So, the German and Japanese bosses who move manufacturing plants to the US are assholes? If that is true, since they are exploiting lower American wages for their unadulterated greed, how come they are not failing like American manufactures?
No – those are challenges to Detroit. They might explain why Detroit is no longer the undisturbed, preeminent auto manufacturing center of the world. The rest of the world got better. Those are some of the external factors that I was eluding too. It does not explain the failure to evolve and adapt. The failure to respond is an internal factor that lies on the doorstep of Detroit and the Big 3 - these factors they did have control over.
But what caused the decline in American manufacturing? I can point to certain self-destructive behaviors on both the management and labor side that drove the Detroit auto sector into the ground. Heck, I can even point to the city management and city unions for their fair share. Did they face some hard external challenges? Yes, they did – but the ultimate responsibility of their failure lays in Detroit.
And I can say this as a trained economist and historian. (armature status today, but still.)
No, the weight of a kilogram is completely arbitrary. They are trying to fix it to something but right now it is just a weight.
A atomic clock works by counting the vibrations in an atom. The atomic clock fails when it miscounts the vibration of an atom, causing the error. The new clock is so good at counting that errors rarely occur.
Legally it can be challenging to release early drafts of the script â" there are in a weird in-between state between the original book and the final product. Also, you don't want to burn your bridges. Piss off people by doing a tell all and you can't get them for your next project. Brad Pitt's input on this project may have been iodic but you many need Brad Pitt (or his wife) in a future project.
Slightly off topic, but this is one of the reasons why I am interested in seeing "Jodorowsky's Dune". It is a documentary about a early attempt to film Dune in the 70s - not David Lynch's 80s attempt. Most everybody is dead or out of the business so people can be honest. Personally I would like a good look at the preproduction art but I suspect that the rights to that are just a overlapping mess between Herberts estate, the production company, and the individual artist.
We can debate if a weaker dollar would have a overall positive or negative impact, or on whom it would have impact on.
However, it would mean higher interest rates. Bonds that have been issued would go down in value but we don’t care about those – we care about the new bonds that will be issued.
As you pointed out, a weaker dollar means more expensive imports, more expensive imports means higher inflation, and higher inflation means a higher interest rate.
Also, a weaker dollar reduces the return of US bonds held by foreign owners, so they would demand a higher interest rate to compensate.
You have it mostly right, and I don’t think Russia has the power, but let us take this a step further. Damage, in theory, could be inflicted. Consider 2 things – supply and demand and that bonds are basically cash. Dump the bonds, demand for cash / bonds remains the same, Supply goes up, ergo the price of USD cash goes down. The US dollar becomes weaker relative to other currencies, fueling inflation. Everybody can buy the bonds that Russia is selling, so newly issued bonds would have to have a higher real interest rate.
See what George Soros did – he broke the bank of England. Now the US is nowhere near the irrational state the Bank of England was, but you can get an idea of the damage that can be done.
IIRC, The amount of US dollars that Russia holds is very small- they export oil and gas and turn right around and buy consumer goods. . China has the large stockpile of USD.
I heard a quote this weekend – That Europe could inflict more damage on Russia then Russia could on Europe, but that Russia was more willing to bear the pain.
You need some inequity to drive the system. Exceptional talent should deserve exceptional rewards. Too much inequity kills the system. The in crowd, the entrenched, the elite dominate the system to their own ends. People get into the top not because of exceptional talent but because they were born into it or luck - either the lottery or only those who are exceptionally talented and lucky (see big name movie stars).
The trick is to find a sweet spot.
You also want the least distortive system, which is why I favor a modest inherence tax. Everybody knows that they are going to die and they can’t take it with them. Having a low inherence tax would be less distortive then a high income tax. FYI, I am a small government person – but even a small government needs a tax base. Not having taxes is another debate.
Sigh, you are confusing spread with real interest rates.
Spread = Interest on loans - Interest on deposits. The bigger the spread the more profitable the bank is.
Then review this formula: Nominal Interest Rates = Real Interest Rates + Expected Inflation.
Real interest rates is what the banks care about because that is how one increase value. Nominal interest rates is what the customer gets quoted and can’t go down below zero. Hold nominal interest rates fixed, decrease inflation (or increase deflation) and real rates increase. This is basically true because most banks have a positive leveraged duration (more long term loans then short term deposits)
One can argue that one can better manage (increase) the spread during times of inflation but the evidence is very mixed. But we do know that deflation does increase the spread, giving the bankers free money.
This is why Bitcoin has the most sensible economic policy of all. Long term, it's meant to have no inflation and no deflation. It's meant to provide a stable monetary base.
