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Hello world!

Welcome to The Gist Blog.  We’re a blog about a better America.  In time, we could become something more.  Things have been unraveling for a while.  Soon we’ll have to make a choice… to come apart or to come together.

Engineering: financial and otherwise

I’ve used Apple products for 30 years. They’ve always been expensive but worked well. The introduction of the revolutionairy iPhone (with AT&T subsidies that magically transformed a $600 micro-computer into a $199 consumer product for only $70 a month on a 24 month contract!) moved Apple products into the mainstream. Three years later, the $500 iPad revolutionized the idea of a computer and gave Apple their first-ever price story to sell.

While it’s never been hard to use Apple’s products, it’s been tough to be a stockholder over the past six months. After a meteoric rise following the introduction of the iPad, Apple’s stock dropped from over $700 to near $420 a share in the last six months. If you’ve owned the stock for years and your basis is $80 a share…no worries!  If you got in last summer at $650… not so much.

I had a flash of clairty when I ran across this delicious quote from Howard Lindzon:

Apple’s problem is that it can’t dance to what Wall Street wants.

Apple’s in the engineering business.  Any fool can imagine a wearable wristwatch computer. Hell, Dick Tracy had one 75 years ago. Apparently the challenge is in acutally designing, manufacturing and delivering millions of copies of a working device, all over the world, within a few days of the launch. Then upgrading the software month after month and year after year so that the thing keeps working (and even gets better) the longer you own it. A year later you introduce a new model that has real improvements yet doesn’t destroy the value of the original. Obiously, if you could do this, you’d have a great business and Wall Street would love you (and make tons of money off you).

Today Wall Street practically demands the next big thing, an iTV, an iWatch, an iAnything that would cause the iStock to iDouble.

One thing we should have learned in the past decade is this… financial engineering is easy; actual engineering is hard.

Immigration Squabbles

My wife and I had one of our squabbles driving home last night. The subject was immigration. She says I’m not empathetic enough to the plight of America’s undocumented immigrants, especially the children who’ve done nothing wrong but suffer the consequences nonetheless.  She may be right.

What I clearly have no empathy for is our current immigration laws and the policies they are supposedly supporting.  I find them both wrong-headed and ineffective. If the point of immigration law is to make our nation safer, stronger and more prosperous these laws must be significantly loosened or eliminated. Here are a few of mine. Feel free to add or subtract yours as you see fit in the comments.

  • America Wins: If we had a system that allowed nearly unlimited immigration of hard-working ambitious people we’d end up with a hard-working, ambitious (and prosperous) country.  Before the 1920’s, when millions of immigrants arrived here every year (including most of our ancestors), we had this system. How’d that work out for us?

I’m OK with laws which deny legal entry to criminals, people with contagious diseases and people who present a threat to our nation.  I get that they’re hard and won’t work very well, but we can at least try to keep some bad people out.

Read more…

Inauguration Day

Inauguration Day is our democracy’s ultimate test. The winners get to promise, gloat and preen. The losers, if wise, try to lay low and wait for a more opportune time to present differing views. Since the passage of the Twentieth Amendment, Inauguration Day is January 20th. This year, as January 20th fell on a Sunday, the public ceremonies were held on Monday. Here’s the history:

The first time an Inauguration fell on a Sunday was in 1821 for President Monroe’s second swearing-in. Monroe decided, after consulting the Supreme Court, to hold the public ceremony on Monday since “courts and other public institutions were not open on Sunday.”

January 20th in Washington, DC is the depth of winter… but sometimes the cold, crisp air and boundless blues skies are invigorating. I remember JFK’s Inauguration Day that way, as was President Obama’s first Inauguration four years ago.  My wife was there. She says it was empowering and uplifting, but freezing.

The power of the day began with our first President, George Washington. After leading the rebel troops to victory in the revolution, Washington served the first two Presidential terms of our new nation. As a revered figure, the “Father of our Country” could have stayed on, perhaps even turned himself into our first King. What he chose to do was go home and peacefully turn over the power of the government to his successor, Thomas Jefferson.

Every four years we have an increasingly expensive Presidential campaign. Each side spends a year or more choosing their nominee followed by an intense six month’s battle between the cantidates. When we’re lucky, Election Day settles the issue and the winner gets busy assembling a new administration.

All over the world, governments violently rise and fall. Administrations often end with a bullet. I think the majesty of our Inauguration Day depends on the losers. They believed in their arguments as much as the victors. They fought hard and wanted, hoped, even expected to win. But when they didn’t, they too went “home to Mt. Vernon” and supported the peaceful transition of power. Let it ever be thus.

Soon enough…

I’m working on a number of complicated posts and I’m struggling trying to make them simpler so, in the mean time, here’s a link to the Interloper whose posts are always fascinating and unlike any other I follow.

The False Choice

As I’ve said before, I’m universally in favor of more choices because people know their needs better than the experts and most people can deal better with poor choices when they make them themselves.

