traditional liberal bastions, like the City of Toronto, capital of the liberal province of Ontario, voters are becoming more conservative as evidenced by last October’s local election in which Rob Ford, the conservative candidate (small c for conservative here as local elections in Canada are technically non-partisan but Ford was known for his conservative philosophy and his campaign platform was conservative) was elected Mayor while running on a fiscally conservative platform.

Again Stephen Harper was called upon to lead a minority government which he did until March of 2011 when he was forced to call for new elections.


Running on his record of holding taxes down and refusing to follow his counterpart to the south, U.S. President Barack Obama, with huge stimulus spending to fight the world wide economic downturn.  While the United States has suffered high unemployment and the longest period of recession since the Roosevelt led Great Depression of the 1930s, Canada has done very well economically during this period.


Not only has Canada done well with its economy growing, unemployment kept in check and the Canadian dollar, which for decades has been valued well below the U.S. dollar, has steadily risen to where it is now on par and, frequently worth slightly more than the U.S. dollar.

In last week’s election, Stephen Harper and his Conservatives won 167 of the 308 seats giving them a solid 54.2% majority in Parliament.  


Having won on a platform calling for:

• Creating jobs through training, trade and low taxes.
• Supporting families through our Family Tax Cut and more support for seniors and caregivers.
• Eliminating the deficit by 2014-2015 by controlling spending and cutting waste.
• Making our streets safe through new laws to protect children and the elderly.
• Standing on guard for Canada by investing in the development of Canada’s North, cracking down on human smuggling and strengthening the Canadian Armed Forces.

and with his newly elected majority in Parliament, Canada can look forward to more growth and a even more prosperous economic future under Prime Minister Stephen Harper.


The one cautionary note here is that, while the majority of the voters are moving to the right, the remaining voters and their leaders on the left are not shifting rightward to the new center as voters in the United Kingdom and the United States did during the Margaret Thatcher and Ronald Reagan years, but, instead are moving toward the far left New Democratic Party (NDP).

While the NDP ended up in a strong second place with 102 seats in the new Parliament, the Liberals came in with only 34 seats and the Bloc Québécois with a mere 4 seats.  

This leaves Canada with a right of center Conservative government  facing a far left loyal opposition in Parliament.


For Additional Reading on Canada:


Toronto's New Mayor Rob Ford Calls for Privatization of Toronto Community Housing Corporation
A Very Civil War in the Arctic - an article about a dispute between Canada and Denmark over an island in the Arctic that may be sitting on a sea of oil.

Mothers Day 2011

This Sunday (May 8, 2011), the second Sunday in May, is Mother’s Day in the United States.

In addition to honoring their mothers on this Mother’s Day with a at least a visit or phone call, most of us will also be spending some money on them with a card and gifts. Popular Mothers Day gifts include flowers, candy, taking them out to dinner, etc.  


In fact, according to Ellen Davis of the National Retail Federation, as quoted on the Voice of America News website, the average person is expected to spend about $140 on Mothers Day presents this year.  


This translates to some $16 Billion dollars in total retail sales for Mother’s Day 2011.  


While candy, especially chocolate candy, is a popular gift for Mother’s Day it is not the most popular gift.  Things like cards, flowers, being taken to a restaurant, etc. all seem to overshadow candy sales.


According to industry statistics, the big holidays for candy, especially chocolate candy, sales are Halloween, followed by Easter, Christmas and Valentine’s Day in that order although Easter sales are just slightly  less than those of Halloween.  


Mother’s Day is good for sales of chocolate but the boost in sales of this product is not enough to put sales of chocolate candy in league with the other holidays.  However, sales of chocolate candy are a part of the $16 Billion sales figure retailers are expecting to reap this Mother’s Day.


So, HAPPY MOTHERS DAY to all the Mothers, Step-Mothers, Grandmothers, wives, grown daughters, aunts and others who will be honored with gifts this Sunday.

Links for Further Reading:


For a History of Mothers Day in the U.S. see this article about Anna Marie Jarvis the Woman Behind Mothers Day

For more data on holiday sales of chocolate see this article on Origins of Chocolate Easter Eggs

Voice of America News article on 2011 Mothers Day sales expectations 

Nielson article on holiday chocolate sales data

Wading Into Publishing

Publishing is one of those industries that increases in size, and opportunity, with the introduction of every new innovation.

Stone age cavemen used the walls of their caves to record, with pictures, the stories of their exploits.  This was good but limited by the number of caves available and blank wall space on their caves.