You are wrong. Inflation is caused by the change in the demand of money and the supply of money. In Bitcoin the supply of money may be fixed (I would argue that the amount of currency is fixed, not money, but that is another point.). However the demand for money is not. As the economy grows or contracts, and people risk level for holding a safe assets changes, so will the demand for money. I can think of more cases where the demand for money would increase (growing GDP) then decease, so I would think BitCoin would have a strong deflationary bias.
Also, inflation does not help the rich. It destroys the value of cash, bonds, and annuities (which tend to be held in both absolute and relative terms by the wealthy) and eats into the profits of banks (read up on duration leverage, which is how banks make their money and explains the risks and rewards of borrowing money short term and lending it long term.)
What do you mean by private? Private banks own all of the Fed stock – but that stock does not come with voting rights and dividends are capped. The government gets to appoint the board . It is a hybrid institution. Being semi-private is part of the insulation from government but it is hardly absolute. If you want something totally independent you need to go back when the Bank of England was a private bank.
You are confusing productivity with the aggregate supply for money in aggregate (inflation). Yes, productivity is a factor but it is just a slice of the pie. Monetary policy can have a much greater factor. The Fed can turn on or off the supply of money at a whim. Productivity gains are harder and take longer.
Having a low inflation rate has not always been the goal of the central bank. There have been times (70s in particular) when the Fed cranked up inflation. They now know they were wrong. And I would reevaluate your chart. Read up on the issues and flaws of using a price index to measure inflation – It is one of the better measures we have but there are still flaws. Factor in that the data prior to 1912 is second rate. Then redo your chart us a log scale, which you should do when looking at percent changes.
Milton Friedman said that central banks never had to worry about deflation because they could inflate the money by “dropping money out of a helicopter”. There are plenty of examples where the printing press was turned on and inflation jumped up.
Exactly. Both of those countries had low inflation and high growth. I would state that low inflation was not the primary driver and Switzerland has the luxury of being a small high demand market.
Oh – and my second point. The Fed is well insulated from the day to day politics and the bankers have as much influence as the politicians – and bankers hate inflation.
No, the politicians had fairly low control for most of the history, most of the time it has been tied to the gold standard. Lincoln went off the gold standard with the Greenbacks but he was punished whenever he drifted to far (IIRC the Greenback at one point trade $.25 to the dollar). FDR weakened the link but it was Nixon who cut it.
Ummm No. In the Bitcoin debates I have always been liberal on money creation – that some low level inflation is better than low level deflation. But never give control of the printing press to politicians. They will turn on the tap and inflation will spiral out of control. See Germany in the interwar era, or Zimbabwe a few years ago. Deflation may enrich the wealthy (as you point out), but high inflation destroys and savings of the poor and long term investments for the growth of tomorrow.
I don’t think we are that far apart. I am going to assume that we both think that Apple’s corporate tax rate is too low. There are 2 solutions.
There is the bottom up solution where Apple voluntarily increases the taxes it pays to a fair level, but that raises 2 questions. First, what is a fair level? I would say something in the 5 to 10% range. I am going to guess you would suggest something higher, but it really does not matter. The “fair rate” is subjectively decision. This is particuallary true in Apple’s case where they need to split the profits between different states, where each state/society is going to have different concept of fairness. (Is a personal income tax more or less fair then a corporate tax, VAT, etc. High taxes and high services, or low taxes and low services. etc.) Second, why would one company chose a higher level of voluntary contributions then its competitors? Why would it choose to gimp itself? It would not be a stable situation and tax revenue would fall. I understand the moral appeal but I can’t endorse a system that has subjective and unstable values to underpin the morality of the tax code. I don’t think it is workable.
Then there is the top down, where we close the loopholes. I think on this issue we are much closer.
I am not familiar with the NZ example, However I would tend to be skeptical. I think things work best when there are clear goals, incentives, and lines of authority. Without that things become muddy. This year we shaft the owners, next year we shaft the Moi, and nobody can tell if anybody is doing anything useful because we are always tossing out measuring stick for another. The examples that I am familiar with tend to perform at a subpar level. There is a core of highly competent and motivated insiders or a sugary daddy on the outside, things go well for a couple of years (or decades), interest falls, and the whole thing falls apart.
On the other hand I can think of many examples that do work – Co-ops and other mutual companies, foundations and non-profits that own for profit business, etc. But those work because each part is trying to maximize it’s potential (either for profit, charitable gain, or whatever) and as such has a clear goal.
