The Highly Visible (formerly invisible) Hand

I am almost half way done with my first block of classes for this semester. I am taking an Economics class, which seems rather timely considering the current state of affairs on Wall Street. I guess I am just a complete capitalist. I am not really happy with the idea that tax payer money is bailing out these businesses that were plagued with incredibly poor and shortsighted management. It is quite troublesome to me that the federal government feels like it needs to take over the industry. I can’t see any reason why the banking market would benefit from a government takeover; didn’t we just finish de-regulating this industry? I think that they should just let them crash, that is how the market stabilizes itself, it purges out those greedy institutions. I think it would be sad for all the investors that had stock in those institutions, and unfortunate for the good employees of those banks. But, that is how the market works, investors are expected to complete their due diligence prior to investing and employees who are not responsible for the catastrophe are nearly always employable by competitors. I know I am heartless and cruel, but I guess I just think that is the way it is. This is where I draw a stark contrast from Barak Obama, who would like to blame the capitalist market for the troubled financial market. I can’t stand that blame game, why can’t it be the financial market’s fault that they got into that situation? Why should taxpayers have to pay for a bloated governmental institution to oversee these markets? What ever happened to the ideals that Democrat JFK was famous for “Ask not what your country can do for you, but what you can do for your country.” Obama certainly does not prescribe to this doctrine; he seems to think that somehow taxpayers (who he has classified as the rich) are somehow responsible for the non-taxpayers. I can’t stand this shift in responsibility. I’ll tell you who I am responsible for, myself and my family, nobody else. Now if I someday become independently wealthy I think it would be in my best interests to contribute to the well being of America however I don’t think I should be forced to. I think that if I want to contribute to charitable organizations I should be able to decide, independently, which ones and how much. I don’t need a politician to tell me who needs it the most.

Bailouts reward bad behavior; it sends a message to CEOs everywhere that this bad behavior and poor management will not have negative consequences. If the government wants to help out an industry they should create positive incentives, not bailouts. If they want to improve the efficiency of cars they should provide incentives for businesses that create more economical cars, they could create a competition (similar to the Virgin Records Airplane to the Moon). The bailouts and tax penalties work in the wrong direction; it puts the focus on the negative behavior rather than on the innovation and positive behavior. The best thing the government could have been doing during these times of “lax regulation” is to have provided incentives to those financial institutions that were willing to meet certain criteria, including making proper disclosures and maintaining adequate capital. It would also help the less educated masses gain a little transparency as to the legitimacy of the firm they are considering investing in. This method would give an incentive to operate an institution within the guidelines without unnecessarily restricting the market. The reason I am so vehemently opposed to market regulations is they discourage innovation. Discouragement is the nature of restrictions.

Here is the problem with my proposition. I think it kills the current legislative branch, no longer would they be spending time figuring out how to word the bill so that it would restrict a very specific action, no longer would they be accepting bribes from companies or lobbyists trying to undermine the system (unless they were for less than the potential gain of the company), and it would require them to actually be creative in how they formulated incentives. I have already voiced my opinion of the Pork and Barrel spending in politics, I think its garbage, if a bill can’t be voted on its own merit then don’t vote on it at all. I am opposed to personal income tax because it undermines one of the basic building blocks of this nation “no taxation without representation” when is the last time we got an update on how and where personal income tax is being spent? This doesn’t apply to businesses so I don’t have much of a problem with that. Property taxes are accounted for; sales taxes are accounted for, even fuel taxes are accounted for. I don’t have any clue what the number is but I would venture to guess that if we eliminated Pork and Barrel spending entirely we would have a national surplus within a year maybe two. Of course then we will have these special interest groups that would go un-funded. Based on their inability to draw up financial support from the community, maybe they should stay that way.

Well that’s probably enough for this week or so… By the way if you have money invested in the banking industry just remember, buyer beware.