The Babylonians developed both an alphabet and new medium, soft clay, for recording their stories.  Not only were the clay tablets transportable but with clay being less expensive and more readily available than caves there was more opportunity for writers as the medium was less expensive and in greater supply which made the output more affordable for consumers thereby increasing demand for content.

The invention of paper broadened the market even further increasing both demand and supply for content.  And some of the content  from the ancient world has continued to sell down to the present - think of the Judeo-Christian Bible, the writings of Socrates, Plato, Aristotle, the Odyssey of Homer, etc.

With the Gutenberg's invention of movable type the cost of books was reduced further which, again, increased opportunities for writers - a profession whose ranks grew exponentially.

Then came the Internet.  The cost of adding content dropped to near zero which made entry into the market affordable for everyone.  The cost of access to content by consumers also dropped drastically with the result that demand for content is going through the roof.

The Internet Has Opened the Doors for Many Aspiring Writers

A good example of this is HubPages.com in which its huge number of writers have published a total of 1 million Hubs (articles) in the little over four years of its existence.  And much of this is very good content as seen by the three and four figure monthly incomes many of the writers are earning with their part-time writing.   Just take a look at their new Success Stories page. 

Not to brag, but my story is one of those that appear on the Success Stories page and I can personally attest that I have done well both financially and professionally with HubPages.  Because of this success, my son and I have decided to expand our publishing efforts by joining the publishing site Lulu.com and moving into writing books along with our HubPage writing.

Our first foray into publishing is our just released 2011 calendar titled Chika's Dog  Trivia for 2011.  While we have more ambitious book plans, this was a relatively simple project we have been considering for some time and figured it would be a good way to get some hands on practice using the tools on the Lulu site. 

We have now completed the project and have set up our store on the site where it is displayed for sale.

 

 

Calendar Cover

Please click here to visit our new store on Lulu.comhttp://www.lulu.com/spotlight/airnavigator

In Elections Free Speech is Not Without Cost

Everybody knows that the First Amendment to the Constitution, which reads:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.


Freedom here refers to Congress putting restrictions on what people can say or, as some recent court rulings have decided, how they can express themselves.  Of course, Congress can put some limits on what people can say, or at least pass laws punishing people who violate these restrictions.  National Security is one area where speech can be restricted and libelous comments or harming someone's reputation with false and slanderous comments about them.


However, having the right to say what one wants is not the same as having free access to the means to communicating one's political opinions.  


Ask any politician.  They are perfectly free to talk about their ideas and describe what they will do if elected.  However, in order to spread their words far and wide they need money.  Money to travel and meet the voters, money to rent halls to speak in, money to pay for radio and TV time, etc.  


Simply having one's name on the ballot generally won't result in people voting for that person.  One has to get out to meet and talk to voters so that the voters get to know them and want to vote for the candidate.  


We are now about two weeks from Election Day and candidates are scrambling to get the word about their candidacy and convince as many potential voters as possible to vote for them.  However, in this election as in many past ones, significant trends are emerging that indicate that Republicans have the momentum and appear set for a big win.


In addition to polling data and the general mood of the voters - this year Republican voters and others favoring Republican candidates seem excited and eager to get out and vote for their candidate while Democrats and others not wanting a Republican victory seem increasingly resigned to defeat.  


In addition to polling data, candidate fund raising can also be an indicator to predict an election outcome.  As I stated above, candidates need money to get the word out about themselves in order to win.  However, there is an opportunity cost to donating money to campaigns.  Large donors often expect to get access to the candidate once he or she is elected while small donors are generally satisfied with the opportunity to help the person who shares their views win.  


Obviously a large donor won't get any access to an office holder for his or her money if the candidate loses and small donors won't enjoy the satisfaction of having helped the person they believed was best suited for the job win if the candidate loses.  So while supporters may still voice support for a candidate that is losing most will be reluctant to throw money away on a losing candidate.  


So, the ease or difficulty with which a candidate can raise money as an election season draws to a close is another indicator of an election outcome.

Click Here for My WebPage
 

Columbus Day

Tomorrow, Monday October 11, 2010 is Columbus Day, the holiday that honors the Italian navigator Christopher Columbus and his discovery of the New World.

While Columbus's nationality is still subject to debate in some quarters, it is generally agreed that was born in what is now Italy. As I pointed out in my article on Columbus Day on HubPages, Columbus Day began as an Italian-American holiday.

Of course Christopher Columbus' fame rests on his discovery on the New World while in the service of Spain. Although technically, Columbus was employed, not by the Spanish government, but rather in the employ of Queen Isabella of Castile. Castile had been combined with the Kingdom of Aragon by Isabella's marriage to Aragon's King Ferdinand and the the combination of these two kingdoms, both located on the Iberian Peninsula, formed the basis for the modern nation of Spain. In addition to being King of Aragon, King Ferdinand was also the ruler of the Kingdom of Naples on the Italian peninsula.