How would tax movement of money encourage domestic investment? Why would I want to build a domestic plant for export knowing that the plant’s revenues (not profits) will be taxed? Why would a foreign company bother investing in a domestic plant knowing revenue being sent home will be taxed? Well, yes. The point of a good tax policy is to extract the money needed with the least amount of pain – but what makes you think that the pain associated with your tax would be less than that of a corporate income tax?
I will point out there have been huge gains in efficiencies because of greater world integration which would be reversed under your tax regime. Currently, trade is about 25% of the US GNP. In Europe it is even higher. I suspect that to be revenue natural that your tax would be the greater disincentive to invest then a corporate income tax. For example would you want to pay a 20% tax on an investment that return 8% or a 30% tax on a investment that returned 10%?
By the way, I am not a huge fan of a corporate income tax, partly for the reasons you suggested. I will point again to studies that a low corporate income tax does not discourage investment and I do think they should pay some taxes for the advantages and privileges that corporate ownership has (i.e. limited liability). But this all comes down to my belief that corporate taxes should be low and simple – not nonexistent.
I am not making a argument about subsiding apple, and if you reread your comment you will see why. You are suggesting that people in a highly competitive environment play nice and give back a fair amount in taxes (which is subjective) to the correct government (another subjective call) while their competitors don’t. No – your second point is the correct answer – close the loopholes.
As for charity, that is a hot topic in corporate governance. Should a CEO be able to give your money (i.e. the company’s money) to charities he likes? I can point to many examples of abuse. In reality, I will point out that most charitable giving is from the corporate’s marketing office, which makes me wonder how charitable the giving is.
What I am exposing is very much standard orthodoxy and hardly radical, standard business admiration 101 stuff. When you delegate authority to management, a lawyer, or a doctor they are supposed to work for your best interests. Nothing says they have to be your slaves, be 100%, or give you gold plated services for free. On the they just can’t coast.
As for investment – we are getting into semantics here – maybe with the words new verse exchange.. If I own 1 share of stock does that mean I do not own a sliver of that company? And why would Bill Gates every take Microsoft public if he could not sell his interest, and why would anybody every buy unless they knew they could sell on?
Slashdot Mirror
So, the German and Japanese bosses who move manufacturing plants to the US are assholes? If that is true, since they are exploiting lower American wages for their unadulterated greed, how come they are not failing like American manufactures?
No – those are challenges to Detroit. They might explain why Detroit is no longer the undisturbed, preeminent auto manufacturing center of the world. The rest of the world got better. Those are some of the external factors that I was eluding too. It does not explain the failure to evolve and adapt. The failure to respond is an internal factor that lies on the doorstep of Detroit and the Big 3 - these factors they did have control over.
But what caused the decline in American manufacturing? I can point to certain self-destructive behaviors on both the management and labor side that drove the Detroit auto sector into the ground. Heck, I can even point to the city management and city unions for their fair share. Did they face some hard external challenges? Yes, they did – but the ultimate responsibility of their failure lays in Detroit.
And I can say this as a trained economist and historian. (armature status today, but still.)
No, the weight of a kilogram is completely arbitrary. They are trying to fix it to something but right now it is just a weight.
A atomic clock works by counting the vibrations in an atom. The atomic clock fails when it miscounts the vibration of an atom, causing the error. The new clock is so good at counting that errors rarely occur.
And probably it can't be - sadly.
Legally it can be challenging to release early drafts of the script â" there are in a weird in-between state between the original book and the final product. Also, you don't want to burn your bridges. Piss off people by doing a tell all and you can't get them for your next project. Brad Pitt's input on this project may have been iodic but you many need Brad Pitt (or his wife) in a future project.
Slightly off topic, but this is one of the reasons why I am interested in seeing "Jodorowsky's Dune". It is a documentary about a early attempt to film Dune in the 70s - not David Lynch's 80s attempt. Most everybody is dead or out of the business so people can be honest. Personally I would like a good look at the preproduction art but I suspect that the rights to that are just a overlapping mess between Herberts estate, the production company, and the individual artist.
We can debate if a weaker dollar would have a overall positive or negative impact, or on whom it would have impact on.
However, it would mean higher interest rates. Bonds that have been issued would go down in value but we don’t care about those – we care about the new bonds that will be issued.
As you pointed out, a weaker dollar means more expensive imports, more expensive imports means higher inflation, and higher inflation means a higher interest rate.
Also, a weaker dollar reduces the return of US bonds held by foreign owners, so they would demand a higher interest rate to compensate.