Right now the US is facing a real choice:

A larger  government – trying to do more things (some well.. but others not so) and consuming more real resources in the attempt. Somebody has to work and produce to create the wealth a welfare state consumes. Economists, Federal Reserve Governors and the CBO can manipulate the numbers but in the end it all comes out in the wash; if the Government does more, the resources must come from the private sector… and that means YOU! Our federal government does not have sufficient revenues to fulfill this vision today.

A smaller government – trying to do fewer things (but maybe doing some better). Most people agree we need national defense but we could spend less than we’re spending now. We all need police, fire protection and the court system.  Public education is broadly supported but we could get better results for our spending. With luck we could stop doing a few things that government already does badly (like wars on drugs and poverty where the other side is clearly winning).  Maybe the government could stop managing the economy (a gold mine for crony capitalists) and making it easy for anyone to get a home or college loan regardless of the losses and waste this enables.  No practical person actually believes the Federal Government can get smaller but if we could slow the rate of growth to less than the private sector growth rate government would take a smaller share in a few years. The federal government has more than adequate revenues to fulfill this vision.

So why aren’t we having that elusive “national conversation” about our choice? 

Because politicians continue to get re-elected by running on a false choice. 

According to our leaders, we can have a big generous government and make someone else pay. Democrats pick “millionaires & billionaires” while Republicans prefer “someone living in the future”. Neither has the guts to tell you the truth.  If you want more government you will have to pay for it. If you aren’t willing to pay you’ll have to make do with less.

Do you ever wonder what might result if we demand that our government do better with the huge share of our resources they already have?

It’s Official: Confirmation Bias Rules at The New Yorker

John Cassidy has a new post up at The New Yorker. His conclusion’s clear from the title “IT’S OFFICIAL: AUSTERITY ECONOMICS DOESN’T WORK”.  Unfortunately there’s some space between the data and his conclusions so let’s take a look.

First, a definition of Confirmation Bias from the You Are Not So Smart website.

The Misconception: Your opinions are the result of years of rational, objective analysis.

The Truth: Your opinions are the result of years of paying attention to information which confirmed what you believed while ignoring information which challenged your preconceived notions.

His piece starts with the preferred conclusion; that cutting government spending, especially during a slowdown, will shrink the economy (reduce GDP) leading to lower tax revenues and increased benefits.  According to Cassidy, “Austerity Economics” will make deficits larger, not smaller.

Here’s Wikipedia’s definition of Austerity:

In economics, austerity refers to a policy of deficit-cutting by lowering spending via a reduction in the amount of benefits and public services provided.[1] Austerity policies are often used by governments to try to reduce their deficit spending[2] and are sometimes coupled with increases in taxes to demonstrate long-term fiscal solvency to creditors.

Let’s look at actual Revenues & Spending (in Billions of British Pounds, data supplied by the UK government):

UK Budgets 2007-12

The UK budget is fine on 4/5/2008 (prior to the financial crisis). A year later, revenues drop and spending grows as does the deficit. In FY 2010 revenues drop again and spending increases by £37.5 billion. FY 2011 (which began in April 2010) shows the reality of the government’s. Tax receipts increased by £37.3 billion! Spending also continued to increase, though at a slower rate.

So how do these numbers fit with Cassidy’s story? When revenues fell, the UK government responded with tax increases. There were no draconian spending cuts, spending increased every year and the economy shrank. Perhaps a conclusion more connected to the data is that when “austerity” consists of higher spending and tax increases it’s likely to tip the economy back into recession. A more accurate headline would be “It’s Official: Taxing and Spending Doesn’t Work!”

Should someone tell President Obama?

Everybody loves a “Going Out of Business Sale”

We ran a chain of retail hi-fi stores for twenty years. A few times, we were asked by the bankruptcy court or a creditor’s committee to help liquidate the inventory of a failed retailer.

“Going Out of Business Sales” always work! Customers wait in line (and will even pay admission) convincing themselves that the deals are so great they’re worth the effort. As sellers, we loved the “it’s all gotta go” ambience of stores crowded with buyers looking for below-cost merchandise that may be missing pieces or not even work!

For a retailer, it’s the most believable sale ever.

It seems the Federal Government is having their own “Going Out of Business Sale” these days and the average voter is right to love the deals. Up to 99 weeks of unemployment… much better than having to take a crummy job. Social Security Disability… far more pleasant than working two part time jobs to make ends meet. A program for every want… and someone else to pay.

The deals get better when you’re rich and powerful. The government extends copyright and patent protection seemingly forever so Disney’s descendants can live for a century off Mickey Mouse. Drug companies are paid by the government for research which fails but when new drugs result, they get the profits as well. It’s great to be a crony in a crony capitalist world!

Now the deals are so good, no one can resist. Perhaps the tipping point is Medicare. Who wouldn’t like a health insurance program if the plan pays out $340 in benefits for every $100 in premiums!  Medicare’s actual deal is 1,000 times that good.  Wouldn’t more people would drive a Ferrari if it sold for $67,500 rather than $229,825.

Of course, the reason a “Going Out of Business Sale” works is urgency; you’ve got to act fast or you’ll miss out.   Unfortunately, there’s no future in failure.  So, while it’s great to liquidate a competitor, it’s no fun when it’s your government that’s going broke and seems unable to stop itself.

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