The Most Important Election, EVER

So I was listening, in and out, to the Republican Convention last night. I caught most of Rudy’s speech and most of Sarah Palin’s. I love how every election is the most important, I suppose it is because it always determines the future, at least to a certain extent. I thought Palin did a good job and that following Rudy made her look like an even better speaker. I seriously thought Rudy was supposed to be eloquent and what-not but he really seemed to me to be stumbling through the majority of his speech. I did like the contrast that was brought up regarding executive experience vs. legislative experience. Legislators don’t have to make any real decisions, they can just be Present, and not vote yea or nay. Executives can’t do that their decision is yea or nay, no present votes allowed. It accounts for about 3% of all the votes he cast as a state legislator, so not too many but… I think present is a stupid vote; it shouldn’t even be an option. Either vote yes, no, or not at all. I also think it illustrates the difference between being a leader and a law-maker. I think Palin did a very good job with her speech, I think she is a nice contrast to McCain, the only area where I think she could really use some help is in the experience department, but what other options are there?
I’m not sure if I am going to listen to McCain’s speech tonight. While I think the conventions could serve a purpose, they tend to be somewhat of a pandering event for either party just to sell themselves to their current constituents. I would like both parties to actually make a plan, and present it to the people. Instead of just saying you will increase jobs, reduce taxes, reduce spending, etc. I would like to know how they plan to do all these things. I am really turned off by contradictory statements like lowering taxes for working class while raising wages and balancing the budget. The money has to come from somewhere, if they reduce personal income taxes then they will have to increase business profit taxes, or they can take out a loan (unbalanced budget). I am a little tired of Obama’s statement that he is going to “reign in government spending” how exactly does he plan to do that? Does he see areas where there is excess? Why not just say he is going to cut funding for XYZ project? Or if it is the intent remove pork and barrel spending, and all these projects that can’t pass without being attached to a more important bill? Of course politicians are famous for their ability to add on to bills (irrespective of parties) traditionally the democrats have a greater propensity to inflate bills, at least in the cost department.
I would like to change the process for presidential elections. I think it would be nice if we set up job qualifications to apply to be president. Like maybe some sort of quantifiable economic understanding, it would also be nice if they really understood the constitution (one reason I really like Ron Paul), I hate to say it but military experience of some sort is almost essential (aren’t they applying to be commander in chief?). We could have them take a series of personality tests that can then be published to the masses, evaluate their ethical behavior, personal conviction, ability to relate with others, even sense of humor. Of course the biggest challenge in doing this would to be to maintain an unbiased perspective. Drug testing isn’t a bad idea either; this is pretty cut and dry as far as I am concerned. It makes me cringe to think that here Americans are left to choose between two candidates that in many ways aren’t really qualified for the position; of course that is my opinion so… I think the business world understands what it means to hire people; all those tests and interviews actually are there for a reason. Attrition is very expensive, at the Presidential level it can’t even be put into numbers the cost. I guess my choice has just come down to who is the most qualified, or the closest to being qualified.

Eco-Capitalist

So my thoughts of late have revolved around the environment. I consider myself a pretty “green” conservative, which in most people’s minds sounds like a walking contradiction, but I don’t think so. Anyway I have a small collection of some interesting thoughts regarding energy efficiency:
1. CFLs – Compact Fluorescent Lights you may know these as those swirlly looking light bulbs, they are about 7 times more efficient in their use of energy over your standard light bulb, and they last about 12 times longer. The downside is they have a ballast structure built into the base of the bulb that contains Mercury. Mercury is a toxic chemical that requires disposal in a toxic waste site (check the CFL package, they are not to be discarded in a standard landfill)
2. Hybrid Cars – we now have a whole gamut of “hybrid” cars, trucks, and SUVs hitting the market. I have several issues on this one,
a. First is the inflated MPG numbers that are often reported, this happens across the board for the most part, in my experience Toyota and Honda are the most prominent offenders.
b. My other gripe is the fact that the Hybrids really aren’t all that environmentally friendly. While they may provide better gas mileage, they generally use Nickel Cadmium as the base for their batteries. The mining of this ore uses strip mining, and leaves a sludge that is highly acidic; it destroys vegetation and water for miles. Then you have an issue of how to deal with the battery once it is used up, that is another story though.
c. Finally, the maintenance cost is very high, the batteries are very expensive (~$5k), and don’t last beyond 100,000 miles, most are only guaranteed for 30,000. So you pay a premium on the initial car purchase, then within 10 years you get to pay another premium. Hybrids on average are about 15% heavier, this leads to an accelerated schedule for other maintenance items such as tires, axles, transmission, etc.
3. Cow Farts – These things are toxic, comprising an estimated 15% of total greenhouse gases (per myth busters). Scientists should be spending more time finding ways to streamline the digestive process of livestock, beano for cows or something.

Going back to where I started; I think that being a capitalist doesn’t have to be mutually exclusive from having environmental responsibility. My evidence that this is successful is to look at all the “Organic” food in your grocery stores, if they can charge a premium for that label then why can’t we charge a premium to sell items that are environmentally friendly. The challenge is being able to charge a premium high enough to offset any additional costs incurred to create a more environmentally friendly product/service. I don’t think it is that hard, and I think the real problem is not the additional “cost”, but the all too common misconception about “green.” I saw a survey, forgot where sorry, that said that most CEOs estimated the cost to make their company green at about a 25% premium above their current costs, when an outside analysis was performed it was found the costs would only increase 5%, on average, and that is short term. So the work that needs to be done in my mind is creating more awareness for environmentally friendly alternatives and the benefits of these products over their less friendly alternatives. However it should also be given a fair analysis, I think some of these “green” alternatives are just hype and no substance.

Finally just an interesting thought (I couldn't figure out how to create a poll): Which house do you think uses less energy Al Gore's primary residence or George W. Bush's Ranch? You could probably guess by the question that it is actually old W who has the smaller carbon footprint, how's that for some irony, or maybe it's just "An Inconvenient Truth."