You have it mostly right, and I don’t think Russia has the power, but let us take this a step further. Damage, in theory, could be inflicted. Consider 2 things – supply and demand and that bonds are basically cash. Dump the bonds, demand for cash / bonds remains the same, Supply goes up, ergo the price of USD cash goes down. The US dollar becomes weaker relative to other currencies, fueling inflation. Everybody can buy the bonds that Russia is selling, so newly issued bonds would have to have a higher real interest rate.
See what George Soros did – he broke the bank of England. Now the US is nowhere near the irrational state the Bank of England was, but you can get an idea of the damage that can be done.
IIRC, The amount of US dollars that Russia holds is very small- they export oil and gas and turn right around and buy consumer goods. . China has the large stockpile of USD.
I heard a quote this weekend – That Europe could inflict more damage on Russia then Russia could on Europe, but that Russia was more willing to bear the pain.
O.K. – I will step up to the plate.
You need some inequity to drive the system. Exceptional talent should deserve exceptional rewards. Too much inequity kills the system. The in crowd, the entrenched, the elite dominate the system to their own ends. People get into the top not because of exceptional talent but because they were born into it or luck - either the lottery or only those who are exceptionally talented and lucky (see big name movie stars).
The trick is to find a sweet spot.
You also want the least distortive system, which is why I favor a modest inherence tax. Everybody knows that they are going to die and they can’t take it with them. Having a low inherence tax would be less distortive then a high income tax. FYI, I am a small government person – but even a small government needs a tax base. Not having taxes is another debate.
Is that a fair comparison? IIRC Alibaba does a huge amount of b2b stuff – which has a large notional value but a very thin payout for Alibaba.
Sigh, you are confusing spread with real interest rates.
Spread = Interest on loans - Interest on deposits. The bigger the spread the more profitable the bank is.
Then review this formula: Nominal Interest Rates = Real Interest Rates + Expected Inflation.
Real interest rates is what the banks care about because that is how one increase value. Nominal interest rates is what the customer gets quoted and can’t go down below zero. Hold nominal interest rates fixed, decrease inflation (or increase deflation) and real rates increase. This is basically true because most banks have a positive leveraged duration (more long term loans then short term deposits)
One can argue that one can better manage (increase) the spread during times of inflation but the evidence is very mixed. But we do know that deflation does increase the spread, giving the bankers free money.
This is why Bitcoin has the most sensible economic policy of all. Long term, it's meant to have no inflation and no deflation. It's meant to provide a stable monetary base.
You are wrong. Inflation is caused by the change in the demand of money and the supply of money. In Bitcoin the supply of money may be fixed (I would argue that the amount of currency is fixed, not money, but that is another point.). However the demand for money is not. As the economy grows or contracts, and people risk level for holding a safe assets changes, so will the demand for money. I can think of more cases where the demand for money would increase (growing GDP) then decease, so I would think BitCoin would have a strong deflationary bias.
Also, inflation does not help the rich. It destroys the value of cash, bonds, and annuities (which tend to be held in both absolute and relative terms by the wealthy) and eats into the profits of banks (read up on duration leverage, which is how banks make their money and explains the risks and rewards of borrowing money short term and lending it long term.)
What do you mean by private? Private banks own all of the Fed stock – but that stock does not come with voting rights and dividends are capped. The government gets to appoint the board . It is a hybrid institution. Being semi-private is part of the insulation from government but it is hardly absolute. If you want something totally independent you need to go back when the Bank of England was a private bank.
You are confusing productivity with the aggregate supply for money in aggregate (inflation). Yes, productivity is a factor but it is just a slice of the pie. Monetary policy can have a much greater factor. The Fed can turn on or off the supply of money at a whim. Productivity gains are harder and take longer.
Having a low inflation rate has not always been the goal of the central bank. There have been times (70s in particular) when the Fed cranked up inflation. They now know they were wrong. And I would reevaluate your chart. Read up on the issues and flaws of using a price index to measure inflation – It is one of the better measures we have but there are still flaws. Factor in that the data prior to 1912 is second rate. Then redo your chart us a log scale, which you should do when looking at percent changes.
Milton Friedman said that central banks never had to worry about deflation because they could inflate the money by “dropping money out of a helicopter”. There are plenty of examples where the printing press was turned on and inflation jumped up.
Exactly. Both of those countries had low inflation and high growth. I would state that low inflation was not the primary driver and Switzerland has the luxury of being a small high demand market.
Oh – and my second point. The Fed is well insulated from the day to day politics and the bankers have as much influence as the politicians – and bankers hate inflation.