In addition to being privately financed by Queen Isabella (unlike today, the finances of monarchs were closely linked with that of their kingdoms), it should be remembered that the real purpose of Columbus' voyages was more for the purpose of discovering a new, and more direct, trade rout to Asia rather than exploration per se.

Europe, at the time of Columbus was entering a period of economic growth that was driven in part by both population growth and by a period of global warming. A desire to expand trade was a part of this economic growth and, while the New World proved to be a big barrier to a western sea route to Asia, the the New World itself became a major trading partner for Europe.

Links for Further Reading:

The Origins of Columbus Day - my article on how the Columbus Day Holiday came about.

Lief Erikson Day October 9th - Some five centuries before Columbus Lief Erikson and his fellow Vikings attempted discovered the New World and attempted to establish a colony in North America. Lief Erikson is recognized with a holiday in October but it is observed mainly in Wisconsin, Minnesota and the Dakotas.

Global Warming and the Discovery of America - a major reason for the failure of the Viking settlements in North America and for the economic decline of the Viking colony in Greenland was a period of global cooling. The warming period that followed this cooling period resulted in those who followed Columbus being able to successfully colonize the New World.

Profits and the Poor

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.

However, 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 taxes due to all government entities having jurisdiction over the enterprise.

For the business there are two ways of increasing profit.

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.

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.

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.

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.

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.

Another example of cost saving by recycling was described in a 2008 entry on this blog entitled Saving Money and the Environment by Recycling old Roadbeds. 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.

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.

It is this lowering the cost of living that has been and still is, the main force improving the lot of the poor.

Links to Related Articles:

Prices, Profits and Low Income Consumers

Going Green Is Not Cheap

Solar Energy and Economic Efficiency

Deflation and Wage Stickiness

In a recent article on HubPages, I described what deflation is and the two types of deflation which are generally referred to as good deflation and bad deflation. While I go into more detail in the HubPages article, basically the term good deflation refers to falling prices resulting from increases in worker productivity while so called bad deflation is the result of falling aggregate demand.

A major obstacle to combating a major deflation resulting from a fall in aggregate demand is the so called stickiness of wages. Minimum wage laws, union contracts, government mandates and regulations, etc. all combine to prevent wages from falling.

Unlike other prices which fall when aggregate demand declines, wages tend to remain the same. Of course, while individual wages tend to remain unchanged, employers’ wage costs do adjust as workers are laid off and employers are freed from having to pay those laid off employees.

While no one, including me, likes the idea of having their wages fall, market forces will force a new equilibrium some way and the most common way is layoffs (I didn’t like that either when it happened to me during the major downturn in the late 1980s).

Here is a simple example showing how reducing wages or laying workers off each achieve the same result.. A company employs ten people, with each one earning $10 per hour. The total hourly wage bill for the company is $100 (ten employees times $10 pay per hour = $100 per hour wage bill). Now, if business is such that the employer can only afford a total wage bill of $90 per hour they have two choices.

The first choice is to reduce everyone’s pay by $1 which makes the wage $9 per hour. Since $9 per hour times ten people equals $90 the employees’ wages have been reduced to what the employer can afford to pay. This is the free market response and is one of the assumptions behind Say’s Law (which states supply creates its own demand and was named after the nineteenth century French economist Jean Baptiste Say).

The second choice is the Keynesian solution (after the mid-twentieth century British economist John Maynard Keynes) which is to keep the wages at $10 per hour but lay off one worker thereby leaving nine workers each earning $10 which results in the same $90 per hour wage bill that the employer can afford to pay.

While the initial result for the employer is the same under each option, namely that the total wages paid fall to what employer can afford to pay, the second choice, keeping individual wages unchanged causes a couple of problems.

First of all, unemployed people lose their wages and are now forced to cut back even more on their consumption which further reduces aggregate demand. At the same time, workers who are still employed remain fearful of losing their jobs so they also choose to hold money rather than spending it which reduces aggregate demand some more.

Unemployed workers frequently cannot afford to make the payments on their mortgages, car loans, etc. and the defaults on these loans, coupled with the decline in values of the assets securing these loans cause problems for banks as the value of their assets decline leading them to pull back on making more loans.

Second, even though the laying off of workers reduces payrolls to the amount that employers can afford in the new declining business environment, keeping wages at current levels makes it too costly for employers to rehire the laid off workers or for new businesses to hire new workers.

This fear or reluctance on the part of employers towards expanding and hiring new workers becomes a vicious circle in which aggregate demand falls because unemployed workers can’t afford to buy things which, in turn, causes employers to decide not to expand and increase output by hiring more workers.

The solution to this problem is to try to reverse the decline in aggregate demand with so called stimulus spending in which the government pumps millions of dollars into the economy in an attempt to artificially stimulate aggregate demand. This was the policy, that was prescribed by John Maynard Keynes during the Great Depression of the 1930s and followed, without success, by President Franklin D. Roosevelt and his New Deal Administration.

Instead, the solution, which President Ronald Reagan employed in fighting the stagflation of the 1970s and early 1980s, is to concentrate on calming fears and enacting policies designed to stimulate aggregate supply. This policy has been successful in the past while the Keynesian policies have never worked.

Links to My Other Articles on This Topic:

The Real Cost of Paying Employees

Deflation - What It is and Why We are Worried About It

Combating Deflation - Option I The Keynesian Prescription

Labor Day 2010 - Bad News for American Workers

Next Monday, September 6, 2010, is Labor Day in the United States and Canada. This is a holiday that was originally created in June of 1894 by the U.S. Congress to honor American workers (less than a month after this Act of Congress, the Canadian Parliament followed suit and declared the same day -first Monday in September - as a national holiday in Canada honoring its workers).

Unfortunately, for many American workers, this will be the second Labor Day holiday in a row in which over 14.5 million American workers (9+% of the American labor force) find themselves listed as being officially unemployed.


Official unemployment refers to civilian workers who are both unemployed AND actively looking for work. In addition to the over 14.5 million officially unemployed workers there are an additional 1.2 million so called discouraged workers or workers who have seen unemployed so long that they have given up looking for work.

Since the discouraged workers are no longer looking for work they are not included in the official unemployed category - however, they still have no job.

While the official unemployment rate is about 9.6% overall (and this does NOT include the 1.2+ million discouraged workers) it is not distributed evenly throughout the workforce. Some regions with in the U.S. have rates higher than the national average while others have a lower rate. Similarly, the rate for college graduates is a little lower than than for non-college graduates.

The worst hit are teenagers. According to a recent report from the U.S. Bureau of Labor Statistics (BLS) a full 26.3% of teen workers are unemployed. Again, these appear to be those who have been laid off and are looking for work. Many more are no longer looking for work.

For the past two years the current Administration and Democratic controlled Congress have been trying to pull us out of the current recession and reduce unemployment with failed Keynesian policies. It is time to accept the fact that the theories and policy prescriptions of the late John Maynard Keynes are useless and replace them with new pro-growth policies.


Links to My other Labor Day Articles:

Labor Day and the North American Labor Movement

What is Labor Day?

Labor Day in America

Selling Last Semester's Textbooks Online

In a previous posting four years ago I discussed how the Internet was changing the college textbook market.

At the time I published that post my daughter had recently graduated from college and I estimated that I had I had paid about two-thirds less for her books by buying them online than if she had purchased them used from the bookstore.

I haven't had as much luck with my son saving on textbook costs. First of all, he hasn't been as good as my daughter was at getting the ISBN numbers for me. A big part of his problem is that the college bookstores have been using various tactics that make it difficult or impossible to obtain the ISBN numbers needed to get the exact textbook each course requires. Tactics like shrink wrapping the book with the ISBN number covered up or having students hand a list of the needed textbooks to a clerk who then retrieves them rather than allowing students access to the shelves with the books are two such tactics that make it impossible to to get the ISBN.

However, despite the problems with obtaining the information needed to accurately order books online, the cheap used textbook market on the Internet is not only still going strong but is also continuing to provide strong competition to college bookstores and textbook publishers. The competition has been so great that bookstores and publishers are being forced to discount their prices.

While I am finding it more difficult and time consuming to save money buying my son's college textbooks online, I am offsetting some of my costs by selling his textbooks from last semester online. Amazon.com, eBay and eBay's Half.com division are among the many sites that make buying and selling of used textbooks and other books easy.

The main key to successful selling is to have your books listed on a site before the start of a new semester. I put my son's most recent collection of textbooks from last semester on Half.com (a site I have been using for years to buy and sell books)a couple of days ago and have already earned $60 from the sale of three books. Prices, of course, vary greatly depending upon supply and demand but, in today's economy every little bit helps.

Half.com and similar sites are also great places to sell books other than textbooks as well as other media such as DVDs and games.

Serving a Few Cookies Can Accomplish a Lot

Serving a Few Cookies Can Accomplish a Lot