No, the politicians had fairly low control for most of the history, most of the time it has been tied to the gold standard. Lincoln went off the gold standard with the Greenbacks but he was punished whenever he drifted to far (IIRC the Greenback at one point trade $.25 to the dollar). FDR weakened the link but it was Nixon who cut it.
Ummm No. In the Bitcoin debates I have always been liberal on money creation – that some low level inflation is better than low level deflation. But never give control of the printing press to politicians. They will turn on the tap and inflation will spiral out of control. See Germany in the interwar era, or Zimbabwe a few years ago. Deflation may enrich the wealthy (as you point out), but high inflation destroys and savings of the poor and long term investments for the growth of tomorrow.
I don’t think we are that far apart. I am going to assume that we both think that Apple’s corporate tax rate is too low. There are 2 solutions.
There is the bottom up solution where Apple voluntarily increases the taxes it pays to a fair level, but that raises 2 questions. First, what is a fair level? I would say something in the 5 to 10% range. I am going to guess you would suggest something higher, but it really does not matter. The “fair rate” is subjectively decision. This is particuallary true in Apple’s case where they need to split the profits between different states, where each state/society is going to have different concept of fairness. (Is a personal income tax more or less fair then a corporate tax, VAT, etc. High taxes and high services, or low taxes and low services. etc.) Second, why would one company chose a higher level of voluntary contributions then its competitors? Why would it choose to gimp itself? It would not be a stable situation and tax revenue would fall. I understand the moral appeal but I can’t endorse a system that has subjective and unstable values to underpin the morality of the tax code. I don’t think it is workable.
Then there is the top down, where we close the loopholes. I think on this issue we are much closer.
I am not familiar with the NZ example, However I would tend to be skeptical. I think things work best when there are clear goals, incentives, and lines of authority. Without that things become muddy. This year we shaft the owners, next year we shaft the Moi, and nobody can tell if anybody is doing anything useful because we are always tossing out measuring stick for another. The examples that I am familiar with tend to perform at a subpar level. There is a core of highly competent and motivated insiders or a sugary daddy on the outside, things go well for a couple of years (or decades), interest falls, and the whole thing falls apart.
On the other hand I can think of many examples that do work – Co-ops and other mutual companies, foundations and non-profits that own for profit business, etc. But those work because each part is trying to maximize it’s potential (either for profit, charitable gain, or whatever) and as such has a clear goal.
How would tax movement of money encourage domestic investment? Why would I want to build a domestic plant for export knowing that the plant’s revenues (not profits) will be taxed? Why would a foreign company bother investing in a domestic plant knowing revenue being sent home will be taxed?
Well, yes. The point of a good tax policy is to extract the money needed with the least amount of pain – but what makes you think that the pain associated with your tax would be less than that of a corporate income tax?
I will point out there have been huge gains in efficiencies because of greater world integration which would be reversed under your tax regime. Currently, trade is about 25% of the US GNP. In Europe it is even higher. I suspect that to be revenue natural that your tax would be the greater disincentive to invest then a corporate income tax. For example would you want to pay a 20% tax on an investment that return 8% or a 30% tax on a investment that returned 10%?
By the way, I am not a huge fan of a corporate income tax, partly for the reasons you suggested. I will point again to studies that a low corporate income tax does not discourage investment and I do think they should pay some taxes for the advantages and privileges that corporate ownership has (i.e. limited liability). But this all comes down to my belief that corporate taxes should be low and simple – not nonexistent.
For trade as a percentage of GNP,
http://data.worldbank.org/indi...
I am not making a argument about subsiding apple, and if you reread your comment you will see why. You are suggesting that people in a highly competitive environment play nice and give back a fair amount in taxes (which is subjective) to the correct government (another subjective call) while their competitors don’t. No – your second point is the correct answer – close the loopholes.
As for charity, that is a hot topic in corporate governance. Should a CEO be able to give your money (i.e. the company’s money) to charities he likes? I can point to many examples of abuse. In reality, I will point out that most charitable giving is from the corporate’s marketing office, which makes me wonder how charitable the giving is.
What I am exposing is very much standard orthodoxy and hardly radical, standard business admiration 101 stuff. When you delegate authority to management, a lawyer, or a doctor they are supposed to work for your best interests. Nothing says they have to be your slaves, be 100%, or give you gold plated services for free. On the they just can’t coast.
As for investment – we are getting into semantics here – maybe with the words new verse exchange.. If I own 1 share of stock does that mean I do not own a sliver of that company? And why would Bill Gates every take Microsoft public if he could not sell his interest, and why would anybody every buy unless they knew they could sell on?